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.

A Test of the Free Cash Flow Hypothesis: The Case of Bidder Returns

Abstract: The free cash flow hypothesis advanced by Jensen (1988) states that managers endowed with free cash flow will invest it in negative net present value (NPV) projects rather than pay it out to shareholders. Jensen defines free cash flow as cash flow left after the firm has invested in all available positive NPV projects. In this paper, we test this hypothesis on a sample of large investments made by firms, namely decisions to acquire control of other firms through tender offers.

Facts and Fantasies about Commodity Futures

Abstract: For this study of the simple properties of commodity futures as an asset class, an equally weighted index of monthly returns of commodity futures was constructed for the July 1959 through December 2004 period. Fully collateralized commodity futures historically have offered the same return and Sharpe ratio as U.S. equities. Although the risk premium on commodity futures is essentially the same as that on equities for the study period, commodity futures returns are negatively correlated with equity returns and bond returns. The negative correlation is the result, primarily, of commodity futures' different behavior over a business cycle. Commodity futures are positively correlated with inflation, unexpected inflation, and changes in expected inflation.

Interpreting Tests of the Convergence Hypothesis

Abstract: This paper provides a framework for understanding the cross- section and time series approaches which have been used to test the convergence hypothesis First, we present two definitions of convergence which capture the implications of the neoclassical growth model for the relationship between current and future cross-country output differences Second, we identify how the cross-section and time series approaches relate to these definitions Cross-section tests are shown to be associated with a weaker notion of convergence than time series tests Third, we show how these alternative approaches make different assumptions on whether the data are well characterized by a limiting distribution As a result, the choice of an appropriate testing framework is shown to depend on both the specific null and alternative hypotheses under consideration as well as on the initial conditions characterizing the data being studied

The Human Capital Model

Abstract: This chapter contains a detailed treatment of the human capital model of the demand for health which was originally developed in 1972. Theoretical predictions are discussed, and theoretical extensions of the model are reviewed. Empirical research that tests the predictions of the model or studies causality between years of formal schooling completed and good health is surveyed. The model views health as a durable capital stock that yields an output of healthy time. Individuals inherit an initial amount of this stock that depreciates with age and can be increased by investment. The household production function model of consumer behavior is employed to account for the gap between health as an output and medical care as one of many inputs into its production. In this framework the “shadow price” of health depends on many variables besides the price of medical care. It is shown that the shadow price rises with age if the rate of depreciation on the stock of health rises over the life cycle and falls with education (years of formal schooling completed) if more educated people are more efficient producers of health. An important result is that, under certain conditions, an increase in the shadow price may simultaneously reduce the quantity of health demanded and increase the quantities of health inputs demanded.