Samuelson’s Dictum refers to the conjecture that there is more informational inefficiency at the aggregate stock market level than at the individual stock level. Our paper recasts it in a global setup: there should be more informational inefficiency at the global level than at the country level. We find that sovereign CDS spreads can predict future stock market index returns, GDP, and PMI of their underlying countries. Consistent with the global version of Samuelson’s Dictum, the predictive power for both stock returns and macro variables is almost entirely from the global, rather than country-specific, information from the sovereign CDS market. (JEL G12, G14, G17)
{"title":"A Global Version of Samuelson's Dictum","authors":"Yaqing Xiao, Hongjun Yan, Jinfan Zhang","doi":"10.1257/aeri.20210186","DOIUrl":"https://doi.org/10.1257/aeri.20210186","url":null,"abstract":"Samuelson’s Dictum refers to the conjecture that there is more informational inefficiency at the aggregate stock market level than at the individual stock level. Our paper recasts it in a global setup: there should be more informational inefficiency at the global level than at the country level. We find that sovereign CDS spreads can predict future stock market index returns, GDP, and PMI of their underlying countries. Consistent with the global version of Samuelson’s Dictum, the predictive power for both stock returns and macro variables is almost entirely from the global, rather than country-specific, information from the sovereign CDS market. (JEL G12, G14, G17)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2022-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48263813","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We consider optimal government debt maturity in a deterministic economy in which the government can issue any arbitrary debt maturity structure and in which bond prices are a function of the government’s current and future primary surpluses. The government sequentially chooses policy, taking into account how current choices—which impact future policy—feed back into current bond prices. We show that issuing consols constitutes the unique stationary optimal debt portfolio, as it boosts government credibility to future policy and reduces the debt financing costs. (JEL E62, G12, H61, H63)
{"title":"The Commitment Benefit of Consols in Government Debt Management","authors":"Davide Debortoli, Ricardo Nunes, P. Yared","doi":"10.1257/aeri.20210341","DOIUrl":"https://doi.org/10.1257/aeri.20210341","url":null,"abstract":"We consider optimal government debt maturity in a deterministic economy in which the government can issue any arbitrary debt maturity structure and in which bond prices are a function of the government’s current and future primary surpluses. The government sequentially chooses policy, taking into account how current choices—which impact future policy—feed back into current bond prices. We show that issuing consols constitutes the unique stationary optimal debt portfolio, as it boosts government credibility to future policy and reduces the debt financing costs. (JEL E62, G12, H61, H63)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2022-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45682264","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies robust predictions when players may have additional information in an otherwise standard seller-offer bargaining with private values. Players’ extra information gives rise to higher-order uncertainties about the underlying surplus. We show that the equilibrium outcomes in the frequent-offer limit depend critically on the nature of second-order uncertainty: (i) when the seller’s beliefs about the buyer’s values are public, the limiting equilibrium outcomes are efficient and any surplus division is possible; (ii) when the seller’s beliefs are private, any feasible and individually rational payoffs can be the limiting equilibrium payoffs.(JEL C78, D82, D83)
{"title":"Robust Predictions in Coasian Bargaining","authors":"Heng Liu","doi":"10.1257/aeri.20210144","DOIUrl":"https://doi.org/10.1257/aeri.20210144","url":null,"abstract":"This paper studies robust predictions when players may have additional information in an otherwise standard seller-offer bargaining with private values. Players’ extra information gives rise to higher-order uncertainties about the underlying surplus. We show that the equilibrium outcomes in the frequent-offer limit depend critically on the nature of second-order uncertainty: (i) when the seller’s beliefs about the buyer’s values are public, the limiting equilibrium outcomes are efficient and any surplus division is possible; (ii) when the seller’s beliefs are private, any feasible and individually rational payoffs can be the limiting equilibrium payoffs.(JEL C78, D82, D83)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2022-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47989012","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We consider an information design problem in which a sender tries to persuade a receiver that has “correlation neglect,” i.e., fails to understand that signals might be correlated. We show that a sender with unlimited number of signals can fully manipulate the receiver. Specifically, the sender can induce the receiver to hold any state-dependent posterior she wishes to. If the sender only wishes to induce a state-independent posterior, she can use fully correlated signals, but generally she needs to design more involved correlation structures. (JEL D82, D83)
