A substantive body of equity-market academic research documents an extensive range of costs arising from the SEC’s October 2000 adoption of strictures on selective disclosure and insider trading; suggesting an unusual outcome, specifically, an increase in informed trading. We investigate the efficacy of the SEC’s regulations by examining informed trading in an attractive setting for exploiting private information; the options market. Using data on the S&P 1500 industrial firms, our analysis indicates that about 38% of firms exhibited symptoms of informed option trading prior to regulatory intervention. After regulatory intervention, we observe that only 19% of firms show symptoms of informed trading. In additional testing of ADR firms – explicitly exempt from complying with Reg FD, we find no evidence of a change in informed option trading from pre- to post-regulation; suggesting that the SEC’s strictures on US firms led a to a significant reduction in informed option trading. Notably, our proxies for large shareholder and financial analyst access are associated with the largest decreases in informed option trading. In developing a unique measure of informed trading based on option market data, we provide evidence on the efficacy of security regulation in limiting informed trading.

We examine monthly variation in weekly work hours using data from 2003 to 2010. The data sources include the Current Population Survey (CPS) on hours/worker, the Current Employment Survey (CES) on hours/job, and the American Time Use Survey (ATUS) on both. The ATUS data minimize recall difficulties and constrain hours of work to accord with total available time. The ATUS hours/worker are less cyclical than the CPS series, but the hours/job are more cyclical than the CES series. We present alternative estimates of productivity based on ATUS data, and find that it is more pro-cyclical than other productivity measures.

Following Grossman and Rossi-Hansberg (2008) we present a model in which tasks of varying complexity are matched to workers of varying skill in order to develop and test predictions regarding the effects of immigration and offshoring on US native-born workers. We find that immigrant and native-born workers do not compete much due to the fact that they tend to perform tasks at opposite ends of the task complexity spectrum, with offshore workers performing the tasks in the middle. An effect of offshoring and a positive effect of immigration on native-born employment suggest that immigration and offshoring improve industry efficiency. (JEL J24, J41, J61, L24)

We outline a strategy for distinguishing rank-dependent probability weighting from systematic risk misperceptions in field data. Our strategy relies on singling out a field environment with two key properties: (i) the objects of choice are money lotteries with more than two outcomes; and (ii) the ranking of outcomes differs across lotteries. We first present an abstract model of risky choice that elucidates the identification problem and our strategy. The model has numerous applications, including insurance choices and gambling. We then consider the application of insurance deductible choices and illustrate our strategy using simulated data.

We use data on insurance deductible choices to estimate a structural model of risky choice that incorporates “standard” risk aversion (diminishing marginal utility for wealth) and probability distortions. We find that probability distortions—characterized by substantial overweighting of small probabilities and only mild insensitivity to probability changes—play an important role in explaining the aversion to risk manifested in deductible choices. This finding is robust to allowing for observed and unobserved heterogeneity in preferences. We demonstrate that neither Kőszegi-Rabin loss aversion alone nor Gul disappointment aversion alone can explain our estimated probability distortions, signifying a key role for probability weighting. (JEL D14, D81, G22)

ABSTRACT We study a broad sample of firms across 32 countries and find that strong shareholder protections and better access to stock market financing lead to substantially higher long‐run rates of R&D investment, particularly in small firms, but are unimportant for fixed capital investment. Credit market development has a modest impact on fixed investment but no impact on R&D. These findings connect law and stock markets with innovative activities key to economic growth, and show that legal rules and financial developments affecting the availability of external equity financing are particularly important for risky, intangible investments not easily financed with debt.

SCOPUS: ar.j

Do laboratory subjects correctly perceive the dynamics of a mean-reverting time series? In our experiment, subjects receive historical data and make forecasts at different horizons. The time series process that we use features short-run momentum and long-run partial mean reversion. Half of the subjects see a version of this process in which the momentum and partial mean reversion unfold over 10 periods ('fast'), while the other subjects see a version with dynamics that unfold over 50 periods ('slow'). Typical subjects recognize most of the mean reversion of the fast process and none of the mean reversion of the slow process.

We examine long-term neighborhood effects on low-income families using data from the Moving to Opportunity (MTO) randomized housing-mobility experiment. This experiment offered to some public-housing families but not to others the chance to move to less-disadvantaged neighborhoods. We show that ten to 15 years after baseline, MTO: (i) improves adult physical and mental health; (ii) has no detectable effect on economic outcomes or youth schooling or physical health; and (iii) has mixed results by gender on other youth outcomes, with girls doing better on some measures and boys doing worse. Despite the somewhat mixed pattern of impacts on traditional behavioral outcomes, MTO moves substantially improve adult subjective well-being.