Increasing Health Club Attendance Through Self-Prophecy

Prior research has shown that asking people to anonymously predict whether they will perform a socially desirable behavior increases their probability of performing the action (Sherman, 1980). This article extends the empirical base of the phenomenon in a consumer service context demonstrating that an anonymous prediction request can increase likelihood of performing a socially desirable real-world behavior (working out at a health club). The effect was also observed for the first time over an extended time period (six months). The article concludes with tentative theory-relevant generalizations regarding the phenomenon and directions for further research.     

COSTS OF CALIFORNIA's CORRELATIVE RIGHTS DOCTRINE AS A SOLUTION TO GROUNDWATER OVERDRAFT

This paper reports the present value of groundwater use under alternative institutional structures for the eastern portion of California's San Joaquin Valley. The Gisser-Sanchez model, with data from the California Department of Water Resources, produced these results. The paper, through the use of an optimal control model, shows that private property rights outperform common property rights as an institutional guide to groundwater use. Furthermore, the paper shows that adjudicating groundwater rights under claim of adverse possession gives rise to a discounted flow of future income which, when compared with that of common property, gives the incentive to adjudicate groundwater rights.     

A Re-Examination of Shareholder Wealth Effects of Calls of Convertible Preferred Stock

Common stock price reactions to announcements of 67 calls of in-the-money convertible preferred stocks are examined, and a significant average abnormal return of ?1.6 percent is documented. The finding is robust to the choice of estimation period and the assumed return-generating process. Annual dividend obligations for the called preferred issues in the sample typically are greater than the dividends for the common shares into which they are converted, and announcement-period abnormal returns are negatively correlated with changes in dividends. Moreover, calls that result in dilution of voting rights appear to have greater adverse valuation effects than calls that do not alter voting rights concentration.     

Preferences for Stock Characteristics As Revealed by Mutual Fund Portfolio Holdings

This investigation of the cross-section of mutual fund equity holdings for the years 1991 and 1992 shows that mutual funds have a significant preference towards stocks with high visibility and low transaction costs, and are averse to stocks with low idiosyncratic volatility. These findings are relevant to theories concerning investor recognition, a potential agency problem in mutual funds, tests of trend-following and herd behavior by mutual funds, and corporate finance.     

Long‐Run Consumption Risk and Asset Allocation under Recursive Utility and Rational Inattention

We study the portfolio decision of a household with limited information‐processing capacity (rational inattention [RI]) in a setting with recursive utility. We find that RI combined with a preference for early resolution of uncertainty could lead to a significant drop in the share of portfolios held in risky assets, even when the departure from the standard expected utility setting with full‐information rational expectations is small. In addition, we show that the equilibrium equity premium increases with the degree of inattention because inattentive investors with recursive utility face greater long‐run risk and thus require higher compensation in equilibrium.     

Promote Internally or Hire Externally? The Role of Gift Exchange and Performance Measurement Precision

Managers often face the choice between promoting an internal employee and hiring an external candidate. Using an interactive experiment, we examine the drivers of managers’ promote/hire decisions and internal employees’ behavior before and after those decisions. Consistent with gift exchange theory, we find that employees exert costly effort to increase the chance of being promoted, and they raise their effort level as the promote/hire decision becomes imminent. Managers respond by promoting those who exert high effort, despite employees’ inferior ability compared to external candidates. Results suggest that managers view employees’ past effort as both a gift to reciprocate and a signal of their future effort. Moreover, we find that managers are more likely to promote internally rather than hire externally under a less precise performance measurement system, and this result is driven by managers who observe low employee output. Finally, we find that total effort is significantly higher when managers promote internally versus hire externally.     

A Note on Aggregate Investment in Australia*

The purpose of this paper is to explore the relevance of Tobin's ‘q theory’ of investment in explaining aggregate investment in Australia, over the period from December 1966 to December 1986. Using standard capital stock data, the q theory performs poorly. However, the cost of adjustment model implies that the conventional capital stock data need to be revised to allow for these adjustment costs. Once this is done, it is found that the q theory explains a statistically significant (although small) proportion of the movements in aggregate investment The residual behaviour of investment is well explained by an accelerator model