analysts weighting of private and public information using both a linear regression method and a probability based method we find that on average analysts place larger than efficient weights on i e they overweight their private information when they forecast corporate earnings we also find that analysts overweight more when issuing forecasts more favorable than the consensus and overweight less and may even underweight private information when issuing forecasts less favorable than the consensus further the deviation from efficient weighting increases when the benefits from doing so are high or when the costs of doing so are low these results suggest that analysts incentives play a larger role in misweighting than their behavioral biases copyright 2006 oxford university press

evaluating welfare reform in the united states this paper reviews the economic literature on welfare reform over the 1990s a brief summary of the policy changes is followed by a discussion of the methodological techniques that analyze the effects of these changes on outcomes the paper then critically reviews the econometric and experimental literature on caseload changes labor force changes poverty and income changes and family formation changes a growing body of evidence suggests that recent policy changes have influenced economic behavior and well being one particular set of new style welfare programs seems to show especially promising results with significantly increased work and earnings and reduced poverty

learning about a new technology pineapple in ghana this paper investigates the role of social learning in the diffusion of a new agri cultural technology in ghana we use unique data on farmers communication patterns to define each individual s information neighborhood conditional on many potentially confounding variables we find evidence that farmers adjust their inputs to align with those of their information neighbors who were surpris ingly successful in previous periods the relationship of these input adjustments to experience further indicates the presence of social learning in addition applying the same method to input choices for another crop of known technol ogy correctly indicates an absence of social learning effects jel d83 013 033 q16

mutual forbearance and competition among security analysts research in industrial organization and strategic management has shown that rivals competing with each other in multiple markets are more willing to show each other mutual forbearance i e compete less aggressively within their spheres of influence i e the markets in which each firm dominates sell side equity analysts typically cover multiple stocks in common with their rivals we examine the impact of this multipoint contact for mutual forbearance on two key dimensions of competition among security analysts forecast accuracy and information leadership issuing earnings forecasts or stock recommendations that influence rival analysts we find that multipoint contact is associated with analysts exerting greater information leadership on stocks within their own spheres of influence we also find greater forbearance related to information leadership under regulation fair disclosure reg fd in contrast multipoint contact was not associated with greater forecast accuracy on stocks within analysts

macroeconomic forecasts and microeconomic forecasters in the presence of principal agent problems published macroeconomic forecasts by professional economists may not measure expectations forecasters may use their forecasts in order to manipulate beliefs about their ability i test a cross sectional implication of models of reputation and information revelation i find that as forecasters become older and more established they produce more radical forecasts since these more radical forecasts are in general less accurate ex post forecast accuracy grows significantly worse as forecasters become older and more established these findings are consistent with reputational factors at work in professional macroeconomic forecasts

transparency of information and coordination in economies with investment complementarities how do public and private information affect equilibrium allocations and social welfare in economies with investment complementarities and what is the optimal transparency in the information conveyed for example by economic statistics policy announcements or news in the media we first consider an environment where the complementarities are weak so that the equilibrium is unique no matter the structure of information an increase in the precision of public information may have the perverse effect of increasing aggregate volatility nevertheless as long as there is no value to lotteries welfare unambiguously increases with an increase in either the relative or the absolute precision of public information hence full transparency is optimal this is because more transparency facilitates more effective coordination which is valuable from a social perspective on the other hand when complementarities are strong enough that multiple equilibria are possible more transparency permits the market to coordinate more effectively on either the bad or the good equilibrium in this case constructive ambiguity becomes optimal if there is a high risk that more transparency will lead to coordination failures this abstract was borrowed from another version of this item

the characteristics of individual analysts forecasts in europe abstract this study investigates the determinants of financial analysts forecasts differential accuracy in 14 different european stock markets using the i b e s detail history database i find that european financial analysts forecast accuracy is positively associated with analyst firm specific experience forecast accuracy is negatively associated with the number of countries followed by analysts and the age of the forecast surprisingly i find no relationship between forecast accuracy and analysts job experience and the size of the bank employing the analyst

analyst forecasts and herding behavior the use of analyst forecasts as proxies for investors earnings expectations is commonplace in empirical research an implicit assumption behind their use is that they reflect analysts private information in an unbiased manner as demonstrated here this assumption is not necessarily valid there is shown to be a tendency for analysts to release forecasts closer to prior earnings expectations than is appropriate given their information further analysts exhibit herding behavior whereby they release forecasts similar to those previously announced by other analysts even when this is not justified by their information these results are shown to have interesting empirical implications article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

