risk aversion in contests in a contest participants spend money or effort to increase their chances of winning a prize the authors examine primarily the following question could the timid the more risk averse have a better chance of winning in contests under limited liability the answer is always positive in the absence of limited liability there is no single answer whereas when the prize is shared as a function of effort the outcome is independent of the contestants risk aversion the authors also relate their results to self protection and examine some other implications of risk aversion copyright 1995 by royal economic society

50th anniversary article option pricing valuation models and applications this paper surveys the literature on option pricing from its origins to the present an extensive review of valuation methods for european and american style claims is provided applications to complex securities and numerical methods are surveyed emphasis is placed on recent trends and developments in methodology and modeling

econometric developments in agricultural and resource economics the first 100 years this article reviews the major contributions of agricultural and resource economists in the area of econometrics over the past 100 years early on a number of agricultural economists were in on the ground floor in terms of developing new econometric methods over time as the economics profession became more empirically oriented agricultural and resource economists increasingly assumed the role of early adopters of new econometric methods even so agricultural and resource economists continue to make useful modifications to econometric techniques in order to adapt the methods to the unique nature of the problems and applications that we study

insider trading as a signal of private information there is substantial evidence that insider trading is present around corporate announcements and that this insider trading is motivated by private information using real estate investment trusts that choose to reappraise themselves as our sample we establish that the appraisals contain information but find no market response to the public announcement of this information in these appraisals we consider two possible explanations for this inconsistency the first that the appraisal information is not highlighted in earnings reports and hence remains unobserved and the second that insiders trade on the appraisal information in the time that elapses between the appraisal and its public announcement we find strong support for the second hypothesis with insiders buying selling after they receive favorable unfavorable appraisal news especially for negative appraisals we also find that positive negative appraisals and net insider buying selling elicit significant positive negative abnormal returns during the appraisal period article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

variance of agricultural prices industrial prices and money the relative uncertainty of agricultural prices and industrial prices with respect to the uncertainty of growth in the money supply are investigated utilizing multivariate arch and garch analysis the conditional variances of agricultural prices were shown to dwarf the variances of industrial prices and the money supply the relatively greater sensitivity of the conditional variance of agricultural prices to changes in the variance of the money supply than industrial prices found in this analysis provides a further perspective on the uncertainty confronting farmers including the impacts of the monetary policy shock that precipitated the farm financial crisis in the early 1980s

expectations and commodity price dynamics the overshooting model comment commodity markets at the top of page 345 an arbitrage condition is asserted for commodity prices but we have an arbitrage condition that must hold in the commodity markets since commodities are storable the rate of return on treasury bills can be no greater than the expected rate of increase of commodity prices plus storage costs but this is not an arbitrage condition in the commodity markets that is when the condition is violated risk free arbitrage does not necessarily occur at first reading the condition in the quoted sentence appears to be

anomalies risk aversion economists ubiquitously employ a simple and elegant explanation for risk aversion it derives from the concavity of the utility of wealth function within the expected utility framework we show that this explanation is not plausible in most applications since anything more than economically negligible risk aversion over moderate stakes requires a utility of wealth function that is so concave that it predicts absurdly severe risk aversion over very large stakes we present examples of how the expected utility framework has misled economists and why we believe a better explanation for risk aversion must incorporate loss aversion and mental accounting

a new method of estimating risk aversion i show existing evidence on labor supply behavior places an upper bound on risk aversion in the expected utility model i derive a formula for the coefficient of relative risk aversion in terms of the ratio of the income elasticity of labor supply to wage elasticity and degree of complementarity between consumption and labor i bound the degree of complementarity using data on consumption choices when labor supply varies across states using labor supply elasticity estimates i find a mean estimate of 1 then show generating 2 requires that wage increases cause sharper labor supply reductions jel d81 j22

psychological factors and stock option exercise we investigate stock option exercise decisions by over 50 000 employees at seven corporations controlling for economic factors psychological factors influence exercise consistent with psychological models of beliefs employees exercise in response to stock price trends exercise is positively related to stock returns during the preceding month and negatively related to returns over longer horizons consistent with psychological models of values that include reference points employee exercise activity roughly doubles when the stock price exceeds the maximum price attained during the previous year

monetary impacts on prices in the short and long run some evidence from new zealand this paper presents support for long run monetary neutrality based on evidence that individual time series for money manufacturing prices and agricultural prices are nonstationary but cointegrated with a stationary proportional long run relationship among their levels dynamic simulations from a vector error correction model with this restriction imposed show that monetary shocks shift relative prices in favor of agriculture in the short run and permanently raise nominal prices manufacturing price shocks have similar long run effects but initially place agriculture in a cost price squeeze while agricultural price shocks are transitory and have little impact on the other series

