In this study, we examine whether investors' actions to acquire accounting information are predictive of future firm performance because these actions partially reveal investors' private expectations of this performance. Using a database of EDGAR downloads, we find some evidence that information acquisition of accounting reports by EDGAR users is, on average, predictive of future firm performance. We then determine the identity of the EDGAR user and examine whether different users' private expectations will be relatively more predictive of subsequent performance. We find that the information acquisition activities of more sophisticated institutional users (e.g., hedge funds, investment banks) are more strongly associated with future performance than are those of less sophisticated retail users. Finally, we find that information acquisition by sophisticated institutions is a leading indicator of their equity holdings. In summary, this study provides evidence of predictive information embedded in sophisticated investors' actions to acquire accounting information

In the aftermath of the 2007–2008 global financial crisis, a series of measures have been proposed to regulate the OTC derivatives market. The motivation is to increase the disclosure of OTC transactions aiming to decrease the probability of crisis. The main objective of this paper is to investigate how regulatory changes in the OTC derivatives market affect the non-financial sector. The Brazilian FX derivatives market provides a natural experiment for this issue: in 2011, the Brazilian government taxed short positions in FX derivatives to reduce the carry trade, which was causing the local currency to appreciate. Although Chamon and Garcia (2013, Capital control in Brazil: effective? International Monetary Fund, manuscript) find that this policy helped reduce the incentives for carry trade strategies, it could have unintended consequences on other markets. For example, if banks pass through the extra cost to clients, this taxation may affect the FX hedges of non-financial firms. This paper investigates whether, and if so how much, the increase in the cost of OTC derivatives is transferred to the non-financial sector. The results indicate that this cost more than doubled for companies exposed to devaluation of the local currency (for instance, importers). Although a thorough welfare analysis is beyond the scope of this paper, the findings suggest that this cost increase may be a concern to the extent that it could prevent EME firms from hedging their FX positions, as the NDF quotation of some EMEs is high due to the interest rate differentials

I provide a new characterization of internal capital markets in an emerging economy using daily divisional data on all Peruvian fish-processing firms. A regression discontinuity model exploiting government production bans on regulated divisions (“fishmeal”) shows that the increased investment in the nonfishmeal divisions due to the bans is substantial (over 30 % of the mean value), after controlling for productivity. The redeployment of financial capacity into nonfishmeal investments is particularly sharper when external financing is more costly and when firms are more closely monitored by creditors. The value-creating nature of this redeployment is supported by its positive effects on nonfishmeal exports. (JEL G30, G31, G32, Q56) The pursuit of value-creating opportunities in emerging economies has become an increasingly important theme for investors and scholars. Accordingly, a growing body of research on global stock market integration, privatization waves, mergers and acquisitions, and banking has led to important lessons about financial markets in emerging economies. Yet surprisingly little is known about how real firms based in emerging economies allocate their internal capital to different investment opportunities. To address this major gap, it would be useful to understand whether and how firms in emerging economies operate their “internal capital markets, ” arguably the most active source of funding for Mark Garmaise provided generous feedback and his help is much appreciated. I am also grateful to Michael

In the past two decades, considerable progress has been made in studying the economic relationships between countries through the linkage of large-scale national econometric models. Examples of these projects include Project Link, the RDX2-MPS experiments of the Bank of Canada, and the multicountry model of the Federal Reserve Board. While these models tell us much, they typically suffer from several important problems. First, the linkages are often incomplete. In some cases the separate country models may only be linked via the trade accounts. Or, if capital and factor flows are considered, they are modeled in only a highly aggregated fashion. Second, as Ray Fair (1979) has noted, no model does an adequate job of linking the underlying sectoral flows of funds accounts with the national income accounts. Therefore, in the interest of modeling aggregate relationships, underlying balance sheet constraints may be violated or ignored. This could have, Fair argues, important consequences for empirical results.' In