Recent literature in behavioral finance has contradicted the notion of efficiency of markets. Greater emphasis on how psychological biases influence both the behavior of investors and asset prices has led to a strong debate among proponents of behavioral finance and neoclassical finance. This has created the need to study how psychology affects financial decisions in households, markets and organizations. This study conducts a pooled ordinary least squares (OLS) model using the fixed effects estimator to investigate the linkage between investor sentiment and stock prices for 35 firms belonging to three different industries over a time period of 56 years, from 1950 to 2005. The findings suggest that investor sentiment does not significantly affect the stock prices in this sample.
The spread of HIV and AIDS and risky sexual behavior continues to be a problem in Sub-Saharan African countries despite government measures to educate people on the risk and severity of the disease and measures to promote safe sex practices such as making condoms readily available at reduced or no cost. We examine whether people decide to engage in risky sexual behavior due to low income and low life expectancy. Sub-Saharan Africa is characterized by conditions that signicantly reduce life expectancy such as unsanitary conditions prevalent in poverty stricken areas, inaccessibility to health care, and dangerous working conditions such as those in very poor mining regions. Moreover, since income per capita in these countries is very low, the opportunity cost associated with dying from AIDS and foregoing future consumption is very low. We examine how a government provided life insurance benet may be an effective means of deterring risky sexual behavior. To evaluate this policy prescription we develop a life-cycle model with personal and family consumption and endogenous probability of survival. In the model, agents can receive life insurance benets if their death is not the result of AIDS. We demonstrate that excessive risky behavior does result from low life expectancy and low levels of income and illustrate the conditions for which the life insurance benet can replicate the effects of higher income and life expectancy, deterring risky sexual behavior and reducing the spread of HIV/AIDS.
Using representative samples from populations of 19 sub-Sahara African countries, this paper investigates the effects of different levels of HIV/AIDS knowledge on sexual behavior of males with country specific effects and controls for socioeconomic characteristics and location of residence. The main findings are that HIV/AIDS knowledge increases the likelihood of using condoms with and without commercial sex workers, has no significant effect on the likelihood of paying for sex, and increases both the likelihood of having pre and extra marital sex. These results indicate that increased HIV knowledge on average does not lead to safer sexual behavior of males in sub-Saharan Africa at the macro level.
Compensation of K-12 school principals, and the effect that it has on the performance of the schools they lead, has become a relevant policy debate in recent years. This study examines the relationship between principal salaries and student performance on Colorado Student Assessment Program (CSAP) tests by using multivariate quintile regressions on data from the 2002-2005 school years. Controlling for differences in cost of living across districts, a positive correlation between principal salaries and student CSAP scores was found, particularly in the mathematics section of the test. However, the percentage of a school’s students on free and reduced lunch and teacher salaries were found to have a larger impact on student performance.
This study considers the implications of excessive non-salary-based executive pay on capital structure during the years 2005 through 2007, directly preceding the 2008 stock market crash. The hypothesis proposes that for firms in the financial sector, executives awarded generous compensation packages compared to salary implemented a higher use of debt in their firm’s capital structure. The study examines data on 40 firms in the financial sector and 40 firms in the manufacturing sector to empirically test for a relationship between executive pay and leverage. Cross-sectional analysis of nine models reveals that compensation is a significant determinant of a firm’s total debt-to-total assets ratio for the financial sector, especially with the existence of a one- to two- year lag between the variables, while the manufacturing sector yielded no significant relationship. These findings reveal sources of agency conflicts and behavioral biases within the financial sector during the three years preceding the financial collapse.
Closely following the notion of innovative geographic clusters, this paper examines knowledge flows in the US agriculture industry for evidence of innovative agglomeration. The data indicate that a closer distance between any two agricultural patent origins increases the probability that one cites the other as prior art. Further, subtle interregional variations characterize the degree to which proximity advances agricultural innovation. Finally, the results show that older innovations in agriculture proliferate more readily than recently created knowledge.
While there is anecdotal evidence that home values decline when a big-box store (such as Wal-Mart) decides to locate in the area, there is a paucity of evidence on that effect. This paper uses a repeat sales model to compare residential property values, and the speed of sale of the property, to compare the impact that an arrival has. Results conclude that there is a "news effect" surrounding the arrival, and that the total effect is small at most. For most specifications tested, the number of stores nearby, the arrival of new stores, and the distance to the nearest store all have insignificant impacts on both property resale value and the number of days that a property spends on the market prior to sale. In the worst-case scenario, the arrival of a Wal-Mart is associated with a decline equivalent to roughly one percent of the home's square footage and is not absorbed by those closest to the new retailer but by rather more distant neighbors.
Continuing this series on the theory of financial management, the current article investigates capital structure, offering insight into the roles of stockholder wealth maximization, the risk-return tradeoff, and agency conflicts. Much literature addresses this topic, and some of the most recent literature challenges certain theoretical cornerstones touted in the textbooks, as revealed in this work.
A total of 56 stadiums and arenas opened between 1995 and 2009 including: 17 new baseball stadiums, four basketball arenas, nine hockey arenas, seven dual use NBA/NHL venues and 19 football fields. And it’s far from over: the San Francisco 49ers, San Diego Chargers, New York Giants, New York Jets, Minnesota Vikings, Oakland Athletics, Florida Marlins, Tampa Bay Rays, Minnesota Twins, Sacramento Kings, Orlando Magic, New Jersey Nets, New York Islanders and Pittsburgh Penguins anticipate new arenas by 2015. This paper summarizes recent and emerging trends associated with the capacity, cost, public subsidy and accompanying legislative characteristics of stadium and arena construction.
Economists have studied the impact of legalized abortion on a variety of factors including women’s decision surrounding when to enter the work force and how many hours to work, schooling and most controversially crime. They have also examined the determinants of state abortion restrictions across the United States, considering the strength of interest advocacy groups and demographic characteristics. Notably absent from the existing literature is a study of the impact of legalized abortion on the use of contraceptives. Earlier work has established that states with more lenient laws regarding access to contraceptive services by minors have greater pill use, but the impact of the legal framework surrounding abortion restrictions has not been examined. This paper explores the possibility that variation in state abortion availability, as proxied by legislation pertaining to women’s reproductive rights (particularly either supporting or restricting access to abortions) across the United States may generate variation in the use of birth control pills. Without the option of terminating a pregnancy, one would expect that oral contraceptives would be more widely utilized. We find restrictions on abortion availability (through abortion legislation mandating parental consent or notification) induce women to seek a reliable form of birth control to avoid unwanted pregnancies, while pro-choice sentiments in the legislature may have the opposite effect. We also consider the effect of sex education on the rate of oral contraceptive use within states.