on passive money there are two ways in which the quantity of money may be included in a general equilibrium system as a datum whose value is fixed exogenously or as an unknown whose value is determined by the equilibrium system itself let them be called active money and passive money respectively current monetary theory uses the first approach the ricardo walraskeynes tradition in general equilibrium models is clearly of the activemoney variety this is also true of the more contemporary versions such as patinkin s well known system 1965 apart from the main stream of thought however a number of analyses exist which imply passive money the gold standard model as it is usually expounded belongs to this class the price of gold in terms of money is given while the stock of money is endogenously determined by the set of equilibrium conditions the form in which the quantity of money adapts to its equilibrium level differs according to the institutional mechanism convergence is assured through monetization and demonetization of gold in the pure goldcurrency system and through convertibility of notes into gold and vice versa in the gold standard system with paper money in either case the money supply is allowed to conform to its equilibrium volume this kind of monetary system in which the money price of a certain product or commodity is a datum and the quantity of money a dependent magnitude may be denoted in general as a commodity standard

exercise behavior valuation and the incentive effects of employee stock options abstract we use a large database on eso exercises to document characteristics of exercise behavior and calibrate a utility based model for measuring how differences in exercise behavior are manifested in option values and incentives option values and incentives computed from the model calibrations are compared to those computed from models used to value tradable options our analysis provides guidance to both academics and practitioners about how differences in exercise behavior and model choice affect measures of eso values and incentives and underscores the importance of gaining a thorough understanding of the underlying economic forces that affect the behavior of eso holders

the subjective and objective evaluation of incentive stock options owners of incentive options invariably hold undiversified portfolios this paper derives a model for the subjective and objective values of such options the subjective value the value to the holder is less than the market value because the option is held in an undiversified portfolio and because it is exercised suboptimally from the market perspective the objective value is the cost to the firm of issuing the option and lies between the market and subjective values this value recognizes the suboptimal exercise but not the undiversified discount the model which is the black scholes model with modified parameters is simple to use

money and the dispersion of relative prices a price dispersion equation is tested with data from the german hyperinflation the equation is derived from a version of lucas s and barro s partial information localized market models in this extension different excess demand elasticities across commodities imply a testable dispersion equation in which the explanatory variable is the magnitude of the unperceived money growth in order to test this hypothesis a price dispersion series is constructed and a measure of the unperceived part of money growth is estimated the model receives support from the empirical analysis although it is evident that unincluded variables have important effects on price dispersion

are women more risk averse we find that single women exhibit relatively more risk aversion in financial decision making than single men using u s sample data we examine household holdings of risky assets to determine whether there are gender differences in financial risk taking as wealth increases the proportion of wealth held as risky assets is estimated to increase by a smaller amount for single women than for single men gender differences in financial risk taking are also influenced by age race and number of children greater financial risk aversion may provide an explanation for women s lower levels of wealth compared with men s jel j16 d81 g11

green taxes in a post paris world are millions of nays inevitable turning the paris agreement s greenhouse gas emissions pledges into domestic policies is the next challenge for governments we address the question of the acceptability of cost effective climate policy in a real voting setting first we analyze voting behavior in a large ballot on energy taxes rejected in switzerland in 2015 by more than 2 million people energy taxes were aimed at completely replacing the current value added tax we examine the determinants of voting and find that distributional and competitiveness concerns reduced the acceptability of energy taxes along with the perception of ineffectiveness most people would have preferred tax revenues to be allocated for environmental purposes second at the same time of the ballot we tested the acceptability of alternative designs of a carbon tax with a choice experiment survey on a representative sample of the swiss population survey respondents are informed about environmental distributional and competitiveness effects of each carbon tax design these impacts are estimated with a computable general equilibrium model this original setting generates a series of novel results providing information on the expected environmental effectiveness of carbon taxes reduces the demand for environmental earmarking making distributional effects salient generates an important demand for progressive designs e g social cushioning or recycling via lump sum transfers the case of lump sum recycling is particularly striking it is sufficient to show its desirable distributional properties to make it one of the most preferred designs which corresponds to a completely novel result in the literature we show that providing detailed information on the functioning of environmental taxes may contribute to close both the gap between acceptability ex ante and ex post and the gap between economists prescriptions and the preferences of the general public

monetary policy shocks and the dynamics of agricultural commodity prices evidence from structural and factor augmented var analyses fluctuation in commodity prices is a significant and timely issue to be studied this study is to examine the impact of monetary policy and other macroeconomic shocks on the dynamics of agricultural commodity prices the major contributions of this study are twofold first unlike other studies that use indexes this study analyzes the commodities individually affording the inclusion of commodity specific fundamentals such as the level of inventory an important determinant of commodity price in a structural var framework second it exploits a rich data set of agricultural commodity prices which includes commodities that are usually overlooked in the literature and extracts a common factor using the dynamic factor model to understand the extent of comovement of the prices and to gauge the extent to which macroeconomic shocks drive the comovement in a factor augmented var favar framework the findings show that monetary policy global economic conditions and the u s dollar exchange rates play an important role in the dynamics of agricultural commodity prices