{"title":"Persuasion with Correlation Neglect: A Full Manipulation Result","authors":"Gilat Levy, Inés Moreno de Barreda, R. Razin","doi":"10.1257/aeri.20210007","DOIUrl":"https://doi.org/10.1257/aeri.20210007","url":null,"abstract":"We consider an information design problem in which a sender tries to persuade a receiver that has “correlation neglect,” i.e., fails to understand that signals might be correlated. We show that a sender with unlimited number of signals can fully manipulate the receiver. Specifically, the sender can induce the receiver to hold any state-dependent posterior she wishes to. If the sender only wishes to induce a state-independent posterior, she can use fully correlated signals, but generally she needs to design more involved correlation structures. (JEL D82, D83)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2022-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47827763","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Bargaining over real prices with microenterprise owners in Ghana, we show that sellers with less per capita household liquidity agree to lower sale prices. This relationship is robust across firms and within firms over time, even after controlling for a plethora of time-varying observables. A computerized bargaining experiment, with randomized initial payout sizes, corroborates the real-bargaining findings. This pattern can be explained by an application of classical bargaining theory that includes endowments and utility functions with decreasing absolute risk aversion. The potential poverty-multiplying implications of pricing behavior is a key frontier in understanding barriers to the profitability of microenterprises. (JEL D22, G51, L25, L26, O12, O14)
{"title":"Gotta Have Money to Make Money? Bargaining Behavior and Financial Need of Microentrepreneurs","authors":"Morgan Hardy, G. Kagy, L. Song","doi":"10.1257/aeri.20200723","DOIUrl":"https://doi.org/10.1257/aeri.20200723","url":null,"abstract":"Bargaining over real prices with microenterprise owners in Ghana, we show that sellers with less per capita household liquidity agree to lower sale prices. This relationship is robust across firms and within firms over time, even after controlling for a plethora of time-varying observables. A computerized bargaining experiment, with randomized initial payout sizes, corroborates the real-bargaining findings. This pattern can be explained by an application of classical bargaining theory that includes endowments and utility functions with decreasing absolute risk aversion. The potential poverty-multiplying implications of pricing behavior is a key frontier in understanding barriers to the profitability of microenterprises. (JEL D22, G51, L25, L26, O12, O14)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2022-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47868595","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Manipulating subjects’ expectations about the resolution of uncertainty, I show that subjects update beliefs about ego-relevant information optimistically when they expect no resolution of uncertainty but neutrally when they expect immediate uncertainty resolution. This finding highlights an important channel of the supply side of motivated beliefs and informs the discussion about the puzzling evidence on belief updating about ego-relevant information. Moreover, I document that subjects ex post rationalize information by manipulating their stated beliefs about the ego-relevance of the underlying event depending on the valence of information. This result suggests an additional channel that subjects use to protect their ego utility. (JEL D81, D83, D84)
{"title":"Motivated Beliefs and Anticipation of Uncertainty Resolution","authors":"Christoph Drobner","doi":"10.1257/aeri.20200829","DOIUrl":"https://doi.org/10.1257/aeri.20200829","url":null,"abstract":"Manipulating subjects’ expectations about the resolution of uncertainty, I show that subjects update beliefs about ego-relevant information optimistically when they expect no resolution of uncertainty but neutrally when they expect immediate uncertainty resolution. This finding highlights an important channel of the supply side of motivated beliefs and informs the discussion about the puzzling evidence on belief updating about ego-relevant information. Moreover, I document that subjects ex post rationalize information by manipulating their stated beliefs about the ego-relevance of the underlying event depending on the valence of information. This result suggests an additional channel that subjects use to protect their ego utility. (JEL D81, D83, D84)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2022-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44058153","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
J. Ameriks, Andrew Caplin, Minjoon Lee, M. Shapiro, Christopher Tonetti
Cognitive decline may lead older Americans to make poor financial decisions. Preventing poor decisions may require timely transfer of financial control to a reliable agent. Cognitive decline, however, can develop unnoticed, creating the possibility of suboptimal timing of the transfer of control. This paper presents survey-based evidence that older Americans with significant wealth regard suboptimal timing of the transfer of control, in particular delay due to unnoticed cognitive decline, as a substantial risk to financial well-being. This paper provides a theoretical framework to model such a lack of awareness and the resulting welfare loss. (JEL G51, G53, H55, J14, J26, J32)
