estimation methods in portfolio selection and the effectiveness of short sales restrictions uk evidence forecasting the mean returns vector and the covariance matrix is a key feature in implementing portfolio theory the performance of the bayes stein method for forecasting these parameters for use in the markowitz model with and without short sales was compared with that of seven other estimation methods and three alternative portfolio selection techniques this paper represents the first large scale empirical investigation of the usefulness of the bayes stein approach using historical data this data was drawn from the london stock exchange in contrast to earlier studies the relative performance of bayes stein was mixed while it produced reasonable estimates of the mean returns vector there were superior methods e g overall mean for estimating the covariance matrix when short sales were permitted when short sales were prohibited actual portfolio performance was clearly improved although there was little to choose between the various estimation methods

measuring global economic interdependence a hierarchical network approach this paper investigates the business cycle co movement across countries and regions since 1950 as a measure for quantifying the economic interdependence in the ongoing globalisation process our methodological approach is based on analysis of a correlation matrix and the networks it contains such an approach summarises the interaction and interdependence of all elements and it represents a more accurate measure of the global interdependence involved in an economic system our results show 1 the dynamics of interdependence has been driven more by synchronisation in regional growth patterns than by the synchronisation of the world economy and 2 world crisis periods dramatically increase the global co movement in the world economy

the costs of distribution in the uk life insurance market the cost of direct and independent distribution in the uk life insurance sector over the period 1990 1997 is examined this is a novel contribution to the literature that until now has focused almost solely on distribution in the non life sector unlike the non life sector the distribution of life insurance is complicated by the existence of investor protection policies which in the uk are believed to have increased the use of independent agents using a pooled data set of 44 companies between 1990 and 1997 this study finds little evidence for such a view cost benefits are found for firms focusing in one mode of distribution from a modelling of the distribution decision this finding maybe attributed to firms choosing distribution systems which match the transactional problems associated with their product mix and or mode of corporate governance

optimal portfolio of foreign currencies with borrowing and lending until the late sixties most american corporations held their liquid assets in the form of cash short term government notes and other highly liquid marketable securities since the early seventies more and more firms have begun to hold their current assets in foreign currencies beyond what would be required to conduct normal foreign operations in the last few years companies have accumulated and retained much more cash than they held in the past in order to understand the magnitude of this issue realize that at the end of 1977 cash and short term securities held by international business machines amounted to 5 4 billion by exxon 4 2 billion and ford and general motors held well above 3 billion obviously with this cash pile up most companies devote much attention to cash management even a slight improvement in the management of these assets means a substantial profit and firms have responded with highly trained staff in particular people familiar with the international money market and the investment opportunities available the change in attitude toward cash management may be summarized by the following quotation from a senior adviser to the j henry schroder bank and trust company companies are no longer looking at a bank balance they re looking at a

flexible shrinkage in portfolio selection abstract how to quantify estimation risk is important in portfolio selection for this purpose we derive the flexible shrinkage estimator for the optimal portfolio weights which allows dynamic adjustments of model structure our estimator is based on grouping the assets in order to capture non homogeneity of estimation risk the assets are assigned to groups using a clustering procedure with the number of groups determined from the data the proposed flexible shrinkage approach exhibits sound and robust performance compared to the popular portfolio selection alternatives

marginal and conditional probabilities of excess demand abstract this note compares and illustrates two criteria for classifying observations on a non clearing market namely the marginal probability of excess demand and the probability of excess demand conditional on the observed quantity

money bonds and foreign exchange in the theory of finance capital markets provide securities which allow the ownership of productive assets to be allocated among investors according to their willingness to bear risk in exchange for return and independently of their tastes for the productive services provided by the assets this paper uses the theory of finance to study the role of money as a productive asset and the transformation of money into a portfolio asset true to its purpose the capital market provides securities nominal bonds that allow an allocation of the current services of the money supply according to its current productivity and without regard for its future purchasing power risk and an allocation of the future purchasing power risk of the money supply according to the willingness of investors to bear this risk in exchange for return and without regard for investor needs for the future transactions services of money in open