forecasting vector autoregressions with bayesian priors the paper explores the justification for and application of bayesian priors in forecasting a vector autoregression a nonsymmetric random walk prior outperforms three alternative time series representations in forecasting five series of the u s hog market

the effects of macroeconomic announcements on commodity prices this article analyzes the immediate reaction of a representative sample of commodity prices and two t bill yields to the unanticipated components of thirteen macroeconomic announcements surprises in the monetary variables cause the majority of the significant commodity price responses while these plus other cyclical surprises such as the unemployment rate cause significant lumber and t bill reactions the results provide strong support for the policy anticipations hypothesis and against the inflationary expectations hypothesis i e that monetary surprises cause changes in real interest rates rather than in nominal rates only as the inflationary expectations hypothesis contends

are risk aversion and impatience related to cognitive ability is the way that people make risky choices or tradeoffs over time related to cognitive ability this paper investigates whether there is a link between cognitive ability risk aversion and impatience using a representative sample of the population and incentive compatible measures we conduct choice experiments measuring risk aversion and impatience over an annual time horizon for a randomly drawn sample of roughly 1 000 german adults subjects also take part in two different tests of cognitive ability which correspond to sub modules of one of the most widely used iq tests interviews are conducted in subjects own homes we find that lower cognitive ability is associated with greater risk aversion and more pronounced impatience these relationships are significant and robust to controlling for personal characteristics educational attainment income and measures of credit constraints we perform a series of additional robustness checks which help rule out other possible confounds

endogenous matching and the empirical determinants of contract form empirical work on contracts typically regresses contract choice on observed principal and agent characteristics if i some of these characteristics are unobserved or partially observed and ii there are incentives whereby particular types of agents end up contracting with particular types of principals estimated coefficients on the observed characteristics may be misleading we address this endogenous matching problem using a data set on agricultural contracts between landlords and tenants in early renaissance tuscany controlling for endogenous matching has an impact on parameters of interest and tenants risk aversion appears to have influenced contract choice

identifying monetary impacts on agricultural prices in var models since the mid 1970s a number of studies have used vector autoregressive var models to evaluate the magnitude and timing of macroeconomic impacts on agriculture use of the var method has been viewed as a way to obtain empirical evidence about these impacts that might not emerge from more traditional overidentified and less dynamic econometric models the hope has been that by placing minimal restrictions on var models the true structure of the economic relationships under investigation can be observed while the aim is laudable critics of var models have argued that it has had the unfortunate consequence of obscuring some important structural identification issues and seeming to promise that something can be obtained for nothing cooley and leroy leamer they point out that identifying restrictions are required to give economically interpretable meaning to the results of any simultaneous equation model sem in standard practice identification of var models is obtained implicitly by choice of a choleski decomposition of the covariance matrix of one step ahead forecast errors which is equivalent to imposing a recursive structure for the economy of concern is that the recursive structure may not be believable further as bernanke has observed examination of ad hoc variants of the recursive order implies a strange set of prior beliefs in which the analyst holds strongly that the system is recursive but is not sure in what order the variables should be arranged in response to these concerns several recent papers have pointed out that identification of var models does not have to rely on the assumption that the contemporaneous structure is recursive bernanke sims rather the distinguishing features of a var model are first that identification rests on the assumption that distinct mutually orthogonal behavior shocks drive the economy and second that lagged relationships among the endogenous and exogenous variables if any are left entirely unrestricted given these features a var model must be identified solely by restrictions placed on the contemporaneous interactions among the variables but the identifying restrictions do not have to preclude simultaneity in this paper we elaborate on the structural interpretation of var models and use this analysis to examine monetary impacts on agricultural prices we discuss the identification problem and the implications of a recursive structure we illustrate our points with respect to the three variable model of money industrial prices and agricultural prices that has been used in several articles to evaluate the effects of monetary shocks on price dynamics bessler devadoss and meyers we then introduce a somewhat richer behavioral model of the macroeconomy and its effects a simultaneous model is shown to offer a more believable identification of monetary policy and other macroeconomic shocks than a recursive model and monetary impacts on agricultural prices are assessed

sticks or carrots optimal ceo compensation when managers are loss averse this paper analyzes optimal executive compensation contracts when managers are loss averse we calibrate a stylized principal agent model to the observed contracts of 595 ceos and show that this model can explain observed option holdings and high base salaries remarkably well for a range of parameterizations we also derive and calibrate the general shape of the optimal contract that is increasing and convex for medium and high outcomes and that drops discontinuously to the lowest possible payout for low outcomes finally we identify the critical features of the loss aversion model that render optimal contracts convex

