This article examines skill gaps between immigrants and native‐born Americans and generational progress achieved by different immigrant ethnic groups. Evidence of a widening skill gap is not strong. While wage data show a pronounced fall in relative wages of “recent” immigrants, significant independent contributors to that decline are a widening age gap and the increasing price of skill. When attention shifts to legal migrants, the evidence is that legal migrants are, at a minimum, keeping up with native‐born Americans. I find that the concern that educational generational progress among Latino immigrants has lagged behind other immigrant ethnic groups is unfounded.

Utilizing a bank-lending channel framework, we investigate the effects of expansionary and contractionary policy separately on the loan behavior of low-capital and high-capital banks, and between pre-Basel/FDICIA and post-Basel/FDICIA periods. Our results show that low-capital banks are adversely affected by contractionary policy. Expansionary policy, however, is not effective in stimulating the loan growth of low-capital banks. These results are consistent with lending channel predictions, but only hold in the post-Basel/FDICIA period when the capital constraint is stringent relative to the pre-Basel/FDICIA period. These asymmetric policy results have implications for the interaction of monetary and capital regulatory policies.

Not necessarily: a firm's fundamental value increases with uncertainty about average future profitability, and this uncertainty was unusually high in the late 1990s. After calibrating a stock valuation model that takes this uncertainty into account, we compute the level of uncertainty that is needed to match the observed Nasdaq valuations at their peak. The uncertainty we obtain seems plausible because it matches not only the high level but also the high volatility of Nasdaq stock prices. In general, we argue that the level and volatility of stock prices are positively linked through firm-specific uncertainty about average future profitability.

Educators worry that high-stakes testing will induce teachers and their students to focus only on the test and ignore other, untested aspects of knowledge. Some counter that although this may be true, knowing something is better than knowing nothing and many students would benefit even by learning the material that is to be tested. Using the metaphor of deterring drivers from speeding, it is shown that the optimal rules for high-stakes testing depend on the costs of learning and of monitoring. Incentives need to be concentrated for those whose costs of action are high. For high cost learners this implies announcing the exact requirements of the test. For more able students, a more amorphous standard produces superior results. This is analogous to announcing where the police are when the detection costs are high. Other applications are discussed.

We examine cross-sectional determinants of the informativeness of analyst research, i.e., their effect on security prices, controlling for endogeneity among the factors affecting informativeness. Analyst reports are more informative when the potential brokerage profits are higher (e.g., high trading volume, high volatility, and high institutional ownership) and lower when information processing costs (e.g., more business segments) are high. We also find that the informativeness of analyst research and informativeness of financial statements are complements.

Using a unique set of household level panel data, we estimate the effect of capital gains on saving by asset type, controlling for observable and unobservable household specific fixed effects. The results suggest that the decline in the personal saving rate since 1984 is largely due to the significant capital gains in corporate equities experienced over this period. Over five-year periods, the effect of capital gains in corporate equities on saving is substantially larger than the effect of capital gains in housing or other assets. Failure to differentiate wealth affects across asset types results in a significant understatement or overstatement of the size of their impact, depending on the asset.

We develop and compare two theories of professional forecasters’ strategic behavior. The first theory, reputational cheap talk, posits that forecasters endeavor to convince the market that they are well informed. The market evaluates their forecasting talent on the basis of the forecasts and the realized state. If the market expects forecasters to report their posterior expectations honestly, then forecasts are shaded toward the prior mean. With correct market expectations, equilibrium forecasts are imprecise but not shaded. The second theory posits that forecasters compete in a forecasting contest with pre-specified rules. In a winner-take-all contest, equilibrium forecasts are excessively differentiated.

We study the stock market's reaction to aggregate earnings news. Prior research shows that, for individual firms, stock prices react positively to earnings news but require several quarters to fully reflect the information in earnings. We find a substantially different pattern in aggregate data. First, returns are unrelated to past earnings, suggesting that prices neither underreact nor overreact to aggregate earnings news. Second, aggregate returns correlate negatively with concurrent earnings; over the last 30 years, for example, stock prices increased 5.7% in quarters with negative earnings growth and only 2.1% otherwise. This finding suggests that earnings and discount rates move together over time and provides new evidence that discount-rate shocks explain a significant fraction of aggregate stock returns.