Christie and Schultz (1994), (Journal of Finance, 49, 1813–1840) find that market makers in many active Nasdaq stocks avoid odd-eighth quotes. This paper studies 67 (58) Nasdaq stocks whose market makers initiate (withdraw) odd-eighth quotes. These regime shifts are often completed within the span of a day, and coincide with dramatic changes in dollar, percentage and effective spreads. In most cases, we are unable to identify comparable changes in the costs of making markets. We do identify long-run changes in average prices that may provide a partial explanation. However, we also find that these patterns are not shared by stocks traded in auction markets.

Estimates from the Panel Study of Income Dynamics indicate that African-American men are one-third as likely to be self-employed as white men. The large discrepancy is due to a black transition rate into self-employment that is approximately one-half the white rate and a black transition rate out of self-employment that is twice the white rate. Using a new variation of the Blinder-Oaxaca decomposition technique, the author finds that racial differences in asset levels and probabilities of having self-employed fathers explain a large part of the gap in the entry rate, but almost none of the gap in the exit rate. Copyright 1999 by University of Chicago Press.

Relative performance evaluation (RPE) is likely to improve boards of director's ability to identify unfit CEOs, and competition is likely to enhance the usefulness of RPE. Consistent with our hypotheses, the frequency of CEO turnover is greater in highly competitive industries than in less competitive industries. We also find that RPE-based (firm-specific) accounting measures are more closely associated with CEO turnover in high (low) competition industries than in low (high) competition industries. These findings suggest that the lack of support for RPE in prior studies results from not considering the effects of competition.

This paper considers a generalized method of moments (GMM) estimation problem in which one has a vector of moment conditions, some of which are correct and some incorrect. The paper introduces several procedures for consistently selecting the correct moment conditions. The procedures also can consistently determine whether there is a sufficient number of correct moment conditions to identify the unknown parameters of interest. The paper specifies moment selection criteria that are GMM analogues of the widely used BIC and AIC model selection criteria. (The latter is not consistent.) The paper also considers downward and upward testing procedures. All of the moment selection procedures discussed in this paper are based on the minimized values of the GMM criterion function for different vectors of moment conditions. The procedures are applicable in time-series and cross-sectional contexts. Application of the results of the paper to instrumental variables estimation problems yields consistent procedures for selecting instrumental variables.