policy watch infrastructure investment and economic growth in the late 1980s david aschauer 1989 triggered a long overdue dialogue among economists and political leaders when he published a study arguing that much of the decline in u s productivity that occurred in the 1970s was precipitated by declining rates of public capital investment my own work confirmed these results munnell 1990a spending advocates seized on these findings as support for increased public investment the enthusiasm among policymakers for the early aschauer results was matched if not surpassed by skepticism on the part of many economists critics of these studies charged that the methodology was flawed that the direction of causation between public investment and output growth is unclear and that even if the historical empirical relationships were estimated correctly they provide no clear indications for current policy who s right what do we know and not know about the link between public infrastructure and productivity and what are the implications of these results for policy

more on estimation risk and simple rules for optimal portfolio selection for the risk averse investor consideration of estimation risk is important in selecting an expected utility maximizing portfolio it has previously been shown that the composition of the tangency portfolio is unaffected by the recognition of estimation risk if the full covariance model is used alternatively if the market model is used the composition of the tangency portfolio has been shown to be affected by the recognition of estimation risk however as is demonstrated in this paper the effect will generally not be as substantive as previously believed and in many situations can be safely ignored in order to determine the composition and location of an efficient frontier from which an optimal portfolio will be selected the investor must employ estimates of expected returns variances and covariances for the set of securities under consideration if the investor simply treats the estimated parameter values for the securities as true parameter values then estimation risk will have been ignored and as shown by barry 1 and klein and bawa 14 15 a suboptimal portfolio will most likely have been selected bawa brown and klein 6 and klein and bawa 14 discuss the effects of estimation risk on the selection of an optimal portfolio from a set of risky assets and note that the location but not the composition of the efficient frontier changes when estimation risk is recognized if security returns are generated by a stationary multivariate normal distribution for which the investor has a diffuse prior furthermore brown 8 has shown these results to be robust for severe misspecification of the underlying multivariate distribution of returns e g assuming it to be normal when in actuality it is student t with small degrees of freedom this paper is concerned with the effects of estimation risk on the composition of the tangency portfolio derived from a set of risky assets and a risk free asset under the assumption that the investor has a diffuse prior 1 barry 2 bawa and brown 4 and brown 7 have shown analytically that the composition of the tangency portfolio is unaffected by estimation risk if the full covariance model is used chen and brown 10 have expanded upon the work of brown 9 and have argued that if security returns are generated by the market model then the composition of the tangency portfolio will be substantively different when estimation risk is recognized

analysts forecasts as proxies for investor beliefs in empirical research abstract we analyze how analysts forecasts relate to investor beliefs and describe the implications of these relations for price and volume reactions to earnings surprises we show that dispersion among forecasts does not fully capture investor uncertainty we also show how the relations between market reactions and forecast properties differ under the alternative assumptions of exogenous and endogenous private information acquisition finally the analysis suggests refined tests for volume reactions at the time of an announcement our results indicate that the model is useful for understanding and interpreting empirical work and developing empirical tests of market reactions to announcements

undocumented immigration and income inequality in the native born population of the us econometric evidence according to the theoretical models suggested by chiswick and others the growing presence of undocumented immigrants in the us should have a disequalizing effect on income distribution in the native born population however this proposition has not been subjected to empirical test here an econometric model of income inequality in native born households is constructed and census based estimates of the state distribution of undocumented immigrants are used to estimate model parameters the results show that such immigration has been disequalizing but that the impact has been small ranking behind several other socio economic variables

womens labour force participation and the distribution of household incomes evidence from cross national data this study investigates the effects of womens labour force participation on household income inequality the theoretical background is examined an econometric model is specified and tested and a simulation is performed it is found that the direction and strength of the income distribution effects depend on the level of womens participation starting from low levels a rise in their activity rates intensifies income inequality but the disequalizing tendency diminishes as participation continues to increase and is replaced by an equalizing process when high levels of participation are attained excerpt

public disclosure private information collection and short term trading abstract this paper examines how public disclosure affects private inforamtion acquisition activity in a market economy we analyze a setting where traders with short term investment horizons are allowed to trade on their private information prior to a public disclosure we demonstrate in this setting that public disclosure stimulates investment in private information acquisition this result is shown to have implications for the magnitude of the pre announcement and announcement price reactions to the disclosure

