Stochastic Discount Factor Bounds with Conditioning Information

Hansen and Jagannathan (1991) (hereafter HJ) derive restrictionson the volatility of stochastic discount factors that pricea given set of returns. This article studies the sampling propertiesof HJ bounds that use conditioning information. One approachis to multiply the returns by the lagged variables. We alsostudy optimized HJ bounds with conditioning information fromGallant, Hansen, and Tauchen (1990) and based on portfoliosderived in Ferson and Siegel (2001). We document striking finite-samplebiases in the HJ bounds, where the bounds reject asset-pricingmodels too often. We provide a useful bias correction. We alsoevaluate asymptotic standard errors for the bounds from Hansen,Heaton, and Luttmer (1995).     

The Design of Financial Policies in Corporate Spin-offs

We examine differences in financial leverage between parentand spun-off firms that emerge from corporate spin-offs. Ourtests control for past financing choices and the costs of adjustingcapital structure, factors that can obscure cross-sectionalpatterns among firms' target leverage ratios. We find that firmsthat emerge from spin-offs with more financial leverage havea higher cash flow return on assets, lower variability of industryoperating income, and a greater proportion of fixed assets.The positive relation between profitability and the use of financialleverage, in a setting that is free of pecking order effects,is particularly important because it contrasts with existingevidence. Our results indicate that the ability to cover debtpayments and default-related costs are important determinantsof the use of financial leverage, as implied by the trade-offtheory of capital structure. We find no evidence that managerialincentives or governance characteristics affect the differencein leverage ratios in firms that emerge from spin-offs.     

Effects of sex and attitudes toward women on the processing of television commercials

This study examined the effects of sex and attitudes toward women on different cognitive measures that were obtained after ‘liberal’ and ‘nonliberal’ male and female subjects viewed 12 television commercials: 6 commercials depicted ‘traditional’ female roles and 6 were ‘neutral.’ The dependent variables included (1) ratings of the commercials, (2) objections to the commercials, (3) perceived content or interpretation of the commercials, and (4) willingness to buy. The results suggested that liberals had more objections to the stereotypic commercials and that they rated and interpreted some of them more negatively when compared with nonliberals. Liberals were also less willing to buy some of the products after viewing traditional commercials. The findings were discussed with reference to Bem's (1981) gender schema theory.     

Consumer prices,wholesale prices,and causality

This paper uses the Wald variant of the Granger direct causality test recently prescribed by Geweke, Meese, and Dent (1983) to assess the causal nature of the pairwise relationship between U.S. consumer and wholesale (producer) prices. For the sample period, January 1947 to December 1983, as well as for the two sample subperiods, January 1947 to June 1971 and May 1974 to December 1983, the test reveal that bidirectional causality, or feedback, exists between monthly observations on seasonally unadjusted consumer and wholesale price changes. The finding of bidirectional causality corroborates other empirical evidence suggesthing that a simultaneous equation approach represents the appropriate way to estimate a bivariate model that consists of consumer and wholesale prices.     

Hedonic Property Valuation Models: Are Subjective Measures of Neighborhood Amenities Needed?

Common applications of hedonic residential property valuation models have relied on proxy measures of neighborhood amenities rather than directly measured subjective evaluations. While this approach simplifies data collection, there is reason to suspect that the use of proxy measures has degraded the accuracy of hedonic valuation models. The extent to which the use of proxy measures may decrease predictive accuracy, and fail to capture the effect of neighborhood amenities, has not been reported previously. The results presented here show that direct subjective measures yield only modest improvements in price prediction. Careful use of proxy measures for neighborhood amenities appears to be cost efficient for large-scale appraisal work.