day of the week effects and asset returns the number of empirical studies using daily stock returns is rapidly increasing researchers generally assume that the distribution of stock returns is identical for all days of the week a convenient statistical assumption but not a necessary condition of market equilibrium nevertheless there are reasons to suspect that the distribution of returns may vary according to the day of the week the most obvious is the impact of weekends on monday s return since monday s return is calculated over three instead of one calender day the mean and variance may well be higher on monday compared with any other daily return perhaps three times as large previous research has examined the daily distribution of stock returns for a monday effect while fama 1965 does not compare daily mean returns he does report that monday s variance is about 20o greater than other daily returns with a traditional distributional assumption regarding the returns on a financial asset specifies that the expected returns are identical for all days of the week contrary to this plausible assumption this paper discovers that the expected returns on common stocks and treasury bills are not constant across days of the week the most notable evidence is for monday s returns where the mean is unusually low or even negative several explanations of the results are investigated but none proves satisfactory aside from documenting significant day of the week effects the implications of the results for tests of market efficiency are examined while market adjusted returns continue to exhibit day of the week effects these effects are no longer concentrated on monday during the last year we have had many conversations with our colleagues throughout the professions we are particularly thankful to the participants at sessions of the western and american finance associations where preliminary versions of this paper were presented special thanks are due to gene fama gailen hite jon ingersoll robert jarrow merton miller clifford smith and rex thompson the expert research assistance of frank rabinovitch and youngsup yun is gratefully acknowledged 1 the list of papers using daily stock returns is too long to name recent examples include charest 1978 dodd 1980 banz 1981 and reinganum 1981

a model of target changes and the term structure of interest rates abstract we investigate the effects of short term rate targeting by the federal reserve on the term structure of interest rates and make contributions at two levels using a new series of interest rate targets made available by the federal reserve bank of new york we develop a family of models that highlight the implications of discrete changes in interest rate targets for the term structure of interest rates we show that spreads between short term rates and the overnight federal reserve funds rate are mainly driven by expectations of changes in the target not by the transitory dynamics of the overnight rate around the target hence the bias in tests of the expectations hypothesis that we document can be mainly attributed to the erroneous anticipation of future changes in monetary policy our modeling assumptions and newly available data make it possible to extract a series of market expectations of the next target change which are compared with a series of realized target changes

estimation of current quarter gross national product by pooling preliminary labor market data two methods of using labor market data as indicators of contemporaneous gross national product gnp are developed the establishment survey data are used by inverting a partial adjustment equation for hours a second gnp forecast can be extracted from the household survey by using okun s law using preliminary rather than final data adds about 2 to 4 percentage point to the expected value of the root mean squared errors and changes the weights that the pooling procedure assigns to the two forecasts the use of preliminary rather than final data results in a procedure that assigns more importance to the okun s law forecast

beauty and the labor market the authors examine the impact of looks on earnings using interviewers ratings of respondents physical appearance plain people earn less than average looking people who earn less than the good looking the plainness penalty is 5 to 10 percent slightly larger than the beauty premium effects for men are at least as great as for women unattractive women have lower labor force participation rates and marry men with less human capital better looking people sort into occupations where beauty may be more productive but the impact of individuals looks is mostly independent of occupation suggesting the existence of pure employer discrimination copyright 1994 by american economic association

income shocks and gender gaps in education evidence from uganda abstract this paper uses exogenous variation in rainfall across districts in uganda to estimate the causal effects of household income shocks on children s enrollment and academic performance conditional on gender i find negative deviations in rainfall from the long term mean to have negative and highly significant effects on female enrollment in primary schools and the effect grows stronger for older girls i find no effect of rainfall variation on the enrollment of boys and young girls moreover i find that when schooling is free of charge and both marginal boys and girls are enrolled a negative income shock has an adverse effect on the test scores of female students while boys are not affected the results imply that households respond to income shocks by varying the amount of schooling and resources provided to girls while boys are to a large extent sheltered a finding consistent with a model where parents values of child labor differ across sexes

the impact of fomc statements on the volatility of asset prices this article examines the impact of federal open market committee fomc statements on asset prices statements are found to have a much more pronounced impact on the volatility of asset prices than interest rate surprises they influence primarily stock returns intermediate and long term yields whereas short term rates are driven both by statements and by interest rate surprises we also find that the regime shift of may 1999 has improved the effectiveness of monetary policy as reflected in an overall reduction in market volatility during the most recent regime in addition markets are equally well prepared for the upcoming rate decision in both regimes but the process of adjustment depends on whether a statement was issued in the old regime or not when a statement is issued price adjustments are very similar across both periods whereas if no statement is issued then the rate of adjustment towards the new value is more gradual and occurs throughout the entire intermeeting period

