This paper analyzes the determinants of partial ownership of the foreign affiliates of U.S. multinational firms and, in particular, the marked decline in the use of joint ventures over the last 20 years. The evidence indicates that whole ownership is most common when firms coordinate integrated production activities across different locations, transfer technology, and benefit from worldwide tax planning. Because operations and ownership levels are jointly determined, it is helpful to use the liberalization of ownership restrictions by host countries and the imposition of joint venture tax penalties in the U.S. Tax Reform Act of 1986 as instruments for ownership levels to identify these effects. Firms responded to these regulatory and tax changes by using wholly owned affiliates instead of joint ventures and expanding intrafirm trade and technology transfer. The implied complementarity of whole ownership and intrafirm trade suggests that the reduced costs of engaging in integrated global operations contributed substantially to the sharply declining propensity of American firms to organize their foreign operations as joint ventures over the last two decades. Estimates imply that as much as one-fifth to three-fifths of the decline in the use of joint ventures by multinational firms is attributable to the increased importance of intrafirm transactions. The forces of globalization appear to have diminished, rather than accelerated, the use of shared ownership.

We examine some basic data on the evolution of aggregate short interest, both during the dot-com era, and at other times in history. Total short interest moves in a countercyclical fashion. For example, short interest in NASDAQ stocks actually declines as the NASDAQ index approaches its peak. Moreover, this decline does not seem to reflect a substitution away from outright short-selling and towards put options, as the ratio of put-to-call volume displays the same countercyclical tendency. The evidence suggests that: i) arbitrageurs are reluctant to bet against aggregate mispricings; and ii) short-selling does not play a particularly helpful role in stabilizing the overall stock market.

Asian initial public offerings (IPOs) require investors to pay subscription funds up-front upon submission of applications, and these funds are locked-up for 1–3 weeks without interest. Hence, the IPO process entails an explicit financing cost (opportunity cost) whether investors borrow funds or use their own funds to apply for IPO shares. The IPO subscription costs are not trivial, especially in a high interest rate environment or when an IPO is highly oversubscribed. These costs should be considered in any comparison of IPO returns across countries.

We examine the mapping of the distribution of ability onto earnings in a hierarchical job assignment model. Workers are assigned to a continuum of jobs in fixed proportions, ordered by sensitivity to ability. The model implies a novel marginal productivity interpretation of wages. We derive comparative statics for changes in technology and in the distribution of ability. We find conditions under which a more unequal distribution of ability maps onto a more/less unequal distribution of earnings. We also analyze an assignment model with variable proportions and find that in the Cobb‐Douglas case, a rise in the inequality of ability always narrows the range of earnings.

We derive a parsimonious rational model of active portfolio management that reproduces many regularities widely regarded as anomalous. Fund flows rationally respond to past performance in the model even though performance is not persistent and investments with active managers do not outperform passive benchmarks on average. The lack of persistence in returns does not imply that differential ability across managers is nonexistent or unrewarded or that gathering information about performance is socially wasteful. The model can quantitatively reproduce many salient features in the data. The flow-performance relationship is consistent with high average levels of skills and considerable heterogeneity across managers. One of the central mysteries facing financial economics is why financial intermediaries appear to be so highly rewarded, despite the apparent fierce competition between them and the uncertainty about whether

Abstract Firms that substantially increase capital investments subsequently achieve negative benchmark-adjusted returns. The negative abnormal capital investment/return relation is shown to be stronger for firms that have greater investment discretion, i.e., firms with higher cash flows and lower debt ratios, and is shown to be significant only in time periods when hostile takeovers were less prevalent. These observations are consistent with the hypothesis that investors tend to underreact to the empire building implications of increased investment expenditures. Although firms that increase capital investments tend to have high past returns and often issue equity, the negative abnormal capital investment/return relation is independent of the previously documented long-term return reversal and secondary equity issue anomalies.

In early 1991, the Dutch pig-industry was struck by the so-called mystery swine disease. Large-scale laboratory investigations were undertaken to search for the etiological agent. We focused on isolating viruses and mycoplasmas, and we tested paired sera of affected sows for antibodies against ten known pig viruses. The mycoplasmas M. hyosynoviae, M. hyopneumoniae, and Acholeplasma laidlawii, and the viruses encephalomyocarditis virus and porcine enterovirus types 2 and 7 were isolated from individual pigs. An unknown agent, however, was isolated from 16 of 20 piglets and from 41 of 63 sows. This agent was characterised as a virus and designated Lelystad virus. No relationship between this virus and other viruses has yet been established. Of 165 sows reportedly afflicted by the disease, 123 (75 per cent) seroconverted to Lelystad virus, whereas less than 10 per cent seroconverted to any of the other virus isolates or to the known viral pathogens. Antibodies directed against Lelystad virus were also found in pigs with mystery swine disease in England, Germany, and in the United States. We conclude that infection with Lelystad virus is the likely cause of mystery swine disease.

We develop a novel system of reclassifying historical exchange rate regimes. One key difference between our study and previous classifications is that we employ monthly data on market-determined parallel exchange rates going back to 1946 for 153 countries. Our approach differs from the IMF official classification (which we show to be only a little better than random); it also differs radically from all previous attempts at historical reclassification. Our classification points to a rethinking of economic performance under alternative exchange rate regimes. Indeed, the breakup of Bretton Woods had less impact on exchange rate regimes than is popularly believed.