Knowledge that Transforms

This study analyzes the extent to which mutual funds purchase stocks based on their past returns as well as their tendency to exhibit 'herding' behavior (i.e., buying and selling the same stocks at the same time). The authors find that 77 percent of the mutual funds were 'momentum investors, ' buying stocks that were past winners; however, most did not systematically sell past losers. On average, funds that invested on momentum realized significantly better performance than other funds. The authors also find relatively weak evidence that funds tended to buy and sell the same stocks at the same time. Copyright 1995 by American Economic Association.

The high income elasticity of demand often estimated for U.S. imports may be a spurious result of omitting new product varieties from the import price indexes. The purpose of this paper is to demonstrate how to incorporate new product varieties into a constant-elasticity-of-substitution aggregate of import prices. This method is applied to U.S. imports of six disaggregate manufactured goods. It is shown that the corrected indexes are able to account for part--but not all--of the high income elasticities. Copyright 1994 by American Economic Association.

The authors explore the twin hypotheses (1) that high-performance incentives, worker ownership of assets, and worker freedom from direct controls are complementary instruments for motivating workers, and (2) that such instruments can be expected to covary positively in cross-sectional data. They also relate their conclusions to empirical evidence, particularly that on the organization, compensation, and management of sales forces. Copyright 1994 by American Economic Association.