Contents Volume 24 2003

Volume Contents

Contents Volume 24 2003     

Relational contracts with subjective peer evaluations

We study optimal dynamic contracting for a firm with multiple workers where compensation is based on public performance signals and privately reported peer evaluations. We show that if evaluation and effort provision are done by different workers (e.g., consider supervisor‐agent hierarchy), first‐best can be achieved even in a static setting. However, if each worker both exerts effort and reports peer evaluations (e.g., consider team setting), effort incentives cannot be decoupled from truth‐telling incentives. This makes the optimal static contract inefficient. Relational contracts based on public signals increase efficiency. Interestingly, the optimal contract may ignore signals that are informative about effort.     

Fundamental analysis of banks: the use of financial statement information to screen winners from losers

This study investigates the efficacy of a fundamental analysis-based approach to screen U.S. bank stocks. We construct an index (BSCORE) based on fourteen bank–specific valuation signals. We document a positive association between BSCORE and future profitability changes, as well as current and one-year-ahead stock returns, implying that BSCORE captures forward looking information that the markets are yet to impound. A hedge strategy based on BSCORE yields positive hedge returns for all but two years during our 1994–2014 sample period. Results are robust to partitions of size, analyst following, and exchange listing, and persist after adjusting for risk factors. We further document a positive relation between BSCORE and future analyst forecast surprises as well as earnings announcement period returns, and a negative relation between BSCORE and future performance-based delistings. Overall, our results show that a fundamental analysis-based approach can provide useful insights for analyzing banks.     

Is PIN priced risk?

Several recent papers assume that private information (PIN), proposed by Easley et al. [2002. Is information risk a determinant of asset returns? Journal of Finance 57, 2185–2221; 2004. Factoring information into returns. Working Paper, Cornell University], is a determinant of stock returns. We replicate Easley et al. (2002) and show that while PIN does predict future returns in the sample they analyze, the effect is not robust to alternative specifications and time periods. There is no evidence that PIN factor loadings predict returns or that PIN factor returns reflect future GDP growth. PIN exhibits no association with implied cost of capital derived from analysts’ earnings forecasts. Overall, our findings cast doubt on whether PIN reflects information risk systematically priced by investors.     

Temporal Evolution of Mortality Indicators

Abstract

In Spain, as in other developed countries, significant changes in mortality patterns have occurred during the 20th and 21st centuries. One reflection of these changes is life expectancy, which has improved in this period, although the robustness of this indicator prevents these changes from being of the same order as those for the probability of death. If, moreover, we bear in mind that life expectancy offers no information as to whether this improvement is the same for different age groups, it is important and necessary to turn to other mortality indicators whose past and future evolution in Spain we are going to study. These indicators are applied to Spanish mortality data for the period 1981–2008, for the age range 0–99. To study its future evolution, the mortality ratios have to be projected using an adequate methodology, namely, the Lee-Carter model. Confidence intervals for these predictions can be calculated using the methodology that Lee and Carter apply in their original article for expected lifetime confidence intervals, but they take into account only the error in the prediction of the mortality index obtained from the ARIMA model adjusted to its temporal series, excluding other sources of error such as that introduced by estimations of the other parameters in the model. That is why bootstrap procedures are preferred, permitting the combination of all sources of uncertainty.     

Factors influencing the decision to hire contract labour by Indian manufacturing firms

ABSTRACT

Over a third of workers employed in the Indian formal manufacturing sector are ‘contract’ workers – hired through the services of labour contractors, facing lower wages and no job security in relation to regular workers. We investigate the role of a variety of factors that influence the decision of employers to hire in contract workers, using information from a specially commissioned survey of manufacturing firms. While there are immediate cost advantages that tilt firms towards hiring in contract labour, a counterforce has employers favouring regular workers in firms that have a large proportion of their workforce concentrating on production activity – probably instances where long-term human capital investment by regular workers is important for the firm.

Abbreviation: CLA: Contract Labour (Regulation and Abolition) Act, 1970 ASI: Annual Survey of Industries NIC: National Industrial Classification MSME: Micro, Small and Medium Enterprises SEZ: Special Economic Zone ICRIER: Indian Council for Research on International Economic Relations     

Strategy-proof and individually rational social choice functions for public good economies: A note

Summary. Serizawa [3] characterized the set of strategy-proof, individually rational, no exploitative, and non-bossy social choice functions in economies with pure public goods. He left an open question whether non-bossiness is necessary for his characterization. We will prove that non-bossiness is implied by the other three axioms in his characterization. Received: October 17, 1997; revised version: January 19, 1998     

流行文化批判(节选)

文化批评1992年,在纪念伯明翰学派文化研究十周年的研讨会上,斯图尔特霍尔(StuartHall)以批判的口吻说起美国文化研究在理论上已变得流利无比。他说他并不是要英国同行向美国文化研究学习。问题不在于美国文化研究没有能力对文化领域的权力进行理论分析和总结,也不在于它把历史和政治关系从文化领域剥离。相反,他认为美国文化研究现在可以无边际、无休止地从理论上论述权力——政治、种族、阶级、性别、征服、统治、排斥、边缘化、     

Nature in Economics

Nature has been ill-served by 20th century economics. When asked, economists acknowledge nature’s existence, but most would appear to deny that she is worth much. If ecologists worry about the contemporary nexus between population size (and growth), the standard of living, and the natural environment, we economists point to the accumulation of capital and technological progress and say Malthus got it wrong. In this paper I show by an appeal to theory that economics has been so badly misused, that it has deflected attention from deep problems at the nexus that are faced both regionally and globally. Text of the President’s introductory remarks at the proceedings of Section F (Economics) of the BA (British Association for the Advancement of Science) Festival of Science 2006, at the University of East Anglia, September 2006.