We test both the unconditional and conditional Mean Variance Efficiency of the UK stockmarket, paying particular attention to choosing a suitable set of instruments for the conditional version of the model. By considering more carefully than previous authors the pricing of economic risk within the mean-variance framework we show that certain instruments can enhance the basic model structure. Given the tendency for financial market data to display non-constancy in variance and non-normality we employ the GMM procedure described in Hansen (1982), which requires much weaker distributional assumptions than the more traditional OLS techniques. We discuss forming portfolios of stocks using both size and dividend yield as a criterion to achieve a suitable spread of risk and return, and find that our conclusions are sensitive both to the method of portfolio formation and to the choice of estimator. This is an important finding given the problem of thin trading associated with the size ordering of UK stocks. We find some support for both the unconditional and conditional version of the CAPM, though we are cautious about our conclusions given the instability of the parameter estimates.

Factors display strong cross-sectional momentum that subsumes momentum in industries and other portfolio characteristics. The profits of all these momentum strategies—based on factors, industries, and other characteristics—significantly correlate with each other and therefore likely emanate from the same source. If factors display momentum, so will any set of portfolios with cross-sectional variation in factor loadings. Consistent with factors being at the root of momentum, we find that momentum in industry-neutral factors explains industry momentum, but industry momentum explains none of the factor momentum. Cross-sectional factor momentum concentrates in the first few highest-eigenvalue factors and is distinct from time-series factor momentum.

In the late nineteenth century Britain had almost no mandatory shareholder protections, but had very developed financial markets. We argue that private contracting between shareholders and corporations meant that the absence of statutory protections was immaterial. Using approximately 500 articles of association from before 1900, we code the protections offered to shareholders in these private contracts. We find that firms voluntarily offered shareholders many of the protections that were subsequently included in statutory corporate law. We also find that companies offering better protection to shareholders had less concentrated ownership. Received August 19, 2016; editorial decision October 24, 2018 by Editor David Denis.

We study the introduction of a wealth-management robo-adviser that constructs portfolios tailored to investors’ holdings and preferences. Adopters are similar to non-adopters in terms of demographics and prior interactions with human advisers but tend to be more active and have greater assets under management. Investors adopting robo-advising experience diversification benefits. Ex ante undiversified investors increase stock holdings and hold portfolios with less volatility and better returns. Already well-diversified investors hold fewer stocks, yet see some reduction in volatility, and trade more after adoption. All investors increase attention based on online account logins. We find that adopters exhibit declines in prominent behavioral biases, including the disposition, trend chasing, and rank effect. Our results emphasize the promises and pitfalls of robo-advising tools, which are becoming ubiquitous all over the world.Received May 31, 2017; editorial decision August 21, 2018 by Editor Wei Jiang.

This paper uses a novel dataset of commodity-linked notes (CLNs) to examine the impact of the flows of financial investors on commodity futures prices. Investor flows into and out of CLNs are passed to and withdrawn from the futures markets via issuers' trades to hedge their CLN liabilities. The flows are not based on information about futures price movements but nonetheless cause increases and decreases in commodity futures prices when they are passed through to and withdrawn from the futures markets. These finding are consistent with the hypothesis that non-information-based financial investments have important impacts on commodity prices.

We examine editors’ influence on the scientific content of academic journals by unpacking the role of three major forces: journals’ stated missions, the aggregate supply of and demand for specific topics, and scientific homophily via editorial gatekeeping. In a sample of top biomedical journals, we find the first two forces explain the vast majority of variation in published content. The upper bound of the homophily effect is statistically significant but practically much less important. Marginal changes to the composition of editorial boards do not meaningfully impact journals’ content in the short run. However, we cannot rule out persistent or pervasive frictions in the publication process.

In 1966, Southern hospitals were barred from participating in Medicare unless they discontinued their longstanding practice of racial segregation. Using data from five Deep South states and exploiting county-level variation in Medicare certification dates, we find that gaining access to an ostensibly integrated hospital had no effect on Black postneonatal mortality. Similarly, there is little evidence that the campaign contributed to the trend towards in-hospital births among Southern Black mothers. These results are consistent with descriptions of the hospital desegregation campaign as producing only cosmetic changes and illustrate the limits of anti-discrimination policies imposed upon reluctant actors.

The labor market prospects of young, unskilled men fell dramatically in the 1980s and improved in the 1990s. Crime rates show a reverse pattern: increasing during the 1980s and falling in the 1990s. Because young, unskilled men commit most crime, this paper seeks to establish a causal relationship between the two trends. Previous work on the relationship between labor markets and crime focused mainly on the relationship between the unemployment rate and crime, and found inconclusive results. In contrast, this paper examines the impact of both wages and unemployment on crime, and uses instrumental variables to establish causality. We conclude that both wages and unemployment are significantly related to crime, but that wages played a larger role in the crime trends over the last few decades. These results are robust to the inclusion of deterrence variables, controls for simultaneity, and controlling for individual and family characteristics.