Though trading halts are a common feature in securities markets, the issues associated with the coordination of these halts across markets are not well understood. In fact, regulations often allow traders to circumvent trading halts through the use of alternative venues. Using a sample of order imbalance delayed openings on the NYSE, we examine the costs and benefits of continued trading on alternative venues when the main market calls a halt. We find that trades routed to off-NYSE venues during NYSE halts are associated with significant price discovery and lead to an improved post-halt trading environment. In addition, limit orders routed through ECNs reflect price-relevant information even prior to the halt, with limit book imbalances decreasing and depth filling in during the halt around the eventual reopening NYSE price. However, these informational benefits come at a substantial cost, as both execution costs and volatility are extremely high on off-NYSE venues during NYSE halts.

Using a large, new database of contractual provisions governing the allocation of cash flow rights in venture capital (VC) financings, we investigate how contract design is related to VC abilities to monitor and provide value-added services to the entrepreneur. We find that more experienced VCs, who have superior abilities and more frequently join the boards of their portfolio companies, obtain weaker downside-protecting contractual cash flow rights than less experienced VCs. Several pieces of evidence suggest that this relation is unlikely to be driven by selection effects. The results suggest that VCs with better governance abilities focus less on obtaining downside protections, which entail risk-sharing costs, and more on other aspects of the contract (such as obtaining board representation) during negotiations with entrepreneurs. The results also imply that previous estimates of the amount entrepreneurs pay for affiliation with high-quality VCs are overstated.

Abstract If an individual with expected utility and a reasonable level of wealth rejects a small actuarially favorable gamble, it implies a very high degree of risk aversion. It also predicts (counterfactually) the rejection of more sizable and very attractive bets. If additional background uncertainty affects wealth, this result also applies to non-expected utilities. The authors describe a set of reasonable conditions under which an individual may reject the small bet but accept the large bet, even in the presence of background uncertainty. The two critical assumptions that the authors use are rank-dependent utility and a discrete distribution for background risk. Plausible calibrations can reconcile large/small bet risk attitudes and the empirical evidence on limited stock market participation in the presence of labor income risk.

This essay briefly reviews the state of knowledge about the government spending multiplier. Drawing on theoretical work, aggregate empirical estimates from the United States, as well as cross-locality estimates, I assess the likely range of multiplier values for the experiment most relevant to the stimulus package debate: a temporary, deficit-financed increase in government purchases. I conclude that the multiplier for this type of spending is probably between 0.8 and 1.5. (JEL E23, E62, H50)

We do not have a good measure of the effects of fiscal policy in a recession because the methods that we use to estimate the effects of fiscal policy—both those using the observed outcomes following different policies in aggregate data and those studying counterfactuals in fitted model economies—almost entirely ignore the state of the economy and estimate “the” government multiplier, which is presumably a weighted average of the one we care about—the multiplier in a recession—and one we care less about—the multiplier in an expansion. Notable exceptions to this general claim suggest this difference is potentially large. Our lack of knowledge stems significantly from the focus on linear dynamics: vector autoregressions and linearized (or close-to-linear) dynamic stochastic general equilibrium (DSGE) models. Our lack of knowledge also reflects a lack of data: deep recessions are few and nonlinearities hard to measure. The lack of statistical power in the estimation of nonlinear models using aggregate data can be addressed by exploiting estimates of partial-equilibrium responses in disaggregated data. Microeconomic estimates of the partial-equilibrium causal effects of a policy can discipline the causal channels inherent in any DSGE model of the general equilibrium effects of policy. Microeconomic studies can also provide measures of the dependence of the effects of a policy on the states of different agents, which is a key component of the dependence of the general-equilibrium effects of fiscal policy on the state of the economy. (JEL E12, E13, E32, E62, H50)

The idea of the Squam Lake Report was to bring together some fifteen leading U.S. financial economists to see what regulatory changes they could jointly agree and thereby influence policy discussions. Seeking to find a consensus, however, meant that many issues were not mentioned in the Report, e.g., structural limitations, Pigovian taxes, procyclicality, and boundary problems between banks and nonbanks. But what is presented is generally, though not invariably, admirable, and the book is beautifully written in good, easily accessible English. (JEL E44, E52, G01, G21, G28, L51)

The paper studies the effects and the determinants of interregional redistribution in a model of residential and political choice. We find that paradoxical consequences of interjurisdictional transfers arise if people are mobile: while self-sufficient regions are necessarily identical with respect to policies and average incomes in our model, interregional redistribution always leads to the divergence of regional policies and per capita incomes. Thus, interregional redistribution prevents inter regional equality. At the same time, however, transfers may allow for more inter personal equality among the inhabitants of each region. The voting population may therefore in a decision over the fiscal constitution deliberately implement such a transfer scheme to foster regional divergence. Empirical evidence from panel data from OECD countries and Canadian provinces is consistent with the theory.