We test whether hedging currency risk improves the performance of international stock portfolios.We show that an auxiliary regression provides a wealth of information about the optimal portfolio holdings for non-mean–variance investors, analogous to the information provided by the Jensen regression about optimal portfolio holdings for the mean–variance case. We find that static hedging with currency forwards does not lead to significant improvements in portfolio performance for a US-Dollar based stock portfolio from the G5 countries, whereas dynamic hedges that are conditional on the interest rate spread do. These conclusions hold for both mean–variance and power utility investors and show up both in-sample and out-of-sample. However, the optimal forward positions can differ significantly for both types of investors.

Das et al. (1998) suggest that as earnings become less predictable, analysts issue increasingly optimistic forecasts to please managers and consequently gain, or at least limit the loss of, access to managers' private information. We reexamine the association between earnings forecast error and earnings predictability because there is evidence suggesting that deliberate earnings forecast optimism is not an effective mechanism for gaining access to managers' information (e.g., Eames et al. 2002; Matsumoto 2002). We document associations between earnings level and both forecast error and earnings predictability. These associations suggest that earnings level may be an important control variable when examining the association between forecast error and earnings predictability. When we control for the level of earnings we find no significant association between forecast error and earnings predictability. Thus, we find no evidence that analysts intentionally issue optimistically biased earnings forecasts.

In this paper we document the short-term stock price behaviour following a period of stock market stress. We focus on price behaviour using daily market indexes from 39 stock exchanges over the period 1989–1998. Our results are not consistent with the overreaction hypothesis. We find positive (negative) abnormal price performance in the short-term window (up to 10 days) following positive (negative) price shocks. Our analysis also highlights differences between developed and emerging markets. We show that the post-shock abnormal performances are significantly larger for emerging markets but that this momentum behaviour is markedly less in the late 1990s. We find the size of the after-shock tremors to be related to market liquidity, with larger post-shock price changes in less-liquid markets.

This paper generalizes the M-square and M-vector models [Fong and Fabozzi, Appendix E: Derivation of Risk Immunization Measures, in: Fixed Income Portfolio Management, Dow Jones-Irwin, Homewood, IL, pp. 291–294, 1985; Nawalkha and Chambers, Journal of Portfolio Management, Winter (1997) 92] by using a Taylor series expansion of the bond return function with respect to specific functions of the cash flow maturities. The classic M-vector computes the weighted averages of the distance between the maturity of each cash flow and the planning horizon, raised to integer powers (e.g., (t−H)1,(t−H)2,(t−H)3,…). Implementation of the new approach involves computing the weighted averages of the distance between some function of the maturity of each cash flow and that of the planning horizon, raised to integer powers (e.g., (g(t)−g(H))1,(g(t)−g(H))2,(g(t)−g(H))3,…). Adopting this approach, this paper explores six different generalized M-vector models corresponding to six different polynomial functions, over five different planning horizons from one year to five years. It is shown that generalized M-vector models corresponding to polynomial functions of lower power provide significantly enhanced protection from interest rate risk over short planning horizons.

In spite of the fact that equal opportunities for men and women have been a priority in many countries, enormous gender differences prevail in most competitive high-ranking positions. We conduct a series of controlled experiments to investigate whether women might react differently than men to competitive incentive schemes commonly used in job evaluation and promotion. We observe no significant gender difference in mean performance when participants are paid proportional to their performance. But in the competitive environment with mixed gender groups we observe a significant gender difference: the mean performance of men has a large and significant, that of women is unchanged. This gap is not due to gender differences in risk aversion. We then run the same test with homogeneous groups, to investigate whether women under-perform only when competing against men. Women do indeed increase their performance and gender differences in mean performance are now insignificant. These results may be due to lower skill of women, or more likely to the fact that women dislike competition, or alternatively that they feel less competent than their male competitors, which depresses their performance in mixed tournaments. Our last experiment provides support for this hypothesis.

Charitable Bequests and Taxes on Inheritances and Estates: Aggregate Evidence from across States and Time by Jon M. Bakija, William G. Gale and Joel B. Slemrod. Published in volume 93, issue 2, pages 366-370 of American Economic Review, May 2003

Equity market liberalizations are like IPOs, but they are IPOs of a country's stock market rather than of individual firms. Both are endogenous events whose benefits are limited by poor investor protection, agency costs, and information asymmetries. As for stock prices following an IPO, there are legitimate concerns about the efficiency in the period following the liberalization of the stock market returns of countries that liberalize their equity markets. Equity markets of liberalizing countries experience extremely strong performance immediately after the liberalization, but then go through a period of poor performance. This pattern of stock returns is more dramatic for countries with poorer financial development before the liberalization.

Changes in the Distribution of Children's Family Income over the 1990's by Rebecca M. Blank and Robert F. Schoeni. Published in volume 93, issue 2, pages 304-308 of American Economic Review, May 2003

Inviting political scientists to tell economists how they could do better work is an act of disciplinary generosity. The reality is that contemporary political science is a net importer of ideas and methods from other disciplines, and from none more than economics. Indeed, some of the most exciting research in political science in the past 40 years has involved the incorporation of ideas from economics. We have neither the space nor the mandate to summarize that research here, but refer interested readers to Gary J. Miller's (1997) extensive review. Our aim here is to offertwo modest case studies of specific instances of overlap between the interests and research efforts of economists and political scientists. Our first case study focuses on describing and explaining participation in the workforce, the polity, and many other social activities and organizations. Our second case study focuses on the impact of political processes and institutions on macroeconomic policies and performance. In both these instances the work of economists has been quite fruitful—but also, we think, hampered by a characteristic overreliance on standard economic models and methods. However, in both areas, recent developments may point the way toward a more constructive research style combining the theoretical and empirical rigor of economics with a broader and more eclectic approach familiar to political scientists.

A common explanation offered for the observed wage differential between men and women is that women are less attached to the labor market; they exhibit a greater degree of labor-market intermittency than do men. There are several theories that explain this link between intermittency and lower wages, including differences in human-capital attainment, atrophy of skills during absences, and preferences of employers (see e.g., Solomon W. Polachek and W. Stanley Siebert, 1993; Joyce P. Jacobsen and Laurence M. Levin, 1995; James W. Albrecht et al., 2000). The goal of this paper is to explore in greater depth the role past labormarket intermittency plays in the determination of a woman’s current wage and at what level of intermittent activity women can expect to have that activity affect her wage. Previous methods employed to measure the penalty associated with intermittent activity have either classified workers as intermittent if they have at least one spell of absence from the labor market (Jacobsen and Levin, 1995) or have relied on the percentage of time out of the labor force to classify intermittent workers (Elaine J. Sorenson, 1993). However, if employers perceive intermittent behavior as a signal, then both the frequency of intermittent spells and the duration of the spells should be taken into account. We contribute to this literature by creating an intermittency index that captures both of these factors. We also statistically determine at what level of intermittency a woman will incur a penalty for absence from the labor force. This index is used to determine the magnitude of the penalty associated with intermittent participation in the labor force. The analysis is limited to women as intermittent behavior is more prevalent for women and to avoid potential confounding factors associated with gender discrimination.