social networks and technology adoption in northern mozambique despite their potentially strong impact on poverty agricultural innovations are often adopted slowly using a unique household dataset on sunflower adoption in mozambique we analyse whether and how individual adoption decisions depend upon the choices of others in the same social networks since farmers anticipate that they will share information with others we expect farmers to be more likely to adopt when they know many other adopters dynamic considerations however suggest that farmers who know many adopters might strategically delay adoption to free ride on the information gathered by others we present empirical evidence that shows that the relationship between the probability of adoption and the number of known adopters is shaped as an inverse u in line with information sharing the network effect is stronger for farmers who report discussing agriculture with others the data contains information which is needed to ameliorate the identification issues that commonly arise in this context in particular social networks are precisely identified and in addition we can control for village heterogeneity and endogenous group formation

the effects of improved roads on wages and employment evidence from rural labour markets in indonesia abstractthis paper examines the impact of road quality on labour supply and wages using household panel data from rural indonesia the analysis uses fixed effect instrumental variable estimation by first differencing two round panel data first road projects are found to increase the transportation speed second the empirical results from intra village variations of household endowments and labour market behaviour show that an increase in transportation speed raised wages in both non agricultural and agricultural employment and was associated with a decline in working time in agricultural employment for the households whose members are relatively educated the findings support potential complementarity between road quality and education implying that the government s public investments in roads and education should be coordinated to capture cross augmenting positive impacts in the long run

decomposing learning by doing in new plants the paper examines learning by doing in the context of a production function in which the other arguments are labor human capital physical capital and vintage as a proxy for embodied technical c

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

analyst responsiveness and the post earnings announcement drift abstract this study examines the responsiveness of analyst forecasts to current earnings announcements the results show considerable cross sectional variation in analyst responsiveness and suggest that this variation is related to the costs and benefits associated with prompt forecast revisions more importantly this study finds that with responsive forecast revisions more of the market reaction takes place in the event window and less in the drift window suggesting that analyst responsiveness mitigates the post earnings announcement drift and facilitates market efficiency

supply chain design and adoption of indivisible technology in this paper we develop a framework to analyze adoption of indivisible technologies by relatively small farms using a threshold diffusion model it shows that different supply chains may emerge to enable the adoption of indivisible technologies independent technology dealers may buy the indivisible equipment and rent it to farmers when the gain from adoption is not affected by scale or ownership of the technology also larger farmers may buy the technology equipment and rent it renting the machine per se or providing a set of services that includes use of the machinery for the farmer buying the service to smaller farmers especially when there are gains from scale or ownership the paper derives equilibrium prices and quantities in the output equipment and technology rental market these equilibrium prices and quantities depend on the heterogeneity of farmers and the features of the technology introduction of the new indivisible technology will benefit larger adopting farmers and consumers but may hurt non adopters we illustrate our conceptual findings with empirical examples

following the leader a study of individual analysts earnings forecasts abstract this paper develops and tests procedures for ranking the performance of security analysts based on the timeliness of their earnings forecasts the abnormal trading volume associated with these forecasts and forecast accuracy our framework provides an objective assessment of analyst quality that differs from the standard approach which uses survey evidence to rate analysts we find that lead analysts identified by our measure of forecast timeliness have a greater impact on stock prices than follower analysts further we find that performance rankings based on forecast timeliness are more informative than rankings based on abnormal trading volume and forecast accuracy we also present evidence that analyst s forecast revisions are correlated with recent stock price performance suggesting that security analysts use publicly available information to revise their earnings forecasts

information use and acquisition in price setting oligopolies asymmetric price setting multi product suppliers have access to multiple sources of information about demand conditions where the publicity of each source corresponds to the cross industry correlation of signals received from it a signal s influence on suppliers prices is increasing in its publicity as well as in its precision the emphasis on relatively public information is stronger for smaller suppliers who control narrower product portfolios when information is endogenously acquired suppliers listen to only a subset of information sources this subset is smaller when products are less differentiated and when the industry is less concentrated smaller suppliers focus attention on fewer information sources the inefficiencies arising from information acquisition and use are identified the associated externalities depend upon the extent of product differentiation the concentration of the industry and the degree of decreasing returns to scale

social programs as positive inducements for tax participation a significant amount of non compliance with the personal income tax is due to individuals who have not filed a tax return and so who are not in the system we use experimental laboratory methods to examine the effect of positive inducements for filing a tax return our design captures the essential features of a voluntary income reporting and tax assessment system human participants earn income they must decide whether to file a tax return and conditional upon filing they must choose how much income to report taxes are paid on reported income only unreported income of filers may be discovered via a random audit and the participant then pays owed taxes plus a fine inducements for filing are introduced as treatments a social safety net e g unemployment replacement income that is conditional upon past filing behavior and a tax credit that is available only to those who file our results suggest that an untargeted tax credit can encourage participation but that targeting the credit to low income earners offers a stronger inducement to file also the provision of a social safety net via unemployment benefits has a positive albeit an indirect impact on participation