public capital and the demand for private inputs abstract this paper investigates the impact the provision of public capital has on the demand for private inputs using a cost function with public capital included as a fixed unpaid factor of production the productivity effects of public capital provision are recovered by using duality theory the model is applied to a panel of 31 two digit industries of the west german manufacturing industry it is shown that private and public capital are complements whereas a substitutive relation emerges for labour the empirical evidence suggests that the provision of public capital has a stabilizing but steadily decreasing impact on private input demand

a new measure of earnings forecast uncertainty abstract relying on the well established theoretical result that uncertainty has a common and an idiosyncratic component we propose a new measure of earnings forecast uncertainty as the sum of dispersion among analysts and the variance of mean forecast errors estimated by a garch model the new measure is based on both common and private information available to analysts at the time they make their forecasts hence it alleviates some of the limitations of other commonly used proxies for forecast uncertainty in the literature using analysts earnings forecasts we find direct evidence of the new measure s superior performance

migration theories and evidence an assessment abstract this paper presents a critical survey of theories of migration their welfare and policy implications and their empirical relevance we also develop some extensions to the theory beginning with the harris and todaro ht model in particular the ht model is extended to examine risk averse behaviour within families where the migration of members of families serves to diversify risk the welfare implications of the individual migration decision and government intervention in the form of employment subsidies are examined recent evidence on international migration is presented it is shown that migration does not flow automatically in response to wage differentials characteristics of migrants and the process of self selection are found to be important determinants of the rate of migration

equilibrium pricing and portfolio composition in the presence of uncertain parameters abstract we analyze the effect of parameter uncertainty on equilibrium asset prices for the symmetric case when the amount of estimation risk is the same for all securities the existing literature argues that parameter uncertainty is largely irrelevant for equilibrium our results differ we find that symmetric estimation risk affects equilibrium values of relative asset prices expected returns market weights and betas

information and diversity of analyst opinion this paper examines problems in the use of divergence of analyst opinion as a proxy for estimation risk in empirical studies of security returns and asset pricing models we demonstrate that diversity of opinion can increase even though the amount of private information increases and we show that diversity of opinion may overstate estimation risk if the capital market aggregates the information held by investors we produce empirical results consistent with our conclusions specifically we find that divergence of opinion can produce measures of estimation risk that are inconsistent with a received proxy for estimation risk and with observed common stock returns

predisclosure information firm capitalization and security price behavior around earnings announcements several studies on the relationship between earnings reports and security price behavior provide evidence suggesting that a significant portion of the information revealed through earnings reports is reflected in security prices prior to the report month e g ball and brown 1968 and brown and kennelly 1972 this has been attributed at least partly to the existence of other more timely sources of information which allow market agents to forecast earnings prior to their release the evidence above reflects an average finding across all firms one question of interest is whether there are significant systematic crosssectional differences in the security price reactions to earnings announcements of firms which are associated with specific firm characteristics that lead to differential amounts of predisclosure information this study focuses on firm size capitalization as one such characteristic a firm

measuring forecast uncertainty by disagreement the missing link using a standard decomposition of forecast errors into common and idiosyncratic shocks we show that aggregate forecast uncertainty can be expressed as the disagreement among the forecasters plus the perceived variability of future aggregate shocks thus the reliability of disagreement as a proxy for uncertainty will be determined by the stability of the forecasting environment and the length of the forecast horizon using density forecasts from the survey of professional forecasters we find direct evidence in support of our hypothesis our results support the use of garch type models rather than the ex post squared errors in consensus forecasts to estimate the ex ante variability of aggregate shocks as a component of aggregate uncertainty copyright 2010 john wiley sons ltd

undocumented immigration and unemployment of u s youth and minority workers econometric evidence we use census based data on the state distribution of the undocumented alien population in analyzing the relationship between that population and unemployment among youth and minority workers in the united states regression results from our two equation models do not support commonly expressed fears that undocumented immigration has caused any substantial increases in joblessness among these presumably vulnerable groups although small amounts of displacement are indicated a sizeable reverse effect is evident undocumented immigrants tend to concentrate in states where labor markets for these marginal groups are most favorable excerpt

how to measure labour market effects of immigration a review abstract this paper surveys available empirical evidence on labour market effects of immigration many different approaches have been used already to try to find out whether immigration hurts the labour market opportunities of natives no doubt new approaches will follow in the future as globalization will keep the migration issue on the agenda this literature review discusses the different approaches concentrating on both the methodology and the results at the end it tries to summarize available evidence

