Auditing, Qualified opinion, Market reaction, Litigation exposure

Previous empirical studies have uncovered little evidence that police reduce crime, possibly due to simultaneity problems. This paper uses the timing of mayoral and gubernatorial elections as an instrumental variable to identify a causal effect of police on crime. Increases in the size of police forces are shown to be disproportionately concentrated in mayoral and gubernatorial election years. Increases in police are shown to substantially reduce violent crime, but have a smaller impact on property crime. The null hypothesis that the marginal social benefit of reduced crime equals the costs of hiring additional police cannot be rejected.

This paper measures the effect on the federal funds rate of an open-market operation. The paper deals with simultaneous-equations bias by developing a proxy for the errors the Federal Reserve makes in forecasting the extent to which Treasury operations will add or drain reserves available to private banks. These errors induce fluctuations in bank reserves which have measurable consequences for the federal funds rate. The paper estimates that a reduction in nonborrowed reserves of $30 million, if sustained for an entire 14-day reserve maintenance period, will cause the federal funds rate to rise by 10 basis points.

This article examines whether shifts in the stance of monetary policy can account for the observed predictability in excess stock returns. Using long-horizon regressions and short-horizon vector autoregressions, the article concludes that monetary policy variables are significant predictors of future returns, although they cannot fully account for observed stock return predictability. The author undertakes variance decompositions to investigate how monetary policy affects the individual components of excess returns (risk-free discount rates, risk premia, or cash flows).

This article examines whether shifts in the stance of monetary policy can account for the observed predictability in excess stock returns. Using long‐horizon regressions and short‐horizon vector autoregressions, the article concludes that monetary policy variables are significant predictors of future returns, although they cannot fully account for observed stock return predictability. I undertake variance decompositions to investigate how monetary policy affects the individual components of excess returns (risk‐free discount rates, risk premia, or cash flows).

This article examines whether shifts in the stance of monetary policy can account for the observed predictability in excess stock returns. Using long-horizon regressions and short-horizon vector autoregressions, the article concludes that monetary policy variables are significant predictors of future returns, although they cannot fully account for observed stock return predictability. I undertake variance decompositions to investigate how monetary policy affects the individual components of excess returns (risk-free discount rates, risk premia, or cash flows).

In some experiments rational players who understand the structure of the game could improve their payoff. We hound the size of the observed losses in several such experiments, lb do this, we suppose that observed play resembles an equilibrium because players learn about their opponents' play. Consequently, in an extensive-form game, some actions that are not optimal given the true distribution of opponents' play could be optimal given available information. We find that average losses are small: $0.03 to $0.64 per player with stakes between $2 and $30. In one of the three experiments we examine, this also implies a narrow range of outcome.

We analyze the empirical power and specification of test statistics in event studies designed to detect long-run (one- to five-year) abnormal stock returns. We document that test statistics based on abnormal returns calculated using a reference portfolio, such as a market index, are misspecified (empirical rejection rates exceed theoretical rejection rates) and identify three reasons for this misspecification. We correct for the three identified sources of misspecification by matching sample firms to control firms of similar sizes and book-to-market ratios. This control firm approach yields well-specified test statistics in virtually all sampling situations considered.