vehicle scrappage and gasoline policy abstract we estimate the sensitivity of scrap decisions to changes in used car values and show how this scrap elasticity produces emissions leakage under fuel efficiency standards a process known as the gruenspecht effect we first estimate the effect of gasoline prices on used vehicle values and scrappage of vehicles with different fuel economies we then estimate the scrap elasticity itself which we find to be 0 7 when applied in a model of fuel economy standards 13 16 percent of the expected fuel savings leak away through the used vehicle market this effect rivals or exceeds the importance of the often cited mileage rebound effect jel h23 l62 l78 q35 q38 q48 q58

survey evidence on the willingness of u s consumers to pay for automotive fuel economy abstract prospect theory holds that human beings faced with a risky bet will tend to value potential losses about twice as much as potential gains previous research has demonstrated that prospect theory could be sufficient to explain an energy paradox in the market for automotive fuel economy this paper analyzes data from questions added to four commercial multi client surveys of 1000 u s households each in 2004 2011 2012 and 2013 households were asked about willingness to pay for future fuel savings as well as the annual fuel savings necessary to justify a given upfront payment payback periods inferred from household responses are generally consistent over time and across different formulations of questions mean calculated payback periods are about 3 years but there is substantial dispersion among individual responses the calculated payback periods do not appear to be correlated with the attributes of respondents respondents were able to quantitatively describe their uncertainty about both vehicle fuel economy and future fuel prices simulation of loss averse behavior based on respondents stated uncertainty illustrates how loss aversion could lead consumers to substantially undervalue future fuel savings relative to their expected value

size seasonality and stock market overreaction recent research finds that the prior period s worst stock return performers losers outperform the prior period s best return performers winners in the subsequent period this potential violation of the efficient markets hypothesis is labeled the overreaction phenomenon this paper shows that the tendency for losers to outperform winners is not due to investor overreaction but to the tendency for losers to be smaller sized firms than winners when losers are compared to winners of equal size there is little evidence of any return discrepancy and in periods when winners are smaller than losers winners outperform losers

inflation output growth and nominal and real uncertainty empirical evidence for the g7 abstract we use univariate garch models of inflation and output growth and monthly data for the g7 covering the 1957 2000 period to test for the causal effect of real and nominal macroeconomic uncertainty on inflation and output growth and the effect of inflation on inflation uncertainty our evidence supports a number of important conclusions first inflation is a positive determinant of uncertainty about inflation second output growth uncertainty is a positive determinant of the output growth rate third there is mixed evidence regarding the effect of inflation uncertainty on inflation and output growth hence uncertainty about the inflation rate is not necessarily detrimental to economic growth finally there is not much evidence supporting the hypothesis that output uncertainty raises inflation

impacts of fuel economy improvements on the distribution of income in the u s abstract we estimate the impacts of passenger car and light truck fuel economy improvements in the u s since 1975 on the real monetary incomes of u s households by income quintile over the period 1980 2014 we limit our analysis to the direct monetary impacts fuel savings minus increased vehicle costs and do not attempt a full welfare analysis we include all vehicle purchases new and used household fuel expenditures come from the u s consumer expenditures surveys ces costs of increased new passenger car and light truck fuel economy were obtained from four national research council nrc studies plus a literature review of earlier estimates the nrc cost functions provide a unique time series of technology supply functions constructed by balanced expert panels and comprised of specific technologies proven to increase fuel economy effects of fuel economy improvements on used vehicle prices are based on an analysis of the ces data retrospective analysis indicates that all income quintiles received net savings and that the effect on the distribution of income was progressive a prospective analysis of future fuel economy improvements produced similar results sensitivity analysis indicates that these findings are relatively robust

