This paper analyzes the robustness of the day-of-the-week (DOW) and weekend effects to alternative estimation and testing procedures. The results show that sample size can distort the interpretation of classical test statistics unless the significance level is adjusted downward. Specification tests reveal widespread departures from OLS assumptions. Hypothesis tests results are reported using robust econometric methods and a GARCH model. The strength of the DOW and weekend effect evidence appears to depend on the estimation and testing method. Both effects seem to have disappeared by 1975.

We show there is a much stronger negative, dynamic relation between changes in economic uncertainty and Treasury yields over weaker economic times since at least 1990. We document this economic-state variation in uncertainty-yield dynamics for weekly and monthly change horizons, for nominal yields and real-yield proxies, for multiple economic-state identification methods, and for different economic uncertainty metrics. We present additional findings that suggest short-term fluctuations in precautionary-savings and consumption-smoothing forces are more impactful on interest rate dynamics during weaker economic times, especially relying on surveys of expected economic growth and inflation. Received February 8, 2019; editorial decision August 24, 2020 by Editor Nikolai Roussanov.

This paper considers a complex relation among R & D, market structure and a market value-based measure of profits. Perhaps of greatest interest, a positive effect of R & D on profits emerges, as does a negative R & D-concentration interaction effect. Both appear robust, and support an and rivalrous view of R & D. Despite substantial interest in the question little direct evidence on research and development (R&D), market structure and profits relations has appeared in the literature. An important exception to this rule is Grabowski and Mueller (hereafter G-M) (1978) who reported a strong effect of R & D on adjusted profit rate data, in addition to an equally strong negative R & Dmarket concentration interaction effect. G-M interpret their findings as support for an intangible capital and rivalrous view of R & D. Alternatively, they are also consistent with the hypothesis that firms in highly concentrated markets pursue R & D less efficiently, or take on riskier projects. In any event, G-M's findings seem inconsistent with a view of R & D as a barrier to entry (see Kamien and Schwartz, 1975). This study extends previous research in at least four respects. First, we adopt a market valued-based measure of profits in order to avoid any bias inherent in accounting profit data due to an expense-as-incurred rather than capitalization and amortization treatment of R & D, advertising and similar expenditures. Second, we evaluate simultaneous influences among profits, R & D, advertising and concentration suggested, but not tested, previously. Third, estimation results are derived using Leamer's SEARCH technique which illustrates the sensitivity of estimates to alternate model specifications. And fourth, we consider an n = 390-firm Fortune 500 sample, which is substantially larger than in previous studies, including firms responsible for nearly 90% of private sector R & D during 1977. Estimation results should therefore be broadly indicative of the economic consequences of R & D.

We study whether asset-class risk dynamics can help explain the predominantly negative stock-bond return relation and movements in the term structure’s slope over 1997–2011. Using option-derived implied volatilities to measure risk, we find i) the negative stock-bond return relation largely disappears when controlling for risk movements, at both monthly and weekly horizons; ii) the partial relation between equity-risk changes and 10-year T-bond excess returns (term-slope movements) is reliably positive (negative); and iii) a stronger link between equity risk and stock returns implies a more negative stock-bond return correlation. Our results suggest a flight-to-quality influence between equity-risk dynamics and longer-term Treasury pricing.

Robert A. Connolly, Barry T. Hirsch, Mark Hirschey, Union Rent Seeking, Intangible Capital, and Market Value of the Firm, The Review of Economics and Statistics, Vol. 68, No. 4 (Nov., 1986), pp. 567-577

When firms have discretion in valuing their balance sheet debt, how do they make this valuation decision given its impact on firm value? Firms make extensive use of operating leases, but unlike other types of debt, their balance sheet value is set by the firm. Using novel information on operating leases, we examine firm behavior in valuing these leases. We find that 20% of firms report higher-than-expected rates, reflecting their cost of unsecured rather than collateralized borrowing. These firms have poor information quality, operate in competitive markets, and understate lease and debt ratios by 15%.

Ample literature builds on the notion that real estate values boost corporate secured borrowing (“collateral channel”). A comprehensive contract-level database allows us to observe the value, location, and end-use of firms’ real estate holdings in the US and all debts raised against those assets over the 2000–2017 period. Firms raise new debt following an increase in the value of their real estate but use unsecured rather than secured borrowing. We rationalize these findings with a model where firms’ choices between secured and unsecured debt reflect the systematic risk exposures of the assets on their balance sheets. While secured debt may be seen as a safer claim than unsecured debt contractually, we demonstrate that it can be riskier from an economic perspective. Our analysis adds new insight into how firms set their debt structure.