wage and price adjustment in a multimarket disequilibrium model the estimation of wage and price adjustment equations rests heavily on the use of tension variables that aim at capturing the disequilibria in the labour and goods markets disequilibrium models therefore provide a natural way of endogenizing these tension variables this paper estimates jointly a two market disequilibrium model and a wage and price adjustment block where price and wage growth react to excess effective demands the estimation is carried out using the simulated pseudo maximum likelihood methods developed by laroque and salanie 1989 the results look promising as regards the estimation of even more sophisticated models

bayes stein estimation for portfolio analysis in portfolio analysis uncertainty about parameter values leads to suboptimal portfolio choices the resulting loss in the investor s utility is a function of the particular estimator chosen for expected returns so this is a problem of simultaneous estimation of normal means under a well specified loss function in this situation as stein has shown the clas sical sample mean is inadmissible this paper presents a simple empirical bayes estimator that should outperform the sample mean in the context of a portfolio simulation analysis shows that these bayes stein estimators provide significant gains in portfolio selection problems

disagreement portfolio optimization and excess volatility disagreement a key factor inducing trading has been receiving ever increasing attention in recent years most research has focused on disagreement about the expected returns several authors have shown that if the average belief coincides with the true expected return in the portfolio context prices are unaffected by disagreement in this paper we study the pricing effects of disagreement about return variances we show that i disagreement about variances has systematic and significant pricing effects more disagreement leads to higher prices and ii prices are very sensitive to the degree of disagreement even if the average belief about the variance is constant tiny fluctuations in the disagreement about the variance lead to substantial price fluctuations this second result may offer an explanation for the excess volatility puzzle when small changes in the degree of disagreement occur they induce relatively large price changes yet the changes in disagreement may be hard to directly detect empirically leading to apparent excess volatility

structural unemployment and disequilibrium abstract in this paper we present a disequilibrium model of the labor market which allows us to distinguish cyclical unemployment due to wage rigidity from structural unemployment this is done through the insertion in the exchange condition of an aggregate disequilibrium model of variables measuring mismatch between disaggregated labor supplies and labor demands such a model also allows unemployment and job vacancies to coexist the model is estimated using canadian quarterly data from 1966 to 1983 our results imply that structural unemployment due to inter industrial shocks while significant is fairly small

the intertemporal substitution model of labour market fluctuations an empirical analysis the paper uses two approaches to study whether aggregate fluctuations in employment and unemployment may be explained within a market clearing framework as intertemporal substitution in labour supply first log linear equations for labour supply and unemployment are estimated using a forecasting model to measure wage and price expectations second a utility function is used to derive and estimate an equation for labour supply as a function of the current real wage and consumption the influence of expected future real wages and interest rates is captured by the consumption variable the empirical results do not support the intertemporal substitution model

a disequilibrium model of rational expectations for the u k so far the new classical model and the policy ineffectiveness proposition have been tested essentially within an equilibrium framework and disequilibrium methods of estimation have been used to estimate the labor market models in this paper the authors develop an aggregate goods market model for the united kingdom in which the new classical rational expectations hypothesis and the disequilibrium approach are integrated their estimates of the model show that the structural parameters are well determined and price adjustment in the united kingdom is very sluggish therefore the new classical policy ineffectiveness proposition is not valid for the united kingdom copyright 1991 by royal economic society

portfolio selection an alternative approach this paper provides a solution to the portfolio diversification problem based on finding optimal weights that will result in maximizing the risk adjusted return of the underlying portfolio subject to the budget constraint contrary to the standard approach that aims at finding the required weights based on minimizing the variance of the portfolio subject to the budget constraint a mathematical proof is given for the suggested solution an application is provided to the portfolio diversification opportunity between all the share market indexes of the two largest economies in the world the results show that the portfolio created by our suggested approach leads to almost one percent increase in the risk adjusted return compared to the portfolio created by the standard method

