We analyze the firm-level and aggregate consequences of equity market imperfections in the form of noisy information aggregation for corporate risk-taking and investment. Market imperfections cause controlling shareholders to invest too much in upside risks and too little in downside risks in an attempt to capture market rents. In partial equilibrium, these inefficiencies are particularly severe if upside risks are coupled with near constant returns to scale. In general equilibrium, the shareholders' collective attempts to boost shareholder value of individual firms leads to a novel pecuniary externality that amplifies investment distortions with downside risks but offsets distortions with upside risks, thereby overturning the results from the partial equilibrium analysis. We consider policy interventions to correct the distortions, and show that in general equilibrium such interventions disrupt the financial market's allocational role. We analyze extensions of our model to excess leverage, agency conflicts between shareholders and managers, negative welfare effects of transparency, excess sensitivity of investment to stock prices, and dynamically inconsistent firm behavior.
Imperfect Financial Markets and Shareholder Incentives in Partial and General Equilibrium -- by Elias Albagli, Christian Hellwig, Aleh Tsyvinski
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Survey Measurement of Probabilistic Macroeconomic Expectations: Progress and Promise -- by Charles F. Manski
Economists commonly suppose that persons have probabilistic expectations for uncertain events, yet empirical research measuring expectations was long rare. The inhibition against collection of expectations data has gradually lessened, generating a substantial body of recent evidence on the expectations of broad populations. This paper first summarizes the history leading to development of the modern literature and overviews its main concerns. I then describe research on three subjects that should be of direct concern to macroeconomists: expectations of equity returns, inflation expectations, and professional macroeconomic forecasters. I also describe work that questions the assumption that persons have well-defined probabilistic expectations and communicate them accurately in surveys. Finally, I consider the evolution of thinking about expectations formation in macroeconomic policy analysis. I favorably observe the increasing willingness of theorists to study alternatives to rational expectations assumptions, but I express concern that models of expectations formation will proliferate in the absence of empirical research to discipline thinking. To make progress, I urge measurement and analysis of the revisions to expectations that agents make following occurrence of unanticipated shocks.
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Handle with Care: The Local Air Pollution Costs of Coal Storage. -- by Akshaya Jha, Nicholas Z. Muller
Burning coal is known to have environmental costs; this paper quantities the local environmental costs of transporting and storing coal at U.S. power plants for the sample period 2002-2012. We first demonstrate that a 10% increase in coal stockpiles (number of deliveries) results in a 0.07% (0.16%) increase in the average concentration of fine particulates (PM2.5) for locations up to 25 miles away from, and downwind from, plants. We next assess the impacts of PM2.5 on average adult and infant mortality rates using coal stockpiles and deliveries as instruments for PM2.5. Our findings within this instrumental variables framework indicate that a 10% increase in PM2.5 leads to a 1.1% (6.6%) increase in average adult (infant) mortality rates; these causal estimates are similar in magnitude to the epidemiological estimates used by the USEPA in their regulatory impact analyses. Our estimated increase in mortality rates implies local environmental costs of $183 ($203) per ton of coal stockpiled (delivered); to put this in perspective, the average power plant paid roughly $48 per ton for coal during our sample period. These sizable but highly localized environmental costs of coal transportation and storage disproportionately impact the economically disadvantaged communities living near coal-fired power plants.
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Australian Squatters, Convicts, and Capitalists: Dividing Up a Fast-Growing Frontier Pie 1821-1871 -- by Laura Panza, Jeffrey G. Williamson
Compared with its nineteenth century competitors, Australian GDP per worker grew exceptionally fast, about twice that of the US and three times that of Britain. This paper asks whether the fast growth performance produced rising inequality. Using a novel data set we offer new evidence supporting unambiguously the view that, in sharp contrast with US, Australia underwent a revolutionary levelling in incomes between the 1820s and the 1870s. This assessment is based on our annual estimates of functional shares in the form of land rents, convict incomes, free unskilled incomes, free skill premiums, British imperial transfers and a capitalist residual.
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From Extreme to Mainstream: How Social Norms Unravel -- by Leonardo Bursztyn, Georgy Egorov, Stefano Fiorin
Social norms are typically thought to be persistent and long-lasting, sometimes surviving through growth, recessions, and regime changes. In some cases, however, they can quickly change. This paper examines the unraveling of social norms in communication when new information becomes available, e.g., aggregated through elections. We build a model of strategic communication between citizens who can hold one of two mutually exclusive opinions. In our model, agents communicate their opinions to each other, and senders care about receivers' approval. As a result, senders are more likely to express the more popular opinion, while receivers make less inference about senders who stated the popular view. We test these predictions using two experiments. In the main experiment, we identify the causal effect of Donald Trump's rise in political popularity on individuals' willingness to publicly express xenophobic views. Participants in the experiment are offered a bonus reward if they authorize researchers to make a donation to an anti-immigration organization on their behalf. Participants who expect their decision to be observed by the surveyor are significantly less likely to accept the offer than those expecting an anonymous choice. Increases in participants' perceptions of Trump's popularity (either through experimental variation or through the "natural experiment" of his victory) eliminate the wedge between private and public behavior. A second experiment uses dictator games to show that participants judge a person less negatively for publicly expressing (but not for privately holding) a political view they disagree with if that person's social environment is one where the majority of people holds that view.