nowcasting the real time informational content of macroeconomic data abstract a formal method is developed for evaluating the marginal impact that intra monthly data releases have on current quarter forecasts nowcasts of real gross domestic product gdp growth the method can track the real time flow of the type of information monitored by central banks because it can handle large data sets with staggered data release dates each time new data are released the nowcasts are updated on the basis of progressively larger data sets that reflecting the unsynchronized data release dates have a jagged edge across the most recent months

measuring the information content of the beige book a mixed data sampling approach studies of the predictive ability of the federal reserve s beige book for aggregate output and employment have proven inconclusive this might be attributed in part to its irregular release schedule we use a model that allows for data sampling at mixed frequencies to analyze the predictive power of the beige book we find that the beige book s national summary and district reports predict gdp and aggregate employment and that most district reports provide information content for regional employment in addition there appears to be an asymmetry in the predictive content of the beige book language

fundamental analysis future earnings and stock prices in this paper we investigate how detailed financial statement data fundamental signals enter the decisions of market participants by examining whether current changes in the signals are informative about subsequent earnings changes our approach is consistent with the view expressed by penman 1992 and others that predicting accounting earnings as opposed to explaining security returns should be the central task of fundamental analysis studying the links between fundamental signals and future earnings changes allows us to test directly the validity of the economic intuition that underlies the original construction of the signals an alternative and less direct approach followed by lev and thiagarajan 1993 henceforth lt is based on an examination of the relations between the fundamental signals and contemporaneous returns

educational policy and the economics of the family this paper analyzes the implications of alternative ways to model decision making by families for educational policy we show that many of the policy implications associated with credit constraints cannot be distinguished from the implications of models of the family that differ from the conventional barro becker model we then argue that it is the combination of credit constraints and non conventional preferences that provides a robust basis for government intervention to promote educational investment

extreme risk spillovers between crude oil and stock markets abstract this paper investigates the spillovers of extreme risks between crude oil and stock markets using daily data of the s p 500 stock index and west texas intermediate wti crude oil futures returns based on the method of granger causality in risk value at risk var is employed to measure market risk and a class of kernel based tests is used to detect negative and positive risk spillover effects empirical results reveal that there are significant risk spillovers between the two markets extreme movements past or current in one market may have a significant predictive power for those in the other market prior to the recent financial crisis there are positive risk spillovers from stock market to crude oil market and negative spillovers from crude oil market to stock market after the financial crisis bidirectional positive risk spillovers are strengthened markedly the risk spillovers may occur instantaneously and or with a long time delay both positive and negative risk spillover effects exhibit asymmetric correlations

how well does the beige book reflect economic activity evaluating qualitative information quantitatively eight times a year approximately two weeks before every fomc meeting the federal reserve releases a description of economic conditions in the twelve federal reserve districts called the beige book this description relies primarily on surveys and anecdotal evidence gathered by the twelve district banks for this paper we read and numerically scored past beige books in order to determine the extent to which the descriptions in these books accurately reflect current economic activity as measured by quarterly real gdp growth we find that both in sample and out of sample the quantitative beige book indices do have significant predictive content for current and next quarter real gdp growth furthermore the beige book has information about current quarter real gdp growth not present in other indicators such as the blue chip consensus forecast or time series models that use real time data

analyzing the analysts career concerns and biased earnings forecasts this paper examines the career concerns of security analysts we relate long histories of their earnings forecasts to job separations we find that relatively accurate past forecasts lead to favorable career outcomes such as remaining at or moving up to a high status large prestigious brokerage house controlling for accuracy optimistic forecasts relative to the consensus increase the chances of favorable job separations job separations depend much less on accuracy for analysts who cover stocks that are underwritten by their brokerage houses such analysts are also much more likely to be rewarded for optimistic forecasts than other analysts furthermore job separations were much less sensitive to accuracy and somewhat more sensitive to optimism during the stock market mania of the late 1990s these findings suggest that the well documented analyst forecast optimism bias is likely due to incentives to promote stocks

women empowerment and economic development women empowerment and economic development are closely related in one direction development alone can play a major role in driving down inequality between men and women in the other direction empowering women may benefit development does this imply that pushing just one of these two levers would set a virtuous circle in motion this paper reviews the literature on both sides of the empowerment development nexus and argues that the interrelationships are probably too weak to be self sustaining and that continuous policy commitment to equality for its own sake may be needed to bring about equality between men and women

