Liquidity plays an important role in global research. We identify high-quality liquidity proxies based on low-frequency (daily) data, which provide 1,000× to 10,000× computational savings compared to computing high-frequency (intraday) liquidity measures. We find that: (i) Closing Percent Quoted Spread is the best monthly percent-cost proxy when available, (ii) Amihud, Closing Percent Quoted Spread Impact, LOT Mixed Impact, High–Low Impact, and FHT Impact are tied as the best monthly cost-per-dollar-volume proxy, (iii) the daily version of Closing Percent Quoted Spread is the best daily percent-cost proxy, and (iv) the daily version of Amihud is the best daily cost-per-dollar-volume proxy.

Accountants making judgments with respect to a particular set of standards are increasingly aware of standards from other reporting regimes that offer additional or conflicting guidance. In fact, IFRS encourages reliance on out‐of‐regime standards when IFRS lacks guidance. This paper reports the results of two experiments which provide evidence that auditors in such circumstances are vulnerable to contrast effects , whereby reporting judgments under IFRS are systematically influenced away from the accounting treatment supported by standards from another regime (U.S. GAAP ). Contrast effects are observed (i) when out‐of‐regime standards are considered before making a reporting judgment under IFRS , and (ii) when out‐of‐regime standards are applied as local GAAP for a subsidiary of a foreign parent that reports under IFRS . We also find that contrast effects are reduced when auditors believe IFRS lacks guidance. These results have implications for financial statement preparers and auditors in the current incomplete‐convergence environment.

Can a temporary economic shock to an important local industry influence long-run city population? To answer this question I study the large temporary shock to British cities caused by the U.S. CivilWar (1861–1865), which reduced cotton supplies to Britain’s important cotton textile industry. I show that this event temporarily reduced the growth rate of cities specializing in cotton textile production, relative to other English cities, and led to a persistent change in the level of city population.

The unit banking structure of the United States produced a uniquely important interbank correspondent network. During the National Banking Era, this network normally provided banks with access to money markets, facilitated payment processing, and helped banks meet legal reserve requirements. In crises, network connections could be a source of liquidity risk. That risk became evident during the Panic of 1893, when New York suspended convertibility. Banks with high two-sided liquidity risk (those holding more of their liquid assets with their correspondents and funded to a greater extent by deposits of other banks) were particularly exposed and more likely to close.

ABSTRACT Errors and bias are both inherent features of accounting. In theory, while errors discourage bias by lowering the value relevance of accounting, they can also facilitate bias by providing camouflage. Consistent with theory, we find a hump‐shaped relation between a firm's propensity to engage in intentional misstatement and the prevalence of unintentional misstatements in the firm's industry for the whole economy and a majority of the industries. The result is robust to using firms’ number of items in financial statements and exposure to complex accounting rules as alternative proxies for errors and to using the restatement amount in net income to quantify the magnitude of bias and errors. To directly test for the two effects of errors, we show that when errors are more prevalent, the market reacts less to firms’ earnings surprises and bias is more difficult to detect. Our results highlight the imperfectness of accounting, advance understanding of firms’ reporting incentives, and shed light on accounting standard setting.

This paper links the CEO's concerns for the current stock price to reductions in real investment. We identify short-term concerns using the amount of stock and options scheduled to vest in a given quarter. Vesting equity is associated with a decline in the growth of research and development and capital expenditure, positive analyst forecast revisions, and positive earnings guidance, within the same quarter. More broadly, by introducing a measure of incentives that is determined by equity grants made several years prior, and thus unlikely driven by current investment opportunities, we provide evidence that CEO contracts affect real decisions.

We design an experiment to test the hypothesis that, in violation of Bayes’ rule, some people respond more forcefully to the strength of information than to its weight. We provide incentives to motivate effort, use naturally occurring information, and control for risk attitude. We find that the strength–weight bias affects expectations but that its magnitude is significantly lower than originally reported. Controls for nonlinear utility further reduce the bias. Our results suggest that incentive compatibility and controls for risk attitude considerably affect inferences on errors in expectations.

This paper examines the long-term impacts of in-utero and early childhood exposure to ambient air pollution on adult labor market outcomes. We take advantage of a new administrative data set that is uniquely suited for addressing this question because it combines information on individuals ’ quarterly earnings together with their counties and dates of birth. We use the sharp changes in ambient air pollution concentrations driven by the implementation of the 1970 Clean Air Act Amendments as a source of identifying variation, and we compare cohorts born in counties that experienced large changes in total suspended particulate (TSP) exposure to cohorts born in counties that had minimal or no changes. We find a significant relationship between TSP exposure in the year of birth and adult labor market outcomes. A 10 unit decrease in TSP in the year of birth is associated with a 1 percent increase in annual earnings for workers aged 29-31. Most, but not all, of this effect is driven by an increase in labor force participation. In present value, the gains from being born into a county affected by the 1970 Clean Air Act amount to about $4,300 in lifetime income for the 1.5 million individuals born into

We investigate the information content of stock correlation based network measures for systemic risk rankings, such as SIFIRank (based on Google’s PageRank). Using European banking data, we show that SIFIRank is empirically equivalent to a ranking based on average pairwise stock correlations as developed in this paper. The correlation based network measures complement currently available alternative systemic risk ranking methods based on book or market values. A further analytical investigation shows that the value-added appears to be mainly attributable to pairwise cross-sectional heterogeneity rather than to more subtle network relations and feedback loops.

This paper discusses recent trends in the use of replications in economics. We include the results of recent replication studies that have attempted to identify replication rates within the discipline. These studies generally find that replication rates are relatively low. We then consider obstacles to undertaking replication studies and highlight replication initiatives in psychology and political science, behind which economics appears to lag.