credit constraints interest rates and agricultural prices although there are some earlier contributions the paper by schuh the exchange rate and u s agriculture touched off a controversy within the agricultural economics profession that has yet to be resolved in its original form the controversy centered around whether or not exchange rates had a significant effect on u s agricultural prices exports and farm income later the argument seems to have moved one step further back along the logical line to a question of whether or not monetary phenomena can have real effects thus to some extent agricultural economists interested in this issue have polarized themselves into two camps that closely resemble what for lack of a better term might be called keynesians and non keynesians this paper is not an attempt to settle this dispute indeed if observations based on developments in macroeconomics offer any guide i think that the dispute is based upon such fundamentally different perceptions of the world that no single paper or series of papers will ever settle the issue rather in this paper i want to discuss what i perceive to be one of the key issues in this debate are agricultural prices more flexible than nonagricultural prices my choice of this topic is somewhat personal and i choose it mainly because i feel that if monetary variables are going to have real effects these effects can only be short run in nature and are best explained by differential price adjustments the argument is simple suppose you have two goods a and b and suppose that good a is priced administratively a la gardiner means while good b s price is perfectly flexible now suppose further that the money supply is artificially inflated in the current instances the price of a will not adjust instantaneously while the price of b is free to adjust if the price of b does adjust as a result of an increase in the money s pply then manipulation of the money supply has caused a real change since the price ratio between a and b changes in this case therefore we can also expect other real changes in the economy but such effects should be only short run in nature the real effects set in motion by the relative price change should ultimately be self correcting under the usual ceteris paribus assumptions since even administered prices have to adjust in the long run to maintain entrepreneurial profitability however even if such issues of relative flexibility are not a central element in the discussion that is germane to the present paper and the associated controversy the general belief that agricultural prices are more flexible than nonagricultural prices is firmly rooted in the stylized facts of agricultural economics moreover the high degree of instability of agricultural prices is often given as the primary argument for extensive government interference in the agricultural economy in what follows i will first offer a brief survey of some of the studies of the effects of monetary phenomena on u s agricultural prices exports and incomes in this part of the paper i specifically exclude papers of what i think of as the is inflation neutral with

effects of fiscal policies on us agriculture according to the macro rational expectation mre hypothesis only unanticipated macroeconomic policy has impacts on real economic variables and anticipated policy changes have no real impacts this study analysis the effects of the anticipated and unanticipated components of fiscal policy on the us farm real gnp by testing the neutrality and rationality propositions of the mre hypothesis the test results show that both the rationality and neutrality propositions are rejected the empirical findings indicate that the anticipated fiscal policy does have significant effects on farm output examination of a specific sector sheds light on the nature of the market and helps ascertain the resons for the non neutrality

the cross industry effects of unanticipated money in an equilibrium business cycle model abstract this paper examines the differential real effects of monetary policy across industries the purpose is to test whether these differential effects can be accounted for by an incomplete information rational expectations model of the business cycle in the lucas barro tradition such a model implies a positive relation across markets between the variability of market specific shocks and the reduced form output effect of a monetary shock this proposition is tested using industry level post war u s data and support is found the exploration also uncovers other interesting industry level and aggregate results

desperation or desire the role of risk aversion in marriage i introduction attitudes toward risk are an important determinant of a vast array of decisions such decisions include ones with a big impact on life the choice of education the choice of career investment decisions and even when and if to get married or divorced most empirical studies of behavior implicitly assume risk preferences are identical across households such a research strategy undoubtedly results in appreciably different predictions of behavior than would occur if risk preferences are permitted to vary while an increasing number of surveys are asking respondents questions that allow for construction of a measure of interpersonal variation in risk that is based on economic theory there is still a paucity of empirical studies that explicitly investigate the impact of risk preferences on behavior 1 i use information on risk preferences from the national longitudinal survey of youth 1979 nlsy79 to predict how interpersonal variation in these preferences affects the time to marriage decision because of the uncertainty inherent in searching for a partner and the uncertainty of the future quality and state of the marriage itself risk attitudes likely directly impact the timing of marriage risk preference variables are constructed from a series of hypothetical gambles over lifetime income that were offered to respondents in the nlsy79 i examine how the risk preference variables affect the hazard rate into marriage and find that the more risk averse marry sooner l also exploit sibling data from the nlsy79 to examine the robustness of the empirical results by controlling for unobserved family effects that might be correlated with risk attitudes and find qualitatively similar results in addition i find that risk preferences affect the timing of marriage differentially for the sexes with a larger and more statistically significant effect of risk preferences on the hazard rate into marriage for men one possible explanation for this finding is that women value risk aversion as a desirable characteristic in a spouse to explore this possibility i analyze spouse characteristics by the risk aversion of the respondent i find that spouse quality in terms of education and other measurable traits is generally lower for more risk averse men than for more risk loving men this finding is in accordance with a prediction of a search model the reservation price is decreasing in risk aversion spouse quality of more risk averse women is usually but not always lower than for more risk loving women suggesting that the effect of a woman s own risk aversion on time to marriage may be more complex than suggested by a search model overall the results suggest that risk preferences have some causal influence on the timing of marriage whether it be from a supply side standpoint such as in the case of a basic search model or from a demand side standpoint where risk aversion is a desirable trait this article contributes to a sparse literature that employs empirical measures of risk aversion many of these studies ask how demographic characteristics affect risk attitudes 2 a few ask how these measures of risk aversion affect behaviors like the propensity to smoke or invest in risky assets 3 these studies are however cross sectional and do not employ survival analysis as does this article to my knowledge only two existing studies light and ahn 2008 schmidt 2008 employ an empirical measure of risk aversion to investigate the relationship between risk preferences and the marriage market schmidt focuses on fertility but also considers marital timing of employed women and light and abn focus on divorce timing the findings of both studies are consistent with mine 4 my study adds to schmidt s by considering all women and men and exploring the differences between the genders including a discussion of how spousal characteristics might differ by the risk aversion of respondents