fundamental information analysis fundamental analysis is aimed at determining the value of corporate securities by a careful examination of key value drivers such as earnings risk growth and competitive position in the context of such analysis we identify below a set of financial variables fundamentals claimed by analysts to be useful in security valuation and examine these claims by estimating the incremental value relevance of these variables over earnings our findings support the incremental value relevance of most of the identified fundamentals in fact for the 1980s the fundamentals add approximately 70 on average to the explanatory power of earnings with respect to excess returns we also show that the returns fundamentals relation is considerably strengthened when it is conditioned on macroeconomic variables thereby demonstrating the importance of a contextual capital market analysis for example several fundamentals that appear only weakly value relevant or even irrelevant in the unconditional analysis exhibit strong association with returns under specific economic conditions e g the accounts receivable and the provision for doubtful receivables signals during high inflation from a general examination of the role of fundamentals in security valuation we turn to the related issues of earnings persistence growth and the earnings response coefficient we hypothesize that the funda

prices credit markets and child growth in low income rural areas in this paper it is argued that fluctuations in child growth in rural areas of bangladesh during and after severe floods in i988 can provide insight into the structure of credit markets a model of intertemporal resource allocation is developed and euler equations relating growth patterns of children to the cost of borrowing by household are then derived from the model the evidence indicates that although some of the variation in growth patterns over the relevant period may be attributed to variation in illness and the price of rice growth patterns for children in landless households were influenced by credit market imperfections this paper links two prominent strands of research in economic development the first strand examines the extent to which households in poor rural economies are able to protect themselves from the adverse weather and other shocks that importantly influence earnings in underdeveloped areas while it has long been thought that credit market imperfections and other forms of market failure make it difficult for poor individuals in these economies to smooth consumption both within and across years there remains some question about the magnitude and pervasiveness of these imperfections while there is evidence that fluctuations in economic conditions result in inefficient allocation of resources e g morduch 1990 rosenzweig and wolpin i993 some recent papers have emphasised the fact that consumption patterns of households in the same village comove in a manner consistent with the idea that a substantial fraction of idiosyncratic variation in income is effectively

the frequency of monetary policy signaling from the administration to the federal reserve note recently this journal published a paper that reported the first hard evidence of direct and systematic administration influence on monetary policy havrilesky 1988a an index was constructed from a simple weekly sum of the number of wall street journal articles that indicated whether the administration desired either easier 1 or tighter 1 monetary policy the index signaling from the administration to the federal reserve or safer was premised on the notion that the financial press efficiently reports the content of the mostly informal exchanges that are occumng between the executive branch and the fed one problem with using this index as a means of continually measuring an administration s influence on monetary policy and whether its signals are heeded regularly or only episodically say as presidential elections approach l is that periodically the level of signaling shifts rather abruptly for example a precipitous drop in signaling occurred after 1984 the yearly average of the absolute value of monthly signals fell by over one half in the 1984 1988 period compared to the 1981 1984 period the break coming in 1985 when the yearly total of the absolute value of monthly signals fell to six as compared to twenty two in 1984 2 unless such shifts can be explained standard reaction function estimation of the causes and consequences of signaling is not feasible across all time periods this paper will attempt to explain these and other changes in signaling over the period from october 1974 to december 1989 using data on the state of the economy and the partisan composition of the federal reserve board of governors except for the welldocumented shift that occurred during the reagan administration it will be as

the influence of the federal advisory council on monetary policy the federal advisory council consists of twelve bankers elected by federal reserve bank directorates who advise the federal open market committee every three months on their desired direction for monetary policy this paper tests the conjecture that the council s directives to the committee contain information that predicts subsequent changes in interest rates and committee directives regression equations and granger causality tests do not disprove the conjecture this is the first hard evidence of private interest group influence on monetary policy copyright 1990 by ohio state university press

public information arrival we develop a measure of public information flow to financial markets and use it to document the patterns of information arrival with an emphasis on the intraday flows the measure is the number of news releases by reuter s news service per unit of time we find that public information arrival is nonconstant displaying seasonalities and distinct intraday patterns next we relate our measure of public information to aggregate measures of intraday market activity our results suggest a positive moderate relationship between public information and trading volume but an insignificant relationship with price volatility

stock prices and economic news this paper examines the daily response of stock prices to announcements about the money supply inflation real economic activity and the discountrate except for the discount rate survey data on market participants expectations of these announcements are used to identify the unexpected component of the announcements in order to test the efficient markets hypothesis that only the unexpected part of any announcement the surprise moves stock prices the empirical results support this hypothesis and indicate further that surprises related to monetary policy significantly affect stock prices there is only limited evidence of an impact from inflation surprises and no evidence of an impact from real activity surprises on the announcement days there is also only weak evidence of stock price responses to surprises beyond the announcement day this abstract was borrowed from another version of this item

