We employ corporate takeover decisions to investigate the impact of institutional ownership on corporate performance. The OLS regressions of bidder gains on institutional ownership indicate a positive relation between the two. However, we find institutional ownership to be significantly determined by firm size, insider ownership and the firm's presence in the S&P 500 index. Thus, when bidder gains are regressed on the predicted values of institutional ownership in two-stage regressions, the recursive estimates do not confirm the relationship shown by the OLS regressions. Furthermore, we do not find any evidence that active institutional investors (e.g., CalPERS) as a group enhance efficiency in the market for corporate control. These findings cast doubt on the superior selection/monitoring abilities of institutional investors.

Rakesh Basant, Brian Fikkert, The Effects of R&D, Foreign Technology Purchase, and Domestic and International Spillovers on Productivity in Indian Firms, The Review of Economics and Statistics, Vol. 78, No. 2 (May, 1996), pp. 187-199

Rakesh Vohra of University of Pennsylvania reviews “The Everything Token: How NFTs and Web3 Will Transform the Way We Buy, Sell, and Create” by Steve Kaczynski and Scott Duke Kominers. The Econlit abstract of this book begins: “Explores how non-fungible tokens (NFTs) are changing the way that business is done, demonstrating the role and inevitability of NFT technology in everyday life.”

Since prices are constrained to discrete tick multiples while dividends are essentially continuous, ex day price changes will not equal dividends. We argue that the expected price drop is strictly less than the dividend but within one tick of the dividend. The price-drop-to-dividend ratio will (i) be less than one, (ii) increase with dividends generally, and (iii) decline between tick multiples, giving a sawtooth pattern in the data. Since dividends and dividend yields are highly correlated, discreteness will give the impression of tax-induced dividend clienteles even if there are none. Taxable cash dividends and nontaxable stock dividends exhibit similar ex day behavior.

Rakesh V. Vohra of University of Pennsylvania reviews, “Jane Austen, Game Theorist” by Michael Suk-Young Chwe. The Econlit abstract of this book begins: “Explores the ways in which the core ideas of game theory appear in Jane Austen's novels. Discusses the argument; game theory in context; folk tales and human rights; game theory in Flossie and the Fox; Austen's six novels; Austen's foundations of game theory; Austen's competing models; Austen on what strategic thinking is not; Austen's innovations; Austen on strategic thinking's disadvantages; Austen's intentions; Austen on cluelessness; and real-world cluelessness. Chwe is Associate Professor of Political Science at the University of California, Los Angeles.”

Centralized markets reduce search for buyers and sellers. Their “thickness” increases the chance of order execution at nearly competitive prices. In spite of the incentives to consolidate, some markets, securities markets and on‐line advertising being the most notable, are fragmented into multiple trading venues. We argue that fragmentation is an inevitable feature of any centralized market except in special circumstances.

Anscombe and Aumann showed that if one accepts the existence of a physical randomizing device such as a roulette wheel then Savage's derivation of subjective expected utility can be considerably simplified. They, however, invoked compound gambles to define their axioms. We demonstrate that the subjective expected utility derivation can be further simplified and need not invoke compound gambles. Our simplification is obtained by closely following the steps by which probabilities and utilities are elicited.

We investigate whether or not monetary aggregates are important in determining output. In addition to the official Simple Sum measure of money, we employ the sophisticated weighted Divisia aggregate. We also investigate whether or not the influence of money on output is time varying using data-driven procedures to identify breaks in the data and conduct estimations for the different segments defined by these breaks. We find that structural breaks do exist in some of the variables under investigation and these do influence the relationship between monetary aggregates and output. However, the official Simple Sum aggregate appears to be more affected by the breaks than the theoretically superior Divisia aggregate. In particular, our results show that in some segments of our data, the Simple Sum aggregate does not influence output significantly whereas the Divisia aggregate maintains a significant relationship with output in all segments. We conclude that Divisia money is still influencing output in spite of the diminished role played in monetary policy. Our investigation also suggests that the recovery from the financial crisis using quantitative easing would have been faster if money was not being hoarded.

This paper presents conditions under which a person's beliefs about the occurrence of uncertain events are quantified by a capacity measure, i.e., a nonadditive probability. Additivity of probability is violated in a large number of applications where probabilities are vague or ambiguous due to lack of information.The key feature of the theory presented in this paper is a separation of the derivation of capacities for events from a specific choice model. This is akin to eliciting a probability distribution for a random variable without committing to a specific decision model. Conditions are given under which Choquet expected utility, the Machina-Schmeidler probabilistically sophisticated model, and subjective expected utility can be derived as special cases of our general model.