Federal Reserve Bank of New York

About: Federal Reserve Bank of New York is a other organization based out in New York, New York, United States. It is known for research contribution in the topics: Monetary policy & Market liquidity. The organization has 537 authors who have published 2674 publications receiving 156142 citations. The organization is also known as: New York Fed.

Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk

Abstract: This paper uses a disaggregated approach to study the volatility of common stocks at the market, industry, and firm levels. Over the period from 1962 to 1997 there has been a noticeable increase in firm-level volatility relative to market volatility. Accordingly, correlations among individual stocks and the explanatory power of the market model for a typical stock have declined, whereas the number of stocks needed to achieve a given level of diversification has increased. All the volatility measures move together countercyclically and help to predict GDP growth. Market volatility tends to lead the other volatility series. Factors that may be responsible for these findings are suggested.

Do Better Schools Matter? Parental Valuation of Elementary Education

Abstract: The evaluation of numerous school reforms requires an understanding of the value of better schools. Given the difficulty of calculating the relationship between school quality and student outcomes, I turn to another method and use house prices to infer the value parents place on school quality. I look within school districts at houses located on attendance district boundaries; houses then differ only by the elementary school the child attends. I thereby effectively remove the variation in neighborhoods, taxes, and school spending. I find that parents are willing to pay 2.5 percent more for a 5 percent increase in test scores. This finding is robust to a number of sensitivity checks.

Consumption, Aggregate Wealth, and Expected Stock Returns

Abstract: This paper studies the role of f luctuations in the aggregate consumption‐wealth ratio for predicting stock returns. Using U.S. quarterly stock market data, we find that these f luctuations in the consumption‐wealth ratio are strong predictors of both real stock returns and excess returns over a Treasury bill rate. We also find that this variable is a better forecaster of future returns at short and intermediate horizons than is the dividend yield, the dividend payout ratio, and several other popular forecasting variables. Why should the consumption‐wealth ratio forecast asset returns? We show that a wide class of optimal models of consumer behavior imply that the log consumption‐aggregate wealth ~human capital plus asset holdings! ratio summarizes expected returns on aggregate wealth, or the market portfolio. Although this ratio is not observable, we provide assumptions under which its important predictive components for future asset returns may be expressed in terms of observable variables, namely in terms of consumption, asset holdings and labor income. The framework implies that these variables are cointegrated, and that deviations from this shared trend summarize agents’ expectations of future returns on the market portfolio. UNDERSTANDING THE EMPIRICAL LINKAGES between macroeconomic variables and financial markets has long been a goal of financial economics. One reason

Output Fluctuations in the United States: What Has Changed since the Early 1980's?

Abstract: In this paper, we document a structural break in the volatility of U.S. GDP growth in the first quarter of 1984 and provide evidence that this break emanates from a reduction in the volatility of durable goods production. Further, the reduction in durables volatility corresponds to a decline in the share of durable goods accounted for by inventories. We find no evidence of increased stability in the nondurables, services or structures sectors of the economy. Our evidence is compatible with a scenario in which changes in inventory management techniques in the durable goods sector have reduced the variability of aggregate output.