loss function assumptions in rational expectations tests on financial analysts earnings forecasts abstract prior research concludes that financial analysts do not process public information efficiently in generating their earnings forecasts the ordinary least squares ols regression based tests used in prior studies assume implicitly that analysts face a quadratic loss function in contrast we argue that analysts likely face a linear loss function and hence try to minimize their absolute forecast errors we conduct and compare rational expectations tests using these two alternative loss functions we reproduce most prior findings of forecast inefficiency with ols regressions but find virtually no evidence of forecast inefficiency with least absolute deviation regressions where we explicitly assume a linear loss function

automated earnings forecasts beat analysts or combine and conquer prior studies attribute analysts forecast superiority over time series forecasting models to their access to a large set of firm industry and macroeconomic information an information advantage which they use to update their forecasts on a daily weekly or monthly basis a timing advantage this study leverages recently developed mixed data sampling midas regression methods to synthesize a broad spectrum of high frequency data to construct forecasts of firm level earnings we compare the accuracy of these forecasts to those of analysts at short horizons of one quarter or less we find that our midas forecasts are more accurate and have forecast errors that are smaller than analysts when forecast dispersion is high and when the firm size is smaller in addition we find that combining our midas forecasts with analysts forecasts systematically outperforms analysts alone which indicates that our midas models provide information orthogonal to analysts our results provide preliminary support for th

what do you expect imperfect policy credibility and tests of the expectations hypothesis abstract the expectations hypothesis of the term structure of interest rates describes a conventional view of the transmission mechanism of monetary policy where bond rates reflect current and expected movements in the policy controlled rate however empirical rejections of the expectations hypothesis are commonplace and lead many to question this description of policy transmission this paper argues that failure to account for imperfect policy credibility may explain empirical rejections empirical rejections may occur even when changing anticipations of future short rates are the primary source of variation in bond rates and the standard term structure transmission channel remains valid

income smoothing and consumption smoothing one way that risk averse households protect consumption levels is to borrow and use insurance mechanisms another way common in low income economies is to diversify economic activities and make conservative production and employment choices households thus tend toward limiting exposure only to shocks that can be handled with available credit and insurance typically both types of mechanisms are studied independently but much more can be learned by studying them together first we obtain a more complete picture of risks costs and insurance possibilities second it opens the way to considering biases in standard tests of credit and insurance

the impact of public information on the stock market we study the relation between the number of news announcements reported daily by dow jones company and aggregate measures of securities market activity including trading volume and market returns we find that the number of dow jones announcements and market activity are directly related and that the results are robust to the addition of factors previously found to influence financial markets such as day of the week dummy variables news importance as proxied by large new york times headlines and major macroeconomic announcements and non information sources of market activity as measured by dividend capture and triple witching trading however the observed relation between news and market activity is not particularly strong and the patterns in news announcements do not explain the day of the week seasonalities in market activity our analysis of the dow jones database confirms the difficulty of linking volume and volatility to observed measures of information

averages of forecasts some empirical results an alternative to using a single forecasting method is to average the forecasts obtained from several methods in this paper we investigate empirically the impact of the number and choice of forecasting methods on the accuracy of simple averages it is concluded that the forecasting accuracy improves and that the variability of accuracy among different combinations decreases as the number of methods in the average increases thus combining forecasts seems to be a reasonable practical alternative when as is often the case a true model of the data generating process or a single best forecasting method cannot be or is not for whatever reasons identified

beauty productivity and discrimination lawyers looks and lucre we propose models with an ascriptive characteristic generating earnings differentials and causing sectoral sorting allowing us to distinguish among sources producing such differentials we use longitudinal data on a large sample of graduates from one law school and measure beauty by rating matriculation photographs 1 betterlooking attorneys who graduated in the 1970s earned more than others after 5 years of practice an effect that grew with experience 2 attorneys in the private sector are better looking than those in the public sector differences that rise with age these results support theories of dynamic sorting and customer behavior

distinguished lecture on economics in government what central bankers could learn from academics and vice versa academic writing about monetary policy has been useful to practical central bankers but more of certain aspects of the economists way of thinking could profitably be imported on the other hand academics could improve their analysis and make it more useful to policymakers if they would pay more attention to certain real world aspects of monetary policy the author draws on his experience at the federal reserve board to point out a number of specific lessons for each side

