Equilibrium Portfolio Strategies in the Presence of Sentiment Risk and Excess Volatility

Our objective is to identify the trading strategy that would allow an investor to take advantage of "excessive" stock price volatility and "sentiment" fluctuations. We construct a general equilibrium "difference-of-opinion" model of sentiment in which there are two classes of agents, one of which is overconfident about a public signal, while still optimizing intertemporally. Overconfident investors overreact to the signal and introduce an additional risk factor causing stock prices to be excessively volatile. Consequently, rational investors choose a conservative portfolio; moreover, this portfolio depends not just on the current price divergence but also on their prediction about future sentiment and the speed of price convergence.     

An Economic Analysis of Licensure and Public Policy: Evidence from the Social Work Case

Occupational licensure is commonly accepted as a means of protecting consumers by ensuring minimum levels of professional competence. This study analyzes the rationale for licensure in terms of consumer information and consumer choice, applying the analysis to the proposal to license social workers in Tennessee. The analysis makes it possible to separate the numerous issues involved in the licensure question, identifying the probable impact of the proposed measures in terms of a clearer identification of consumers' interests. It is shown that the need for licensure is tied to the manner in which services are provided. In the social work case this means that while the positions of social workers would be enhanced, licensure would offer their client-consumers little protection which they do not already enjoy.     

The Dynamic Properties of Financial‐Market Equilibrium with Trading Fees

We incorporate trading fees into a dynamic, multiagent general‐equilibrium model in which traders optimally decide when to trade. For that purpose, we propose an innovative algorithm that synchronizes the traders. Securities prices are not so much affected by the payment of the fees itself, but rather by the trade‐off that the traders face between smoothing consumption and smoothing holdings. In calibrated examples, the interest rate and welfare decline with trading fees, while risk premia and volatilities increase. Liquidity risk and expected liquidity are priced, leading to deviations from the consumption‐CAPM. With trading fees, capital is slow‐moving, generating slow price reversal.     

MAKING THE COLONIAL STATE: DEVELOPMENT,DEBT, AND WARFARE IN NEW ZEALAND, 1853–76

Warfare in New Zealand during the 1860s has recently been linked to the rise of the central state and growth of the national debt in that colony. This article argues that any parallel to the growth of the European fiscal‐military state is misguided. The fundamental cause of state centralisation and rising indebtedness was the same long‐run dynamic of colonial development active in all settler societies during the nineteenth century. The colonial state functioned, in part, to raise capital for development, and if necessary the colonial state would be remodelled in order to achieve this. New Zealand was no exception.     

Long‐term changes in sickness and health: further evidence from the Hampshire Friendly Society1

This article presents new evidence on long‐term trends in sickness rates in England and Wales using data from the Hampshire Friendly Society. In previous work, Edwards, Gorsky, Harris, and Hinde argued that this Society contained a uniquely detailed set of records for the study of individual sickness histories. However, their initial findings were based on the records of a relatively small number of men who joined the Society at different points in time between 1871 and 1912. The current article draws on a much larger body of evidence, based on the records of over 5,500 men who joined between 1824 and 1939. It examines trends in the seasonality of sickness episodes, changes in the relationship between sickness and age, and cause‐specific sickness rates. The results indicate that there was little change in age‐specific morbidity rates over time, but morbidity did increase with age, mainly because older men remained off work for longer, even when they succumbed to the same conditions as men in younger age groups.     

Politics,Economic Provisioning,and Suffrage in St. Louis: What Women Said,What Men Heard

One of the enduring questions in history is why any group would choose to share power with another group. The granting of suffrage to American women in 1919 is one of those events in which we seek answers. I focus here on the diversity of women's economic provisioning functions, arguing that, because of that diversity, the granting of suffrage had more political benefits to the men in power and less political risks. The social provisioning status‐quo, which had been threatened by the feminist voices of the 19^th century, must have seemed to be back under the control of the men in power. In order to consider economic provisioning and politics more specifically, I study the economic profile of women and the political cost/benefit thinking of male legislators in St. Louis, Missouri.     

Private Equity Performance: What Do We Know?

We study the performance of nearly 1,400 U.S. buyout and venture capital funds using a new data set from Burgiss. We find better buyout fund performance than previously documented—performance has consistently exceeded that of public markets. Outperformance versus the S&P 500 averages 20% to 27% over a fund's life and more than 3% annually. Venture capital funds outperformed public equities in the 1990s, but underperformed in the 2000s. Our conclusions are robust to various indices and risk controls. Performance in Cambridge Associates and Preqin is qualitatively similar to that in Burgiss, but is lower in Venture Economics.     

Cities as the Industrial Districts of Housebuilding

In North America the housebuilding industry is ubiquitous and locally autonomous. In Ontario during the 1990s, 81% of urban single‐family homes were erected by locally based builders, a proportion that varied with urban isolation. Urban areas may be regarded as the industrial districts of home builders: numerous small, specialized firms interact frequently within a rich, embedded market network; subcontracting is the norm; networks and firm boundaries are fluid. The theory of industrial districts offers a useful vocabulary for analysing the neglected building industry. Analytically, the building industry offers unequalled opportunities to explore the dynamics of industrial districts, and how economic globalization meets local limits.     

The Theory of Capital Structure

This paper surveys capital structure theories based on agency costs, asymmetric information, product/input market interactions, and corporate control considerations (but excluding tax-based theories). For each type of model, a brief overview of the papers surveyed and their relation to each other is provided. The central papers are described in some detail, and their results are summarized and followed by a discussion of related extensions. Each section concludes with a summary of the main implications of the models surveyed in the section. Finally, these results are collected and compared to the available evidence. Suggestions for future research are provided.