International Transmission Channels of U.S. Quantitative Easing: Evidence from Canada

The U.S. Federal Reserve responded to the great recession by implementing quantitative easing, or large‐scale asset purchases, when its conventional policy rate reached the zero lower bound. We assess the international spillover effects of this quantitative easing program on the Canadian economy in a factor‐augmented vector autoregression (FAVAR) framework, by considering a counterfactual scenario in which the Federal Reserve's long‐term asset holdings do not rise in response to the recession. We find that U.S. quantitative easing boosted Canadian output, mainly through the financial channel.     

Multiperiod Loans,Occasionally Binding Constraints,and Monetary Policy: A Quantitative Evaluation

We introduce multiperiod mortgage loans, fixed interest rate, a lower bound constraint on newly granted loans, and a possibly slack collateral constraint, in an otherwise standard Dynamic Stochastic General Equilibrium (DSGE) model with housing. Our nonlinear estimation shows that all those features are important to understand the evolution of mortgage debt during the recent U.S. housing market boom and bust. The transmission of monetary policy becomes dependent on the housing cycle, with weaker effects when house prices are high or start falling sharply. Higher average loan duration makes monetary policy less effective, eventually leading to asymmetric responses to positive and negative monetary shocks.     

Monetary Policy and Financial Stability: Cross‐Country Evidence

We explain the heterogeneous response of central banks to financial stability risks based on a financial stability orientation (FSO) index, which reflects statutory, regulatory, and discretionary components of central banks' monetary policy frameworks. Our baseline results from a cross‐country panel of modified Taylor rules suggest that central banks with a high FSO increase their policy rates in response to elevated financial stability risks by 0.27 percentage points more than central banks with a low orientation. Back‐of‐the‐envelope calculations suggest that this policy rate differential translates into a reduced crisis probability but also into considerably lower inflation and output growth rates.     

Processing Fluency and Investors’ Reactions to Disclosure Readability

The SEC's emphasis on the use of plain English is designed to make disclosures more readable and more informative. Using an experiment, I find that more readable disclosures lead to stronger reactions from small investors, so that changes in valuation judgments are more positive when news is good and more negative when news is bad. Drawing on research in psychology to explain this result, I predict and find that processing fluency from a more readable disclosure acts as a subconscious heuristic cue and increases investors’ beliefs that they can rely on the disclosure. Although I do not find that more readable disclosures directly increase perceptions of management credibility, I do find evidence of an indirect effect operating through feelings of processing fluency. In supplemental analyses, I find that investors who receive more readable disclosures revise their valuation judgments to be less extreme when they are explicitly made aware of the potential for variation in readability. I discuss potential explanations for these revised valuation judgments.     

No System Is Perfect: Understanding How Registration‐Based Editorial Processes Affect Reproducibility and Investment in Research Quality

The papers in this volume were published through a Registration‐based Editorial Process (REP). Authors submitted proposals to gather and analyze data; successful proposals were guaranteed publication as long as the authors lived up to their commitments, regardless of whether results supported their predictions. To understand how REP differs from the Traditional Editorial Process (TEP), we analyze the papers themselves; conference comments; a survey of conference authors, reviewers, and attendees; and a survey of authors who have successfully published under TEP. We find that REP increases up‐front investment in planning, data gathering, and analysis, but reduces follow‐up investment after results are known. This shift in investment makes individual results more reproducible, but leaves articles less thorough and refined. REP could be improved by encouraging selected forms of follow‐up investment that survey respondents believe are usually used under TEP to make papers more informative, focused, and accurate at little risk of overstatement.     

Self‐Serving Attribution Bias,Overconfidence, and the Issuance of Management Forecasts

Prior studies document that managers consider a variety of costs and benefits when deciding whether to issue earnings forecasts. Using an abstract experiment and a survey of experienced financial managers, we provide evidence that managerial overconfidence may also contribute to this decision. Our experiment shows that participants engage in self‐serving attribution, giving greater weight to internal than external factors as explanations for good performance. This increases confidence in improved future performance, which increases their willingness to issue forecasts. Two facets of the stable individual trait overconfidence, dispositional optimism and miscalibration, also contribute to confidence in improved future performance and willingness to issue forecasts. Consistent with these results, experienced financial manager survey participants believe other managers are likely to overestimate the extent to which they contribute to positive firm performance, and both overoptimism about firm performance and overconfidence in their ability to predict future firm performance contribute to issuance of earnings forecasts.     

Do Jobseekers Value Diversity Information? Evidence from a Field Experiment and Human Capital Disclosures

We examine how information about the diversity of a potential employer's workforce affects individuals’ job-seeking behavior. We embed a field experiment in job recommendation emails from a leading career advice agency in the United States. The experimental treatment involves highlighting a diversity metric to jobseekers. Our results indicate that disclosing diversity scores in job postings leads jobseekers to click on firms with higher diversity scores, with such effects varying across jobseeker demographics. A follow-up survey provides evidence on potential explanations for why jobseekers value diversity information. We then examine how jobseekers’ preferences for diversity relate to disclosure choices under the U.S. SEC Human Capital Disclosure requirement. We find that firms in industries characterized by higher jobseeker responsiveness to diversity information tend to voluntarily disclose diversity metrics in their 10-Ks under these new disclosure requirements.