car buyers and fuel economy abstract this research is designed to help researchers and policy makers ground their work in the reality of how us consumers are thinking and behaving with respect to automotive fuel economy our data are from semi structured interviews with 57 households across nine lifestyle sectors we found no household that analyzed their fuel costs in a systematic way in their automobile or gasoline purchases almost none of these households track gasoline costs over time or consider them explicitly in household budgets these households may know the cost of their last tank of gasoline and the unit price of gasoline on that day but this accurate information is rapidly forgotten and replaced by typical information one effect of this lack of knowledge and information is that when consumers buy a vehicle they do not have the basic building blocks of knowledge assumed by the model of economically rational decision making and they make large errors estimating gasoline costs and savings over time moreover we find that consumer value for fuel economy is not only about private cost savings fuel economy can be a symbolic value as well for example among drivers who view resource conservation or thrift as important values to communicate consumers also assign non monetary meaning to fuel prices for example seeing rising prices as evidence of conspiracy this research suggests that consumer responses to fuel economy technology and changes in fuel prices are more complex than economic assumptions suggest the us department of energy and the energy foundation supported this research the authors are solely responsible for the content and conclusions presented

a theory of ambiguity credibility and inflation under discretion and asymmetric information this paper develops a positive theory of credibility ambiguity and inflation under discretion and asymmetric information the monetary policymaker maximizes his own politically motivated objective function that is positively related to economic stimulation through monetary surprises and negatively related to monetary growth the relative importance he assigns to each target shifts stochastically through time his current preference trade off is known to him but not to the public when choosing the state contingent path of money growth for the present and the future the policymaker compares the benefits from current stimulation with the costs associated with higher future inflation expectations current monetary growth conveys information to the public about future money growth because there is persistence in the policymaker s objectives although expectations are rational information is imperfect because monetary control procedures are imprecise as a result the public cannot correctly distinguish persistent changes of emphasis on different policy objectives from transitory monetary control errors the public becomes aware of changes gradually by observing past monetary growth credibility is defined in terms of the speed with which the public recognizes changes in the objectives of the policymaker credibility is lower the noisier monetary control and the more stable the objectives of the policymaker looser monetary control and a higher degree of time preference on the part of the policymaker induce him to produce higher and more variable monetary growth when the policymaker is free to determine the accuracy of monetary control he does not always choose the most effective control available in spite of the fact that monetary surprises always have an expected value of zero the reason is that ambiguous control procedures enable the policymaker to generate positive surprises when he cares more than on average about economic stimulation he leaves the inevitable negative surprises for periods in which he cares more about inflation prevention this result provides an explanation for the fed s preference for ambiguity recently documented by goodfriend 1986 the policymaker is more likely to pick more ambiguous control procedures the more uncertain his objectives and the higher his time preference the paper also provides a theoretical underpinning for the well documented crosscountry positive correlation between the level and the variability of inflation

gasoline prices fuel economy and the energy paradox abstract policymakers often assert that consumers undervalue future gasoline costs when they buy automobiles we test this by measuring whether relative prices of vehicles with different fuel economy ratings fully adjust to variation in gasoline prices vehicle prices move as if consumers are indifferent between 1 00 in discounted future gas cost and 0 76 in vehicle purchase price we show how corrections for endogenous market shares and utilization measurement error and different gasoline price forecasts affect the results we also provide unique evidence of sticky information vehicle markets respond to changes in gasoline prices with up to a six month delay

the lmdi approach to decomposition analysis a practical guide in a recent study ang energy policy 32 2004 compared various index decomposition analysis methods and concluded that the logarithmic mean divisia index method is the preferred method since the literature on the method tends to be either too technical or specific for most potential users this paper provides a practical guide that includes the general formulation process summary tables for easy reference and examples

do consumers recognize the value of fuel economy evidence from used car prices and gasoline price fluctuations abstract debate about the appropriate design of energy policy hinges critically on whether consumers might undervalue energy efficiency due to myopia or some other manifestation of limited rationality we contribute to this debate by measuring consumers willingness to pay for fuel economy using a novel identification strategy and high quality microdata from wholesale used car auctions we leverage differences in future fuel costs across otherwise identical vehicles that have different current mileage and therefore different remaining lifetimes by seeing how price differences across high and low mileage vehicles of different fuel economies change in response to shocks to the price of gasoline we estimate the relationship between vehicle prices and future fuel costs our data suggest that used automobile prices move one for one with changes in present discounted future fuel costs which implies that consumers fully value fuel economy

