The Federal Reserve's mandate has evolved considerably over the organization's hundred-year history. It was changed from an initial focus in 1913 on financial stability, to fiscal financing in World War II and its aftermath, to a strong anti-inflation focus from the late 1970s, and then back to greater emphasis on financial stability since the Great Contraction. Yet, as the Fed's mandate has expanded in recent years, its range of instruments has narrowed, partly based on a misguided belief in the inherent stability of financial markets. We argue for a return to multiple instruments, including a more active role for reserve requirements.

ABSTRACT The concept of conditional conservatism (asymmetric earnings timeliness) has provided new insight into financial reporting and stimulated considerable research since Basu (1997). Patatoukas and Thomas (2011) report bias in firm-level cross-sectional asymmetry estimates that they attribute to scale effects. We do not agree with their advice that researchers should avoid conditional conservatism estimates and inferences from research based on such estimates. Our theoretical and empirical analyses suggest the explanation is a correlated omitted variables problem that can be addressed in a straightforward fashion, including fixed-effects regression. Correlation between the expected components of earnings and returns biases estimates of how earnings incorporate the information contained in returns. Further, the correlation varies with returns, biasing asymmetric timeliness estimates. When firm-specific effects are taken into account, estimates do not exhibit the bias, are statistically and economically significant, are consistent with priors, and behave as a predictable function of book-to-market, size, and leverage. Data Availability: Data are publicly available from sources identified in the article.

ABSTRACT We find consistent value and momentum return premia across eight diverse markets and asset classes, and a strong common factor structure among their returns. Value and momentum returns correlate more strongly across asset classes than passive exposures to the asset classes, but value and momentum are negatively correlated with each other, both within and across asset classes. Our results indicate the presence of common global risks that we characterize with a three‐factor model. Global funding liquidity risk is a partial source of these patterns, which are identifiable only when examining value and momentum jointly across markets. Our findings present a challenge to existing behavioral, institutional, and rational asset pricing theories that largely focus on U.S. equities.

This exploratory study examined specific emotion processes and cognitive problem-solving processes in individuals with borderline personality disorder (BPD), and assessed the relationship of these changes to treatment outcome. Emotion and cognitive problem-solving processes were assessed using the Toronto Alexithymia Scale, the Linguistic Inquiry Word Count, the Derogatis Affect Balance Scale, and the Problem Solving Inventory. Participants who showed greater improvements in affect balance, problem solving, and the ability to identify and describe emotions showed greater improvements on treatment outcome, with affect balance remaining statistically significant under the most conservative conditions. The results provide preliminary evidence to support the theory that specific improvements in emotion and cognitive processes are associated with positive treatment outcomes (symptom distress, interpersonal functioning) in BPD. The implications for treatment are discussed.

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.

We present evidence on the level of and trend in inequality from 1985-2010 in the United States, using disposable income and consumption for a sample of individuals from the Consumer Expenditure (CE) Survey. Differing from the findings in other recent research, we find that the trends in income and consumption inequality are broadly similar between 1985 and 2006, but diverge during the Great Recession with consumption inequality decreasing and income inequality increasing. Given the differences in the trends in inequality in the last four years, using both income and consumption provides useful information.

ABSTRACT: To address potential threats to auditor independence, the Sarbanes-Oxley Act of 2002 (SOX) requires the audit committee to pre-approve nonaudit services (NAS) procured from the auditor. However, the presence of a former audit firm partner (FAP) affiliated with the current auditor on the audit committee could undermine the audit committee's due diligence over the NAS pre-approval process. To alleviate such concerns, the Securities and Exchange Commission approved a three-year “cooling-off” period for appointing audit firm alumni as independent directors. Our analyses show that the presence of both affiliated and unaffiliated FAPs on audit committees does not lead to greater NAS procured from the auditor; rather, FAPs reduce NAS procured from the auditor. Moreover, NAS decline significantly following the appointment of FAPs to the audit committee. Further tests suggest the three-year cooling-off period may not be warranted and deserves further investigation. Our study raises important implications for regulators, policy makers, corporate boards, and future research. Data Availability: Data are publicly available from sources identified in the text.

ABSTRACT Private equity funds pay particular attention to capital structure when executing leveraged buyouts, creating an interesting setting for examining capital structure theories. Using a large, international sample of buyouts from 1980 to 2008, we find that buyout leverage is unrelated to the cross‐sectional factors, suggested by traditional capital structure theories, that drive public firm leverage. Instead, variation in economy‐wide credit conditions is the main determinant of leverage in buyouts. Higher deal leverage is associated with higher transaction prices and lower buyout fund returns, suggesting that acquirers overpay when access to credit is easier.

We propose a social choice rule for aggregating preferences elicited from surveys into a marginal adjustment of policy from the status quo. The mechanism is: (i) symmetric in its treatment of survey respondents; (ii) ordinal, using only the orientation of respondents' indifference surfaces; (iii) local, using only preferences in the neighborhood of current policy; and (iv) what we call “first-order strategy-proof,” making the gains from misreporting preferences second order. The mechanism could be applied to guide policy based on how policy affects responses to subjective well-being surveys.