DEPOSIT GUARANTEES AND THE BURST OF THE JAPANESE BUBBLE ECONOMY

This paper examines the current status of deposit guarantees in Japan and how they have functioned during the burst of the bubble economy in the first half of the 1990s. During this period, the Ministry of Finance has had to depart from its "no failure" policy and declare depository institutions insolvent. The resources of Japan's most important deposit insurance agency—the Deposit Insurance Corporation—were exhausted as of late 1995. The other deposit insurance agency for small specialized depositories also is technically insolvent. Many of the problems that Japan's deposit guarantee system experienced are similar to those experienced in the United States during the 1980s.     

The Use of a Statement of Changes in Financial Position to Interpret Financial Data: An Empirical Investigation

This study provides empirical evidence on the use of a statement of changes in financial position by financial analysts to interpret and make judgments on information contained in annual reports. Analysts were required to answer five questions developed from claims made in a professional accounting standard about the purpose of the statement of changes in financial position. The results indicate that the statement of changes in financial position does not generally enhance financial analysis.     

Deviations from Purchasing Power Parity in the Long Run

This paper demonstrates that deviations from purchasing power parity reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible rate periods, for a wide variety of countries, and in both monthly and annual data. Since this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage, the paper proposes an alternative explanation which instead relies on financial arbitrage in bonds as the underlying mechanism.     

Information Cascades: Evidence from a Field Experiment with Financial Market Professionals

Previous empirical studies of information cascades use either naturally occurring data or laboratory experiments. We combine attractive elements from each of these lines of research by observing market professionals from the Chicago Board of Trade (CBOT) in a controlled environment. Analysis of over 1,500 individual decisions suggests that CBOT professionals behave differently from our student control group. For instance, professionals are better able to discern the quality of public signals and their decisions are not affected by the domain of earnings. These results have implications for market efficiency and are important in both a positive and normative sense.