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.

Consumption and Portfolio Decisions when Expected Returns are Time Varying

Abstract: This paper presents an approximate analytical solution to the optimal consumption and portfolio choice problem of an infinitely lived investor with Epstein-Zin-Weil utility who faces a constant riskless interest rate and a time-varying equity premium. When the model is calibrated to U. S. stock market data, it implies that intertemporal hedging motives greatly increase, and may even double, the average demand for stocks by investors whose risk-aversion coefficients exceed one. The optimal portfolio policy also involves timing the stock market. Failure to time or to hedge can cause large welfare losses relative to the optimal policy.

The Company You Keep: The Effects of Family and Neighborhood on Disadvantaged Youths

Abstract: We examine the effects of family background variables and neighborhood peers on the behaviors of inner-city youths in a tight labor market using data from the 1989 NBER survey of youths living in low-income Boston neighborhoods. We find that family adult behaviors are strongly related to analogous youth behaviors. The links between the behavior of older family members and youths are important for criminal activity, drug and alcohol use, childbearing out of wedlock, schooling, and church attendance. We also find that the behaviors of neighborhood peers appear to substantially affect youth behaviors in a manner suggestive of contagion models of neighborhood effects. Residence in a neighborhood in which a large proportion of other youths are involved in crime is associated with a substantial increase in an individual's probability of the being involved in crime. Significant neighborhood peer effects are also apparent for drug and alcohol use, church attendance, and the propensity of youths to be out of school and out of work. Our results indicate that family and peer influences both operate in manner such that "like begets like."

Insecurity and the Pattern of Trade: An Empirical Investigation

Abstract: Corruption and imperfect contract enforcement dramatically reduce international trade. This paper estimates the reduction using a structural model of import demand in which insecurity acts as a hidden tax on trade. We find that inadequate institutions constrain trade as much as tariffs do. We also find that omission of indices of institutional quality biases the estimates of typical gravity models, obscuring a negative relationship between per capita income and the share of total expenditure devoted to traded goods. Finally, we argue that cross-country variation in the effectiveness of institutions and the consequent variation in the prices of traded goods offer a simple explanation for the stylized fact that high-income, capital-abundant countries trade disproportionately with each other.

Contrarian Investment, Extrapolation, and Risk

Abstract: For many years, stock market analysts have argued that value strategies outperform the market. These value strategies call for buying stocks that have low prices relative to earnings, dividends, book assets, or other measures of fundamental value. While there is some agreement that value strategies produce higher returns, the interpretation of why they do so is more controversial. This paper provides evidence that value strategies yield higher returns because these strategies exploit the mistakes of the typical investor and not because these strategies are fundamentally riskier.

Estimating the Knowledge-Capital Model of the Multinational Enterprise

Abstract: What we term the firm includes three principal assumptions. First, services of knowledge-based and knowledge-generating activities, such as R&D, can be geographically separated from production and supplied to production facilities at low cost. Second, these knowledge-intensive activities are skilled-labor intensive relative to production. These characteristics give rise to vertical multinationals, which fragment production and locate activities according to factor prices and market size. Third, knowledge-based services have a (partial) joint-input characteristic that they can be supplied to additional production facilities at low cost. This characteristic gives rise to horizontal multinationals, which produce the same goods or services in multiple locations. In this paper, we note how this model predicts relationships between affiliate sales and country characteristics. We then subject these predictions to empirical tests.