Does the Stock Market Rationally Reflect Fundamental Values?

This paper examines the power of statistical tests commonly used to evaluate the efficiency of speculative markets. It shows that these tests have very low power. Market valuations can differ substantially and persistently from the rational expectation of the present value of cash flows without leaving statistically discernible traces in the pattern of ex-post returns. This observation implies that speculation is unlikely to ensure rational valuations, since similar problems of identification plague both financial economists and would be speculators.     

The Size and Incidence of the Losses from Noise Trading

Recent empirical research has identified a significant amount of volatility in stock prices that cannot easily be explained by changes in fundamentals; one interpretation is that asset prices respond not only to news but also to irrational “noise trading.” We assess the welfare effects and incidence of such noice trading using an overlapping-generations model that gives investors short horizons. We find that the additional risk generated by noise trading can reduce the capital stock and consumption of the economy, and we show that part of that cost may be borne by rational investors. We conclude that the welfare costs of noise trading may be large if the magnitude of noise in aggregate stock prices is as large as suggested by some of the recent empirical litrature on the excess volatility of the market.     

Positive Feedback Investment Strategies and Destabilizing Rational Speculation

Analyses of rational speculation usually presume that it dampens fluctuations caused by “noise” traders. This is not necessarily the case if noise traders follow positive-feedback strategies—buy when prices rise and sell when prices fall. It may pay to jump on the bandwagon and purchase ahead of noise demand. If rational speculators' early buying triggers positive-feedback trading, then an increase in the number of forward-looking speculators can increase volatility about fundamentals. This model is consistent with a number of empirical observations about the correlation of asset returns, the overreaction of prices to news, price bubbles, and expectations.     

The Effect of Information on Willingness to Pay for Canned Tuna Fish with Different Corporate Social Responsibility (CSR) Certification: A Pilot Study

The objective of this study was to assess the role of information in consumers' willingness to pay (WTP) for food products with corporate social responsibility (CSR) certification. The item used for the experimental design was canned tuna fish, a product on the market that is already exhibiting various kinds of certification related to social and environmental attributes. Two different kinds of certifications were examined, namely Friend of the Sea, which involves environmental aspects, and SA8000, related to workers' rights and more general social attributes. We implemented experimental auctions, taking into account three information treatments. The initial findings show that the WTP for both CSR labels is higher than the WTP for tuna fish without any CSR certification. Nevertheless, the information provided on CSR certification did not change consumers' WTP among the certification schemes. Our findings could also serve to fine‐tune marketing strategies to consumer preferences and determine which CSR activities are worth undertaking.     

Constraints,Domain Conditions,and Well-Being: Evidence from Poland during the Transformation

The relationships among the recent changes in socioeconomic and demographic characteristics of the household, domain conditions (objective well-being), and the household members' assessment of their situation (subjective well-being) are assessed with data from 600 households in the province of Lublin, Poland. Four domains are included in the measures of recent change, domain conditions, and well-being: housing, household equipment, food consumption, and transportation. As expected, domain conditions are a function of household constraints; well-being is a function of domain conditions and recent change. Rural residents have significantly poorer domain conditions than urban residents, but report significantly higher levels of well-being.     

The Impact of Internal Union Politics on the 1981 UMWA Strike

This paper explicitly addresses the role internal union politics played in the rank-and-file rejection of the United Mine Workers of America (UMWA)-Bituminous Coal Operators Association (BCOA) contract in March 1981. The strike decision is viewed as having both political and economic components and as being rooted in the specific history and traditions of the UMWA. Using a unique data set, a statistically significant relationship between the vote for challenger Richard Trumka and the vote for the strike is found. Miners struck for many reasons in 1981. This study concludes that one of those reasons was to protest the union leadership.     

High school students' knowledge of telemarketing fraud tactics in the U.S.A.

Telemarketing fraud is a rapidly increasing problem with widespread economic implications for consumers and society. Given the extent of the problem, government agencies and consumer organizations are involved in educational efforts aimed at reducing telemarketing fraud. But does education make a difference? The effects of an educational experience on the knowledge of high school students with regard to telemarketing fraud tactics were explored in a controlled setting, in this study. Analyses of pre- and post-test results for treatment and control groups revealed an increased knowledge of telemarketing fraud tactics from a lesson on legitimate and fraudulent telemarketing practices. Even after controlling for age, gender and rural/urban residence a significant difference in average test scores continued to exist.