infrastructure investment a review essay economists try not to be faddists but they often cannot help themselves while work on a topic should mirror the prospective importance of the topic that situation seems to occur with disappointing frequency instead the usual pattern is that some reasonably important topic will be totally ignored for the longest time then recognized and then the subject of a flurry of work all out of proportion to its likely long run importance nowhere has this speculative bubble of economic research been more clearly illustrated than with infrastructure investment macroeconomists havelong felt that the stock of public capital is an important factor input in the production of total output macroeconomists have known that u s productivity growth slowed dramatically in about 1973 and macroeconomists should have known that united states investment in public capital has been down since the late 1960s yet analysis of the u s productivity slowdown completely ignored infrastructure investment for the first fifteen years of this slowdown concentrating instead on energy prices social regulation the composition of the work force research and development different rates of obsolescence of the private capital stock and any number of other matters the public capital stock was hardly ever even mentioned as a potential factor in the productivity slowdown aschauer changed all that he wrote a series of papers 1989a 1989b 1989c that put these two movements together econometrically infrastructure investment turned down and aggregate productivity turned down slightly later both in the united states and in some other developed countries his work hit the magic button those who had worried about the productivity puzzle for fifteen years welcomed a new suspect those who were worried about low rates of u s national saving welcomed a new way to make their argument even more forcefully than with official figures on saving and investment which do not count infrastructure investment as investment political liberals and liberal politicians saw a way to rescue government spending and projects from the assaults of reaganism and even a way to avoid oth

is all public capital created equal this paper uses a var approach to investigate the effects of public investment on private sector performance in the united states this approach is consistent with the argument that the analysis of

dynamics of public infrastructure industrial productivity and profitability a restricted equilibrium framework is utilized to estimate the contribution of public investment in infrastructure to private sector profitability a restricted cost function in translog form which treats labor and materials as variable inputs and private capital and public sector capital stock in transportation communications and electricity as quasi fixed inputs is specified a system of non linear equations comprising variable cost function and derived input demand equations is estimated using data from 1970 to 1987 for twenty six mexican three digit manufacturing industries the divergence of private and public capital stocks from their static equilibrium levels is estimated the net rate of return to fixed factors is also calculated estimates of allocative efficiency are derived the study further provides estimates of short run and long run scale economies output elasticity of factors measures of productivity growth and technical change economic significance and policy implications of the findings are also presented copyright 1992 by mit press

public capital and total factor productivity new evidence from the italian regions 1970 98 destefanis s and sena v 2005 public capital and total factor productivity new evidence from the italian regions 1970 98 regional studies 39 603 618 this paper analyses the relationship between industrial total factor productivity and public capital across the 20 italian administrative regions it adds upon the existing literature in a number of ways it analyses a longer period 1970 98 it allows for the role of human capital accumulation it tests for the existence of a long run relationship between total factor productivity and public capital through previously suggested panel techniques and for weak exogeneity of public capital and it assesses the significance of public capital within a non parametric set up based on the free disposal hull the results confirm that public capital has a significant impact on the evolution of total factor productivity particularly in the southern regions this impact is mainly ascribed to the core infrastructures road and airports harbours railroads w

the value of school facility investments evidence from a dynamic regression discontinuity design author s cellini stephanie riegg ferreira fernando rothstein jesse abstract despite extensive public infrastructure spending surprisingly little is known about its economic return in this paper we estimate the value of school facility investments using housing markets standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow margins we extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices student achievement and district composition our results indicate that california school districts underinvest in school facilities passing a referendum causes immediate sizable increases in home prices implying a willingness to pay on the part of marginal homebuyers of 1 50 or more for each 1 of capital spending these effects do not appear to be driven by changes in the income or racial composition of homeowners and the impact on test scores appears to explain only a small portion of the total housing price effect c 2010 by the president and fellows of harvard college and the massachusetts institute of technology

consensus forests of corporate earnings analysts forecasts and time series methods an alternative to using a single forecasting method is to average the forecasts made by various methods in this paper we examine empirically combinations of financial analysts forecasts and forecasts from time series methods in order to predict corporate earnings per share we conclude that on average the primary forecasting advantages of analysts over time series methods based on annual data appear to occur over short forecast horizons less than a year neither analysts nor other time series methods substantially outperform a random walk prediction of no change when forecasts are made near the beginning of the fiscal year for predictions in the first half of the fiscal year there is evidence of forecasting benefits from combining time series and analysts forecasts especially if there are few analysts forecasts