risk sharing networks and insurance against illness most risk sharing tests on developing country data are conducted at the level of the village generally the full risk sharing hypothesis is rejected this paper uses detailed data on all insurance networks within a village in tanzania networks are not clustered but largely overlapping we test whether full risk sharing occurs within these networks while village level full insurance cannot be rejected for food consumption we find evidence consistent with at least partial insurance of non food consumption via networks

financial innovation and the transactions demand for cash we document cash management patterns for households that are at odds with the predictions of deterministic inventory models that abstract from precautionary motives we extend the baumol tobin cash inventory model to a dynamic environment that allows for the possibility of withdrawing cash at random times at a low cost this modification introduces a precautionary motive for holding cash and naturally captures developments in withdrawal technology such as the increasing diffusion of bank branches and atm terminals we characterize the solution of the model which qualitatively reproduces several empirical patterns we estimate the structural parameters using micro data and show that quantitatively the model captures important economic patterns the estimates are used to quantify the expenditure and interest rate elasticity of money demand the impact of financial innovation on money demand the welfare cost of inflation and the benefit of atm ownership

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

knowing what others know coordination motives in information acquisition we explore how optimal information choices change the predictions of strategic models when a large number of agents play a game with strategic complementarity information choices exhibit complementarity as well if an agent wants to do what others do they want to know what others know this makes heterogeneous beliefs di cult to sustain and may generate multiple equilibria in models with substitutability agents prefer to difierentiate their information choices we use these theoretical results to examine the role of information choice in recent price setting models and to propose modeling techniques that ensure equilibrium uniqueness

are nonconvexities important for understanding growth everyday experience and a simple logical argument show that nonconvexities are essential for understanding growth compared to previous statements of this well known argument the presentation here places more emphasis on the distinction between two of the fundamental attributes of any economic good rivalry and excludability it also emphasizes the difference between public goods and the technological advances that are fundamental to economic growth like public goods technological advances are rionrival goods hence they are inextricably linked to nonconvexities but in contrast to public goods which are nonexcludable technological advances generate benefits that are at least partially excludable hence innovations in the technology are for the most part privately provided this means that nonconvexities are relevant for goods that trade in private markets consequently an equilibrium with price taking in all markets cannot be sustained concluding remarks describe some of the recent equilibrium growth models that do not rely on price taking and highlight some of the implications of these models this abstract was borrowed from another version of this item

adoption of agricultural innovations in developing countries a survey this paper reviews various studies which have provided a description and possible explanation to patterns of innovation adoption in the agricultural sector the survey points out that the tendency of many studies to consider innovation adoption in dichotomous terms adoption nonadoption may not be appropriate in many cases where the actual decisions are defined over a more continuous range more attention needs to be given to the socio cultural and institutional environment in area studies so that their interrelation with economic factors affecting adoption can be inferred the presence of several interrelated innovations is another aspect that needs to be considered more carefully in future research since a number of simultaneous decisions may be involved furthermore the possibility of regular sequential patterns in adopting components of a new technological package should be specifically addressed in future studies finally the impact of differential adoption rates on land holding distribution merits attention in future research

sell side analysts career concerns during banking stresses we propose a new approach to examine sell side analysts career concerns by relating their forecast boldness to their employers news flows specifically we use banking sector news to proxy for the severity of career concerns analysts follow more closely the consensus forecast when the prospects of the banking sector are negative and vice versa the effect is both economically and statistically significant after controlling for various firm analyst brokerage house and forecasting characteristics as well as sector and economy wide effects the more established analysts in terms of reputation and experience are generally unaffected by banking sector news in contrast their less established peers tend to cluster their forecasts near the consensus after a sequence of negative news flows for banks collectively our results support the notion that during banking stresses when job security is low analysts tendency to imitate others increases

the demand for money financial innovation and the welfare cost of inflation an analysis with household data we use microeconomic data on households to estimate the parameters of the demand for currency derived from a generalized baumol tobin model our data set contains information on average currency deposits and other interest bearing assets the number of trips to the bank the size of withdrawals and ownership and use of atm cards we model the demand for currency accounting for adoption of new transaction technologies and the decision to hold interest bearing assets the interest rate and expenditure flow elasticities of the demand for currency are close to the theoretical values implied by standard inventory models however we find significant differences between individuals with an atm card and those without the estimates of the demand for currency allow us to calculate a measure of the welfare cost of inflation analogous to bailey s triangle but based on a rigorous microeconometric framework the welfare cost of inflation varies considerably within the population but never turns out to be very lar