early childhood nutrition and academic achievement a longitudinal analysis abstract many policymakers propose early childhood nutrition programs as a way to increase students academic achievement this paper investigates the nutrition learning nexus using a unique longitudinal data set that follows a large sample of filipino children from birth until the end of their primary education we find that better nourished children perform significantly better in school partly because they enter school earlier and thus have more time to learn but mostly because of greater learning productivity per year of schooling our cost benefit analysis suggests that a dollar invested in an early childhood nutrition program in a developing country could potentially return at least three dollars worth of gains in academic achievement and perhaps much more

income shocks and hiv in africa we examine how variation in local economic conditions has shaped the aids epidemic in africa using data from over 200 000 individuals across 19 countries we match biomarker data on individuals serostatus to information on local rainfall shocks a large source of income variation for rural households we estimate infection rates in hiv endemic rural areas increase by 11 for every recent drought an effect that is statistically and economically significant income shocks explain up to 20 of variation in hiv prevalence across african countries suggesting existing approaches to hiv prevention could be bolstered by helping households manage income risk better the relationship between income and health has long been of interest to economists and a lengthy literature documents strong linkages between economic conditions and many important health outcomes currie 2009 there has been much less progress however in understanding the economic foundations of the hiv aids epidemic one of the most important global health challenges such an understanding might yield particular dividends in sub saharan africa ssa where over a million people continue to become newly infected with the disease each year unaids 2010 in this article we explore the role of negative income shocks in shaping the

macroeconomic forecasting with mixed frequency data forecasting output growth in the united states many macroeconomic series such as u s real output growth are sampled quarterly although potentially useful predictors are often observed at a higher frequency we look at whether a mixed data frequency sampling midas approach can improve forecasts of output growth the midas specification used in the comparison uses a novel way of including an autoregressive term we find that the use of monthly data on the current quarter leads to significant improvement in forecasting current and next quarter output growth and that midas is an effective way to exploit monthly data compared with alternative methods

is informal risk sharing less effective for the poor risk externalities and moral hazard in mutual insurance abstract poor farm households are less keen to adopt high risk high return technologies than rich households yet the poor are more vulnerable to income shocks we develop a model of endogenous risk taking to explain these facts in autarky poor households adopt less risky production plans and obtain lower expected returns but face higher relative risk than the rich the introduction of risk sharing generates negative risk externalities between agents at the first best the social planner imposes a homogeneous level of risk taking in the group at the second best risk taking is not enforceable and increases with insurance generating moral hazard interestingly the poor s risk taking behavior is more sensitive to insurance the social planner thus mitigates risk taking by applying a lower insurance coverage in poor groups the introduction of risk sharing therefore reinforces the gap between rich and poor in terms of expected income and absolute risk while the effect on relative risk is ambiguous

child health and household resources in south africa evidence from the old age pension program this paper presents nonparametric evidence on the effects of the expansion of the old age pension program in south africa on child health did this increase in household resources improve child health and nutrition does the gender of the recipient of the pension affect its impact the answers to these questions have very important policy implications there is evidence that inadequate nutrition during childhood and even in utero affects long term physical development as well as the development of cognitive skills this in turn affects productivity later in life see partha dasgupta 1993 john strauss and duncan thomas 1998 t paul schultz 1999 in the united states the evidence suggests that monetary transfers to the poor have very little impact on child welfare janet currie 1995 susan mayer 1997 however the effects of parental income and monetary transfers on child outcomes are likely to be of greater magnitude among poor households in developing countries the south african pension program provides an unusual opportunity to evaluate the possible effects of such a monetary transfer this paper exploits the rapid increase in the coverage and benefits of the old age pension program in south africa which took place in the early 1990 s anne case and angus deaton 1998 at the end of the apartheid era the government committed to achieving parity of benefits and eligibility requirements between whites and africans this was achieved mostly by increasing the benefits received by the africans in 1993 80 percent of african women above age 60 and 77 percent of african men above 65 received the pension the maximum benefit of 370 rands per month aproximately 3 per day was equal to half of the minimum wage and about twice the median income per capita in rural areas due to living arrangements inherited from the apartheid era close to onethird of african children under the age of 5 currently live with a pension recipient children who live with a pension recipient tend to come from relatively disadvantaged backgrounds as a consequence they tend to be smaller than other children their age to estimate the effect of receiving a pension on the anthropometric status of children this paper exploits the fact that height reflects accumulated investments in child nutrition the larger the proportion of her life during which a child is well nourished the taller she will be given her age due to the expansion of the program in the early 1990 s individuals of qualified age became more likely to receive a pension and the benefits became substantially larger thus children born after the expansion of the program are more likely to have spent a larger fraction of their lives wellnourished if they live with a pension recipient to the extent that the pension resulted in improved nutrition in this paper i present nonparametric evidence of the program s effect on nutrition based on this observation