wealth and executive compensation using new data on the wealth of swedish ceos i show that higher wealth ceos receive stronger incentives since high wealth excluding own firm holdings implies low absolute risk aversion this is consistent with a risk aversion explanation to examine whether wealth is likely to proxy for power i use lagged wealth typically measured before the ceo was hired and the results remain for one of two incentive measures also the wealth incentive result is not stronger for ceos likely to face limited owner oversight finally wealth is unrelated to pay levels and is hence unlikely to proxy for skill the compensation of chief executives of large listed companies is often largely in the form of risky instruments such as shares and options since share prices are affected by many factors outside management control this exposes ceos to risk according to standard agency theory the risk inherent in incentive compensation should reduce optimal incentives looking across firms the evidence that volatile stock prices reduce incentives in actual compensation has been mixed see e g aggarwal and samwick 1999 core and guay 2001 and prendergast 2002 for different views the importance of risk for incentives is thus in dispute 1 this paper takes another look at ceo incentives exploiting variation in risk aversion rather than risk decreasing absolute risk aversion implies that a wealthy ceo is less risk averse than a similar same coefficient of relative risk aversion but less wealthy ceo wealth should therefore proxy for risk aversion wealth may also be related to ceo skill and power obviously using wealth variation empirically hinges on having adequate data on individual wealth i use swedish tax filings to construct a proxy of wealth in sweden tax authorities provide data on aggregate yearly income

the median voter setters and non repeated construction bond issues the median voter model pervades the literature concerning the estimation of demands for collective expenditures but with some unanswered criticism the general issue addressed in this paper is whether observed collective expenditure levels and the characteristics of observed majorities are more adequately described by the median voter model or the romer and rosenthal setter model on a sample of non repeated hospital construction referenda bond issues the median voter model and the romer and rosenthal setter model are compared in both full information and uncertainty contexts little empirical support of the setter model is found indeed the evidence supports the absence of expenditure maximizing behavior the specific conclusions are 1 the standard median voter model explains quite well for this sample of non repeated bond issues 2 the explanatory power of the median voter model appears to vary across both voting arrangements and types of reversion threats 3 the explanation of hospital expenditures which have been judged too large may be due to how benefits and costs are distributed among voters and 4 the preponderance of large majorities for hospital construction in the face of evidence that such facilities typically become a burden on the general tax fund is consistent with setters offering the median ideal in the presence of a reversion below the ideal

effects of the monetary macro economy on canadian agricultural prices this paper examines the importance of monetary macro economic variables on canadian agricultural prices using vector autoregressive var modeling the research results suggest that u s monetary macro economic policy as represented by the u s world exchange rate is the most significant monetary factor influencing canadian agricultural price instability the paper also examined how agricultural prices and manufactures prices respond to a monetary shock the results suggest that agricultural prices respond more quickly in the short run but that manufactures prices catch up in later periods this conclusion supports bordos contract length hypothesis and frankel s overshooting hypothesis it does not support tweeten s cost price squeeze hypothesis

effects of global liquidity on commodity and food prices summary this article investigates the relationship between global liquidity and commodity and food prices applying a global cointegrated vector autoregressive model we use different measures of global liquidity and various indices of commodity and food prices for the period 1980 2011 our results support the hypothesis that there is a positive long run relation between global liquidity and the development of food and commodity prices and that food and commodity prices adjust significantly to this cointegrating relation global liquidity in contrast does not adjust it drives the relationship

the exercise and valuation of executive stock options abstract in theory hedging restrictions faced by managers make executive stock options more difficult to value than ordinary options because they imply that exercise policies of managers depend on their preferences and endowments using data on option exercises from 40 firms this paper shows that a simple extension of the ordinary american option model which introduces random exogenous exercise and forfeiture predicts actual exercise times and payoffs just as well as an elaborate utility maximizing model that explicitly accounts for the nontransferability of options the simpler model could therefore be more useful than the preference based model for valuing executive options in practice

asset allocation and individual risk aversion 1992 asset allocation and individual risk aversion financial analysts journal vol 48 no 6 pp 32 37