this paper we suggest our own strategy for modeling the economic linkages between any two countries. Our strategy focuses on the underlying flows between these two countries and the sectoral contributions to these flows. That is, we propose to merge the flow of funds accounts via their bilateral balance of payments. We envision an integrated flow of funds accounting framework with the two countries sharing a common balance of payments. This modeling strategy has several advantages. First, our suggested framework could be used, following the strategy of Fair, to supply the financial underpinning for future economic modeling of international linkages of prices and interest rates. The balance sheet constraints inherent in the framework will impart additional information in any statistical estimation of such a model. Second, this strategy should yield a better understanding of a country's balance of payments since it necessarily links domestic decision making with its international outcome. Third, our framework should be useful to policymakers since it would allow them to model the underlying financial implications of proposed policy changes. Finally, the implementation of our proposal could lead to improved accuracy in balance of payments statements. tDiscLussant: John A. Sawyer, University of Toronto

This study was conducted to evaluate George Kaufman's extension of the Friedman and Meiselman technique for an empirical definition of money. This method defines as money that financial aggregate which satisfies two criteria: 1) it exhibits the highest correlation with GNP, and 2) the correlations between GNP and each of the components considered separately do not exceed that between GNP and the aggregate. The components are thus substitutes the public alters the composition of its portfolio due to changes in supply conditions, while keeping its portfolio size constant relative to GNP. (See Friedman and Schwartz, ch. 2; and J. R. Hicks, p. 49.) The set of assets heretofore considered include liquid financial assets. Friedman and Meiselman discovered that the dual criteria were best satisfied by the sum of currency and all privately held deposits at commercial banks (pp. 182-84). Kaufman examined the proposition that if money is a factor in determining GNP, its effect may be delayed by as long as a year. From correlations between GNP and various financial aggregates which led GNP by +4 to -2 quarters, he found that the best definition of money depends on the number of quarters by which the financial measure leads or lags GNP. In general, the broader aggregates perform better when they are observed two or more quarters before income while the narrow definition performs best when observed concurrently with income (see Kaufman, pp. 86-87, Tables 1 and 2). Kaufman examines the impact of changes in the monetary aggregate on changes in income in a particular current or future quarter, a procedure which is appropriate if money's effect on income occurs with a discrete time lag. The present study, extends the Kaufman analysis, allowing the effect of money on GNP to be distributed over several quarters by examining regressions of the following form

T HE NEW International Encyclopedia of the Social Sciences has already received the attention it rightly deserves. It is a worthy sequel the Encyclopedia of the Social Sciences which has, since its publication in the early 1930s, become badly outdated with respect both facts and theoretical developments in rapidly moving disciplines. The IESS is a wholly new product, not merely a revision of the earlier work. Its editors set themselves the task to make available readers throughout the world the concepts, principles, theories, methods, and empirical regularities that characterize the social sciences today (vol. 1, p. xxiii) and urged contributors include historical and descriptive material illustrate concepts and theories, rather than for its own sake. The publication coming from this effort contains 1716 articles-598 are biographical entries-bound in 17 volumes (including an extensive index) and selling for $503 a set, postpaid. (The Preface reports that the publisher was willing invest $2 million in the enterprise.) Casual perusal of the articles suggests that the editors were successful and early sales support this: an initial printing of 10,000 was sold out within five months, and the set went into a second printing of similar size. The buyers, I am told, include a large number of high schools, using Title II funds under the Federal Elementary and Secondary School Act. The purpose of this review is draw attention the non-biographical entries dealing with international economics. Sixteen articles deal directly with intemational economics, that is, with subjects that might be covered in a college course of that title. Many others, such as those on central banking, foreign aid (economic), mercantilism, spatial economics, and a number of the biographies, of course are also relevant international economics. About the same number of articles on international economcs appeared in the earlier Encyclopedia, and by rough calculation the share of international economics in the total