estimation risk and simple rules for optimal portfolio selection elton gruber and padberg egp 6 7 have recently simplified the process of constructing optimal portfolios by developing simple criteria for optimal portfolio selection which do not involve use of mathematical programming their simple decision rules permit one to determine easily which securities to include in an optimal portfolio and how much to invest in each however in practical applications of theoretical models sample estimators are usually treated as if they were true values of unknown parameters as a result the effect of the standard errors of sample estimators on decision rules are completely ignored bawa brown and klein 1 have shown that what is optimal in the absence of estimation risk is not necessarily optimal or even approximately optimal in the presence of estimation risk moreover brown 4 examined optimal portfolio choice under uncertainty for various portfolio selection procedures the diffuse bayes rule the markowitz certainty equivalent ce rule the aggregation ce rule and the equal weight rule 1 and found that the diffuse bayes rule uniformly dominates the markowitz ce rule in repeated samples for the quadratic utility case as the sample size increases the bayes rule becomes superior to the aggregation ce and the equal weight rules in addition the result holds even where the probability distribution of returns is seriously misspecified thus brown s 4 study has clearly indicated that without taking estimation risk into account portfolio selection rules other than the bayes rule can lead investors to select suboptimal portfolios this paper shows by using the single index model for the return generating process that the simple decision rules for optimal portfolio selection derived by elton gruber and padberg 7 are not identical under the bayesian and the traditional methods of analysis 2 moreover in the case where short sales are not

institutional ownership differential predisclosure precision and trading volume at announcement dates abstract this study examines the relation between ownership structure as revealed by the percentage of outstanding shares held by institutional investors and trading volume at earnings announcement dates we find that volume response as a function of institutional ownership is quadratic with the quadratic curve that reaches a maximum at around 50 institutional ownership when risk tolerances are identical across investor types such a relation is consistent with kim and verrecchia s 1991a proposition that trading volume response to public announcements increases with the level of cross investor variation in precision of private predisclosure information

trading volume reactions to annual accounting earnings announcements the incremental role of predisclosure information asymmetry abstract this study provides empirical evidence regarding the effect of annual accounting earnings announcements on investors trading behavior we find that the magnitude of trading volume reaction is an increasing function of both the magnitude of the associated price reaction and the level of predisclosure information asymmetry these results are consistent with kim and verrecchia s 1991a theoretical trading volume proposition

intertemporal tax discontinuities we define an intertemporal tax discontinuity itd as a circumstance in which different tax rates are applied to gains realized at one point in time versus some other point in time we study the effects of itds on market behaviors at the time of disclosures of firm performance assuming that all investors who trade firm equities are subject to tax the results of our paper suggest that relative to an economy in which itds are absent itds may dampen trading volume and amplify price changes at the time of disclosure

the political economy of immigration law impact of simpson rodino on the united states and mexico about two years ago the united states passed the immigration reform and control act also called the simpson rodino bill of 1986 the act called for increased enforcement of migration policy employer sanctions and amnesty for those who could prove continuous residence since 1982 despite considerable discussion and debate prior to the act the legislation was passed without any comprehensive economic analysis of its potential impact on the united states or its main source of undocumented immigration mexico notwithstanding the politically charged atmosphere surrounding the bill the sense among many in congress and the white house that we need to restore control over our borders and the determination by mexico to stay out of what it regarded as a domestic u s legislative matter the absence of attention to basic economics in a bill so fundamental to the performance of both countries was surprising in this paper we shall look at some implications of the recent immigration law for both economies given their widely differing levels of income and productivity the challenges each faces to restructure its economy given increased international competitiveness and the particular problems and opportunities presented by a common border with growing labor market interdependence by our calculations the economic opportunity cost of simpson rodin o as compared to continuation of the prior status quo will add up to a present value of 110 billion between now and the year 2000 a general equilibrium approach to the problem of migration policy indicates that the united states has even more to gain than mexico from greater accessibility to mexican labor in the next decade than simpson rodino would permit however the gains to capital and the majority of higher skilled workers would be partially offset by slower earnings growth for the lowest 10 percent of its wage earners mexico on the

