National Bureau of Economic Research

About: National Bureau of Economic Research is a nonprofit organization based out in Cambridge, Massachusetts, United States. It is known for research contribution in the topics: Monetary policy & Population. The organization has 2626 authors who have published 34177 publications receiving 2818124 citations. The organization is also known as: NBER & The National Bureau of Economic Research.

The Market for News

Abstract: We investigate the market for news under two assumptions: that readers hold beliefs that they like to see confirmed, and that newspapers can slant stories toward these beliefs. We show that, on the topics where readers share common beliefs, one should not expect accuracy even from competitive media: competition results in lower prices, but common slanting toward reader biases. However, on topics where reader beliefs diverge (such as politically divisive issues), newspapers segment the market and slant toward the biases of their own audiences, yet in the aggregate a conscientious reader could get an unbiased perspective. Generally speaking, reader heterogeneity is more important for accuracy in media than competition per se.

Benchmarks as Limits to Arbitrage: Understanding the Low Volatility Anomaly

Abstract: Over the past 41 years, high volatility and high beta stocks have substantially underperformed low volatility and low beta stocks in U.S. markets. We propose an explanation that combines the average investor's preference for risk and the typical institutional investor’s mandate to maximize the ratio of excess returns and tracking error relative to a fixed benchmark (the information ratio) without resorting to leverage. Models of delegated asset management show that such mandates discourage arbitrage activity in both high alpha, low beta stocks and low alpha, high beta stocks. This explanation is consistent with several aspects of the low volatility anomaly including why it has strengthened in recent years even as institutional investors have become more dominant.

Sufficient Statistics for Welfare Analysis: A Bridge Between Structural and Reduced-Form Methods

Abstract: The debate between structural and reduced-form approaches has generated substantial controversy in applied economics. This article reviews a recent literature in public economics that combines the advantages of reduced-form strategies—transparent and credible identification—with an important advantage of structural models—the ability to make predictions about counterfactual outcomes and welfare. This literature has developed formulas for the welfare consequences of various policies that are functions of reduced-form elasticities rather than structural primitives. I present a general framework that shows how many policy questions can be answered by estimating a small set of sufficient statistics using program-evaluation methods. I use this framework to synthesize the modern literature on taxation, social insurance, and behavioral welfare economics. Finally, I discuss problems in macroeconomics, labor, development, and industrial organization that could be tackled using the sufficient statistic approach.

Cointegration Vector Estimation by Panel Dols and Long-Run Money Demand

Abstract: We study the panel DOLS estimator of a homogeneous cointegration vector for a balanced panel of N individuals observed over T time periods. Allowable heterogeneity across individuals include individual-specific time trends, individual-specific fixed effects and time-specific effects. The estimator is fully parametric, computationally convenient, and more precise than the single equation estimator. For fixed N as T approaches infinity, the estimator converges to a function of Brownian motions and the Wald statistic for testing a set of linear constraints has a limiting chi-square distribution. The estimator also has a Gaussian sequential limit distribution that is obtained first by letting T go to infinity then letting N go to infinity. In a series of Monte Carlo experiments, we find that the asymptotic distribution theory provides a reasonably close approximation to the exact finite sample distribution. We use panel dynamic OLS to estimate coefficients of the long-run money demand function from a panel of 19 countries with annual observations that span from 1957 to 1996. The estimated income elasticity is 1.08 (asymptotic s.e.=0.26) and the estimated interest rate semi-elasticity is -0.02 (asymptotic s.e.=0.01).

Industry Effects and Appropriability Measures in the Stock Markets Valuation of R&D and Patents

Abstract: This paper examines the stock market's valuation of a firm's innovative activity. We estimate the market's relative valuation of firms' tangible and intangible assets, focusing on knowledge capital in the form of accumulated "stocks" of R&D and patents. We tried to improve upon our estimates of the stock market's valuation of knowledge capital embodied in such "stocks" by bringing in measures of the appropriability environment facing a firm from the Yale Survey on Industrial Research and Development. The responses to Survey questions about the effectiveness of patents as a mechanism for protecting the returns from innovation turn out to be of some use: there is evidence of an interaction between industry level measures of the effectiveness of patents and the market's valuation of a firm's past R&D and patenting performance, as well as its current R&D moves. We find no evidence, however, that other appropriability mechanisms differ enough across industries to leave measurable traces in our data. The structure of the Yale Survey makes it possible to estimate the sampling error in the appropriability measures derived from it. This information was used by us in an errors-in-variables context, but with little success. In the absence of R&D variables, our estimates imply that a two standard deviation increase in our index of patent effectiveness would raise the value of a patent held by our average firm from $0.4 million to $1.0 million. When R&D variables are introduced into the equations, the patents variables become insignificant - R&D expenditures are a better measure of input to the innovative function of firms than patents are of its output - but we estimate that the same experiment would induce changes in q of between 10 and 27 percent for the average firm, approximately doubling the market's valuation of this kind of capital.