the forecast accuracy of individual analysts evidence of systematic optimism and pessimism o brien 1990 examines the annual earnings forecast accuracy of individual analysts reporting to the institutional brokers estimate system ibes of lynch jones and ryan during july 1975 september 1982 using a regression model which adjusts for average firm and year effects o brien finds no evidence of differential forecast accuracy comparing individual analysts earnings forecasts to median consensus forecasts during 1983 86 we also find no statistically significant evidence of differential analyst forecast accuracy our result however does not mean that one analyst s forecasts are much like another s we find that analysts are persistently optimistic or pessimistic relative to consensus forecasts we examine this persistent behavior and its effect on measures of forecast accuracy over a sample

financial markets forecasts revisited are they rational stubborn or jumpy this paper evaluates professional forecasters behavior using a panel data of individual forecasts we find that i professional forecasts are behavioral and ii there exists a stock bond dissonance the forecasting behavior seems to be stubborn in the stock market but jumpy in the bond market even in the same country forecasting behavior is quite different by market

analyst characteristics timing of forecast revisions and analyst forecasting ability abstract we first examine whether analysts with certain characteristics that prior research has identified are related to superior forecasting ability systematically time their forecast revisions later in the fiscal quarter we then examine whether this superior ability persists after controlling for the timing advantage by using relative forecast error a measure that largely eliminates the timing advantage of recent forecasts using a sample of quarterly earnings forecast revisions over the 20 year period from 1990 to 2009 we find that analysts with more firm specific and general experience and more accurate prior period forecasts analysts employed by larger brokerage firms and analysts who follow fewer industries and companies tend to revise forecasts later in the quarter we also find that analyst characteristics that are positively correlated with revision timing are negatively related to relative forecast errors these results are consistent with analyst characteristics being useful proxies for analyst forecasting ability and analysts with greater ability revising forecasts later in the quarter

learning by doing and learning from others human capital and technical change in agriculture household level panel data from a nationally representative sample of rural indian households describing the adoption and profitability of high yielding seed varieties hyvs associated with the green revolution are used to test the implications of a model incorporating learning by doing and learning spillovers the estimates indicate that i imperfect knowledge about the management of the new seeds was a significant barrier to adoption ii this barrier diminished as farmer experience with the new technologies increased iii own experience and neighbors experience with hyvs significantly increased hyv profitability and iv farmers do not fully incorporate the village returns to learning in making adoption decisions

the law of the few the law of the few refers to the following empirical phenomenon in social groups a very small subset of individuals invests in collecting information while the rest of the group invests in forming connections with this select few in many instances there are no observable dierences in characteristics between those who invest in information and those who invest in forming connections this paper shows that the law of few naturally emerges in environments with identical rational agents we develop a strategic game in which players have the opportunity to invest in collecting information as well as in investing in bilateral connections with others we find that every strict equilibrium of this game exhibits the law of the few we also show that this pattern of social dierentiations is ecient in some cases

acquiring information through peers we develop an endogenous network formation model in which agents form connections to acquire information our model features complementarity in actions as agents care not only about accuracy of their decision making but also about the actions of other agents in equilibrium the information structure is a hierarchical network and under weakly convex cost of forming links the equilibrium network is core periphery although agents are ex ante identical there is ex post heterogeneity in payoffs and actions

crime and social interactions the high variance of crime rates across time and space is one of the oldest puzzles in the social sciences this variance appears too high to be explained by changes in the exogenous costs and benefits of crime we present a model where social interactions create enough covariance across individuals to explain the high cross city variance of crime rates this model provides an index of social interactions which suggests that the amount of social interactions is highest in petty crimes moderate in more serious crimes and almost negligible in murder and rape

modeling technology adoption in developing countries an analysis of technology adoption decisions by poor farmers is provided some possible empirical models for studying technology adoption are reviewed the issue of theoretical consistency is dealt with in terms of the costs of such consistency measured in data needs and model complexity and the benefits measured in terms of understanding the micro economic foundations of adoption

competitive parity status disparity and mutual forbearance securities analysts competition for investor attention most studies of responses to change in competitive environments focus on competitor specific adaptations however rivals are often acutely aware of one another and this awareness should influence their competitive behavior in this study we focus on three market structures that affect competitive behavior competitive parity status disparity and multipoint contact in particular we examine how securities analysts responded to a regulatory discontinuity regulation fair disclosure reg fd which promotes competitive parity by eliminating privileged access to proprietary firm information as a critical source of competitive advantage we predict and find that reg fd activated mutual forbearance among analysts linked through multipoint contact we also predict and find that high status analysts forbear more strongly analysts responses to heterogeneity in competitive advantage thus depend importantly on their competitive overlap and status which has implications for both their behavior and the information they provide to investors

