This paper characterizes the patterns of intergenerational mobility in the United States using data for matched parent/child pairs from the National Longitudinal Surveys. In general, what is found is far from the extremes of either perfect mobility or perfect immobility. Parents' log income explains only about 9 percent to 11 percent of the variation in children's log incomes. Earnings exhibit more mobility than does total income, and the difference is most striking for daughters. The paper also identifies the influence of family background characteristics on mobility. The addition of these background variables adds another 3 to 5 percent age points to the R2 in the intergenerational earnings and income regressions.

This paper examines problems in the use of divergence of analyst opinion as a proxy for estimation risk in empirical studies of security returns and asset pricing models. We demonstrate that diversity of opinion can increase even though the amount of private information increases, and we show that diversity of opinion may overstate estimation risk if the capital market aggregates the information held by investors. We produce empirical results consistent with our conclusions. Specifically, we find that divergence of opinion can produce measures of estimation risk that are inconsistent with a received proxy for estimation risk and with observed common stock returns.

[Weekly data for foreign currency futures prices are examined for evidence of risk premiums. Covariance risks are measured with respect to the excess returns from benchmark portfolios for consumption and wealth. When the parameters representing the prices of the covariance risks are held constant, no risk premiums are detected. However, when these prices are allowed to vary with the conditional expected returns and variances of the benchmark portfolios, possibly reflecting changing investment opportunities, strong evidence of risk premiums is obtained.]

This paper develops a specialized principal-agent model of the investor-investment advisor relationship and embeds the standard advisory compensation schedule in the model. Advisors are endowed with information-gathering abilities and investors are endowed with funds. Information-gathering services are traded indirectly through the investor's receipt of portfolio returns net of advisory fees. Model results show that the parameters of the compensation schedule are both a function of the idiosyncracies of an advisor's information services and the degree of risk sharing between the advisor and investor. Several predictions of the model are supported using data on mutual fund advisors. Unsupported predictions may be due to self-selection of advisors by risk tolerance.

Preferred Stocks, Foreign Tax Credits, Tax Reform Act, Tax burden

Recent theory casts doubt on the frequently used interindustry regression method of inferring a country's abundant factors. This paper examines the empirical importance of these theoretical qualifications by comparing regression-derived estimates of factor abundance with both revealed and actual factor abundances for 35 countries and 12 resources. We demonstrate the theoretical importance of trade imbalances for the reliability of the regression estimates and therefore propose and implement a theoretically consistent trade imbalance correction. The results indicate that, despite valid theoretical concerns, the regression estimates are generally reliable indicators of revealed factor abundance. Therefore, the innumerable regression studies conducted over the past 30 years can be considered to provide reliable evidence concerning the validity of the factor abundance theory.

The author reports a bound on the variance of price-dividend ratios and a decomposition of their variance into terms that reflect changes in dividend growth and discount rates. The specification is not restrictive. The test statistics do not require construction of ex post present values; instead, they are restrictions on means, variances, and covariances of price-dividend ratios, dividend growth, and discount rates. He considers implications for the mean price-dividend ratio, and he evaluates whether a low mean discount rate can rationalize the mean and variance of price-dividend ratios. The results do not indicate any striking rejections of present-value models. However, the bulk of the variance of price-dividend ratios must be accounted for by changing forecasts of discount rates, and discount rates must possess some unusual characteristics. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

[This study adds to recent research that assesses the value implications of earnings changes. Stock price changes associated with reported earnings innovations (typically assessed by estimating earnings response coefficients) have been characterized as related to the persistence of earnings, which is defined as the revision in expected future earnings that is implied by a current earnings innovation. Permanent earnings innovations are associated with higher multipliers than transitory ones. This stream of research stems from Kormendi and Lipe (1987) and Easton and Zmijewski (1989). These studies characterize earnings persistence as a stationary, firm-specific phenomenon that describes the evolution of earnings over time. They estimate parameters of earnings persistence from time-series data on earnings and then show that the market's pricing of earnings innovations are related to the persistence measures. Typically, this evaluation involves ex post information, so the approach is not relevant for investors' ex ante determination of pricing multipliers. This article reports three findings on the pricing of annual earnings changes. First, pricing multipliers can be evaluated contemporaneously by other information published in annual financial statements along with earnings. An investor who seeks to assess persistence and the price effect of a reported earnings change can do so by referring to other information in the financial statements. Second, in contrast to previous research, this study shows that the earnings persistence indicated by financial statements is not a fixed attribute, but changes over time and tends to revert to the mean of all firms. Correspondingly, pricing multipliers follow a similar pattern, which requires their periodic updating through financial statement analysis. Third, the multiplier of earnings changes is also related to information published in the previous year's annual report. To the extent that previous accounting reports provide forecasts of earnings that are already incorporated in prices, multipliers are lower.]