material remained unchanged at 1.2 percent. But while in the earlier Encyclopedia 39 percent of the total coverage represented topics in economics, in the IESS this share dropped 14 percent [3, Sills, 1969, p. 1173]. No doubt this reflects not only the change in principal editorship from two economists (E.R.A. Seligman and Alvin Johnson) a sociologist (David Sills) but also the relative growth during the past generation of anthropology, sociology, statistics, and (especially) psychology. Thus international economists can take some satisfaction that the relative importance of their field within the discipline of economics seems have risen sharply; or else international economists are more prolix than their closed economy counterparts. Thirteen of the sixteen articles on international economics are grouped under three broad headings: international monetary economics is covered by R. A. Mundell

2019 THROUGH MID-2020 SAW A PERIOD in which management decisions made by the Executive Committee the previous two years began to produce positive financial results, leaving the Econometric Society in its strongest financial position yet. The new royaltybased contract with Wiley Publishers combined with membership fee enhancements, robust membership drives, and solid investment returns even during a tumultuous market, put the Society in good shape to weather any future challenges. The new contract between Wiley and the Econometric Society went into effect in 2019. In 2019, the Society earned total institutional journal revenues of $721,383 compared to $698,010 the previous year. However, both figures include deferred revenues no longer accruing as a result of the new royalty-based contract. For 2019, real institutional publishing revenues came to $509,613 for the first full year under the new contract while $211,770 in deferred revenues was carried over from previous years. In exchange, henceforth Wiley will cover the cost of printing, distributing and disseminating the Econometric society journals. Unfortunately, 2019’s promising year-end results are unlikely to continue through 2020 given the onset of COVID-19. Universities and research centers’ libraries (all of which make up the bulk of institutional sales) all project no or very low growth for the remainder of 2020 so future institutional revenues are expected to compress. Membership revenues fared well too. In 2019, the Society added additional subscription rate options to its membership categories; increased rates across all categories; and for the first time added an auto-renew option for membership purchases. As a result of these changes, the number of year-end memberships (see the Secretary’s report for membership statistics) and total membership revenues increased substantially. Membership revenues jumped from $585,349 at end-of-year 2018 to $680,253 at end-of-year 2019, an increase of $94,904. The Society continued its relationship with Wells Fargo for its day-to-day banking and credit card processing, and with Vanguard to manage its investments. At the same time, the Society’s Investment Committee adjusted its investment strategy and saw gains emerge. By end-of-year 2019, the Society’s Central office investment holdings rose from end-of-year 2018 holdings of 2,357,604 to 2019 end-of-year holdings of $3,331,812, although part of the increase resulted from the transfer of $500,000 from Wells Fargo. The regional account totals, however, went from 2018 combined holdings of $613,413 to 2019 end-of-year holdings of $544,590. While the European region holds the majority of regional funds, Africa, Asia, Australasia, and Latin America’s regional accounts are subsidized by annual grants available to help with activities for young economists. A fundraising initiative for young African scholars was launched in June 2019, bringing in close to $30,000 through generous donations from the Society’s fellows and general membership base. The Society will continue to grow its Fund for African Scholars. The

In a recent paper in this Review, David Howard concludes that his test of the predictive ability of the Barro-Grossman disequilibrium model is successful within the Soviet context. The Barro-Grossman (B-G) model (1971, 1974) focuses on the responses of saving and labor supply to conditions of excess demand, defined as the case where at the prevailing price, the demand for consumer goods exceeds their supply. The B-G model predicts that under conditions of excess demand, referred to also as repressed inflation, an increase (decrease) in the quantity of goods available leads to a decrease (increase) in saving and an increase (decrease) in labor supply, with its consequent multiplier effect on output. Howard tailors the B-G model to the Soviet economy by including an uncontrolled market, specifically the collective farm market, and by eliminating the role of profits as an argument in the effective saving and labor supply functions. While the B-G model supplies an important theoretical framework for predicting responses to changes in the constrained availability of goods, the model is difficult to test empirically. Moreover the methodology used by Howard is flawed in several ways. An