free and slave labor in the antebellum south perfect substitutes or different inputs the substitutability between free and slave labor is examined and the permissibility of aggregating the two in to a single labor variab le is investigated using a translog production function slaves on large cotton farms worked in gangs free labor was not observed to do so despite this previous research has aggregated free and slave labor and employed functional forms imposing strong restrictions on substitution estimation of the translog function shows that simple additive aggregation is not acceptable on large farms slaves and free labor were complements while on small nongang farms they were substitutes copyright 1988 by mit press

cvar models with selective hedging for international asset allocation abstract we develop an integrated simulation and optimization framework for multicurrency asset allocation problems the simulation applies principal component analysis to generate scenarios depicting the discrete joint distributions of uncertain asset returns and exchange rates we then develop and implement models that optimize the conditional value at risk cvar metric the scenario based optimization models encompass alternative hedging strategies including selective hedging that incorporates currency hedging decisions within the portfolio selection problem thus the selective hedging model determines jointly the portfolio composition and the level of currency hedging for each market via forward exchanges we examine empirically the benefits of international diversification and the impact of hedging policies on risk return profiles of portfolios we assess the effectiveness of the scenario generation procedure and the stability of the model s results by means of out of sample simulations we also compare the performance of the cvar model against that of a model that employs the mean absolute deviation mad risk measure we investigate empirically the ex post performance of the models on international portfolios of stock and bond indices using historical market data selective hedging proves to be the superior hedging strategy that improves the risk return profile of portfolios regardless of the risk measurement metric although in static tests the mad and cvar models often select portfolios that trace practically indistinguishable ex ante risk return efficient frontiers in successive applications over several consecutive time periods the cvar model attains superior ex post results in terms of both higher returns and lower volatility

performance of portfolios optimized with estimation error we explain the poor out of sample performance of mean variance optimized portfolios developing theoretical bias adjustments for estimation risk by asymptotically expanding future returns of portfolios formed with estimated weights we provide closed form non bayesian adjustments of classical estimates of portfolio mean and standard deviation the adjustments significantly reduce bias in international equity portfolios increase economic gains and are robust to sample size and to nonnormality dominant terms grow linearly with the number of assets and decline inversely with the number of past time periods under suitable conditions sharpe ratio maximizing tangency portfolios become more diversified using these approximation methods it may be possible to assess before investing the effect of statistical estimation error on portfolio performance

explanations of unemployment economists commonly distinguish between two sorts of unemployment roughly speak ing the involuntarily unemployed workers are unwillingly out of work i e they feel that they would be better off with jobs on the other hand the voluntarily unemployed workers prefer to be out of work for any of a wide variety of reasons e g because they are searching or training for a job or because they choose leisure over work

60 years of portfolio optimization practical challenges and current trends abstract the concepts of portfolio optimization and diversification have been instrumental in the development and understanding of financial markets and financial decision making in light of the 60 year anniversary of harry markowitz s paper portfolio selection we review some of the approaches developed to address the challenges encountered when using portfolio optimization in practice including the inclusion of transaction costs portfolio management constraints and the sensitivity to the estimates of expected returns and covariances in addition we selectively highlight some of the new trends and developments in the area such as diversification methods risk parity portfolios the mixing of different sources of alpha and practical multi period portfolio optimization

the benefits from international diversification for nordic investors abstract in this paper we investigate the magnitude of the benefits from international diversification from the nordic point of view special attention is paid to whether potentially increased co movement of stock markets together with more volatile nordic currencies have resulted in decreased benefits from international diversification towards the end of the 1980s moreover the paper presents evidence on the benefits from international diversification for a currency which has recently started its free float the finnish markka fim we find significant increases in stock market co movement both unhedged ex ante strategies as well as strategies hedged for exchange rate risk are investigated revealing substantial benefits from international diversification for the nordic countries however we obtain mixed results concerning the question of the optimality of hedging