{"title":"Cognitive Decline, Limited Awareness, Imperfect Agency, and Financial Well-being","authors":"J. Ameriks, Andrew Caplin, Minjoon Lee, M. Shapiro, Christopher Tonetti","doi":"10.3386/w29634","DOIUrl":"https://doi.org/10.3386/w29634","url":null,"abstract":"Cognitive decline may lead older Americans to make poor financial decisions. Preventing poor decisions may require timely transfer of financial control to a reliable agent. Cognitive decline, however, can develop unnoticed, creating the possibility of suboptimal timing of the transfer of control. This paper presents survey-based evidence that older Americans with significant wealth regard suboptimal timing of the transfer of control, in particular delay due to unnoticed cognitive decline, as a substantial risk to financial well-being. This paper provides a theoretical framework to model such a lack of awareness and the resulting welfare loss. (JEL G51, G53, H55, J14, J26, J32)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48677064","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Beliefs and decisions are often based on confronting models with data. What is the largest “fake” correlation that a misspecified model can generate, even when it passes an elementary misspecification test? We study an “analyst” who fits a model, represented by a directed acyclic graph, to an objective (multivariate) Gaussian distribution. We characterize the maximal estimated pairwise correlation for generic Gaussian objective distributions, subject to the constraint that the estimated model preserves the marginal distribution of any individual variable. As the number of model variables grows, the estimated correlation can become arbitrarily close to one regardless of the objective correlation. (JEL D83, C13, C46, C51)
{"title":"Cheating with Models","authors":"K. Eliaz, R. Spiegler, Y. Weiss","doi":"10.1257/aeri.20200635","DOIUrl":"https://doi.org/10.1257/aeri.20200635","url":null,"abstract":"Beliefs and decisions are often based on confronting models with data. What is the largest “fake” correlation that a misspecified model can generate, even when it passes an elementary misspecification test? We study an “analyst” who fits a model, represented by a directed acyclic graph, to an objective (multivariate) Gaussian distribution. We characterize the maximal estimated pairwise correlation for generic Gaussian objective distributions, subject to the constraint that the estimated model preserves the marginal distribution of any individual variable. As the number of model variables grows, the estimated correlation can become arbitrarily close to one regardless of the objective correlation. (JEL D83, C13, C46, C51)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2021-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43759103","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
D. Acemoglu, V. Chernozhukov, I. Werning, M. Whinston
We study targeted lockdowns in a multigroup SIR model where infection, hospitalization, and fatality rates vary between groups—in particular between the “young,” the “middle-aged,” and the “old.” Our model enables a tractable quantitative analysis of optimal policy. For baseline parameter values for the COVID-19 pandemic applied to the US, we find that optimal policies differentially targeting risk/age groups significantly outperform optimal uniform policies and most of the gains can be realized by having stricter protective measures such as lockdowns on the more vulnerable, old group. Intuitively, a strict and long lockdown for the old both reduces infections and enables less strict lockdowns for the lower-risk groups. (JEL H51, I12, I18, J13, J14)
{"title":"Optimal Targeted Lockdowns in a Multigroup SIR Model","authors":"D. Acemoglu, V. Chernozhukov, I. Werning, M. Whinston","doi":"10.1257/aeri.20200590","DOIUrl":"https://doi.org/10.1257/aeri.20200590","url":null,"abstract":"We study targeted lockdowns in a multigroup SIR model where infection, hospitalization, and fatality rates vary between groups—in particular between the “young,” the “middle-aged,” and the “old.” Our model enables a tractable quantitative analysis of optimal policy. For baseline parameter values for the COVID-19 pandemic applied to the US, we find that optimal policies differentially targeting risk/age groups significantly outperform optimal uniform policies and most of the gains can be realized by having stricter protective measures such as lockdowns on the more vulnerable, old group. Intuitively, a strict and long lockdown for the old both reduces infections and enables less strict lockdowns for the lower-risk groups. (JEL H51, I12, I18, J13, J14)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2021-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46127526","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Andrew Bacher-Hicks, J. Goodman, J. Green, Melissa K. Holt
One-fifth of US high school students report being bullied each year. We use internet search data for real-time tracking of bullying patterns as COVID-19 disrupted in-person schooling. We first show that pre-pandemic internet searches contain useful information about actual bullying behavior. We then show that searches for school bullying and cyberbullying dropped 30–35 percent as schools shifted to remote learning in spring 2020. The gradual return to in-person instruction starting in fall 2020 partially returned bullying searches to pre-pandemic levels. This rare positive effect may partly explain recent mixed evidence on the pandemic’s impact on students’ mental health and well-being. (JEL H75, I12, I21, I28, I31)
{"title":"The COVID-19 Pandemic Disrupted Both School Bullying and Cyberbullying","authors":"Andrew Bacher-Hicks, J. Goodman, J. Green, Melissa K. Holt","doi":"10.3386/w29590","DOIUrl":"https://doi.org/10.3386/w29590","url":null,"abstract":"One-fifth of US high school students report being bullied each year. We use internet search data for real-time tracking of bullying patterns as COVID-19 disrupted in-person schooling. We first show that pre-pandemic internet searches contain useful information about actual bullying behavior. We then show that searches for school bullying and cyberbullying dropped 30–35 percent as schools shifted to remote learning in spring 2020. The gradual return to in-person instruction starting in fall 2020 partially returned bullying searches to pre-pandemic levels. This rare positive effect may partly explain recent mixed evidence on the pandemic’s impact on students’ mental health and well-being. (JEL H75, I12, I21, I28, I31)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2021-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49488020","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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