Linear models with error components are widely used to analyse panel data. Some applications of these models require knowledge of the probability densities of the error components. Existing methods handle this requirement by assuming that the densities belong to known parametric families of distributions (typically the normal distribution). This paper shows how to carry out nonparametric estimation of the densities of the error components, thereby avoiding the assumption that the densities belong to known parametric families. The nonparametric estimators are applied to an earnings model using data from the Current Population Survey. The model's transitory error component is not normally distributed. Use of the nonparametric density estimators yields estimates of the probability that individuals with low earnings will become high earners in the future that are much lower than the estimates obtained under the assumption of normally distributed error components.

We examine the relationship between U.S. thrift institution ownership structure and risk taking along with the impact of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) on this relationship. Our results, based on various indicators of risk, suggest that insider controlled thrifts were more likely to engage in risk taking prior to 1989 than were diversely held institutions. FIRREA seems to have curtailed much of this risk taking. We find inverse relationships between risk-taking and levels of institutional shareholdings. This along with other evidence suggests that the motive for risk-taking was not maximization of the ‘option’ value of shares as has been reported elsewhere. We also find evidence that entrenched managers may have generated significant private benefits.

An analysis of stock and sell recommendations by security analysts at fourteen major U.S. brokerage firms shows significant, systematic discrepancies between prices and eventual values, in contrast to the conclusions of many previous studies. The average initial price change at the time of the recommendations is large, even though few recommendations coincide with other public information releases or provide previously unavailable facts. These price changes which are then ostensibly due primarily to information processing and dissemination are consistent with the expanded Grossman and Stiglitz (1980) definition of market efficiency where informed investors earn a return on their information gathering and processing efforts. Furthermore, these initial price reactions are incomplete. Post-recommendation risk-adjusted price drift implies that analysts' recommendations provide tradable value for investors. For recommendations, the mean, post-event drift is modest (+2.4%) and short-lived (one month), but for sell recommendations, the drift is larger (-9.1%), accruing over a longer six-month interval. Analysts appear to have market timing as well as stock picking abilities. Also, accurate industry predictions appear to be an important component for pessimistic recommendations (sell and removed from buy ) but not for optimistic ones (buy and removed from sell).

An analysis of new buy and sell recommendations of stocks by security analysts at major U.S. brokerage firms shows significant, systematic discrepancies between prerecommendation prices and eventual values. The initial return at the time of the recommendations is large, even though few recommendations coincide with new public news or provide previously unavailable facts. However, these initial price reactions are incomplete. For buy recommendations, the mean postevent drift is modest (+2.4 percent) and short-lived, but for sell recommendations, the drift is larger (-9.1 percent) and extends for six months. Analysts appear to have market timing and stock picking abilities.

ABSTRACT An analysis of new buy and sell recommendations of stocks by security analysts at major U.S. brokerage firms shows significant, systematic discrepancies between prerecommendation prices and eventual values. The initial return at the time of the recommendations is large, even though few recommendations coincide with new public news or provide previously unavailable facts. However, these initial price reactions are incomplete. For buy recommendations, the mean postevent drift is modest (+2.4%) and short‐lived, but for sell recommendations, the drift is larger (−9.1%) and extends for six months. Analysts appear to have market timing and stock picking abilities.

This paper relates the erosion of the custom of shotgun marriage to the legalization of abortion and the increased availability of contraception to unmarried women in the United States. The decline in shotgun marriage accounts for a significant fraction of the increase in out-of-wedlock first births. Several models illustrate the analogy between women who do not adopt either birth control or abortion and the hand-loom weavers, both victims of changing technology. Mechanisms causing female immiseration are modeled and historically described. This technology-shock hypothesis is an alternative to welfare and job-shortage theories of the feminization of poverty.

This paper presents empirically determined indifference functions for income and leisure which exhibit the phenomena of loss aversion and a utility reference point determined by adaptation, as expounded by Kahneman and Tversky and others. Data for this study were gathered in original surveys of seven diverse labor markets. The indifference functions of all show common features consistent with loss aversion/adaptation. These features help explain stability in labor markets in the face of an overtime premium which prevents the many workers in the United States from being at an optimal equilibrium and causes discontinuities in labor supply curves. Labor supply curves derived from indifference curves with the loss aversion adaptation features have much smaller discontinuities than those based on simulated curves without these features. Copyright 1996 by MIT Press.

This paper documents the extent to which immigrants participate in the many programs that make up the welfare state. The immigrant-native difference in the probability of receiving cash benefits is small, but the gap widens once other programs are included in the analysis: 21 percent of immigrant households receive some type of assistance, as compared with only 14 percent of native households. The types of benefits received by earlier immigrants influence the types of benefits received by newly arrived immigrants. Hence there might be ethnic networks that transmit information about the availability of particular benefits to new immigrants.