the measurement and behavior of uncertainty evidence from the ecb survey of professional forecasters summary we examine matched point and density forecasts of output growth inflation and unemployment from the ecb survey of professional forecasters we construct measures of uncertainty from individual histograms and find that the measures display countercyclical behavior and have increased across all forecast horizons since 2007 we also derive measures of forecast dispersion and forecast accuracy and find that they are not reliable proxies for uncertainty there is however evidence of a meaningful co movement between uncertainty and aggregate point predictions for output growth and unemployment these results are robust to changes in the composition of the survey respondents over time copyright 2015 john wiley sons ltd

short run pricing strategies to increase corporate average fuel economy short run pricing strategies to increase corporate average fuel economy i introduction in 1974 the average fuel efficiency of new automobiles sold in the united states reached a low of 14 2 miles per gallon mpg close on the heels of the arab opec oil embargo of 1973 74 and the ensuing petroleum price shocks congress passed the 1975 energy policy and conservation act the act required each manufacturer to meet sales weighted corporate average fuel economy cafe standards beginning with 18 mpg in 1978 and gradually increasing each year to 27 5 mpg in 1985 figure 1 the expressed purpose of the cafe standards was to stimulate the development of technology to improve fuel efficiency the possibility of raising the relative prices of the least energy efficient models as a strategy to meet the standards was considered but only as a last resort 1 although there continues to be intense debate as to whether fuel price increases or the cafe regulations drove the fuel economy improvements of the 1970s and 80s several studies agree that improvements in automotive engineering and design rather than pricing strategies played an overwhelmingly dominant role 2 no empirical evidence supports the effectiveness of using pricing strategies to increase the overall level of automotive fuel economy every year since 1985 automobile manufacturers have successfully petitioned the national highway traffic safety administration which determines the level of the cafe standard to reduce the target from 27 5 to 26 mpg in 1986 88 and 26 5 mpg in 1989 in each case at least one manufacturer argued that it would be unable to meet the original target with its planned product offerings and would have to resort to other strategies that would result in unacceptable economic costs this paper explores a method of estimating the costs of achieving fuel economy goals when pricing strategies are used to alter the distribution of sales the method employs the closed form equation for consumers surplus derived from the multinational logit model of discrete choice discussed by mcfadden 1973 and assumes that manufacturers must bear the full cost of meeting the fuel economy target the estimated cost represents an upper bound on the losses firms would incur by setting prices to minimize loss of profit using econometric estimates of the sensitivity of vehicle choice to vehicle price together with market shares and fuel efficiencies for 1986 i estimate the costs of short term improvements in average fuel economy using pricing strategies for general motors ford and chrysler minor adjustments of up to 1 mpg cost 1 2 percent of the price of a 10 000 car for improvements of 2 mpg or more however pricing strategies become a costly way to improve fuel economy the technique also estimates the market shares for each car line that correspond to the pricing solution it thereby identifies which car lines would be most affected the technique produces precise price changes and market shares for each car line readers should not place too much weight on the apparent precision but should consider the estimates as an approximation the usefulness of which lies in measuring the difficulty of meeting fuel economy targets via pricing strategies alone one can compare the size of these estimates to the fines for failing to meet the standards 50 per mpg per car or to typical manufacturer rebates to stimulate sales often 100 to 2 000 per car ii a formulation of the pricing problem faced with the cafe requirements a firm can respond with engineering and design improvements or by raising the prices of less efficient models and lowering the prices of those that exceed the standard technological improvements generally require a lead time of three to five years very large fluctuations in fuel prices have occurred in far shorter perids figure 1 creating the risk that a manufacturer s product offering could be out of step with the market

asymmetric herding as a source of asymmetric return volatility abstract as a considerable source of asymmetry in return volatility this paper introduces asymmetric herding and extends the continuous beliefs system to account for its asymmetry and derive the asymmetric herding parameters that are easily estimated by using a maximum likelihood method based on the garch type econometric model this paper presents new empirical evidence for asymmetry in the exchange rates volatility of major currencies against the us dollar which have bilateral nature interestingly the asymmetry of japanese yen is the opposite of that of others and the global financial crisis highlights the opposite asymmetry some of traditional hypotheses such as the leverage effect and the volatility feedback effect do not adequately explain these findings however a significant asymmetric herding effect is observed and appears to be time varying further the clear link between asymmetric herding and volatility strongly supports the hypothesis of the asymmetric herding effect