confidence in the familiar an international perspective one striking feature of intemrnational portfolio investment is the extent to which equity portfolios are concentrated in the domestic equity market of the investor the home bias puzzle i examine the role of investors perception of foreign investment risk on their portfolio choices the expected retumrns and risk of foreign investment are specified through an asset pricing model with the home portfolio being the benchmark asset pastor s 2000 domestic capm the model serves as a reference point around which investors can center their prior beliefs i focus on investors prior beliefs that are consistent with the literature on confidence in the familiar foreign equities in terms of both expected returns and risk being viewed less favorably than domestic equities these prior beliefs are then combined with the data on g7 equities and the revised beliefs are used to obtain the global optimal asset allocation to hold predominantly domestic equities each g7 investor has to believe that the risk of foreign investment is several times higher than the actual risk the home bias is more of a puzzle for a u s investor during the 1970s specifying investors prior beliefs around the world capm does not help resolve the puzzle

efficient portfolios when housing needs change over the life cycle abstract we address the issue of the efficiency of household portfolios in the presence of housing risk we treat housing stock as an asset and rents as a stochastic liability stream over the life cycle households can be short or long in their net housing position efficient financial portfolios are the sum of a standard markowitz portfolio and a housing risk hedge term that multiplies net housing wealth our empirical results show that net housing plays a key role in determining which household portfolios are inefficient the largest proportion of inefficient portfolios obtains among those with positive net housing who should invest more in stocks

identification of key sectors in the bangladesh economy a linkage analysis approach this paper purports to identify key sectors in the bangladesh economy employing the concepts of forward and backward linkages an attempt is made to rank sectors according to their employment and output potentials the paper draws a distinction between gross and net linkages defined respectively on the inverses of the leontief technology matrix and the domestic matrix using data for bangladesh it is shown that the transition from gross to net linkages implies significant divergence in sectoral rankings this appears to be true for ranking of sectors in terms of output and employment suggesting a potential conflict between employment and output generation potentials particularly in the industrial sectors when net linkages are considered agricultural sectors appear to rank high on both counts

the specification of partial static equilibrium models in conducting an investigation into the specification of partial static equilibrium factor demand models this paper isolates 1 the endogeneity of output and quasi fixed factor levels 2 the choice of omitted share equation and 3 the presence of serial correlation when using time series data as the specification issues that most affect the existing empirical literature the impact of specification changes are studied via a series of experiments conducted on an illustrative data set and are found to have significant effects on parameter estimates and model diagnostics departures between observed and full equilibrium levels of quasi fixed factors and price elasticities as a consequence caveats must be attached to several previous studies and care must be taken by future researchers in addressing using such models copyright 1987 by mit press

unemployment insurance and labor supply and demand a time series analysis for the united states abstract a disequilibrium model of the u s labor market in which the unemployment insurance system plays a key role is estimated an increase in the level of real unemployment benefits markedly lowers employment and raises real wages

divergency between average and frontier production technologies an empirical investigation for bangladesh applied economic analysis and policy formation often relies on esttimated porduction technologies primal representations of production technologies can be specified as the average production function or as the stochastic frontier this paper uses nested and non nested specification tests and assessment of economic variables including elasticities and marginal products to evaluate systematic differences between the average production function and three different specifications of the stochastic frontier bangladesh serves as an illustrative example the importance emerges of first beginning any analysis of production technologies with nested hypothesis testing of inefficiency and non nested hypothesis testing for systematic but unknown differrences between the average and stochastic frontier functions followed by nested testing of the final form of the production technology