technological change and the households demand for currency abstract it is shown that accounting for technology variations across households and periods is important to obtain theoretically consistent estimates of the demand for currency an inventory model is presented where the withdrawal technology is explicitly modeled both the level and the interest rate elasticity of cash holdings depend on the withdrawal technology available to households empirical proxies for the household withdrawal technology based on the diffusion of cash withdrawal points measured at city level are used to test the model predictions on a panel of italian household data over the 1993 2004 period

financial analyst characteristics and herding behavior in forecasting this study classifies analysts earnings forecasts as herding or bold and finds that 1 boldness likelihood increases with the analyst s prior accuracy brokerage size and experience and declines with the number of industries the analyst follows consistent with theory linking boldness with career concerns and ability 2 bold forecasts are more accurate than herding forecasts and 3 herding forecast revisions are more strongly associated with analysts earnings forecast errors actual earnings forecast than are bold forecast revisions thus bold forecasts incorporate analysts private information more completely and provide more relevant information to investors than herding forecasts

do analysts herd an analysis of recommendations and market reactions this article develops and implements a new test to investigate whether sell side analysts herd around the consensus when they make stock recommendations our empirical results support the herding hypothesis stock price reactions following recommendation revisions are stronger when the new recommendation is away from the consensus than when it is closer to it indicating that the market recognizes analysts tendency to herd we find that analysts from larger brokerages analysts following stocks with smaller dispersion across recommendations and analysts who make less frequent revisions are more likely to herd the author 2009 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oxfordjournals org oxford university press

social influence and collective action effects on farm level soil conservation effort in rural kenya abstract this paper analyzes the effects of social influence and participation in collective action initiatives on soil conservation effort among smallholder farmers in lake naivasha basin kenya we apply binary and ordered probit models in a two stage regression procedure to cross sectional data collected through a household survey among randomly selected smallholder farmers smallholder farming systems in the research area are associated with practices that render farmlands susceptible to soil erosion causing negative impacts on land and the environment therefore strategies that encourage soil conservation are likely to also offer solutions for dealing with agri environmental challenges and poverty alleviation results indicate that social capital facilitates participation in collective action initiatives which then influence individual soil conservation efforts neighborhood social influences subjective norms gender education level farm size access to credit and livestock ownership also emerge as key determinants of soil conservation effort policy implications drawn by this study encourage strategies to increase participation and effectiveness in collective action initiatives as a boost to soil conservation implementation of soil conservation practices could also be encouraged through awareness increasing instruments facilitating access to agricultural micro credit and paying attention to gender related challenges on knowledge access and rights over land and other natural resources

reading the tea leaves model uncertainty robust forecasts and the autocorrelation of analysts forecast errors abstract we put forward a model in which analysts are uncertain about a firm s earnings process faced with the possibility of using a misspecified model analysts issue forecasts that are robust to model misspecification we estimate that this mechanism explains approximately 60 of the autocorrelation in analysts forecast errors the remainder stems from the cross sectional variation in mean forecast errors and in analysts estimation errors of the persistence of earnings growth shocks consistent with our model we find that analysts learn about some features of the earnings process but not others and this learning reduces but does not eliminate the autocorrelation of forecast errors as firms age other potential explanations for the autocorrelation of analyst forecast errors are rejected our model of robust forecasting applies not only to analysts forecasts but also to all model based forecasts

electronic filing tax preparers and participation in the earned income tax credit abstract in 2002 more than 18 million low income individual taxpayers received the earned income tax credit eitc despite its size non participation in this program is a concern and substantial effort is devoted by the irs local governments and many non profits to address it using variation across states in the introduction of state electronic filing programs we show that the introduction of electronic filing had a significant effect on participation in the eitc our results are robust to accounting for other welfare eitc and irs reforms introduced during the same period we speculate that the impact of this policy change on the tax preparation industry played an important role in increasing participation

herding in analysts recommendations the role of media abstract this study investigates the impact of media on analysts herding behavior when making stock recommendations we find three main results first we find that analysts herd less when stocks are covered more in the media second when the firm has negative media sentiment analysts tend to herd more third higher disagreement in the media is associated with a higher tendency to herd among analysts these findings are robust to the confounding effect of news flows on returns as well as to alternative explanations in addition we find that the effect of media on the herding behavior is conditional on analyst characteristics