what do consumers believe about future gasoline prices a full understanding of how gasoline prices affect consumer behavior frequently requires information on how consumers forecast future gasoline prices we provide the first evidence on the nature of these forecasts by analyzing two decades of data on gasoline price expectations from the michigan survey of consumers we find that average consumer beliefs are typically indistinguishable from a no change forecast justifying an assumption commonly made in the literature on consumer valuation of energy efficiency we also provide evidence on circumstances in which consumer forecasts are likely to deviate from no change and on significant cross consumer forecast heterogeneity

inflation uncertainty and contract duration this study examines the determinants of the duration of u s union contracts using a longitudinal contract data base support is found for the hypotheses that 1 inflation uncertainty reduces contract length and that 2 greater contracting costs as proxied by a strike variable and by previous duration increase contract length in addition contract duration is found to be greater for indexed contracts to be procyclical and to have increased over the sample period copyright 1989 by mit press

the day of the week effects on the volatility the role of the asymmetry in this paper we propose to evaluate whether asymmetry influences the day of the week effects on volatility we also investigate empirically the impact of the day of the week effect in major international stock markets using garch family models from a forecast framework indeed the existence of calendar effects might be interesting only if their incorporation in a model results in better volatility forecasts

rational inattention and energy efficiency abstractthis paper argues that it will often be rational for consumers to pay limited attention to energy efficiency when choosing among energy consuming durable goods like automobiles or home appliances the reason is that the proper valuation of energy efficiency requires time and effort but differences in efficiency across products will rarely be pivotal to choice when consumers have strong preferences regarding other product attributes the paper first explains why proper valuation of efficiency is difficult even in the presence of government energy labels it next develops a model that shows how to value additional information about energy efficiency in a discrete choice context it then uses data on automobiles to show that consumers experience only small welfare losses when forced to choose a car without detailed information about fuel costs finally the paper discusses the implications of rational inattention for both economic research and public policy

the reversal of large stock price decreases extremely large negative 10 day rates of return are followed on average by largerthan expected positive rates of return over following days this price adjustment lasts approximately 2 days and is observed in a sample of firms that is largely devoid of methodological problems that might explain the reversal phenomenon while perhaps not representing abnormal profit opportunities these reversals present a puzzle as to the length of the price adjustment period such a slow recovery is inconsistent with the notion that market prices quickly reflect relevant information recent research on stock returns has uncovered a substantial number of empirical findings that are broadly inconsistent with popular asset pricing models for example keim and stambaugh 1985 cross 1973 french 1980 gibbons and hess 1981 and rogalski 1984 find evidence of day ofthe week and weekend effects on stock returns while banz 1981 and reinganum 1983 find evidence of a size effect this paper presents evidence of another empirical puzzle consider the behavior of a firm s rate of return on days after it has experienced a large negative one day rate of return less than say 10 observed daily stock returns after such an extreme event are significantly larger than average on following days for a 10 fall the return above average is 1 773 for the day after and rises cumulatively to 2 215 by the second day this multiple day price adjustment is observed in a sample of firms that is largely devoid of methodological problems that might explain the reversal phenomenon the major interest of this phenomenon is the long recovery period of the stock price reversal such a slow recovery is inconsistent with the notion that market prices fully and quickly reflect relevant information

are stock price reversals really asymmetric a note abstract one of the enigmatic findings about the stock market overreaction effect is that it is asymmetric we argue that this apparent anomaly may be entirely illusory resulting from the peculiar properties of returns the test period return on a contrarian portfolio is not always a satisfactory measure of the strength of price reversals this also renders interportfolio comparisons about the symmetry of reversals more difficult we develop an alternative measure the reversal coefficient which takes account of this deficiency some empirical corroboration is also provided