adequate measure of the supply of goods available on the constrained market (defined by Howard as B?, goods available on controlled market) is needed to test the B-G model. However, Howard's choice for B?, a composite of goods sold on the state and cooperative retail markets, is not such a measure. The significance of introducing a variable to measure availabilities is to capture the notion that what is purchased under conditions of excess demand will not reflect desired purchases, but rather actual purchases, thereby revealing a point of market disequilibrium. Despite the argument that sales seem a good proxy for availabilities because quantities are so limited that whatever is available will be purchased, the use of sales to represent availabilities is unjustified for two reasons. The first reason focuses on the relationship between two of the most important variables in Howard's analysis: B?, state and cooperative retail sales, and sd, the change in savings bank deposits, which can simply be termed saving in the Soviet context where the purchase of interest-earning assets (or even lottery bonds) and the other usual alternatives to savings bank deposits are negligible. Certainly the change in state and cooperative retail sales (AB') and the change in saving (As') must be highly negatively correlated. This can be easily seen in the context of the Howard model by constructing the ratios ABO/A(wLs) and ASdl/A(wLs) where w is the wage rate, Ls is the average nonprivate civilian employment, and the product wLs is the wage bill. Assuming the wage bill is approximately equal to income, these ratios are approximately the marginal propensity to consume and the marginal propensity to save, which must sum to unity, neglecting the fraction of the change in total income spent on the uncontrolled market and assuming other forms of saving to be zero. Noting this obviously negative relationship between ASd and ABIR, the fact that Howard's estimations yield coefficients for aSd/aBO that he claims are both correct and significant with respect to one-tailed t-tests (see his Table 2: OSd OBR = -.424641 with an absolute t-statistic of 2.292 and his Table 3: dSd/0RO = -.42054 with an absolute t-statistic of 2.158) is uninformative except when viewed from a somewhat different perspective; that is, the fact that the coefficients are only so weakly signif*Assistant professor of economics, Graduate School of Business Administration, New York University. This work was funded in part by a New York University faculty research grant

Johannes Stroebel is the David S. Loeb Professor of Finance at New York University's Stern School of Business. Johannes joined Stern as an Assistant Professor of Finance in 2013 and received tenure in 2016. He started his career in 2012 as the Neubauer Family Assistant Professor of Economics at the University of Chicago Booth School of Business after earning a Ph.D. in Economics at Stanford University. Stroebel's prolific body of work, which looks more like that of somebody 20 rather than only 10 years out of the Ph.D., spans a broad range of topics and uses a variety of methods. He has made important contributions to at least four areas: household finance, asset pricing, climate risk, and social networks. Several papers forge connections between these areas. I highlight key contributions to each of these research agendas. The first strand of Johannes' work focuses on household finance. In two papers published in the Quarterly Journal of Economics (Agarwal et al. (2015, 2018)), Stroebel combines a large microlevel data set of credit card accounts with careful identification. The first paper finds that regulation that protected consumers by limiting fees was not undone by banks charging higher costs elsewhere, but rather resulted in higher consumer surplus. The second paper uses the cross-section of credit card accounts to show that the monetary pass-through via the bank lending channel is limited because the borrowers with a high marginal propensity to borrow and consume are those for which the banks have a low marginal willingness to lend. Another important paper in household finance is the American Economic Review paper (Giglio et al. (2021b)) that establishes a modest response of financial portfolio decisions to households' beliefs about expected returns. Johannes returns to the topic of consumer credit in a forthcoming Journal of Finance paper (Howell et al. (2023)) on lender automation and racial disparities in credit access. Much of Johannes' work, some of which I describe below, touches on housing, the largest asset in households' portfolios. Stroebel's second main research pillar is asset pricing. In three connected papers, Giglio, Maggiori, and Stroebel infer the discount rates that investors apply to cash flows that accrue in the very far future. Such very long discount rates are important, for example, for analyses of greenhouse gas abatement investments that trade off the uncertain future benefits against current costs (Giglio et al. (2021a)). More on the climate implications below. In traditional financial markets, we have very few very long-lived assets from which to infer long-run discount