Researchers and practitioners in accounting and finance often investigate or advocate particular disciplined trading strategies, but little work investigates the determinants of individual investors' trading‐strategy reliance. We report two experiments, which provide evidence that the dual‐source model of overconfidence (Sniezek and Buckley [1991]) predicts the circumstances in which investors are more likely to rely on disciplined trading strategies. Our results indicate that reliance is more likely when investors trade portfolios of securities rather than trading on a case‐by‐case basis, particularly when investors have received feedback that their previous (unaided) trading decisions have been unprofitable. These results are driven by the number of shares that investors transact rather than by investors' directional agreement with the recommendations of the trading strategy, suggesting that the effects of a portfolio approach and trading experience occur by mitigating investors' overconfidence. The effects violate an aspect of economic rationality because our experiments ensure that investors in all conditions trade the same set of securities based on the same set of information.

By placing a ceiling on the amount of possible depositor loss, deposit insurance should result in a lower deposit risk premium. However, this effect may be modified if either the insurance promise has low credibility or the moral hazard incentives generated by deposit insurance result in a greater probability of bank default. Using financial and institutional panel data from thirteen countries, we find that the risk premium is over 40 basis points higher on average in uninsured countries than in countries that offer insurance up to some pre-specified maximum. However, the risk premium has a non-linear relationship with the level of maximum insurance coverage, suggesting that the market recognizes the moral hazard potential. Moreover, the effect of deposit insurance on the risk premium is weaker in countries with strong creditor rights, consistent with the view that investors view the latter as a substitute for explicit deposit insurance.

We examine security analysts' career concerns by relating their earnings forecasts to job separations. Relatively accurate forecasters are more likely to experience favorable career outcomes like moving up to a high‐status brokerage house. Controlling for accuracy, analysts who are optimistic relative to the consensus are more likely to experience favorable job separations. For analysts who cover stocks underwritten by their houses, job separations depend less on accuracy and more on optimism. Job separations were less sensitive to accuracy and more sensitive to optimism during the recent stock market mania. Brokerage houses apparently reward optimistic analysts who promote stocks.

The announcement of a bank loan by a borrowing firm has been shown to have a positive effect on the market value of the borrower’s claims. This is consistent with a lender’s implied endorsement of the borrower––an endorsement that has value to the borrower. In this paper, we investigate whether the lender is able to extract a premium loan rate or certification premium in return. We find empirical evidence that in the absence of collateral reputable lenders are able to exact a certification premium.

We analyze the effects of trade barriers using highly disaggregated data. The level of disaggregation allows us to separate the effects of tariffs and nontariff barriers (NTBs) into reduction, diversion, and compression effects. We find that multilateral tariffs significantly reduce trade flows and that trade preferences have a significant diverting effect. We also find that higher multilateral tariffs tend to shift trade towards larger exporters, suggesting that the desire to minimize fixed costs associated with trading dominates any preference for variety. In the case of NTBs, we find that, as often as not, the imposition of an NTB leads to an increase in the value of trade; in industries with low import demand elasticities, the influence of rising prices outweighs the decline in quantity.

Several researchers (e.g., Lundholm 1999; Ryan 1997; Petroni, Ryan, and Wahlen 2000) have proposed a reporting mechanism to enhance the reliability of estimates and other forward‐looking information in financial reports. Their proposals require companies to report reconciliations of prior‐year estimates to actual realizations as supplemental information in their financial reports. Such disclosures would enable investors to distinguish between accurate and opportunistic reporting behavior, and, arguably, should create incentives for companies to estimate accurately in the first place. Our study provides evidence on these proposals. Specifically, we conduct two experiments within the context of an important intangible asset requiring estimation ‐ software development costs. Our results show that the proposed reporting mechanism is effective in communicating information about the accuracy of financial estimates. We find, however, that not all disclosures are equally useful. The most effective disclosures explicitly describe the implications of misestimation (if any) on both the balance sheet and on earnings, thereby reducing the computational complexity associated with less explicit disclosures. Furthermore, our results show that when the disclosures explicitly describe the implications of misestimation, investors reward accurate estimators but do not explicitly punish those who are inaccurate. We conclude that information about previous estimate accuracy is useful to investors and that regulators should consider the type of disclosure, because not all disclosures may be equally effective in creating management incentives for accurate estimation. Moreover, the competitive advantage conferred on firms that provide accurate estimates arguably should create incentives for all companies to estimate accurately in the future.

Although forests have diminished globally over the past 400 years, forest cover has increased in some areas, including India in the last two decades. Aggregate time-series evidence on forest growth rates and income growth across countries and within India and a newly assembled data set that combines national household survey data, census data, and satellite images of land use in rural India at the village level over a 29-year period are used to explore the hypothesis that increases in the demand for forest products associated with income and population growth lead to forest growth. The evidence is consistent with this hypothesis, which also shows that neither the expansion of agricultural productivity nor rising wages in India increased local forest cover.

What motivated men to risk death in the most horrific war in U. S. history when pay was low and irregular and military punishment strategies were weak? In such a situation creating group loyalty by promoting social capital is of paramount importance and in the Civil War was the cement of both armies. We find that individual and company socioeconomic and demographic characteristics, ideology, and morale were important predictors of group loyalty in the Union Army. Company characteristics were more important than ideology or morale. Soldiers in companies that were more homogeneous in ethnicity, occupation, and age were less likely to shirk.

A fundamental assumption in cost accounting is that the relation between costs and volume is symmetric for volume increases and decreases. In this study, we investigate whether costs are “sticky”—that is, whether costs increase more when activity rises than they decrease when activity falls by an equivalent amount. We find, for 7,629 firms over 20 years, that selling, general, and administrative (SG&A) costs increase on average 0.55% per 1% increase in sales but decrease only 0.35% per 1% decrease in sales. Our analysis compares the traditional model of cost behavior in which costs move proportionately with changes in activity with an alternative model in which sticky costs occur because managers deliberately adjust the resources committed to activities. We test hypotheses about the properties of sticky costs and how the degree of stickiness of SG&A costs varies with firm circumstances.

Returns to Education: Evidence from U.K. Twins by Dorothe Bonjour, Lynn F. Cherkas, Jonathan E. Haskel, Denise D. Hawkes and Tim D. Spector. Published in volume 93, issue 5, pages 1799-1812 of American Economic Review, December 2003