I examine the enormous trading volume in the first two days of trading following an initial public offering (IPO) with a sample of Nasdaq IPOs. The composition of trading varies widely with the initial return and not all trading is investor-related. Cold IPOs have a high proportion of interdealer sell trades, whereas hot IPOs have balanced investor buying and selling. Market makers hold zero inventory throughout trading, offsetting any investor inventory imbalance with a trade with the lead underwriter. The paper also helps resolve the disconnect reported in the literature between high initial trading volume and low “flipping” activity.

We employ a new data set comprised of disaggregate figures on clearing house loan certificate issues in New York City to document how the dominant national banks were crucial providers of temporary liquidity during the Panic of 1907. Clearing house loan certificates were extensions of credit by the New York Clearing House to its members. These certificates were transferable to other clearing house members as a form of final payment for settlement of interbank payments. The certificate issues allowed borrowing banks to maintain (and increase) loans, fulfill cash payment upon depositor withdrawal demands, and enabled gold imports, which took two to three weeks to arrive. The large, New York City national banks acted as private liquidity providers by requesting (and the New York Clearing House issuing) a volume of clearing house loan certificates in excess of their own immediate liquidity needs, in accord with their role as central reserve city banks in the national banking system.

We show how a Schumpeterian process of creative destruction can induce rational, herd behavior by entrepreneurs across diverse sectors as if fueled by “animal spirits.” Consequently, a multisector economy, in which productivity improvements are made by independent, profit-seeking entrepreneurs, exhibits regular booms, slowdowns, and downturns as part of the long-run growth process. Our cyclical equilibrium has higher average growth, but lower welfare than the corresponding acyclical one. We show how a negative relationship can emerge between volatility and growth across cycling economies, and assess the extent to which our model matches several features of actual business cycles.

Abstract We propose and axiomatize the categorical thinking model (CTM) in which the framing of the decision problem affects how agents categorize alternatives, that in turn affects their evaluation of it. Prominent models of salience, status quo bias, loss-aversion, inequality aversion, and present bias all fit under the umbrella of CTM. This suggests categorization is an underlying mechanism of key departures from the neoclassical model of choice. We specialize CTM to provide a behavioural foundation for the salient thinking model of Bordalo et al. (2013, Journal of Political Economy, 121, 803–843) that highlights its strong predictions and distinctions from other models.

[We examine the potential for selection bias in voluntarily reported hedge fund performance data. We construct a set of hedge fund returns that have never been reported to a commercial hedge fund database. These returns allow a direct comparison of performance between funds that choose to report to commercial databases and funds that do not. We find that funds that report their performance to commercial databases significantly outperform nonreporting funds. Our results suggest that the voluntarily reported performance in commercial databases suffers from a selection bias that may exaggerate the average skill of the universe of hedge fund managers.]

A new specification of health-insurance-plan choice is developed that uses a nonparametric functional form for the loss function used to evaluate insurance premiums and uncertain out-of-pocket expenditure. The approach is implemented on data resulting from one firm's implementation of a new health plan with three distinct health insurance options. Health expenditure differences greater than 500 percent are observed, indicating extremely strong biased selection. Plan choices are consistent with a convex loss function for small losses, which suggests that consumers underweight high-loss/low-probability outcomes relative to low-loss/high-probability ones. Copyright 1989 by MIT Press.