A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.
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Results 319 resources
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A martingale approach is used to characterize general equilibrium in the presence of portfolio insurance. Insurers sell to noninsurers in bad states and general equilibrium requires that the risk premium rises to induce noninsurers to increase their holdings. The authors show that portfolio insurance increases price volatility, causes mean reversion in asset returns, raises the Sharpe ratio and volatility in bad states, and causes volatility to be correlated with volume. They also explain why out-of-the-money S&P 500 put options trade at a higher volatility than do in-the-money puts.
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The authors study the capital allocation process within firms. Observed budgeting processes are explained as a response to decentralized information and incentive problems. It is shown that these imperfections can result in underinvestment when capital productivity is high and overinvestment when it is low. The authors also investigate how the budgeting process may be expected to vary with firm or division characteristics, such as investment opportunities and the technology for information transfer.
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The availability of tax-exempt financing provides nonprofit (NP) organizations with their own tax-based incentives to issue debt. In this article, we develop a theoretical model in which NPs gain an indirect arbitrage from tax-exempt debt issuance, constrained by: (1) the requirement that fixed investment exceed tax-exempt debt flows (the project financing constraint), and (2) the constraint against share issuance. These constraints cause them to impute tax benefits to projects that afford access to the tax-exempt bond market. Empirical tests indicate that NP hospitals behave as if they have target levels of tax-exempt debt. Debt targeting is constrained by the availability of capital projects, while excess debt capacity stimulates investment.
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This paper examines the effects of ground-level ozone regulation on economic activity. Regulatory effort varies by county attainment status and state attitudes. A switch from attainment to nonattainment status induces greater local regulatory effort, leading to air quality improvement, ceteris paribus, and an exit of polluting industries. Polluting industries spread out, moving from nonattainment (polluted) to attainment (initially less polluted) areas. Localities can improve hourly extreme-value readings, which trigger regulatory activity, without improving measures of typical conditions(for example, daily medians) by spreading economic activity over the day to dampen daily ozone peaks. Copyright 1996 by American Economic Association.
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The authors consider situations where a sale affects the ensuing interaction between potential buyers. These situations are modeled by assuming that an agent who does not acquire the object for sale incurs an identity-dependent externality. The authors construct a revenue-maximizing auction for the seller. They observe that outside options and participation constraints are endogenous; the seller extracts surplus also from agents who do not obtain the auctioned object; and the seller is better-off by not selling at all (while obtaining some payments) if externalities are much larger than valuations. Copyright 1996 by American Economic Association.
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This paper investigates the role in household wealth accumulation of saving for bequests. It employs data from a 1988 survey of TIAA-CREF annuitants designed to measure pension and other net worth as well as lifetime earnings. About half of the households in the data plan to leave estates and the authors find that their behavior conforms with theoretical altruistic models. For the same families, the amount of wealth that the authors attribute to estate building is large. Nevertheless, altruism towards one's children does not seem to be the major explanation of saving in the overall sample. Copyright 1996 by American Economic Association.
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Reciprocal exchange, or gift exchange, remains a widespread means of obtaining goods and services. This paper examines the persistence of reciprocal exchange by formalizing the interaction between self-enforcing exchange agreements and monetary market exchange. When more people engage in reciprocal exchange, market search costs increase, reciprocity is easier to enforce and yields higher utility. Thus, personalized exchange can persist even when it is inefficient. Conversely, large markets can destroy reciprocity when reciprocal exchange is efficient. The results characterize the use of personal 'connections' as a system of reciprocal exchange and explain the disappearance of reciprocity when tribes encounter markets. Copyright 1996 by American Economic Association.
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This study investigates the behavior of the components of the bid-ask spread around earnings announcements. The authors find that the adverse selection cost component significantly increases surrounding the announcements, while the inventory holding and order processing components significantly decline during the same periods. Their results suggest that the directional change in the total bid-ask spread depends on the relative magnitudes of the changes in these three components. Specifically, the decreases in inventory holding costs and order processing costs imply that earnings announcements may have an insignificant impact on the total bid-ask spread, even when they result in increased information asymmetry.
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During the 1980s, insolvency of individual thrifts and the thrift deposit insurer created severe incentive problems. Lacking cash to close insolvent thrifts, regulators induced nearly $10 billion of private capital to flow into the industry through mutual-to-stock conversions. The authors test a theory of how regulators encouraged capital-impaired mutual thrifts to convert by permitting them to pay dividends rather than rebuild capital. They estimate the costs of this policy and interpret the 1991 Federal Deposit Insurance Corporation Improvement Act as requiring regulators to impose restraints on depository institutions parallel to debt covenants that prevent capital distributions by nonfinancial firms experiencing distress.
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