decomposing the gender gap in cognitive skills in a poor rural economy girls lag markedly behind boys in education in many developing countries which may slow economic growth and increase inequity this paper uses indicators of the output of the education production process cognitive skills to characterize and to investigate the determinants of the large educational gender gap in rural pakistan local school availability accounts for about a third of the total cognitive achievement gender gap and over two fifths of that in numeracy which implies that policies that increased local school availability for girls could reduce substantially the gender gaps in cognitive skills to further reduce these gender gaps will require policies that focus on the demand side of the market where our results suggest the response to modest changes in incentives may be high

poverty and witch killing many observers have noted that poverty and violence go hand in hand there is a strong negative relationship between economic growth and crime across countries as well as across districts in india and a link between low income and the occurrence of civil war 1 yet existing studies are typically unable to resolve the key econometric identification issues of omitted variable bias and endogeneity to illustrate the unobserved quality of local government institutions may affect both income growth and crime rates and poverty could lead to violence if desperate people with nothing to lose commit more crimes but violence itself may in turn affect economic productivity this paper uses local rainfall variation to identify the impact of income shocks on murder in a rural tanzanian district 2 extreme rainfall resulting in drought or floods is exogenous and is associated with poor harvests and near famine conditions in the region and a large increase in the murder of witches there are twice as many witch murders in years of extreme rainfall as in other years the victims are nearly all elderly women typically killed by relatives these econometric results across 11 years in 67 villages provide novel evidence on the role of income shocks in causing violent crime and religious violence in particular and also provide insights into witchcraft an important social phenomenon in africa rarely studied by economists the view that economic conditions are a driving force behind witch murders is bolstered by the fact that most witch killing in tanzania takes place in poor rural areas largely dependent on rain fed agriculture and that most victims in our sample are from poor households however it is difficult to definitively disentangle this income shock theory from alternative socio cultural explanations the concentration of tanzanian witch murders in a region dominated by one particular ethnic group the sukuma and the especially high number of witch murders in villages where indigenous religious beliefs are strong both point to the important role of non economic factors economic theories and cultural theories are perhaps best viewed as complements the empirical findings demonstrate the power of economics to rationalize a phenomenon that has previously been understood almost solely through a socio cultural lens 3

remember when it rained schooling responses to shocks in india abstract despite long standing international agreements like the millennium development goals 264 million children in developing countries are not enrolled in school and children in rural areas remain twice as likely to be out of school as children in urban areas one potential explanation for this pattern is that children s education in rural areas is vulnerable to weather shocks but there is no consensus about whether rainfall shocks help or harm school enrollment in the existing literature this paper explores whether changes in the relationship between rainfall shocks and schooling outcomes over time can explain the different results in the literature by using household survey data from india across three decades my study finds that adverse rainfall shocks have an increasingly stronger positive impact on school enrollment over time whereas enrollment is increasingly falling after positive rainfall shocks this effect is stronger for girls than for boys more pronounced for older children and is consistent with an increase in the importance of opportunity costs of a child s time in more recent years children may have to drop out of school when employment opportunities are more readily available after a positive rainfall shock but are able to go to school when jobs are scarce these results offer a potential explanation for the different results in the literature where studies on countries with higher economic development tend to find results consistent with an opportunity cost story whereas this is not the case for studies on countries with a lower level of development the results suggest that policymakers need to pay close attention to the obstacles faced by girls and older children to make access to education universal and should develop policy tools that incentivize households to send their children to school even when employment opportunities are readily available

rational asset pricing bubbles this paper provides a fairly systematic study of general economic conditions under which rational asset pricing bubbles may arise in an intertemporal competitive equilibrium framework our main results are concerned with nonexistence of asset pricing bubbles in those economies these results imply that the conditions under which bubbles are possible including some well known examples of monetary equilibria are relatively fragile this paper is concerned with the conditions under which asset prices in an intertemporal competitive equilibrium are equal to the present value of the streams of future dividends to which each asset represents a claim according to a central result of the theory of finance this is very generally true in the case of economies with trading at only a finite sequence of dates as long as there are no restrictions upon transactions other than that associated with possible incom pleteness of the set of securities that are traded the result is sometimes called the fundamental theorem of asset pricing here we consider the extent to which such a result continues to be valid in the case of trading over an infinite horizon it has often been observed in the econometric literature on asset pricing bubbles that it is possible in principle for the price of a perpetuity and the dividends on that security to satisfy at all times a present value relation for one period holding returns while the security s price nonetheless does not equal the present value of the stream of dividends expected over the infinite future in such a case the price of the perpetuity is said to involve a bubble component 2 joint stochastic processes for which this component is nonzero are sometimes argued to characterize existing assets for a recent example see froot and obstfeld 1991 but such an inference depends upon aspects of the stochastic