rates. The authors turn to real estate markets. In Singapore and the United Kingdom, investors can buy houses either as freeholds, which grant perpetual ownership rights to land and structure, or as leaseholds, which grant tradeable temporary ownership rights ranging between 75 and 999 years. From the price difference between freeholds and leaseholds of different maturities, the authors back out a term structure of discount rates under reasonable assumptions on growth rates of rents. The observed price discounts imply low long-run discount rates of 2.6% per year for very far-out payoffs. Combined with the observation that the overall (maturity-weighted) return on housing is around 6% per year, they conclude that the term structure of discount rates is downward sloping (Giglio, Maggiori, and Stroebel (2015)). These discount rate estimates suggest that there was no bubble in these housing markets in the 2000s (Giglio, Maggiori, and Stroebel (2016)). Put differently, the risk premium applied to cash flows in the very far future is high enough to make its present discounted value equal to zero; the transversality condition for long-lived assets is likely to be satisfied. The third and most recent area Johannes has focused on is climate finance, as summarized in a recent review article (Giglio, Kelly, and Stroebel (2021)). A central issue in this literature is how to think of the uncertainty associated with future benefits of climate abatement investments. More economic activity creates larger climate damages as a by-product. But climate risk also directly affects the economy, think of a natural disaster. Under the first view, states of the world with lots of climate change are states of the world with high GDP (Nordhaus (2013)), whereas in the second view, they are states with low GDP (Barro (2015), Weitzman (2012)). Whether states of the world with rapid climate change are good or bad states has major quantitative implications for the discount rate to be used when calculating the benefits of climate mitigation and the social cost of carbon. Giglio et al. (2021a) argue that real estate markets are informative for which discount rate to use when evaluating climate abatement investments. It establishes that real estate returns are risky, performing poorly in low-growth and consumption disaster states. It also documents that real estate values are indeed exposed to climate risk by studying how coastal house prices change when the perception of climate risk increases. A disaster risk model, where economic activity increases the likelihood of a climate disaster and rebounds after a disaster, generates a downward-sloping discount rate curve, consistent with the aforementioned evidence from the real estate market. Since climate abatement investments hedge climate change risk, the appropriate discount rates are below the risk-free rate at all maturities and rising in maturity. Johannes has several more interesting papers in climate finance (Engle et al. (2020), Stroebel and Wurgler (2021), van Benthem et al. (2022), Alekseev et al. (2022)) that zoom in on risk measurement and management. The fourth, and maybe most well-known area of Johannes' research portfolio is his work on how social networks affect economic decision making, summarized in Bailey et al. (2018a) and Kuchler and Stroebel (2021). Together with Theresa Kuchler and other coauthors, Johannes uses Facebook (now Meta) data to construct a social graph of friendship links and shows that this network is important for the transmission of beliefs about all kinds of real outcomes. Their first and best-known paper in this agenda is in the Journal of Political Economy (Bailey et al. (2018b)). It shows that friends' experiences with house price growth shape the homeownership choices and the price paid for houses of their geographically distant Facebook friends. This influence occurs by changing their beliefs. In Bailey et al. (2019), the authors explore how variation in house price beliefs that is induced by the same type of social network variation affects mortgage leverage choice. Kuchler et al. (2022) shows that mutual fund investment decisions are in part determined by social networks. In more recent worth with Raj Chetty, Matt Jackson, Theresa Kuchler, and other coauthors (Chetty et al. (2022a, 2022b)), Johannes investigates that the effect friendship networks have on upward income mobility. They also study the factors that influence interactions across people of different socioeconomic backgrounds and suggest policy interventions that could increase such interactions. The Fischer Black Prize honors individual financial research. It is awarded for a body of work that best exemplifies the Fischer Black hallmark of developing original research that is relevant to finance practice. The winner should either be under age 40, or under age 45 for a winner who had not been awarded a Ph.D. (or equivalent) by age 35. The American Finance Association appreciates the generosity of the original donors who made this prize possible and the recent 2018 donors who helped to substantially increase the endowment. The names of the donors can be found at https://afajof.org/fischer-black-prize