macroeconomic planning and disequilibrium estimates for poland 1955 1980 the authors specify and estimate a four equation disequilibrium model of the consumption goods market in a centrally planned econo my this work is based on previous papers of r portes and d winter 1977 and w charemza and r quandt 1982 the model contains a household demand equation a planners supply equation a min condition and plan adjustment equation through which plan formation becomes endogenous the paper uses a unique new data set of time series for plans for the major macroeconomic variables in poland the overall framework is applicable to any large organization which plans economic variables coauthors are richard e quandt david winter and stephen yeo copyright 1987 by the econometric society

the use of input output analysis to determine the appropriateness of technology and industries evidence from bangladesh since the proportion of available capital to labor is low in ldcs compared to the developed countries the most appropriate techniques for ldcs from an economic point of view are likely to be the laborintensive ones if we suppose that there is a single most efficient technique for each industry and if it technologically requires labor and capital in fixed proportions the most appropriate industries for ldcs are likely to be the labor intensive ones this is because of the close correspondence between industries and their technological requirements on an international scale this appropriateness is given some support by the heckscher ohlin theorem of international specialization in production as is well known this theorem indicates subject to various assusmptions that countries should specialize in the production of goods that make use of their relatively abundant factors of production the aim of this paper is to identify appropriate industries for bangladesh in view of the relative availability of labor and capital and taking into account the amount of labor and capital needed both directly and indirectly to produce output for each industry unfortunately as specified below a number of previous studies of appropriate techniques and industries have ignored the indirect requirements for labor and capital needed to produce the various intermediate products used in these industries interindustry analysis based on the assumption that the adopted techniques require inputs to be combined in fixed

a multimarket bounded price variation model under rational expectations corn and soybeans in the united states the bounded prices model under rational expectations is extended to a multimarket setting because the resulting rational expectations model is highly nonlinear fair and taylor s iterative procedure is employed in conjunction with the multimarket framework to obtain maximum likelihood estimates of a supply demand model for corn and soybeans the estimated model is then used to simulate the market equilibrium effects associated with removing price support and acreage set aside programs over the sample period among other things the results reveal that acreage set asides have dominated the induced supply effects of price support programs for corn

risk reduction by diversification in the nordic stock markets empirical examination of the ex post potential gains of risk reduction through international portfolio diversification started with grubel 1968 levy and sarnat 1970 solnik 1974 and lessard 1974 in their survey of international finance adler and dumas 1983 p 938 summed up the results the potential for international diversification to reduce risk seems unquestionable in the wake of increasing liberalization for international portfolio investment more recent contributions include jorion 1985 1989 grauer and hakansson 1987 and levy and lerman 1988 the results of the pioneers have been corroborated by contemporary research and according to jorion 1989 p 54 international diversification extolled by grubel as early as 1968 seems to have delivered on its promises despite the long tradition of studies in international portfolio diversification there has been no such work regarding the nordic markets this paper fills the gap through an analysis of potential gains from international diversification for different nordic investors danish finnish norwegian and swedish if they invest in all the nordic equity markets until the beginning of the 1980s nordic investors particularly in finland and sweden faced legal restrictions on investment abroad see nordiska radet 1987 adler and dumas 1983 have pointed out that such restrictions would lead to partially or fully segmented markets and hietala 1989 has shown the existence of premiums in the finnish stock market in our study we do not make any direct test of whether the nordic equity markets have been segmented or integrated but our results might provide some indirect evidence the nordic countries are generally viewed as fairly homogeneous from a social political and economic point of view while international diversifi