public sector capital and the productivity puzzle a number of studies have suggested a quantitatively important relationship between public sector capital accumulation and private sector productivity with the most compelling evidence derived from analyses of state level data estimates herein of production functions that use standard techniques to control for unobserved state specific characteristics however reveal essentially no role for public sector capital in affecting private sector productivity only estimates of state production functions that do not include such controls find substantial productivity impacts this result reconciles existing econometric estimates with the findings of hulten and schwab based on growth accounting techniques as such techniques effectively control for state specific effects region level estimates are essentially identical to those from state data suggesting no quantitatively important spillover effects across states copyright 1994 by mit press

empirical estimates of beta when investors face estimation risk we examine empirical implications of models of differential information that formalize the following intuition securities for which there is relatively little information are perceived as relatively more risky because of the greater uncertainty surrounding the exact parameters of their return distributions the implication that beta risk for low information firms should decline as information increases is confirmed with several data sets we find such a decline over the first geveral periods subsequent to initial public offerings and initial listings there is also an abrupt risk decline at the first annual earnings announcement this paper examines several empirical implications of security return models involving differential information these models formalize the following intuition securities for which there is relatively little information are perceived as relatively more risky because of the greater uncertainty surrounding the exact parameters of their return distributions the research relates to two streams of literature the first revolves around the new issues and new listings market it begins with ibbotson 1975 and includes for example ritter 1984 beatty and ritter 1986 mcconnell and sanger 1987 and muscarella and vetsuypens 1989 the second is the literature dealing with the effects of differential information on the risk assessment of low information firms this second literature is exemplified by the work of klein and bawa 1976 1977 and barry and brown 1984 1985 in our examination we focus on how increased risk associated with low information firms henceforth called estimation risk manifests itself in observed return data we explore how observed security returns to low information firms appear to researchers in relation to how they appear ex ante to investors who base their predictive distribution of security returns on incomplete information about the parameters of the return generating process we also examine data on new listings and new issues to exemplify some of the relationships the data support the most obvious and direct implication of the differential information model that the expected systematic risk of low information firms decreases as time passes and information increases our evidence as in ibbotson that risk declines with seasoning rejects a restrictive null hypothesis that information risk is diversifiable and the under

measuring investors opinion divergence numerous proxies for divergence of investors opinions have been suggested in the empirical accounting and finance literatures i offer a new proxy constructed from proprietary limit order and market order data this allows me to capture additional information on investors private valuations proxies from the extant literature based on publicly available data do not contain such information given my new measure i ask which of the extant proxies correlates best with it in my regression analysis unexplained volume is the best proxy for opinion divergence conditioning on various firm specific and order specific characteristics generally does not change this conclusion the main exception is the sample of firms without ibes forecast dispersion data for which bid ask spread is the best proxy for opinion divergence factor analysis also suggests that unexplained volume is the preferred proxy for opinion divergence

when does government debt crowd out investment summary we examine when government debt crowds out investment for the us economy using an estimated new keynesian model with detailed fiscal specifications and accounting for monetary and fiscal policy interactions whether investment is crowded in or out in the short term depends on policy shocks triggering debt expansions higher debt can crowd in investment for cutting capital tax rates or increasing government investment contrary to the conventional view no systematic relationships between real interest rates and investment exist explaining why reduced form regressions are inconclusive about crowding out at longer horizons distortionary financing is important for the negative investment response to debt copyright 2013 john wiley sons ltd

biased forecasts or biased earnings the role of reported earnings in explaining apparent bias and over underreaction in analysts earnings forecasts the extensive literature that investigates whether analysts earnings forecasts are biased and or inefficient has produced conflicting evidence and no definitive answers to either question this paper shows how two relatively small but statistically influential asymmetries in the tail and the middle of distributions of analysts forecast errors can exaggerate or obscure evidence consistent with analyst bias and inefficiency leading to inconsistent inferences we identify an empirical link between firms recognition of unexpected accruals and the presence of the two asymmetries in distributions of forecast errors that suggests that firm reporting choices play an important role in determining analysts forecast errors r 2003 elsevier b v all rights reserved

is public expenditure productive abstract this paper considers the relationship between aggregate productivity and stock and flow government spending variables the empirical results indicate that i the nonmilitary public capital stock is dramatically more important in determining productivity than is either the flow of nonmilitary or military spending ii military capital bears little relation to productivity and iii a core infrastructure of streets highways airports mass transit sewers water systems etc has most explanatory power for productivity the paper also suggests an important role for the net public capital stock in the productivity slowdown of the last fifteen years

