The liquidity effect for open market operations

The liquidity effect is the negative relationship between the supply of federal funds and the overnight federal funds rate. Deviations of the federal funds rate from its target can be interpreted as demand innovations for federal funds. Permanent adjustments to demand are modeled as an unobserved component and estimated using the Kalman filter to identify liquidity effects. The demand-based approach for identifying the liquidity effect contrasts previous work which concentrates on errors forecasting the supply of federal funds. This paper finds a liquidity effect several times larger than that from previous studies, indicating the market for federal funds is less liquid than previously thought. The effect of a $1 billion increase in open market operations over a 1-week period is a decrease of the federal funds rate by about 12 basis points.     

Regulation,Profit Variability and Beta

Many tests of the Peltzman hypothesis that regulation buffers the firm's cash flows examine the firm's equity beta. We model the asset beta and show that it (and the equity beta) are a function of several variables beyond those found in previous tests. Since these variables are also affected by regulation, tests of the Peltzman theory that do not hold these factors constant will be biased. The empirical tests in this paper hold other determinants of beta equal and find evidence consistent with the Peltzman buffering hypothesis and the model of beta.     

A comparison of the performance of open-and closed-end investment companies

This paper investigates the impact of corporate structure on the return performance and related operational characteristics of open- and closed-end investment companies. A statistical model is used to test for differences in several characteristics of these two different types of funds. The results show that there are differences in the returns of open-and closed-end funds, as well as differences in turnover and expenses of funds with different corporate structures. Moreover, the results are surprising in that they are significantly affected by the type of security held in the funds.     

Value creation in acquisitions: A re-examination of performance issues

This study provides a conceptual framework and an empirical methodology to assess the extent of value creation in acquisitions. Arguments are presented to examine why related acquisitions might not outperform unrelated acquisitions on average. New measures of value creation are developed which resolve the difficulties with measures used by earlier researchers. In addition, the influence of the classification scheme used to identify acquisition types, and the impact of the relative size of the target to the bidder, on the measurement of the extent of value creation, is examined. The empirical results indicate that value is created in both unrelated and related acquisitions. Further, the data do not appear to indicate that related acquisitions create more value than unrelated acquisitions on average.     

Household Participation in Formal and Informal Savings Mechanisms: Evidence from Pakistan

Savings are an important determinant of both individual and national wellbeing. Typically, households employ a wide range of mechanisms for saving, including both formal and informal institutions. The choice of savings instrument has important micro- and macroeconomic implications. However, little is known empirically about the patterns of use of these instruments, or the factors affecting household decisions/ abilities to use them. The authors apply household-level data from a nationally representative survey for Pakistan to explore these issues in detail. In particular, they focus on the choice between banks and bisi , an informal saving committee similar in nature to a rotating-savings-and-credit association.     

The regime-switching risk premium in the gold futures market

A bivariate Markov-switching model identifies two regimes in the futures-price and risk-premium models. The persistent underlying states have very different implications for spot and risk-premium forecasts. In the “low” state, a positive bias predicts spot price appreciation. The “high” state is associated with lower spot appreciation and higher risk premiums. The regime-switching framework provides a new perspective on the intertemporal role of gold as a hedge or safe-haven asset. The gold spot-price appreciation regime is shown to be correlated with higher inflation rates and the complement regime is associated with high market returns and stock market risk premia. Since the state-space methodology procedure can be employed using only past data, forecasts of the persistent unobserved underlying state of the gold price appreciation regime will be augmented as more data becomes available.     

Florida in the Global South: How Eurocentrism Obscures Global Urban Challenges—and What We Can Do about It

According to Richard Florida, the world is in the grip of a ‘New Urban Crisis’. In his most recent book Florida recounts a visit to Medellín that provoked an epiphany in which he realized that the New Urban Crisis is global in scope. Unfortunately, Florida's discovery of the global South is informed by a deeply Eurocentric understanding of urbanization. This leads him to conclude that Southern cities should ‘unleash’ creativity, and he proposes that the United States should develop a global urban policy that would export a version of American urbanism. In this essay we deconstruct Florida's notion of the New Urban Crisis and show that its Eurocentric assumptions obscure the very real environmental, economic and political challenges facing cities in the global South and their residents.