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Status Goods: Experimental Evidence from Platinum Credit Cards -- by Leonardo Bursztyn, Bruno Ferman, Stefano Fiorin, Martin Kanz, Gautam Rao
This paper provides novel field-experimental evidence on status goods. We work with an Indonesian bank that markets platinum credit cards to high-income customers. In a first experiment, we show that demand for the platinum card greatly exceeds demand for a nondescript control product with identical benefits, suggesting demand for the pure status aspect of the card. Transaction data reveal that platinum cards are more likely to be used in social contexts, implying social image motivations. Combining price variation with information on the use of the card sheds light on the magnitude of the demand for social status. In a second experiment, we provide evidence of positional externalities from the consumption of these status goods. The final experiment shows that increasing self-esteem causally reduces demand for status goods. We infer that part of the demand for status is psychological in nature, and that social image is a substitute for self-image.
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Is Preventive Care Worth the Cost? Evidence from Mandatory Checkups in Japan -- by Toshiaki Iizuka, Katsuhiko Nishiyama, Brian Chen, Karen Eggleston
Using unique individual-level panel data, we investigate whether preventive medical care triggered by health checkups is worth the cost. We exploit the fact that biomarkers just below and above a threshold may be viewed as random. We find that people respond to health signals and increase physician visits. However, we find no evidence that additional care is cost effective. For the "borderline type" ("pre-diabetes") threshold for diabetes, medical care utilization increases but neither physical measures nor predicted risks of mortality or serious complications improve. For efficient use of medical resources, cost effectiveness of preventive care must be carefully examined.
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Gender Differences in the Benefits of an Influential Early Childhood Program -- by Jorge Luis Garcia, James J. Heckman, Anna L. Ziff
This paper estimates gender differences in life-cycle impacts across multiple domains of an influential enriched early childhood program targeted toward disadvantaged children that was evaluated by the method of random assignment. We assess the impacts of the program on promoting or alleviating population differences in outcomes by gender. For many outcomes, boys benefit relatively more from high-quality center childcare programs compared to low-quality programs. For them, home care, even in disadvantaged environments, is more beneficial than lower-quality center childcare for many outcomes. This phenomenon is not found for girls. We investigate the sources of the gender differentials in impacts.
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Policy Uncertainty In Japan -- by Elif C. Arbatli, Steven J. Davis, Arata Ito, Naoko Miake, Ikuo Saito
We develop new economic policy uncertainty (EPU) indices for Japan from January 1987 onwards building on the approach of Baker, Bloom and Davis (2016). Each index reflects the frequency of newspaper articles that contain certain terms pertaining to the economy, policy matters and uncertainty. Our overall EPU index co-varies positively with implied volatilities for Japanese equities, exchange rates and interest rates and with a survey-based measure of political uncertainty. The EPU index rises around contested national elections and major leadership transitions in Japan, during the Asian Financial Crisis and in reaction to the Lehman Brothers failure, U.S. debt downgrade in 2011, Brexit referendum, and Japan's recent decision to defer a consumption tax hike. Our uncertainty indices for fiscal, monetary, trade and exchange rate policy co-vary positively but also display distinct dynamics. VAR models imply that upward EPU innovations foreshadow deteriorations in Japan's macroeconomic performance, as reflected by impulse response functions for investment, employment and output. Our study adds to evidence that credible policy plans and strong policy frameworks can favorably influence macroeconomic performance by, in part, reducing policy uncertainty.
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Al Mawared Amman Stock Exchange Weekly Report, 22 May 2017
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Fourth Annual FTSE Russell Global Institutional Smart Beta Survey Marks Peak In Adoption And Rising ESG Interest
FTSE Russell, a leading global index and data provider, today confirmed a new high in global smart beta index adoption and continued strong interest in smart sustainability and multi-factor indexes from global institutional asset owners.
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European Commission: Statement By Michel Barnier At The Press Conference Following The General Affairs Council (Art. 50)
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MIAX Options & MIAX PEARL Holiday Schedule - Memorial Day 2017
Please be advised the MIAX Exchanges will be closed on Monday, May 29, 2017 in observance of Memorial Day.
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LedgerX Raises $11.4 Million To Establish A Regulated Bitcoin Options Clearing House And Exchange - Series B Round Led By Miami International Holdings And Huiyin Blockchain Venture Investments
Ledger Holdings, parent company of bitcoin options exchange LedgerX, closes $ 11.4 Million in Series B financing. Led by Miami International Holdings Inc. and Huiyin Blockchain Venture Investments, this funding supports LedgerX’s plan to operate a regulated exchange and clearing house for bitcoin and other digital currencies.
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Egyptian Exchange: Trading Hours During Ramadan Holy Month
The Egyptian Exchange (EGX) decided that the trading session dates during the month of Ramadan to be as follows:
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Borsa İstanbul Announces The Constituent Changes To The BIST SME Industrial Index For June 1, 2017- May 31, 2018 Period
All changes will be applied after the close of business on Wednesday, May 31, 2017 and will be effective on Thursday, June 1, 2017.
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“Tadawul” Announces Approval Of Securities Tick Size Amendment
The Saudi Stock Exchange “Tadawul” announces today the issuance of its Board resolution on 26/8/1438AH correspondent to 22/5/2017G approving the amendment of securities tick sizes.
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Intercontinental Exchange Announces Results From 2017 Annual Meeting Of Stockholders
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, announced the results of the company’s 2017 Annual Meeting of Stockholders, which was held Friday, May 19 in Atlanta. A replay of the meeting is available at http://ir.theice.com.
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London Stock Exchange Group Plc Transaction In Own Shares
London Stock Exchange Group plc (the "Company") announces that it has purchased through Barclays Capital Securities Limited, in accordance with the authority granted by shareholders at the Company's Annual General Meeting on 26 April 2017, the following number of its ordinary shares of 6 79/86 pence each ("Shares") on the London Stock Exchange as part of the buyback programme announced on 29 March 2017:
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TMX Group's Markets Closed Today
The Exchange's markets are closed today, May 22, 2017.
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