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Creator: Hansen, Gary D. (Gary Duane) and Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 507 Descripción:
Presented at the ASSA meetings in Anaheim, CA.
Palabra clave: 1990, Productivity, Recession, 1991, Technological shocks, Labor, Technology shock, and Knowledge Tema: O33 - Technological change ; Research and development - Technological change : Choices and consequences ; Diffusion processes and G14 - General financial markets - Information and market efficiency ; Event studies
Creator: Boyd, John H., Daley, Lane A., 1953-, and Runkle, David Edward. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 515 Abstract:
This paper examines the seasonal pattern of accruals for loan-loss provisions and chargeoffs chosen by bank managers. Using the existing literature on intra-year discretionary accruals, knowledge of the incentive systems used to evaluate bank managers' performance, and various regulatory characteristics, we predict that accruals for provisions and chargeoffs will cluster in the fourth quarter of each year. We examine quarterly data for 105 large bank holding companies from the first quarter of 1980 through the fourth quarter of 1990. Our results indicate that: (1) provisions and chargeoffs are clustered in the fourth quarter, (2) this clustering is not related to the level of business activity of the banks, (3) the proximity of a bank's actual capital to its regulatory capital requirement does not affect this clustering, and (4) current provisions are affected both by current chargeoffs and by expectations about future chargeoffs. To examine whether the systematic characteristics of these loan-loss provision and chargeoff decisions are understood by users, we also estimate a quarterly equity valuation model in which quarterly provisions should be differentially weighted to reflect their seasonal characteristics. We find strong evidence to indicate that equity prices behave as if the market participants take these seasonal properties into account.
Palabra clave: Bank lending, Loans, Charge-off, Loan losses, Banks, Loan-loss provision, and Seasonality Tema: G21 - Financial institutions and services - Banks ; Other depository institutions ; Micro finance institutions ; Mortgages and G14 - General financial markets - Information and market efficiency ; Event studies
Creator: Ostroy, Joseph M. and Potter, Simon M. Series: Finance, fluctuations, and development Abstract:
We formulate a representative consumer model of intertemporal resource reallocation in which fluctuations in equity prices contribute to the smoothing of consumption flows. Features of the model include (a) an incompletely observable stochastic process of productivity shocks leading to fluctuating confidence of beliefs and (b) technologies involving commitments of a resource good. These features are exploited to show that (1) equities are not a representative form of total wealth and (2) the valuation of currently active firms is not representative of the valuation of all firms. We examine the implications of (1) and (2) to argue that empirical findings for the volatility and 'value shortfall' of equity prices may be consistent with a frictionless representative consumer model having a low degree of risk-aversion. Simulation of a calibrated version of the model for a risk-neutral consumer shows that when the 'data' is analyzed according to current econometric procedures, it is found to exhibit volatility of the same order of magnitude as that found in the actual data, although the model contains no excess volatility.
Palabra clave: Technological commitments, Equity premium, Uncertainty of beliefs, Excess volatility, and Value shortfall Tema: G12 - General financial markets - Asset pricing ; Trading volume ; Bond interest rates, E44 - Money and interest rates - Financial markets and the macroeconomy, G14 - General financial markets - Information and market efficiency ; Event studies, and E13 - General aggregative models - Neoclassical
Creator: Jackson, Matthew O. and Peck, James. Series: Finance, fluctuations, and development Abstract:
We examine price formation in a simple static model with asymmetric information, a countable number of risk neutral traders and without noise traders. Prices can exhibit excess volatility (the variance of prices exceeds the variance of dividends), even in such a simple model. More generally, we show that for an open set of parameter values no equilibrium has prices which turn out to equal the value of dividends state by state, while for another open set of parameter values there exist equilibria such that equilibrium prices equal the value of dividends state by state. When information collection is endogenous and costly, expected prices exhibit a "V-shape" as a function of the cost of information: They are maximized when information is either costless so that everyone acquires it, or else is so costly that no one chooses to acquire it. Prices are depressed if information is cheap enough so that some agents become informed, while others do not. If the model is altered so that information is useful in making productive decisions, then the V-shape is altered, reducing the attractiveness of prohibitively high costs.
Tema: G14 - General financial markets - Information and market efficiency ; Event studies, D50 - General equilibrium and disequilibrium - General, and C70 - Game theory and bargaining theory - General
Creator: Townsend, Robert M., 1948- and Wallace, Neil. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 209 Abstract:
We use a model of pure, intertemporal exchange with spatially and information-ally separated markets to explain the existence of private securities which circulate and, hence, play a prominent role in exchange. The model, which utilizes a perfect foresight equilibrium concept, implies that a Schelling-type coordination problem can arise. It can happen that the amounts of circulating securities that are required to support an equilibrium and that are issued at the same time in informationally separated markets must satisfy restrictions not implied by individual maximization and market clearing in each market separately.
Palabra clave: Trade, Schelling pure coordination game, and Debts Tema: D51 - General equilibrium and disequilibrium - Exchange and production economies and G14 - General financial markets - Information and market efficiency ; Event studies