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

news good or bad and its impact on volatility predictions over multiple horizons we examine whether the sign and magnitude of intra daily returns have impact on expected volatility the next day or over longer future horizons we first let the data speak namely with minimal interference we capture the mapping between intra daily returns and future volatility we revisit the concept of news impact curves introduced by engle and ng 1993 overall we find that moderately good intra daily news reduces volatility the next day while both very good news unusual high intra daily positive returns and bad news negative returns increase volatility with the latter having a more severe impact the asymmetries disappear over longer horizons we also introduce a new class of parametric models which feature asymmetries and with close ties to arch type models albeit applicable to a mixture of high and low frequency data models featuring asymmetries dominate especially during the 2007 2008 financial crisis

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

using weather variability to estimate the response of savings to transitory income in thailand this paper measures the extent to which farmers are able to use savings and dissavings to smooth consumption in response to unexpected shocks to income time series information on regional rainfall is used to construct estimates of transitory income due to rainfall shocks the relationship between these measures of transitory income and savings indicates that farm households save a significantly higher fraction of transitory income than nontransitory income jel d91 016 the incomes of farm households in developing countries are notorious for being both low and uncertain policies that increase the incomes of farmers may well be different

does the beige book move financial markets about two weeks prior to each federal open market committee fomc meeting the federal reserve releases a description of economic activity in a document called the beige book by creating a quantitative index of these qualitative reports we examine whether the content of the beige book affects asset prices the results indicate that more positive beige book reports on economic growth are associated with increases in interest rates particularly intermediate and long term rates but not after controlling for several other macroeconomic indicators the results are consistent with markets viewing the report as a summary indicator of economic growth but not of monetary policy moves in the near term

risk financial markets and human capital in a developing country this paper explores the link between financial market incompleteness and human capital accumulation we examine how child school attendance responds to seasonal fluctuations in the income of agrarian households using panel data from rural india to pinpoint market imperfections we study responses to aggregate and idiosyncratic as well as to anticipated and unanticipated income shocks our main finding is that seasonal fluctuations in school attendance are a form of self insurance but one which does not result in a substantial loss of human capital on average

household income and child schooling in vietnam the stronger are the associations between household income and child schooling the lower is intergenerational social mobility and the less equal is opportunity this study estimates the associations between household income and children s school success in vietnam the estimates indicate that these associations are considerable this article also investigates some ways in which policies relate to household incomes school fees are progressive but school fees are only about one third of what households pay directly to schools and are a much smaller proportion of a household s total school related expenditures total household expenditures paid directly to schools increase with household income less proportionately than do school fees alone so the overall structure of such payments is less progressive than is the structure of school fees because school enrollment is positively related to household income moreover the structure of school fees is less progressive for the entire population than for the selected subset that has children enrolled in school further the two school quality measures that have the strongest positive association with children s school success are much more available to higher income households meaning that higher income households have greater school expenditures in part because they are obtaining higher quality schooling and not because charges for the same quality schooling are progressive across income classes

the effect of central bank transparency on exchange rate volatility abstract the increase in central bank transparency has been one of the main developments in central banking in the past two decades this leads to the question of the effect of central bank transparency on the volatility of exchange rates according to theoretical considerations more information could lead to either more precise forecasts or more noise trading this raises the need for an empirical estimation of the relationship the present study shows that the effect of central bank transparency on exchange rate volatility depends on a country s development while there is no effect of central bank transparency in the full sample and for developing countries transparency increases exchange rate fluctuations in developed countries

on the irrelevance of financial policy under market incompleteness and trading constraints abstract we study the modigliani and miller theorem under portfolio constraints we show that there exist state dependent trading limits under which financial policy is irrelevant in addition a no short selling constraint on equity is innocuous in spite of being state independent

the risk free rate in heterogeneous agent incomplete insurance economies abstract why has the average real risk free interest rate been less than one percent the question is motivated by the failure of a class of calibrated representative agent economies to explain the average return to equity and risk free debt i construct an economy where agents experience uninsurable idiosyncratic endowment shocks and smooth consumption by holding a risk free asset i calibrate the economy and characterize equilibria computationally with a borrowing constraint of one year s income the resulting risk free rate is more than one percent below the rate in the comparable representative agent economy