international portfolio diversification with estimation risk international portfolio diversification has long been advocated as a way of enhancing average returns while reducing portfolio risk for the investor who considers diversifying into foreign securities this proposition however relies on the assumption that the required inputs to the classical mean variance analysis are known with certainty typically expected returns variances and covariances are simply replaced by their ex post sample values and the optimal portfolio is derived without mentioning the uncertainty inherent in these parameter values but the rational investor should take this uncertainty into account when forming expectations and probably will consider estimators that are less subject to estimation error than the classical sample mean this paper investigates alternative estimators of expected returns and their implications for the alleged gains from diversification an important observation is the crucial influence that errors in estimating expected returns have on portfolio analysis a closer examiprevious studies of international portfolio diversification have relied on ex post meanvariance analysis without considering the problem of estimation risk typically past averages are substituted for expected returns and no allowance is made for the uncertainty inherent in these parameter values first i demonstrate the shortcomings of such an approach and second i investigate another method of estimating expected returns initially proposed by stein by shrinking the sample averages toward a common mean i find that the out of sample performance of the optimal portfolio is substantially increased one of the implications of this method is that the classical conclusions vastly overestimate the possible gains in average returns instead benefits from diversification are more likely to accrue from a reduction in risk this paper draws on part of my dissertation at the university of chicago i am grateful to arnold zellner michael mussa george constantinides and especially john bilson for useful discussions and comments numerous improvements were also suggested by the referee this research received the generous financial support of the college interuniversitaire d etudes doctorales dans les sciences du management

can hysteresis explain different labour market operations between europe and the united states this paper offers an analysis of the labour market operation in europe and the united states during 1970 1985 it appears that the labour market developments in europe are more characterized by hysteresis than in the united states simulation results indicate that the unemployment rate in europe would have reached the level of that in the united states in 1985 when wage formation had been more similar

production technology elasticity of substitution and technical efficiency of the handloom textile industry of bangladesh a number of translog and cobb douglas frontier production models were estimated for the bangladesh handloom textile industry to investigate its production technology and technical efficiency in production it was found that the technical efficiency of the industry in producing cloth was only 41 it was concluded that the industry might improve its technical efficiency by increasing its male female labour ratio and yarn capital ratio and decreasing its hired family labour ratio and labour capital ratio the production technology of the industry was found to be characterized by a linearly homogeneous cobb douglas function the elasticity of substitution between labour and capital for the industry was found to be unity

a general equilibrium model of international portfolio choice we investigate in a two country general equilibrium model whether a bias in consumption towards domestic goods will necessarily lead to a preference for domestic securities we develop a model where investors are constrained to consume only from their domestic capital stock and where it is costly to transfer capital across countries in this model investors less risk averse than an investor with log utility bias their portfolios towards domestic assets investors more risk averse than log however prefer foreign assets thus this model suggests that it is unlikely that the portfolios observed empirically can be explained by the high proportion of domestic goods in total consumption we investigate in a two country general equilbrium model whether a bias in consumption toward domestic goods will necessarily lead to a preference for domestic assets in an investor s optimal portfolio we constrain investors to consume only from their domestic capital stock and introduce a proportional cost for transferring goods from one country this cost gives rise to endogenous deviations from the law of one price lop thus the home and foreign investors do not hold identical portfolios we show that an investor s optimal portfolio is biased towards domestic equity only if she is less risk averse than an investor with log utility investors with relative risk aversion greater than one exhibit a preference for the foreign asset this is because the exchange rate derived endogenously is negatively correlated with the return on the foreign asset and therefore the translated return on the foreign stock is less risky than that on the domestic stock thus the results of this model suggest that it is unlikely that the preference for domestic assets that is observed empirically can be explained by the high proportion of domestic goods in total consumption there exists a considerable body of literature documenting the gains from international diversification grubel 1968 was the first to propose that international diversification allows investors to attain lower return variances than those achievable by diversifying domestically this proposition relies on the correlation between stock indices across countries being significantly less

the interaction of monetary policy and wages this paper focuses on the interaction of monetary policy and wage formation in economies with strong labor unions government and unions are viewed as endogenous utility maximizers and the macroeconomic consequences of their strategic interaction are explored with the aid of some elements of simple game theory specifically it is shown a how labor unions adjust wages to prices so as to maximize their utility following changes in monetary policy b how the effectiveness of monetary policy is circumscribed without necessarily being nullified by the utility maximizing reactions of unions and c how the interplay of government and unions can create a persistent tendency towards inflation and unemployment simultaneously

