Announcements of stock repurchase tender offers are examined as a source of information about firms' future earnings prospects and market risk levels. We document positive earnings surprises and equity systematic risk reduction following tender offers. Announcement stock price reactions are positively correlated with earnings surprises over the concurrent and subsequent two years, and negatively correlated with changes in equity market risk. Finally, stock price reactions to quarterly earnings announcements are more strongly correlated with time-series based earnings surprises in the year prior to the tender offer than during the subsequent year, consistent with tender offer announcements conveying earnings information.

Scott W. Barnhart, Andrew C. Szakmary, Testing the Unbiased Forward Rate Hypothesis: Evidence on Unit Roots, Co- Integration, and Stochastic Coefficients, The Journal of Financial and Quantitative Analysis, Vol. 26, No. 2 (Jun., 1991), pp. 245-267

International differences in the cost of production of a key intermediate product can mean that a domestic firm is dependent on supplies from a foreign vertically integrated firm. This paper considers the incentives for the foreign firm and foreign country to supply the domestic firm when the firms compete in a Cournot or Bertrand market for the final product. The vertical supply decision is significantly affected by domestic supply conditions for the input and a domestic tariff on final product imports. Optimal policy by the exporting country may require a tax on both exports, or a subsidy on both exports.

A test for long-run memory that is robust to short-range dependence is developed. It is a simple extension of Mandelbrot's "range over standard deviation" or R/S statistic, for which the relevant asymptotic sampling theory is derived via functional central limit theory. This test is applied to daily, weekly, monthly, and annual stock returns indexes over several different time periods. Contrary to previous findings, there is no evidence of long-range dependence in any of the indexes over any sample period or sub-period once short-term autocorrelations are taken into account. Illustrative Monte Carlo experiments indicate that the modified R/S test has power against at least two specific models of long-run memory, suggesting that stochastic models of short-range dependence may adequately capture the time series behavior of stock returns.

Numerous articles have investigated the distribution of share prices, and find that the returns are fat tailed. Nevertheless, there is still controversy about the amount of probability mass in the tails, and hence about the most appropriate distribution to use in modeling returns. This controversy has proven hard to resolve, as the alternatives are non-nested. We employ extreme value theory, focusing exclusively on the larger observations in order to assess the tail shape within a unified framework. We find that at least the first two moments exist. This enables one to generate robust probabilities on large returns, which put the recent stock market swings into historical perspective.

This study estimates translog variable cost functions for 147 American doctorate granting universities, accounting for three major products of these institutions: undergraduate and graduate instruction, and research. Explicit measures of research output and quality are employed. Evidence is found for considerable economies of scale for the average institution, as well as economies of scope related to the joint production of undergraduate and graduate instruction. The public or private ownership of an institution is not significant for the explanation of variable costs. The intensity of state regulation in the public sector does not have a significant impact on production efficiency. Copyright 1991 by MIT Press.

Surveys of individual's risk-dollar trade-offs illuminate not only the local trade-off rates, but also can be used to address more fundamental questions about the structure of utility functions. This largely unexplored empirical area is investigated by developing an econometric technique to estimate utility functions based on survey data on risk-dollar trade-offs for minor health effects. The empirical tests indicate that for all but one of the temporary health effects considered, consumers treat injuries as tantamount to a drop in income, implying that the health impact does not alter the structure of the utility function in a fundamental way. Copyright 1991 by MIT Press.

This paper determines when a debt contract will be monitored by lenders. This is the choice between borrowing directly (issuing a bond, without monitoring) and borrowing through a bank that monitors to alleviate moral hazard. This provides a theory of bank loan demand and of the role of monitoring in circumstances in which reputation effects are important. A key result is that borrowers with credit ratings toward the middle of the spectrum rely on bank loans, and in periods of high interest rates or low future profitability, higher-rated borrowers choose to borrow from banks.

A country's most talented people typically organize production by others, so they can spread their ability advantage over a larger scale. When they start firms, they innovate and foster growth, but when they become rent seekers, they only redistribute wealth and reduce growth. Occupational choice depends on returns to ability and to scale in each sector, on market size, and on compensation contracts. In most countries, rent seeking rewards talent more than entrepreneurship does, leading to stagnation. Our evidence shows that countries with a higher proportion of engineering college majors grow faster; whereas countries with a higher proportion of law concentrators grow slower.