The structure of information release and the factor structure of returns

We model how firms releasing information on different dates causes the CAPM to fail, requiring an additional factor based on the information structure to price assets. We exemplify this mechanism’s empirical relevance using quarterly earnings announcements, which cluster across months along size and book-to-market. Seventy percent of the alpha reduction from including SMB and HML occurs in the four main earnings announcement months. The information structure factor accounts for all of SMB and HML’s seasonal alpha reduction and one third of their overall alpha reduction. Controlling for size and book-to-market, exposures to SMB and HML vary with firms’ earnings announcement month.     

Production flexibility, stochastic separation, hedging, and futures prices

We study a dynamic model where uncertainty about interim outputadjustments causes producers to face price, cost and outputuncertainty. Stochastically separable production decisions areindependent of the producer's risk preferences and expectationsand are based on the prevailing futures price as a certain outputprice. Conditions under which futures contracts achieve stochasticseparation are established. Optimal hedging and maturity structureof futures contracts, equilibrium futures prices, and the effectsof futures trading on output are studied. The systematic riskpremium depends on the product of the futures beta and the covarianceof the market return with production revenues.     

The divergence of liquidity commonality in the cross-section of stocks

This paper demonstrates that the cross-sectional variation of liquidity commonality has increased over the period 1963–2005. The divergence of systematic liquidity can be explained by patterns in institutional ownership over the sample period. We document that our findings are associated with similar patterns in systematic risk. Our analysis also indicates that the ability to diversify systematic risk and aggregate liquidity shocks by holding large-cap stocks has declined. The evidence suggests that the fragility of the US equity market to unanticipated events has increased over the past few decades.     

The effects of randomizing the opening time on the performance of a stock market under stress

To tackle challenges from derivatives trading and illiquidity, reduce manipulation and improve price discovery, many exchanges have started opening at random times. We investigate how randomization has affected the performance of the Tel Aviv Stock Exchange at trade opening and at the expiration of stock-index derivatives. Randomization has improved price discovery and reduced excess volatility and price distortion, especially on expiration dates. Although preopening prices do not converge to full information values, post-randomization, opening prices on expiration days are at least as accurate as on other days. Spot market trading systems significantly impact the effects of derivatives on spot prices.     

The Effect of the Probability of Marriage on Housing Demand for Single Women

This paper uses a simultaneous system of three equations to model housing choices for female-headed households (FHH). The system includes housing demand, the probability of owning, and the probability of marriage. Also, a wealth gap variable related to the downpayment constraint is measured and included in the tenure choice estimation. The probability of owning is lower for female householders anticipating marriage. The wealth gap significantly affects the home-ownership decision for all households, and wealth constrained FHHs are significantly more responsive to changes in the relative price of owning.     

Adoption and Ex-post Impacts of Improved Cowpea Varieties on Productivity and Net Returns in Nigeria

Cowpea covers the largest area of any grain legume in Africa and is especially important in West Africa where Nigeria and Niger alone account for over 75% of the total cowpea production in the world. Despite successes of international and national cowpea improvement research in the development and release of several improved varieties, there is limited empirical evidence of adoption and ex-post impacts of improved cowpea. Using a nationally representative survey data from a sample of 1,525 cowpea-growing households in northern Nigeria cultivating over 2,500 cowpea plots, we assess the adoption and impacts of improved cowpea varieties on cowpea yields, net returns and production costs. We apply a control function approach and propensity score matching models to estimate the causal effects of adoption of improved cowpea varieties . Our results show that 38% of the cowpea plots were planted with improved varieties, and cowpea yields, net returns and production costs increase significantly with the adoption of improved cowpea varieties. Adoption of improved cowpea varieties is associated on average with 26% yield gains, 61% increase in net returns and 14% increase in production costs. We also show that farmers who have a lower propensity to adopt improved cowpea varieties also face higher costs of production.