exploring new ways of assessing the effect of regulation on environmental management abstract studies indicate that while a variety of factors positively influence voluntary environmental management regulatory pressures are among the most important however most research examines samples representing large manufacturers or single industries essentially assuming a level of regulatory constraint using a sample of heterogeneous facilities this study finds that facilities can be classified according to the level of regulatory constraint and that group membership impacts the choice of environmental management strategy when assessed within a utility maximization framework more extensively regulated facilities implement more individual environmental management practices but participate in fewer formal voluntary environmental programs veps compared to other facilities

cluster analysis for portfolio optimization we consider the problem of the statistical uncertainty of the correlation matrix in the optimization of a financial portfolio by assuming idealized conditions of perfect forecast ability for the future return and volatility of stocks and short selling we show that the use of clustering algorithms can improve the reliability of the portfolio in terms of the ratio between predicted and realized risk bootstrap analysis indicates that this improvement is obtained in a wide range of the parameters n number of assets and t investment horizon the predicted and realized risk level and the relative portfolio composition of the selected portfolio for a given value of the portfolio return are also investigated for each considered filtering method we also show that several of the results obtained by assuming idealized conditions are still observed under the more realistic assumptions of no short selling and mean return and volatility forecasting based on historical data

a krylov subspace approach to large portfolio optimization abstract with a large number of securities n and fewer observations t deriving the global minimum variance portfolio requires the inversion of the singular sample covariance matrix of security returns we introduce the break down free generalized minimum residual bfgmres a krylov subspaces method as a fully automated approach for deriving the minimum variance portfolio bfgmres is a numerical algorithm that provides solutions to singular linear systems without requiring ex ante assumptions on the covariance structure moreover it is robust to illiquidity and potentially faulty data us and international stock data are used to demonstrate the relative robustness of bfgmres to illiquidity when compared to the shrinkage to market methodology developed by ledoit and wolf 2003 the two methods have similar performance as assessed by the sharpe ratios and standard deviations for filtered data in a simulation study we show that bfgmres is more robust than shrinkage to market in the presence of data irregularities indeed when there is an illiquid stock shrinkage to market allocates almost 100 of the portfolio weights to this stock whereas bfgmres does not in further simulations we also show that when there is no illiquidity bfgmres exhibits superior performance than shrinkage to market when the number of stocks is high and the sample covariance matrix is highly singular

unemployment disequilibrium and the short run phillips curve an econometric approach the paper specifies a disequilibrium model for the aggregate labour market consisting of demand and supply functions for labour an adjustment equation for wages as well as for prices a transactions equation and finally an equation that relates measured unemployment to vacancies and to excess demand the model has a more sophisticated treatment of dynamics than earlier disequilibrium models the parameter estimates and the goodness of fit are satisfactory and the model s implications for the behaviour of several important variables are sensible in particular excess demand estimates computed in various ways are reasonable

price inertia and policy ineffectiveness in the united states 1890 1980 this paper introduces a new approach to the empirical testing of the lucas sargent wallace lsw policy ineffectiveness proposition which compares the lsw hypothesis with an alternative that states that prices respond fully in the long run but only gradually in the short run to nominal aggregate demand disturbances the empirical equations estimated for a new set of quarterly data extending back to 1890 exhibit uniformly high responses of real output and low responses of price changes to anticipated changes in nominal gnp the paper compares and tests three alternative methods of introducing persistence effects into the lsw framework

gains from international diversification 1968 85 returns on portfolios of stocks and bonds this paper applies the multi period investment model to a universe of international securities on the basis of the simple probability assessment approach our principal findings are 1 the gains from including non u s asset categories in the universe were remarkably large in some cases statistically significant especially for the highly risk averse strategies 2 the gains from removing the no leverage constraint were more substantial than they were in the absence of non u s securities and 3 there is strong evidence of market segmentation in that the optimal levels of investment in u s securities were mostly zero in the presence of the non u s asset categories