inflation and the distribution of price changes across markets a causal analysis recent advances in time series methodology are applied to the investigation of causal relationships between monthly changes in the consumer price index and changes in its dispersion across different consumption categories this dispersion is associated with the degree to which relative prices are changing past inflation rates seem useful in forecasting changes in relative prices but not vice versa there is also a significant contemporaneous correlation between these series hence it is concluded that fluctuations in the inflation rate help cause fluctuations in relative prices but not vice versa unless the entire effect occurs within a month the analysis also serves to illustrate a new way to implement the granger causality concept

causality of u s agricultural prices and the money supply further empirical evidence empirical evidence presented in this study indicates that the results of causality tests of u s agricultural prices and the money supply are sensitive to the lag selection relying on the minimum final prediction error causality testing technique a unidirectional causal flow is established from the monetary base to retail level agricultural prices no such flow is found to exist from m2 to retail agricultural prices when farm level agricultural prices are investigated no causal flow exists from any of the measures of the money supply to farm prices

the dynamic responses of crop and livestock prices to money supply shocks a bayesian analysis using long run identifying restrictions the impact of monetary policy on agriculture has been much debated this study examines the dynamic responses of u s agricultural prices to money supply shocks using three innovations first the variables responses are identified by long run money neutrality restrictions instead of the more common contemporaneous ordering second a bayesian approach to model uncertainty is used to add robustness to the estimation process third agricultural prices are disaggregated into crop and livestock components the empirical results find that both agricultural sectors benefit in the short run from positive money supply shocks with agricultural prices increasing relative to the general price level

implications of the macroeconomic outlook for agriculture this paper analyzes the implications for agriculture of the macroeconomic scenarios put forth by bosworth and lawrence a substantial body of work in recent years has developed both the theoretical framework and empirical evidence on the channels of influence between the macroeconomy and agriculture the aaea sponsored preconference workshop this year entitled value of large scale aggregate models for economic policy analysis manifests the profession s interest in quantifying the effects that macroeconomic factors have upon the economic performance and financial health of agriculture this paper draws upon the findings of previous work in general terms but more specifically we present the agricultural implications of two alternative macroeconomic environments implied by an existing macroeconomic model which emphasizes agriculture s interface with the macroeconomy the second section of this paper reviews the major findings of the literature on transmission mechanisms linking agriculture with the general economy the third section provides key details of how agriculture fares under bosworth and lawrence s outlook for the general economy through 1990 including the implications for farm prices cash receipts wealth and financial stress the fourth section discusses the consequences of one potential deviation from bosworth and lawrence s out

the effects of macroeconomic factors on south african agriculture significant research efforts have been devoted to understanding the effects of macroeconomic factors on the agriculture sector analysing the sources of volatility in the industry is critical for designing appropriate policies to stabilize agricultural markets reduce poverty and increase economic growth agriculture is a competitive sector with prices that are more flexible than those in nonagricultural sectors this article uses annual data over the 1957 2004 period and a vector error correction model in investigating the dynamic effects of exchange rates money supply and other macroeconomic variables on the agricultural sector in south africa overall real exchange rates interest rates inflation and money supply m3 shocks have significant and persistent impacts on agricultural output prices received by farmers and farm input prices m3 and interest rate shocks tend to put agriculture in a cost price squeeze agricultural price movements are a source of macroeconomic instability in the country r

relative agricultural prices and monetary policy an imperfect information rational expectations model of relative price determination is presented this model provides an econometric specification for testing for a causal relationship between money and the relative prices of agricultural commodities test results indicate that variations in the growth rate of the nominal money supply whether anticipated or unanticipated have not been an important influence on the average level of prices received by farmers relative to other prices in the economy over the period 1951 85

interrelationships between monetary instruments and agricultural commodity trade during the last decade agricultural economists have devoted increasing attention to the macroeconomic aspects of agricultural problems indeed a recent presidential address to the american agricultural economics association tweeten centered on the macroeconomics of agriculture given the currency of the monetary approach to macroeconomics it is not surprising therefore that there is also a growing interest in the effects of monetary instruments and monetary phenomena on agricultural commodity trade in this paper i shall discuss what i feel are some of the most pertinent issues that researchers must address in this area before we proceed too far with our discussion it is important to define what i mean by a monetary instrument perhaps arbitrarily i reserve the term monetary instrument for those macroeconomic variables which are primarily determined within domestic or international monetary markets obvious examples are the level of the money supply interest rates and exchange rates i justify the term instrument by noting that as far as the agricultural sector is concerned these variables are by and large predetermined for example the levels of the money supply and interest rates in the united states are to a large extent determined by the policy of the federal reserve similarly the price of the currency the exchange rateis ultimately determined by the demand and the supply for the currency and thus at least partially by governmental policy the first step in any attempt to outline research needs and goals is an identification of what has been done in the past although the literature on the macroeconomics of agriculture is farily large and rapidly expanding eckstein and heien lamm schuh 1976 and tweeten are important examples relatively li tl attention has been given to the effect of monetary instruments on agricultural trade what attention has been given to this area of resea ch has revolved mainly around the role of exchange rates in determining agricultural exports and prices thus it is logical to start our discussion with a brief survey of the literature on exchange rates and agriculture

