This paper documents differences in lifetime earnings risk across occupations due to wage risk, employment risk, and midcareer occupation changes, which can mitigate other shocks. Total lifetime earnings risk varies considerably across starting occupation, and riskier occupations pay more in expectation. The average worker would give up at least 9% of total lifetime earnings in the least certain occupation to reduce the riskiness of that occupation to the level of the safest starting occupation. The insurance value of occupational mobility is quantitatively important. With mobility, workers absorb only 60%, on average, of negative occupation-specific wage shocks.

Abstract If a nonlinear risk premium in a conditional asset pricing model is approximated with a linear function, as is commonly done in empirical research, the fitted model is misspecified. We use a generic reduced-form model economy with moderate risk premium nonlinearity to examine the size of the resulting misspecification-induced pricing errors. Pricing errors from moderate nonlinearity can be large, and a version of a test for nonlinearity based on risk premiums rather than pricing errors has reasonable power properties after properly controlling for the size of the test. We conclude by examining the importance of moderate nonlinearity in the context of the investment-specific technology shock models of Papanikolaou (2011) and Kogan and Papanikolaou (2014).

We study the relation between hedge fund equity holdings and measures of informational efficiency of stock prices derived from intraday transactions as well as daily data. Our findings support the role of hedge funds as arbitrageurs who reduce mispricing in the market. Hedge funds invest in stocks that are relatively inefficiently priced, and the price efficiency of these stocks improves after hedge funds increase their holdings. Hedge fund ownership contributes more to efficient pricing than ownership by other types of institutional investors. However, stocks held by hedge funds experienced large declines in price efficiency during several liquidity crises.Received July 27, 2016; editorial decision January 07, 2017 by Editor Wayne Ferson.

While the GDP was intended by its originators as a measure of production, the absence of a measure of welfare in the national accounts has led to widespread misuse of the GDP to proxy welfare. Measures of welfare are needed to appraise the outcomes of changes in economic policies and evaluate the results. Concepts that describe the income distribution, such as poverty and inequality, fall within the scope of welfare rather than production. This paper reviews recent advances in the measurement of production and welfare within the national accounts, primarily in the United States and international organizations. Expanding the framework beyond the national accounts has led to important innovations in the measurement of both production and welfare. (JEL D63, E01, E23, E24, E31, I20)

We investigate how seasoned equity offerings (SEOs) by issuers with large customers affect both trading partners’ market values and the relationship's health. We hypothesize that SEOs reveal adverse information about an issuer's major customers and find that issuers and their large customers experience negative returns on SEO announcements. These results are more pronounced when customers have higher levels of information asymmetry and when customer-supplier relationships are particularly important. Large customers of issuers experience larger declines in post-SEO sales, operating performance, and credit ratings than large customers of non-issuers. Also, SEO issuer sales to large customers and relationship duration significantly decline.