Explaining Monday Returns

The Monday effect is reexamined using two stock indexes and a sample of 452 individual stocks that trade on the London Stock Exchange. The results based on conventional test methods reveal a negative average return on Monday. Extending the analysis to examine the effects of various possible influences simultaneously, the average Monday return becomes positive and does not differ significantly from the average returns of most other days of the week. Fortnight, ex‐dividend day, account period, (bad) news flow, trading activity, and bid‐ask spread effects are all controlled for. The results broadly support the trading time hypothesis.     

EMPLOYMENT,DETERRENCE, AND CRIME IN A DYNAMIC MODEL*

Using maximum likelihood techniques and monthly panel data we solve and estimate an explicitly dynamic model of criminal behavior where current criminal activity impacts future labor market outcomes. We show that the threat of future adverse effects in the labor market when arrested acts as a strong deterrent to crime. Moreover, such forward‐looking behavior is estimated to be important. Hence, policies that weaken this deterrence will be much less effective in fighting crime. This suggests that prevention is more powerful than redemption since anticipated redemption allows criminals to look forward to negating the consequences of their crimes.     

THRESHOLD AUTOREGRESSIVE MODELING IN FINANCE: THE PRICE DIFFERENCES OF EQUIVALENT ASSETS1

Threshold autoregressive (TAR) models condition the first moment of a time series on lagged information using a step-function-type nonlinear structure. TAR techniques are expected to be relevant in financial time-series modeling in situations where deviations of prices from equilibrium values depend on discrete transaction costs and where market regulators follow intervention rules based on threshold values of control variables. an important finance application is in modeling the difference in prices of equivalent assets in the presence of transaction costs. the focus of this paper is on motivating the use of TAR models in this context and on the statistical estimation and testing procedures. the procedures are illustrated by modeling the difference between the prices of an index futures contract and the equivalent underlying cash index. It is found that the hypothesis of linearity is conclusively rejected in favor of threshold nonlinearity and that the estimated thresholds are largely consistent with arbitrage-related transaction costs.     

MATURITY,STAGNATION AND CONSUMER DEBT: A STEINDLIAN APPROACH

This paper extends a Steindlian model of growth and income distribution to incorporate borrowing by consumers. It shows that borrowing by consumers can improve growth prospects in the short run by increasing consumer demand. However, in the longer run the effects of increasing consumer borrowing are ambiguous because, by increasing consumer debt, it redistributes income towards the rich who have a higher propensity to save, thereby possibly depressing aggregate demand and growth despite the borrowing‐induced expansion. The problem may be exacerbated by financial considerations involving the increase of the interest rate due to greater borrowing, but these considerations are not necessary for it. The problem is more likely to occur when autonomous investment demand is weak, i.e. when borrowing‐induced consumption increases are most required to counter tendencies towards stagnation.     

格林斯潘谈全球经济

很多人认为,如果美联储主席还是艾伦.格林斯潘的话,面对此次金融市场动荡,美国央行或许会更快、更有力地降息。不会的,格林斯潘如是说。在他位于华盛顿康涅狄格大道的办公室里,在长达3小时的采访过程中,这位前美联储主席表示：时代不同了。格林斯潘称："我们现在所处的时期,要比我在任时困难许多。当时,我们不用担心通胀的苏醒,现在则不得不关注这一点。"他补充道："相比之下,你在下调利率以应对危机时,不得不更加万分小心。"     

Stairway to heaven or highway to hell: Liquidity,sweat equity,and the uncertain path to ownership

We study a setting in which a principal contracts with an agent to operate a firm over an infinite time horizon when the agent is liquidity constrained and privately observes the sequence of cost realizations. We formulate the principal’s problem as a dynamic program in which the state variable is the agent’s continuation utility, which is naturally interpreted as his equity in the firm. The optimal incentive scheme resembles what is commonly regarded as a sweat equity contract, with all rents back loaded. Payments begin when the agent effectively becomes the owner, and from this point on, all production is efficient. These features are shown to be similar to features common in real‐world work‐to‐own franchising agreements and venture capital contracts.     

Real wages,real interest rates,and the Phillips curve

This article argues that any analysis of a Phillips curve should include the real interest rate in addition to inflation and real wages as any changes in the interest rate changes the labour–capital input mix in the production process leading to a change in the level of employment in the economy. To justify this argument a Phillips curve model is developed, which includes the real interest rate in addition to inflation and real wages. After the diagnosis of the time series properties of the data, an error correction model is developed and estimated using a set of US annual data from 1948 to 1996. The estimated parameters of the model do suggest that one should really take into consideration of the real interest rate while analysing the Phillips curve. A non-nested test (F-test) also suggests that the Phillips curve model with real interest rate as an additional variable performs better than the conventional method that does not include the real interest rate.     

On the efficiency of ‘single window’

In many countries, the process of obtaining government approval for different projects involves interaction with multiple government agencies at various levels. This often makes the approval process inefficient by unnecessary lengthening it. In this paper we study the effect of a re-organization of the approval process towards making it a single window clearance system, on the efficiency of the entire process. We have used the expected queue length and the expected waiting time in the system at the stochastic steady state as measures of inefficiency of an approval system.     

Testing and imposing Slutsky symmetry in nonparametric demand systems

Maximization of utility implies that consumer demand systems have a Slutsky matrix which is everywhere symmetric. However, previous non- and semi-parametric approaches to the estimation of consumer demand systems do not give estimators that are restricted to satisfy this condition, nor do they offer powerful tests of this restriction. We use nonparametric modeling to test and impose Slutsky symmetry in a system of expenditure share equations over prices and expenditure. In this context, Slutsky symmetry is a set of nonlinear cross-equation restrictions on levels and derivatives of consumer demand equations. The key insight is that due to the differing convergence rates of levels and derivatives and due to the fact that the symmetry restrictions are linear in derivatives, both the test and the symmetry restricted estimator behave asymptotically as if these restrictions were (locally) linear. We establish large and finite sample properties of our methods, and show that our test has advantages over the only other comparable test. All methods we propose are implemented with Canadian micro-data. We find that our nonparametric analysis yields statistically significantly and qualitatively different results from traditional parametric estimators and tests.