the rebound effect for automobile travel asymmetric response to price changes and novel features of the 2000s abstract previous research suggests that the elasticity of light duty motor vehicle travel with respect to fuel cost known as the rebound effect is modest in size and probably declined in magnitude between the 1960s and the late 1990s however turmoil in energy markets during the early 2000s has raised new questions about the stability of this elasticity using panel data on u s states we revisit the simultaneous equations methodology of small and van dender 2007 and hymel et al 2010 to see whether structural parameters have changed using data through 2009 we confirm the earlier finding of a rebound effect that declines in magnitude with income but we also find an upward shift in its magnitude of about 0 025 during the years 2003 2009 in addition we find that the rebound effect is much greater in magnitude in years when gasoline prices are rising than when they are falling it is also greater during times of media attention and price volatility which explains about half the upward shift just mentioned

asymmetries in stock markets abstract this paper analyzes three major asymmetries in stock markets namely asymmetry in return reversals asymmetry in return persistency and asymmetry in return volatilities it argues for a case of return persistency as stock returns do not always reverse in theory and in practice patterns in return volatility asymmetries are conjectured and investigated jointly under different stock market conditions results from modeling the world s major stock return indexes render support to the propositions of the paper return reversal asymmetry is illusionary arising from ambiguous parameter estimations and deluding interpretations of parameter signs asymmetry in return persistency still weak though is more prevalent

deconstructing the energy efficiency gap conceptual frameworks and evidence abstract energy efficient technologies offer considerable promise for reducing the financial costs and environmental damages associated with energy use but these technologies appear not to be adopted to the degree that appears justified even on a purely private basis we present two complementary frameworks for understanding this so called energy paradox or energy efficiency gap first we build upon previous literature by dividing potential explanations for the energy efficiency gap into three categories market failures behavioral anomalies and model and measurement errors second we examine the elements of cost minimizing energy efficiency decisions the typical benchmark used in assessing the gap s magnitude

the effects of real and nominal uncertainty on inflation and output growth some garch m evidence in this paper we use garch m methods to test four hypotheses about the effects of real and nominal uncertainty on average inflation and output growth in the united states from 1948 to 1996 we find no evidence that higher inflation uncertainty or higher output growth uncertainty raises the average inflation rate we also find no support for the idea that more risky output growth is associated with a higher average real growth rate our key result is that in a variety of models and sample periods inflation uncertainty significantly lowers real output growth copyright 2000 john wiley sons ltd

uncertainty loss aversion and markets for energy efficiency increasing energy efficiency is critical to mitigating greenhouse gas emissions from fossil fuel combustion reducing oil dependence and achieving a sustainable global energy system the tendency of markets to neglect apparently cost effective energy efficiency options has been called the efficiency gap or energy paradox the market for energy efficiency in new energy using durable goods however appears to have a bias that leads to undervaluation of future energy savings relative to their expected value this paper argues that the bias is chiefly produced by the combination of substantial uncertainty about the net value of future fuel savings and the loss aversion of typical consumers this framework relies on the theory of context dependent preferences the uncertainty loss aversion bias against energy efficiency is quantifiable making it potentially correctible by policy measures the welfare economics of such policies remains unresolved data on the costs of increased fuel economy of new passenger cars taken from a national research council study illustrate how an apparently cost effective increase in energy efficiency would be uninteresting to loss averse consumers

are consumers myopic evidence from new and used car purchases abstract we investigate whether car buyers are myopic about future fuel costs we estimate the effect of gasoline prices on short run equilibrium prices of cars of different fuel economies we then compare the implied changes in willingness to pay to the associated changes in expected future gasoline costs for cars of different fuel economies in order to calculate implicit discount rates using different assumptions about annual mileage survival rates and demand elasticities we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow we interpret this as showing little evidence of consumer myopia jel d12 h25 l11 l62 l71 l81

price reversals bid ask spreads and market efficiency we examine the behavior of common stock prices after a large change in price occurs during a single trading day and find evidence that the stock market appears to have overreacted especially in the case of price declines however the magnitude of the overreaction is small compared to the bid ask spreads observed for the individual stocks in the sample we interpret this finding as being consistent with a market that is efficient after transactions costs are considered