using jump diffusion return models to measure differential information by firm size portfolios of stocks issued by small firms are well known to earn rates of return in excess of those commensurate with their market sensitivities one common explanation for this phenomenon is that small firm stocks are riskier than large firm stocks because less information is available about the former than about the latter a necessary condition for such an explanation to be valid is that the information effect not be eliminated by combining the individual stocks into portfolios this paper uses jump diffusion return models to gauge the impact of information by firm size the results show that portfolios of small firm stocks are no more prone to information surprises than are portfolios of large firm stocks however portfolios of small firm stocks are found to react more severely than portfolios of large firm stocks when surprises do occur

public capital accumulation and private sector performance abstract this paper analyzes the effects of public capital on private sector variables in a vector auto regressive framework empirical results suggest first that public capital follows a policy rule that relates public capital positively with lagged output and negatively with lagged employment second public capital crowds in private capital while the long term effects on employment are only marginally positive finally a one dollar increase in public capital increases private output in the long term by 65 cents accordingly while public capital is productive its effects on output are much lower than claimed in the previous literature

market response to financial reports abstract a two date rational expectations model is analyzed at the first date traders can privately acquire a costly signal that provides imperfect information about a public report that will be issued at the second date equilibrium characterizations are provided for the fraction of traders that become informed and the informativeness of the first date price as well as the price change variance and the expected trading volume at the second date comparative statics identify how the above variables are influenced by changes in the information content of the public report and in particular how market phenomena at the public release date are influenced by endogenous prior information acquisition and trading in response to the forthcoming public release

the dynamics of population growth differential fertility and inequality studies of population growth relative to income distribution from single equation and simultaneous equation models have shown that higher population growth rates increase inequality the reasons for this inequality contain important welfare issues including the fact that different income groups grow at different rates with lower income the fastest the differential fertility of the income groups complicates these issues the lorenz curve has often been used as a foundation of the theory of inequality comparisons and uses cumulative shares of income as a function of cumulative shares of population the mortality rates age of new entrants and the mobility across income groups must be factored in these can be analyzed simultaneously using a multistate life table which describes simultaneous transitions across age groups and states data from brazil was used to test whether increase in the fertility rates of the poor would affect income inequality the results indicate a 100 increase in the fertility of the poor which increases the percentage of poor in the equal fertility case there were decreases in the percent of poor from the original number these results confirm that inequality measures can give conflicting signals and could be inconsistent with real changes in relative welfare analyzing relationships between population growth and inequality is difficult and standard measures are inadequate to test hypotheses about the distribution effects of migration or high fertility it appears to be impossible to differentiate changes in population make up from changes in economic status

on public capital hypothesis with breaks abstract this paper further investigates the link between private output and public infrastructure capital for four advanced economies by using a general type of cointegration that allows for parameter changes at an a priori undetermined point in time

differential information and security market equilibrium we propose a simple model of equilibrium asset pricing in which there are differences in the amounts of information available for developing inferences about the returns parame ters of alternative securities in contrast with earlier work we show that parameter uncer tainty or estimation risk can have an effect upon market equilibrium under reasonable conditions securities for which there is relatively little information are shown to have relatively higher systematic risk when that risk is properly measured ceteris paribus the initially very limited model is shown to be robust with respect to relaxation of a number of its principal assumptions we provide theoretical support for the empirical examination of at least three proxies for relative information period of listing number of security returns observations available and divergence of analyst opinion

dispersion of financial analysts earnings forecasts and the option model implied standard deviations of stock returns this study examines whether the information implied by simultaneous levels of option and stock prices specifically the implied standard deviation of returns reflects other contemporaneously available information the independent contemporaneous measure considered is the observed dispersion across several financial analysts at a point in time in the forecasts of earnings per share for a given firm the results indicate that implied standard deviations clearly reflect the contemporaneous dispersion in analysts forecasts incrementally i e beyond the information contained in the historical time series of returns various tests of the black scholes option pricing model have appeared in the literature the basic formulation posits the price of a call option to be a function of the simultaneous market price of the underlying stock the instantaneous variance of the stock s rate of return the exercise price and time to maturity of the option and the risk free interest rate studies by black and scholes 2 galai 8 chiras and manaster 4 and macbeth and merville 12 used the formula to explain the observed prices of options to a successful degree in these tests all the information needed by the formula was directly observable except the instantaneous stock return variance which was measured as the time series variance of historical stock returns manaster and rendleman 14 inverted the procedure to calculate implied stock prices and implied standard deviations of stock returns simultaneously and showed that such implied prices contain information regarding equilibrium future stock prices that is not fully reflected in observed stock prices another set of studies see latane and rendleman 11 chiras and manaster 4 schmalensee and trippi 16 among others examined the properties of the implied instantaneous variance or standard deviation of stock returns that falls out of the formula when the values of all remaining variables are supplied in a test of the predictive ability of such implied standard deviations isd s chiras and manaster 4 found that for predicting future actual time series standard deviations fsd s of stock returns the isd s were superior predictors relative