the informational role of commodity prices in formulating monetary policy a reexamination abstract this paper reexamines the issue of whether commodity prices provide useful information for formulating monetary policy through the application of a recent development in time series methodology developed by toda and yamamoto j econometrics 66 1995 225 250 we found that commodity prices signal the future direction of the economy

estimating the value of employee stock option portfolios and their sensitivities to price and volatility the costs associated with compiling data on employee stock option portfolios is a substantial obstacle in investigating the impact of stock options on managerial incentives accounting choice financing decisions and the valuation of equity we present an accurate method of estimating option portfolio value and the sensitivities of option portfolio value to stock price and stock return volatility that is easily implemented using data from only the current year s proxy statement or annual report this method can be applied to either executive stock option portfolios or to firm wide option plans in broad samples of actual and simulated ceo option portfolios we show that these proxies capture more than 99 of the variation in option portfolio value and sensitivities sensitivity analysis indicates that the degree of bias in these proxies varies with option portfolio characteristics and is most severe in samples of ceos with a large proportion of out of the money options however the proxies explanatory power remains above 95 in all subsamples

an empirical analysis of risk aversion and income growth risk aversion enters many theoretical models of human capital investment but attitudes toward risk have not been incorporated in empirical models of human capital investment this article develops a model of the joint investment in financial wealth and human wealth to show that human capital investment is an inverse function of the degree of relative risk aversion using data from the survey of consumer finances i find that wage growth is positively correlated with preferences for risk taking more educated individuals are also more likely to be risk takers thus risk taking explains a portion of the returns to education

effects of international shocks and domestic macroeconomic policies upon brazilian agriculture abstract an identified vector autoregressive model is used to analyze the transmission of external commodity shocks to the brazilian economy the effects of the interaction between domestic macroeconomic monetary and exchange rate policies and external shocks to agricultural commodity raw material and food prices and crude oil price upon domestic agriculture industry terms of trade are estimated

relative prices and money a vector autoregression on brazilian data recent data on brazilian agricultural prices industrial prices and money supply are analyzed in a vector autoregression the empirical findings show strong one way granger type causality from money supply to agricultural prices while feedback is observed between industrial prices and money supply under the usual monetarist ordering of contemporaneous innovation covariance agricultural prices do not adjust faster than industrial prices to a shock in the money supply

risk aversion performance pay and the principal agent problem this paper calculates numerical solutions to the principal agent problem and compares the results to the stylized facts of ceo compensation the numerical predictions come from parameterizing the models of grossman and hart and of holmstrom and milgrom while the correct incentives for a ceo can greatly enhance a firm s performance providing such incentives need not be expensive for many parameter values ceo compensation need increase only by about 10 for every 1 000 of additional shareholder value for some values the amount is 0 003 cents

lower salaries and no options on the optimal structure of executive pay we estimate a standard principal agent model with constant relative risk aversion and lognormal stock prices for a sample of 598 us ceos the model is widely used in the compensation literature but it predicts that almost all of the ceos in our sample should hold no stock options instead ceos should have lower base salaries and receive additional shares in their companies for a typical value of relative risk aversion almost half of the ceos in our sample would be required to purchase additional stock in their companies from their private savings the model predicts contracts that would reduce average compensation costs by 20 while providing the same incentives and the same utility to ceos we investigate a number of extensions and modi cations of the standard model but nd none of them to be satisfactory we conclude that the standard principal agent model typically used in the literature cannot rationalize observed contracts one reason may be that executive pay contracts are suboptimal

commodity price dynamics and anticipated shocks in this paper we address the robustness of overshooting hypothesis in agricultural prices we find that agricultural prices may undershoot their long run level if the economy experiences an anticipated monetary shock rather than an unanticipated monetary shock we also find that agricultural prices definitely display undershooting if the price of manufactures adjusts instantaneously rather than sluggishly

macroeconomic impacts on bulgarian agriculture during transition an unstable and erratic macroeconomy in an economy in transition might be expected to affect agricultural performance this is tested for bulgaria between 1992 and 1997 using impulse response functions from a vector autoregressive var model despite data limitations it is found that shocks to the foreign exchange rate and interest rate feed into farm prices and agricultural exports but equilibrium will be re established within 5 years agricultural policies may not be sufficient to counteract the wider macroeconomic forces

whether one votes and how one votes the aim of this paper is to determine if whether one votes effects the vote that is cast using an economic model of voting and observed voting results on nuclear power referenda the answer is a resounding yes overcoming registration turnout and roll off hurdles dramatically increases the odds of voting against nuclear power indeed participation swamps both economic and preference variables in the explanation of nuclear power voting outcomes the lesson is that there is a structure to participation at the polls that should not be ignored by those interested in analyzing voting outcomes

