(Unusual) weather and stock returns—I am not in the mood for mood: further evidence from international markets

This paper investigates the explanatory power of weather variables deviations in two leading international financial trading centres (New York and London) on 58 global stock indices over the period September 2000 to December 2013. The empirical results find that unusual deviations of weather variables from their monthly averages have a statistically significant effect on stock returns across global returns. The paper also attempts to explain these effects through the sales and energy prices mechanisms. The results provide strong support to both mechanisms.     

Common Stock Returns and Rating Changes: A Methodological Comparison

This paper examines the adjustments in a firm's common stock price during the eleven months before and during the month of announcement of a bond rating change. Based on several different measures of abnormal security return, the findings are consistent with the proposition that bond downgradings convey information to common stockholders. For bond upgradings, the price adjustments were statistically insignificant in the month of announcement, although in the eleven preceding months, upgraded firms exhibited positive abnormal returns. While the results do not fully support earlier research, we stress that the main contribution of this article lies in the scrutiny it gives to issues of methodology in assessing the possible price effects of bond reclassifications.     

Have R&D Spillovers Declined in the 21st Century?

Slow growth over the last decade has prompted policy attention towards increasing R&D spending, often via the tax system. We examine the impact of R&D on firm performance, both by the firm's own investments and through positive (and negative) spillovers from other firms. We analyse panel data on US firms over the last three decades, and allow for time‐varying spillovers in both technology space (knowledge spillover) and product market space (product market rivalry). We show that the magnitude of R&D spillovers remains as large in the second decade of the 21^st century as it was in the mid 1980s. Since the ratio of the social return to the private return to R&D is about four to one, this implies that there remains a strong case for public support of R&D. Positive spillovers appeared to temporarily increase in the 1995–2004 digital technology boom. We also show how these micro estimates relate to estimates from the endogenous growth literature and give some suggestions for future work.     

Prometheus prostrate

The revival of interest among Marxists and Schumpeterians in regular, half-century long waves of economic activity since the Industrial Revolution leads beyond the mainstream liberal preoccupation with abundance-such as that spawned by Limits to Growth-to consideration of the technological revolutions historically spurring cycles of growth. The requirements and character of future technological revolutions, and prospects for capitalism and liberal institutions, are sketched in an effort to demonstrate what the debate should be about.     

The evolution of the January effect

This paper extends recent studies of the January effect by investigating the evolution of the daily pattern of the effect across size deciles. Our evidence documents a sizable mean reverting component beginning in the latter part of January and a shorter duration of the seasonal effect. Despite lower abnormal returns in the second part of January, higher abnormal returns in the first part of January keep the magnitude of the January effect unchanged. Further analysis of daily trading volumes suggests a stable trading volume intensity in the first part of January and a substantial decline in trading volume intensity in the second part of January.     

Resolution of incentive conflicts in the mortgage industry

This paper analyzes the contractual response to incentive divergencies in the housing-finance sector of the economy. Emphasis is placed on the role played by the private mortgage insurance master policy in stemming the moral hazard of lenders. The structure of the coinsurance feature of the policy is shown to induce the lender to lessen foreclosure costs. Cases are identified where the inducements of coinsurance are not complete. This incompleteness explains the role of the time constraints and bidding instructions imposed on the lender by the master policy.The paper also considers the effects that securitization is having on the incentives of the players in housing finance. The decoupling of the lender from the investor role is lessening the effectiveness of coinsurance, thereby creating new agency costs. Responses such as increased explicit monitoring and the use of reputational bonding are noted and the expected future direction of the contractual structure is discussed.     

On Licensing Under Bertrand Competition

This paper considers licensing by an innovating firm to its competitor in a differentiated duopoly with Bertrand competition. A principal finding is that royalty licensing may be superior to fee licensing for the innovating firm both when the innovation is drastic and when the innovation is non-drastic.