consumption and housing wealth breakdown of the effect of a rise in interest rates in this article the effect on consumption of a fall in housing wealth and housing prices resulting from an increase in interest rates is estimated with the help of a dynamic multiequation macroeconomic model the consumer response function is broken down into two parts a direct response related to a rise in the cost of credit and another indirect one related to the deterioration of the property market estimation of the theoretical model is done by means of a vectorial error correction vec model

measuring the contribution of public infrastructure capital in sweden the authors purpose is to examine ways of evaluating and measuring the contribution of public infrastructure capital to private sector output and productivity growth in sweden they do this by specifying and implementing empirically a number of alternative econometric models using annual data for sweden from 1960 to 1988 applying a dual cost function approach they find that increases in public infrastructure capital ceteris paribus reduce private sector costs the authors compute that amount of public infrastructure capital that would rationalize the cost savings incurred by the private business and manufacturing sectors and find that the amount that can be rationalized in this manner is less than what was in fact available in 1988 but that the extent of excess public infrastructure capital has been falling in the 1980s copyright 1992 by the editors of the scandinavian journal of economics

factor rewards and the international migration of unskilled labor a model with capital mobility abstract conventional economic wisdom holds that the migration of unskilled labor from less developed countries to neighboring developed countries should be expected to narrow the wage gap between those countries and thereby reduce the incentive for further migration if capital is mobile internationally this reasoning may be inappropriate instead emigration of unskilled labor out of the less developed country provides an incentive for capital to leave the country too as a consequence wage rates move in the same direction in each country and the gap between wage rates across countries even may increase

airline traffic and urban economic development this paper provides new evidence on the link between airline traffic and employment in us metropolitan areas the evidence confirms the common view that good airline service is an important factor in urban economic development frequent service to a variety of destinations reflected in a high level of passenger enplanements facilitates easy face to face contact with businesses in other cities attracting new firms to the metro area and stimulating employment at established enterprises the empirical results show that a 10 per cent increase in passenger enplanements in a metro area leads approximately to a 1 per cent increase in employment in service related industries however airline traffic has no effect on manufacturing and other goods related employment suggesting that air travel is less important for such firms than for service related businesses these estimates are generated controlling for reverse causality between employment and traffic the results imply that expansion of chicago s o hare ai

confirming management earnings forecasts earnings uncertainty and stock returns in this study we examine the association among confirming management forecasts stock prices and analyst expectations confirming management forecasts are voluntary disclosures by management that corroborate existing market expectations about future earnings this study provides evidence that these voluntary disclosures affect stock prices and the dispersion of analyst expectations specifically we find that the market s reaction to confirming forecasts is significantly positive indicating that benefits accrue to firms that disclose such forecasts in addition although we find no significant change in the mean consensus forecasts a proxy for earnings expectations around the confirming forecast date evidence indicates a significant reduction in the mean and median consensus analyst dispersion a proxy for earnings uncertainty finally we document a positive association between the reduction of dispersion of analysts forecasts and the magnitude of the stock market response overall the evidence suggests that confirming forecasts reduce uncertainty about future earnings and that investors price this reduction of uncertainty

housing investment in spain has it been the main engine of growth this article studies dynamic responses of employment and gross domestic product gdp growth to a permanent unitary shock in the housing capital stock for the spanish economy it quantifies the importance of this variable in the boom experienced by the spanish economy during the pre crisis years results confirm that building industry has been the most important engine for output and labour growth

the impact of infrastructure expenditure types on regional income in turkey kara m a tas s and ada s the impact of infrastructure expenditure types on regional income in turkey regional studies infrastructure investments that enhance regional economic performance and competitiveness fall into two categories economic and social economic infrastructure investments i e highways power generation and water facilities can directly increase regional production potential and social infrastructure investments i e education and healthcare can aid regional income by improving labour productivity this study identifies how different types of infrastructure expenditures affect regional incomes in turkey as per results drawn from data of 2004 08 infrastructure expenditures enhance regional income in turkey social infrastructure investments and education expenditures demonstrate greater impact on regional income