sell side debt analysts and debt market efficiency we explore sell side debt analysts contributions to the efficiency of securities markets we document that debt returns lag equity returns less when debt research coverage exists which is consistent with debt analysts facilitating the process by which available information is impounded in debt prices the effect of debt research on the debt market s lag is incremental to but comparable in magnitude to hedge fund ownership s effect no such effect exists for credit rating agencies we also find that the dissemination of debt reports has an immediate effect on return volatility in both markets which is consistent with debt analysts providing new information to securities markets increased return covariation suggests that this information impacts the pricing of debt and equity in the same direction a large percentage of debt reports do not induce any immediate debt market return reaction but do induce an equity return reaction which is consistent with new information being provided despite the absence of a debt market reaction finally there is a systematic variation in the debt market s trading and return reactions to debt research timely reports and those by high reputation brokers induce a quicker trading response thus enhancing liquidity whereas only timely reports induce a greater return response this study illuminates the institutional underpinnings of debt market efficiency and it has important implications for information content tests in the debt market where trading is limited

does twitter chatter matter online reviews and box office revenues with a rapid rise of text based social media and online word of mouth wom activity millions of people express their thoughts and opinions on a variety of topics considering that nowadays wom is

overconfidence ceo selection and corporate governance we develop a model that shows that an overconfident manager who sometimes makes value destroying investments has a higher likelihood than a rational manager of being deliberately promoted to ceo under value maximizing corporate governance moreover a risk averse ceo s overconfidence enhances firm value up to a point but the effect is nonmonotonic and differs from that of lower risk aversion overconfident ceos also underinvest in information production the board fires both excessively diffident and excessively overconfident ceos finally sarbanes oxley is predicted to improve the precision of information provided to investors but to reduce project investment

risk aversion uncertain information and market efficiency abstract this paper develops and tests the uncertain information hypothesis as a means of explaining the response of rational risk averse investors to the arrival of unanticipated information the theory predicts that following news of a dramatic financial event both the risk and expected return of the affected companies increase systematically and that prices react more strongly to bad news than good an empirical investigation of over 9000 marketwide and firm specific events produces results consistent with these predictions we conclude that the market reacts to uncertain information in an efficient if not instantaneous manner

dynamics of variety change on wheat farms in pakistan a duration analysis abstract decades after the green revolution sustaining wheat productivity remains an important policy goal for the government of pakistan understanding the speed of diffusion of new wheat varieties can contribute to this goal we apply duration analysis to identify the factors that shorten the time until a farmer replaces one modern variety by another and test hypotheses concerning two recurring themes of the green revolution farm size differences and the role of information sources in seed diffusion we find that time to adoption averages only 4 years but is shorter on larger farms factors that speed variety change also differ by farm size extension and media sources of information significantly influence adoption among larger farmers relative to information gained through social relationships but this is not the case for marginal farmers traits related to consumption quality speed adoption on smaller wheat farms where families both sell and consume their wheat higher yields drive adoption for the most subsistence oriented marginal group

rational inattention and organizational focus this paper studies optimal communication flows in organizations a production process can be coordinated ex ante by letting agents stick to a prespecified plan of action alternatively agents may adapt to task specific shocks in which case tasks must be coordinated ex post using communication when attention is scarce an optimal organization coordinates only a few tasks ex post those tasks are higher performing more adaptive to the environment and influential hence scarce attention requires setting priorities not just local optimization our results provide microfoundations for a central idea in the management literature that firms should focus on a limited set of core competencies

currency demand new technology and the adoption of electronic money micro evidence from japan we estimate currency demand functions conditional on electronic money adoption with household level survey data from japan under an instrumental quantile regression framework contrary to theoretical predictions our results suggest that users of electronic money hold more currency than non users

o ring production on u s hog farms joint choices of farm size technology and compensation we hypothesize that hog production can be characterized by complementarities between new technologies worker skills and farms size such production processes are consistent with kremer s 1993 o ring production theory in which a single mistake in any one of several complementary tasks in a firm s production process can lead to catastrophic failure of the product s value in hog production mistakes that introduce disease or pathogens into the production facility can cause a total loss of the herd consistent with predictions derived from the o ring theory we provide evidence that the most skilled workers concentrate in the largest and most technologically advanced farms and are paid more than comparable workers on smaller farms these findings suggest that worker skills new technologies and farm size are complements in production the complementarities create returns to scale to large hog confinements consistent with the dramatic increase in market share of very large farms over the past 20 years

who is afraid of reg fd the behavior and performance of sell side analysts following the sec s fair disclosure rules we examine regulation fd s impact on the accuracy and dispersion of sell side analysts earnings forecasts using a large sample of quarterly forecasts made over a nearly 10 year period surrounding fd s adoption we uncover two main sets of findings first individual and consensus forecasts become less accurate post fd particularly for early forecasts and for smaller companies second forecast dispersion increases post fd this effect is stronger for early forecasts and has increased with the passage of time these results which are quite robust to alternative empirical methodologies suggest that there has been a reduction in both selective guidance and forecast quality post fd

