Frank J. Fabozzi, Thom B. Thurston, State Taxes and Reserve Requirements as Major Determinants of Yield Spreads Among Money Market Instruments, The Journal of Financial and Quantitative Analysis, Vol. 21, No. 4 (Dec., 1986), pp. 427-436

Filter rule profits found in foreign exchange markets in the early days of the current managed float persist in later periods, as shown by statistical tests developed and implemented here. The test is consistent with, but independent of, a wide variety of asset pricing models. The profits found cannot be explained by risk if risk premia are constant over time. Inclusion of the home-foreign interest rate differential in computing profits has little effect on the comparison of filter returns to those of buy-and-hold.

Filter rule profits found in foreign exchange markets in the early days of the current managed float persist in later periods, as shown by statistical tests developed and implemented here. The test is consistent with, but independent of, a wide variety of asset pricing models. The profits found cannot be explained by risk if risk premia are constant over time. Inclusion of the home‐foreign interest rate differential in computing profits has little effect on the comparison of filter returns to those of buy‐and‐hold.

This paper presents a discrete-time version of Jovanovic's model of worker-firm matching. Descriptive evidence is presented that supports the notion that unobserved worker-firm heterogeneity is an important component in the intertemporal structure of wages for young workers. A structural econometric model of wage dynamics under worker-firm sorting is developed and estimated. Finally, a formal test of the matching model is carried out, and the matching structure on intertemporal covariances of wages is not rejected. My results indicate the necessity of jointly considering processes of turnover and wage growth when analyzing the labor market experiences of young workers.

Empirical investigations of wage determination have often produced autocorrelated residuals from time-series wage equations. Runs of overor underprediction have usually been regarded as weaknesses in specification to be corrected or explained away. In 1980, however, George Perry suggested that such runs represent an important, if neglected, characteristic of American wage setting. He argued that of wage change develop in the labor market. These norms, according to Perry, change discretely; there are periods of more or less wage pushiness. Aggregate wage indexes can be influenced, even if norm shifts are not fully reflected everywhere, providing those sectors that are affected have sufficient weight in the indexes. An obvious division in the labor market is between the union and nonunion sectors. There is reason to believe that while there has been a (downward) shift in wage norms recently, the impact has been concentrated in the union sector (see my 1985 article). Indeed, the union sector is probably inherently more prone to norm shifts than the nonunion.

The Black/Scholes model gives the price of an option as a function of the true variance rate of the underlying stock and other parameters. Because the true variance rate is unobservable, an estimate of the variance rate is used in empirical tests. But, because the Black/Scholes formula is non-linear in the variance, option price estimates using an estimated variance are biased, even if the variance estimate itself is unbiased. This paper develops an unbiased estimator of the Black/Scholes formula from a Taylor series expansion of the formula and the properties of the pdf of the estimated variance.