financial analysts forecasts of earnings a better surrogate for market expectations abstract the specification of the market expectation of accounting numbers is a common feature of many empirical studies in accounting and finance givoly and lakonishok 1979 found that financial analysts forecasts have information content this study evaluates the quality of analysts forecasts as surrogates for the market expectation of earnings and compares it with that of prediction models commonly used in research results indicate that prediction errors of analysts are more closely associated with security price movements suggesting that analysts forecasts provide a better surrogate for market expectations than forecasts generated by time series models the study also identifies factors that might contribute to the performance of the financial analysts forecasts the broadness of the information set employed by analysts and to a lesser extent their reliance on information released after the end of the fiscal year appear to be important contributors to their performance

consensus and uncertainty in economic prediction we define consensus as the degree of agreement among point predictions aimed at the same target by different individuals and uncertainty as the diffuseness of the corresponding probability distributions this distinction is made operational with the aid of the nber asa survey data on matched point and probabilistic forecasts of inflation and the rate of change in gross national product the means of the two sets of forecasts agree closely standard deviations of point forecasts tend to understate uncertainty as measured by standard deviations of the predictive probability distributions however these measures of consensus and uncertainty are on the whole positively correlated there is evidence that expectations of higher inflation generate greater uncertainty about inflation tests also favor the hypothesis that a rise in inflation uncertainty has adverse effects on real growth

a temporal analysis of earnings surprises profits versus losses i show that median earnings surprise has shifted rightward from small negative miss analyst estimates by a small amount to zero meet analyst estimates exactly to small positive beat analyst estimates by a small amount during the 16 years 1984 to 1999 i show that a rightward temporal shift in median surprise from negative to positive describes earnings but neither profits nor losses median profit surprise shifts within the positive quadrant from zero to one cent per share median loss surprise shifts within the negative quadrant from extreme negative about 33 cents per share to zero i show that the median surprise for profits exceeds that for losses in every year i document significant positive temporal trends in both meet and beat analyst estimates for both profits and losses but i find a greater frequency of profits that either meet or beat analyst estimates in every year i find a significant positive temporal trend in positive profits that are a little bit of good news and a significant negative temporal trend in managers who report losses that are an extreme amount of bad news my results are robust to the four internal validity threats i consider namely temporal changes in 1 analyst forecast accuracy 2 the mix of earnings of one sign preceded by earnings of another sign four quarters ago 3 the timeliness of the most recent analyst forecast and 4 the i b e s definition of actual earnings i find that managers of growth firms are relatively more likely than managers of value firms to report good news profits i show that when they do report positive profit surprises managers of growth firms are more likely to report a little bit of good news in every year

spillover effects of public capital formation evidence from the spanish regions maybe because of the inconclusive nature of the results on the impact of public capital on output at the regional level the issue of the po ssible existence of the regional spillovers from public capital formation has received little attention the objective of this paper is to provide evidence on the possible existence of such spillovers we consider the case of spain and its seventeen regions our methodological approach consists in estimating an aggregate var model for spain as well as seventeen region specific var models in which both capital installed in the region and capital installed outside the region are allowed to play a role in en hancing regional output the estimation results can be summarized as follows the aggregate effects of public capital formation in spain are important they cannot however be captured in their entirety by the direct effects in each region from public capital installed in the region itself when for each region both the capital installed in the region and the capital installed outside the region are considered the total disaggregated effect from the seventeen regional models are very much in line with the aggregate results furthermore the aggregate effect seems to be due in almost equal parts to the direct and spillover effects of public capital formation ultimately this paper establishes the relevance of both capital installed in each region and s pillover effects in the understanding of the regional decomposition of the aggregate effects of public capital formation in doing so it opens the door to some tantalizing and potentially highly charged research issues in terms of the determination of the optimal location of public investment projects

information aggregation in a noisy rational expectations economy abstract this paper analyzes a general equilibrium model of a competitive security market in which traders possess independent pieces of information about the return of a risky asset each trader conditions his estimate of the return both on his own private source of information and price which in equilibrium serves as a noisy aggregator of the total information observed by all traders a closed form characterization of the rational expectations equilibrium is presented a counter example to the existence of fully revealing equilibrium is developed