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

do high frequency stock market data help forecast crude oil prices evidence from the midas models abstract extensive studies have used stock market information to forecast crude oil prices and stock market can more easily derive high frequency data than crude oil market due to no revisions which raises a question that whether high frequency stock market data can improve the forecast performance of crude oil prices therefore this paper employs the midas model and the high frequency data of four stock market indices to forecast wti and brent crude oil prices at lower frequency the results indicate that the high frequency stock market indices have certain advantage over the lower frequency data in forecasting monthly crude oil prices and the midas model using high frequency data proves superior to the ordinary model

market opportunities genetic endowments and intrafamily resource distribution child survival in rural india the authors examine how intrafamily resource allocations respond to changes in economic conditions and to genetic differences in children by estimating the determinants of variations in the sex specific survival differentials of rural indian children based on standard census and household survey data they explore in particular the hypothesis that such differences are related to the relative returns to survival with households selectively allocating resources to children in response to variation in sex differences in their expected earnings opportunities as adults data are from the 1961 census and a 1971 household survey excerpt

an extension of the modigliani miller theorem to stochastic economies with incomplete markets and interdependent securities the modigliani miller theorem is shown to hold in a general model of a multiperiod stochastic economy with incomplete markets and perfect foresight in the model firms are allowed to trade all available securities thus share prices and dividends become fully interdependent also several mechanisms of corporate control are considered including value maximization and shareholder voting it is demonstrated that firms have no incentive to trade securities in equilibrium further any such trading does not alter the set of equilibrium allocations this is done by establishing that agents are able to adjust their own portfolios and neutralize corporate policy journal of economic literature classification numbers 021 022 this paper extends the modigliani miller argument on the irrelevance of corporate financial policy to an economy with incomplete markets and fully interdependent securities the approach taken is a general equilibrium model incorporating multiple periods and uncertain states the market is idealized in that there are no transaction costs short sales restrictions or limited liability constraints also agents are assumed to have fully rational expectations regarding future events within this context it is shown that value maximizing firms have no incentive to change the composition of their portfolios and that any such changes have no effect on equilibrium prices and allocations within the economy finally the theory is shown to

under the weather health schooling and economic consequences of early life rainfall life in rural areas of developing countries is prone to many kinds of risk such as illness or mortality of household members crop or other income loss due to natural phenomena weather insect infestations or fire for example and civil conflict in addition to their contemporaneous effects the effects of certain types of shocks may still be felt many years or even decades later from a public policy standpoint it is particularly important to identify shocks that have large long run effects moreover the mechanics underlying the persistence of shocks may be of con siderable interest for example a health shock may have a long run effect simply because the health shock itself persists over time alternately the health shock may not directly affect long run outcomes but it could affect some other outcome such as educational attainment that helps determine long run well being in this paper we focus on shocks that occur at the very beginning of life we ask how sensi tive long run individual well being is to environmental conditions around the time of birth in particular we examine the effect of weather shocks around the time of birth on the adult health education and socioeconomic outcomes of indonesian women and men born between 1953 and 1974 in addition we attempt to shed light on the intervening pathways connecting early life rainfall to adult outcomes illuminating the roles of health and educational attainment in deter mining adult socioeconomic status this investigation has considerable data requirements it necessitates information on weather shocks experienced by individuals several decades earlier as well as detailed current informa tion on adult outcomes we use information in the indonesian family life surveys ifls on an individual s year and location of birth and link each individual in that survey to locality specific rainfall data for their birth year for individuals born in rural areas on whom we focus rainfall variation across space and time should generate corresponding variation in agricultural output and thus household income to deal with measurement error in the rainfall data we run instrumental variables regressions where variables for rainfall measured at slightly more distant rainfall stations serve as instruments for rainfall in the individual s birthplace and birth year we examine the impact of early life rainfall on a range of adult outcomes observed in 2000 we find that higher early life rainfall leads to improved health schooling and socioeconomic status for women women with 20 percent higher rainfall relative to normal local rainfall in their year and location of birth are 3 8 percentage points less likely to self report poor or very poor health they attain 0 57 centimeters greater height attain 0 22 more completed grades of

missing women and the price of tea in china the effect of sex specific earnings on sex imbalance economists have long argued that the sex imbalance in developing countries is caused by underlying economic conditions this paper uses exogenous increases in sex specific agricultural income caused by post mao reforms in china to estimate the effects of total income and sex specific income on sex differential survival of children increasing female income holding male income constant improves survival rates for girls whereas increasing male income holding female income constant worsens survival rates for girls increasing female income increases educational attainment of all children whereas increasing male income decreases educational attainment for girls and has no effect on boys educational attainment