commodity prices money surprises and fed credibilit strict monetarist theory in an extreme form holds that excessive money growth or the expectation of future money growth shows up immediately in the rapid inflation of goods prices however it is widely argued that for most goods prices are in fact sticky in the short run and reflect money growth only in the long run if one seeks a sensitive market measure of the perceived looseiless or tightness of monetary policy one must look elsewhere than at the general price level interest rates being determined in quickly adjusting financial markets are free to respond immediately to expectations regarding monetary policy in 1981 and 1982 every friday at 4 10 p m eastern standard time the federal reserve board would announce the money stock for the week ending nine days previously if the announced money stock was different from what the market had been expecting interest rates generally jumped in the same direction clearly they were responding to revisions of the expected future path of the money stock but nominal interest rates are an ambiguous indicator of expectations on the one hand an announced increase in the money stock may be received by the market as indicating a higher

relative prices and money further results for the united states empirical results support the hypothesis that agricultural prices respond faster than manufactured product prices to a change in money supply in the united states sims vector autoregression var technique was applied in examining this hypothesis the monte carlo integration method was used to test the significance of the impulse responses generated by the var technique

when votes are words not deeds some evidence from the nuclear freeze referendum according to our empirical results voting patterns in the nfr were consistent with the central thesis of an expressive model that moral expression dominates consequentialist behavior when choice is costless while consequentialist theory would predict that owners of capital would favor nuclear weapons capital owners could afford to vote contrary to their interests and in line with common morality because the costs of moral expression in the nfr were so low just as the capital ownership variables do not work in the direction predicted by our consequentialist model neither does income does this mean that wealthy voters cast votes diametrically opposed to their self interest not at all the expressive model contends that when voting is costless people do not have interests but rather moral judgments which now cost very little to express indeed when votes involve words not even individuals interests in government expenditure can be detected

estimating risk preferences from deductible choice we develop a structural econometric model to estimate risk preferences from data on deductible choices in auto insurance contracts we account for adverse selection by modeling unobserved heterogeneity in both risk claim rate and risk aversion we find large and skewed heterogeneity in risk attitudes in addition women are more risk averse than men risk aversion exhibits a u shape with respect to age and proxies for income and wealth are positively associated with absolute risk aversion finally unobserved heterogeneity in risk aversion is greater than that of risk and as we illustrate has important implications for insurance pricing

neutrality of inflation in the agricultural sector abstract the paper considers the effect of inflation on the relative prices of products traded in auction markets prices of us agricultural products are used for the period 1951 1981 since agricultural products are widely traded the real forces of supply and demand specific to agriculture are represented by foreign agricultural prices the exchange rate is entered as a separate variable influencing domestic agricultural prices trade between the usa and the ten countries included in the federal reserve board s trade weighted dollar is considered the empirical results are consistent with the hypothesis that inflation did not alter relative agricultural prices when the real forces of supply and demand and the exchange rate are held constant

expectations and commodity price dynamics the overshooting model monetary policy has important effects on agricultural commodity prices because though they are flexible other goods prices are sticky this paper formalizes the argument by applying the dornbusch overshooting model a decline in the nominal money supply is a decline in the real money supply in the short run it raises the real interest rate which depresses real commodity prices they overshoot their new equilibrium in order to generate an expectation of future appreciation sufficient to offset the higher interest rate these real effects which vanish in the long run also result from a decline in the money growth rate

the risk preferences of u s executives in this paper i elicit risk attitudes of u s executives by calibrating a subjective option valuation model for option exercising data 1996 to 2008 yielding approximately 65 000 values of relative risk aversion rra for almost 7 000 executives the observed behavior is generally consistent with moderate risk aversion and a median mean rra close to one three values are validated for chief executive officers ceos by testing theory based predictions on the influence of individual characteristics on risk preferences such as gender marital status religiosity and intelligence senior managers such as ceos presidents and chairpersons of the boards of directors are significantly less risk averse than non senior executives rra heterogeneity is strongly correlated with sector membership and firm level variables such as size performance and capital structure alternative factors influencing option exercises are tested for their influence on rra values this paper was accepted by brad barber finance

non binding linked issues referenda analysis and an application non binding referenda petitions are an instrument of direct democracy that allows citizens to signal preferences to politicians outside the electoral cycle this paper provides a simple theoretical and empirical analysis of a particular form of non binding referenda so called linked issues petitions it analyzes the ability of issue linkage to increase participation levels above those of single issue petitions and applies the analytical insights to a controversial referendum held in austria in 2002 that linked issues of transboundary nuclear risk and eastern enlargement of the european union

risk preferences and the economics of contracts t he literature of risk aversion and risk preference is one of the richest sources of ad hoc assumptions concerning tastes n o significant behavior has been illuminated by assumptions of differences in tastes such theories have been a convenient crutch to lean on when the analysis has bogged down they give the appearance of considered judgement yet really have only been ad hoc arguments that disguise analytical failures george j stigler and gary s becker 1977 p 89