predicting individual analyst earnings forecasts in this study i propose and test a model that predicts individual analyst forecasts of corporate earnings per share eps using the change in the mean consensus forecast of other analysts since the date of the analyst s current outstanding forecast the deviation of the analyst s current forecast from the consensus forecast and cumulative stock returns since the date of the analyst s current forecast i find that these three variables explain about 38 of the variability in analyst forecast revisions while there is evidence of a relation between changes in earnings expectations and price changes virtually all of the explanatory power of my model arises from other analyst forecasts section 2 describes the data bases used and the sample selection process section 3 presents the model and method for predicting individual analyst forecasts section 4 reports the bias and accuracy of the predicted forecasts conclusions are in section 5

why so much error in analysts earnings forecasts wall street analysts tend to be too optimistic about the earnings prospects of companies they follow the average consensus 12 month eps growth forecast is 17 7 percent which is more than twice the actual growth rate in aggregate forecasts are 11 2 percent above actual earnings at the start of a year and are revised downward continuously in the course of the year for the full study period reported here the percentage of 12 month earnings estimates revised downward exceeded the percentage revised upward on average by 4 4 percent every month since 1993 however the quality of analyst forecasts seems to have improved this article provides an intuitive explanation of the change and suggests ways in which analysts can use the explanation to improve portfolio performance

toward an economic theory of leadership leading by example this paper explores leadership within organizations leadership is distinct from authority because following a leader is a voluntary rather than coerced activity of the followers this paper considers how a leader induces rational agents to follow her in situations when the leader has incentives to mislead them copyright 1998 by american economic association

heard it through the grapevine the direct and network effects of a tax enforcement field experiment on firms abstract tax enforcement may have deterrent effects that extend beyond directly treated taxpayers but evidence of such deterrent effects for major sources of revenue is limited this paper studies the effects of a large scale field experiment on employer deposits that make up most u s tax collections in person visits by revenue officers have a large direct effect on visited firms tax deposits the other clients of visited firms tax preparers also deposit more tax a network effect that suggests preparers disseminate information aggregating over all links this network effect accounts for 1 2 times as much revenue as the direct effect letters conveying the same message are found to have much smaller direct effects and no measurable network effects

the informational role of bond analysts this study uses a large sample of sell side bond analysts reports to examine the properties of recommendations provided by bond analysts and the impact of these recommendations on bond securities first we document that the distribution of bond analysts buy hold and sell recommendations is skewed positively but less so than the distribution of equity analysts recommendations the positive skewness in bond analysts recommendations is greater for

micro shocks and aggregate risk the paper presents a micro shock explanation of aggregate risk shocks are independent over agents and equilibria are always unique it is shown that any amount of aggregate risk can be generated by games in which shocks to players are independent explicit examples are given some of which elaborate on examples in the literature implications are drawn for factor analytic methods of extracting aggregate shocks

job contact networks abstract many workers hear about or obtain their jobs through friends and relatives the aim of this paper is twofold first we relate both individual and aggregate labor market outcomes to the network structure of personal contacts second we study strategic network formation to this purpose we develop a model specifying at the individual level both the decision to form contacts with other agents and the process by which information about jobs is obtained and transmitted we show that equilibrium networks always exist and that only moderate levels of network asymmetry can be sustained at equilibrium also we establish a general non monotonicity result on information flow and unemployment with respect to network size in symmetric networks

reputation and performance among security analysts members of the institutional investor all american research team supply more accurate earnings forecasts than other analysts when forecasts are matched by the corporation followed and by the date of brokerage house issuance this contemporaneous advantage is complemented by a timing advantage all americans supply forecasts more often than other analysts stocks returns immediately following large upward forecast revisions suggest that all americans impact prices more than other analysts however there is virtually no difference in returns following large downward revisions nevertheless the collective results suggest a positive relation between reputation and performance and assuming that all americans are better paid pay and performance

the role of information and social interactions in retirement plan decisions evidence from a randomized experiment this paper analyzes a randomized experiment to shed light on the role of information and social interactions in employees decisions to enroll in a tax deferred account tda retirement plan within a large university the experiment encouraged a random sample of employees in a subset of departments to attend a benee ts information fair organized by the university by promising a monetary reward for attendance the experiment multiplied by more than e ve the attendance rate of these treated individuals relative to controls and tripled that of untreated individuals within departments where some individuals were treated tda enrollment e ve and eleven months after the fair was signie cantly higher in departments where some individuals were treated than in departments where nobody was treated however the effect on tda enrollment is almost as large for individuals in treated departments who did not receive the encouragement as for those who did we provide three interpretations differential treatment effects social network effects and motivational reward effects to account for these results

