We analyze how the anonymous trading of uninformed agents affects the characterization of security market equilibrium. We show that the degree of anonymity provided by a market alters the distribution of wealth across agents, the depth of the market, and the incentive agents have to acquire private information about a security's fundamental value. Moreover, the nature of these effects depends on the type of information about uninformed trading that is revealed to market participants. Our results have implications for sunshine trading, dual trading, brokerage relationships, automation and decentralization of markets, and firms' security listing choices. G10, L10.

A simple search model that includes the possibility of recall provides predictions as to the changing effects of recall expectations, a bonus offer, and job counseling on new job finding rates over time. Using data from the New Jersey Unemployment Insurance Reemployment Demonstration Project (NJUIRDP), I find evidence for an initial positive effect of the bonus offer, which diminishes over time. New job-finding rates are found to be negatively affected by higher initial recall expectations. This effect also diminishes over time, and evidence suggests that job counseling is successful in speeding up this process.

In this paper we analyze how depositors can employ both monitoring and capital requirements to control the risk of bank assets. We also analyze how monitors should be compensated if their actions are not directly observable and if there are binding limits on their liability. Second-best capital and monitoring levels (with unobservable actions) will be distorted away from their respective first-best levels. We derive some results about the nature of these distortions and characterize the optimal incentive scheme for monitors.

This study separates trading volume into buyer- and seller-initiated activities and examines the directional volume reaction in small and large trades to different types of earnings news. ‘Good’ (‘bad’) news triggers brief, but intense, buying (selling) in the large trades. However, a persistent period of unusually high buying activity is observed in the small trades irrespective of the news. This anomalous proclivity of small traders to buy is robust across firm size, trading volume, and different earnings expectation models. Several explanations are discussed, although the behavior does not seem fully explained by existing theories.

The expectations theory of the term structure is well known to give wrong signals as to the future course of long-term interest rates. One explanation involves rational time-varying term premia. However, the “anomaly” may also be due to inflation forecast errors. We study survey forecasts of inflation. It seems that the respondents' forecasts are insufficiently adaptive. Interest rates reflect expectations similar to the inflation forecasts. As a result, past survey forecast errors reliably predict premia on U.S. Government Bonds.

The role of fee contracts in the agency relation between investment bankers and client firms in tender offers is investigated using a sample of offers between 1978 and 1986. Different fees have different payoff functions which can be used by firms to create incentives and by bankers to signal differences in abilities. The effectiveness of fee contracts in resolving agency problems in tested, with mixed results. The evidence suggests that fee contracts are used as a tool by both firms and bankers and that contracts influence tender offer outcomes but that contracting is only a partial solution to the agency problem.

This paper examines why Canadian poverty rates fell relative to U. S. poverty rates during the periods 1970–1979 and 1979–1986. During the 1970s the principal reason for declining Canadian poverty rates is higher economic growth. During the 1980s, however, differences in government transfer policy are the main cause of relative poverty change in the two countries. Virtually all of the 3.3 point fall in relative Canadian/U.S. poverty rates from 1979 to 1986 can be attributed to expansions in the Canadian transfer system and simultaneous contractions in U. S. transfers.

Previous research has separately addressed the problem of estimating risk in the presence of infrequent trading and the problem of estimating quality-adjusted returns in markets with quality variation in the observed price series. This paper simultaneously addresses both problems by applying a signal extraction method for unequally spaced data to decompose the observed price series with varying times between transactions into a quality-adjusted, permanent component (which would be observable in the absence of quality variation) plus a stationary, transitory quality variation component. Stamp auction transaction prices provide an application. Auction quality grading is treated in a manner analogous to bond ratings. Almost all of the observed variance is attributed to the auction quality variation. The observed auction returns and stock index returns are not well related.