We present and calibrate a dynamic model that characterizes the labor market for computer scientists. In our model, firms can recruit computer scientists from recently graduated college students, from STEM workers working in other occupations or from a pool of foreign talent. Counterfactual simulations suggest that wages for computer scientists would have been 2.8-3.8% higher, and the number of Americans employed as computers scientists would have been 7.0-13.6% higher in 2004 if firms could not hire more foreigners than they could in 1994. In contrast, total CS employment would have been 3.8-9.0% lower, and consequently output smaller.

We estimate a dynamic investment model in which firms finance with equity, cash, or debt. Misvaluation affects equity values, and firms optimally issue and repurchase overvalued and undervalued shares. The funds flowing to and from these activities come from investment, dividends, or net cash. The model fits a broad set of data moments in large heterogeneous samples and across industries. Our parameter estimates imply that misvaluation induces larger changes in financial policies than investment. The investment responses are strongest for small firms but nonetheless modest. Managers' rational responses to misvaluation increase shareholder value by up to 4%.

Mathiness lets academic politics masquerade as science. Like mathematical theory, mathiness uses a mixture of words and symbols, but instead of making tight links, it leaves ample room for slippage between statements in the languages of words as opposed to symbols, and between statements with theoretical as opposed to empirical content. Because it is difficult to distinguish mathiness from mathematical theory, the market for lemons tells us that the market for mathematical theory might collapse, leaving only mathiness as entertainment that is worth little but cheap to produce.

We discuss the economics literature relevant to the design of centralized two-sided market mechanisms for environments in which both buyers and sellers have private information. The existing literature and the history of spectrum auctions, including the incentive auction currently being designed by the FCC, can be employed to analyze such mechanisms. We compare the revenue– efficiency trade-off in an environment with private information on one side of the market versus the trade-off with private information on both sides of the market; we provide an impossibility theorem for the efficient allocation of goods using a deficit-free mechanism when there is private information on both sides of the market; we discuss practical deficit-free mechanisms for various environments with two-sided private information; and we provide a synthesis to guide market design efforts and related research going forward.

Recent research finds that investors, broadly defined, react to the linguistic tone of quarterly earnings conference calls; there is a positive relation between firms' stock returns and call tone (a measure of “sentiment” related word tabulations). However, this type of soft information can be subtle, context-specific, and difficult to interpret. Moreover, the literature suggests cross-sectional variation in information processing skills among investors. Thus, we test whether sophisticated investors interpret earnings conference call tone differently than investors at large by examining short selling activity and its relation to earnings conference call tone. We find that short sellers target firms with simultaneous high earnings surprise and abnormally high management tone. The combination of positive earnings surprise and unusually positive tone strengthens short sellers' return predictability. This result indicates that short sellers interpret revealed “inflated” call language by managers more completely than naïve investors. The incomplete stock price reaction by naïve investors due to the lack of reliability that they place on this soft information results in overpricing of the stock. However, it also suggests that managers are unable to maintain prolonged overvaluation of their stock by striking an overly optimistic posture in the interactive conference call disclosure forum since short sellers' trades provide additional price discovery.

In light of the financial crisis, the practice of inflation targeting (IT) has been blamed for authorities’ failure to respond to the increase in financial systemic risk and to the development of asset bubbles. However, utilizing a rich database containing nearly 5500 commercial banks from 70 countries (among which, 22 are IT) for the period 1998–2012, this paper argues that on average, inflation targeting national banking systems (i) are more stable; (ii) possess sounder systemically important banks; and (iii) are less distressed than (or at least as distressed as) other banks during periods of global liquidity shortages. Our results are robust to a series of tests, such as when we compare countries with the same legal origins or control for the delegation of bank supervision responsibility to bodies other than the central bank. Overall, we conclude that IT cannot be blamed for contributing to financial fragility.

We derive a foreign ownership return as the weighted average return of foreign stocks that are connected to a stock through common ownership. The foreign ownership return is of similar economic significance as traditional country and industry factors in explaining international stock returns. It is not related to omitted fundamentals or wealth effects but shifts substantially around ADR and index listings when the investor habitat changes. A decomposition shows that the foreign ownership return is driven by active reallocations of global institutions as opposed to fund flows from end investors. Our findings have important implications for international portfolio diversification.