cournot competition and the social value of information in a differentiated product cournot model each supplier receives informative signals about demand the cross industry correlations of the signals differ more public signals have higher correlation coefficients in equilibrium information is used inefficiently from the industry s perspective information is over used and too much emphasis is placed on relatively public signals from the consumer s perspective information is under used and too much emphasis is placed on relatively private signals welfare is enhanced by increasing the use of information as desired by consumers but re balancing that use away from public signals as desired by the industry if information is costly and endogenously acquired then suppliers acquire too much new information but they use it too little

bayesian learning in social networks we study the perfect bayesian equilibrium of a sequential learning model over a general social network each individual receives a signal about the underlying state of the world observes the past actions of a stochastically generated neighbourhood of individuals and chooses one of two possible actions the stochastic process generating the neighbourhoods defines the network topology we characterize pure strategy equilibria for arbitrary stochastic and deterministic social networks and characterize the conditions under which there will be asymptotic learning convergence in probability to the right action as the social network becomes large we show that when private beliefs are unbounded meaning that the implied likelihood ratios are unbounded there will be asymptotic learning as long as there is some minimal amount of expansion in observations we also characterize conditions under which there will be asymptotic learning when private beliefs are bounded

a strategic model of social and economic networks we study the stability and efficiency of social and economic networks when self interested individuals can form or sever links first for two stylized models we characterize the stable and efficient networks there does not always exist a stable network that is efficient next we show that this tension persists generally to assure that there exists a stable network that is efficient one is forced to allocate resources to nodes that are not responsible for any of the production we characterize one such allocation rule the equal split rule and another rule that arises naturally from bargaining of the players

beauty contests and iterated expectations in asset markets in a financial market where traders are risk averse and short lived and prices are noisy asset prices today depend on the average expectation today of tomorrow s price thus iterating this relationship the date 1 price equals the date 1 average expectation of the date 2 average expectation of the date 3 price this will not in general equal the date 1 average expectation of the date 3 price we show how this failure of the law of iterated expectations for average belief can help understand the role of higher order beliefs in a fully rational asset pricing model and explain over reaction to noisy public information

searching for ghosts who are the nonfilers and how much tax do they owe this paper is about ghosts individuals who fail to comply with their income tax filing requirements as their name suggests the identities and characteristics of these individuals are shrouded in mystery in this paper we attempt to de mystify the issues surrounding ghosts and examine their role in the compliance process we begin by extending a standard model of tax evasion to account for the existence of ghosts we then examine the empirical significance and policy relevance of our extension using a unique data set containing detailed tax and audit information for both filers and nonfilers of u s federal income tax returns 2001 elsevier science b v all rights reserved

security analysts career concerns and herding of earnings forecasts several theories of reputation and herding see e g scharfstein and stein 1990 suggest that herding among agents should vary with career concerns our goal in this paper is to document whether such a link exists in the labor market for security analysts specifically we look at the relationship between an analyst s job tenure a proxy for career concerns and various measures of stock earnings forecast performance we establish the following key results 1 older analysts are more likely to produce earnings forecasts of firms before younger ones 2 their forecasts also deviate more from the consensus forecast than their younger counterparts we argue that these results are consistent with some reputational models of herding we also establish a number of auxiliary findings regarding the relationship between forecast accuracy and frequency of forecast revisions with job tenure

endogenous information acquisition in coordination games in the context of a beauty contest coordination game in which payoffs 1 depend on the quadratic distance of actions from an unobserved state variable and 2 from the average action players choose how much costly attention to pay to vari 3 ous informative signals each signal has an underlying accuracy how precisely it 4 identifies the state and a clarity how easy it is to understand the unique linear 5 equilibrium has interesting properties the signals which receive attention are the 6 clearest available even if they have poor underlying accuracy the number of sig 7 nals observed falls as the complementarity of players actions rises and if actions 8 are more complementary the information endogenously acquired in equilibrium 9 is more public in nature the consequences of rational inattention constraints on 10

leadership coordination and corporate culture what is the role of leaders in large organizations we propose a model in which a leader helps to overcome a misalignment of followers incentives that inhibits coordination while adapting the organization to a changing environment good leadership requires vision and special personality traits such as conviction or resoluteness to enhance the credibility of mission statements and to eectively rally agents around them resoluteness allows leaders to overcome

leadership and information an organization makes collective decisions through neither markets nor contracts instead rational agents voluntarily choose to follow a leader in many cases incentive problems are solved the unique nondegenerate equilibrium achieves the first best even though every agent has incentives to free ride the leader has no special talents but is distinguished by getting exclusive access to information a crucial feature is that the leader reveals part but not all of her information it is this maintenance of informational asymmetry that permits achieving the first best jel d23 m54