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Series:Working Papers  Bank:Federal Reserve Bank of St. Louis 

Working Paper
Market timing with aggregate and idiosyncratic stock volatilities

Guo and Savickas [2005] show that aggregate stock market volatility and average idiosyncratic stock volatility jointly forecast stock returns. In this paper, we quantify the economic significance of their results from the perspective of a portfolio manager. That is, we evaluate the performance, e.g., the Sharpe ratio and Jensen's alpha, of a mean-variance manager who tries to time the market based on those two variables. We find that, over the period 1968-2004, the associated market-timing strategy outperforms the buy-and-hold strategy, and the difference is statistically and economically ...
Working Papers , Paper 2005-073

Working Paper
Dynamics of externalities: a second-order perspective

We show that increasing returns to scale (due to production externalities) may induce a strong degree of asymmetric income effects and nonlinear dynamics that are not fully appreciated by linear approximation methods. For example, hump-shaped output dynamics can emerge even when externalities are significantly below the threshold level required for indeterminacy, and output expansion tends to be smoother and longer while contraction tends to be deeper but shorter-lived. Thus, mild degree of externalities without triggering indeterminacy can potentially explain the asymmetric property of the ...
Working Papers , Paper 2008-044

Working Paper
Input inefficiency in commercial banks: a normalized quadratic input distance approach

A normalized quadratic input distance function is proposed with which to estimate technical efficiency on commercial banks regulated by the Federal Reserve System. The study period covers 1990 to 2000 using individual bank information from the Call and Banking Holding Company Database. A stochastic frontier model is specified to estimate the input normalized distance function and obtain measures of technical efficiency.
Working Papers , Paper 2003-036

Working Paper
Frictionless technology diffusion: the case of tractors

Empirical evidence suggests that there is a long lag between the time a new technology is introduced and the time at which it is widely adopted. The conventional wisdom is that this fact is inconsistent with the predictions of the frictionless neoclassical model. In this paper we study the specific case of the diffusion of the tractor in American agriculture between 1910 and 1960. There are three important driving forces: changes in quality, wage rates and prices of substitutes such as horses and mules. We demonstrate that once these exogenous forces are taken into account, the standard ...
Working Papers , Paper 2013-022

Working Paper
The analytics of technology news shocks

This paper constructs several models in which, unlike the standard neoclassical growth model, positive news about future technology generates an increase in current consumption, hours and investment. These models are said to exhibit procyclical news shocks. We find that all models that exhibit procyclical news shocks in our paper have two commonalities. There are mechanisms to ensure that: (I) consumption does not crowd out investment, or vice versa; (II) the benefit of forgoing leisure in response to news shocks outweighs the cost. Among the models we consider, we believe, one model holds ...
Working Papers , Paper 2013-036

Working Paper
Tests of the expectations hypothesis: resolving the Campbell-Shiller paradox

One of the more puzzling results in the expectations hypothesis (EH) testing literature is the Campbell-Shiller paradox. In an influential paper, Campbell and Shiller (1991) found that ?the slope of the term structure almost always gives a forecast in the wrong direction for the short-term change in the yield on the longer bond, but gives a forecast in the right direction for long-term changes in short rates.? This paper provides an econometric resolution to the Campbell-Shiller paradox. Specifically, it shows that, by their construction, these tests can generate results consistent with the ...
Working Papers , Paper 2003-022

Working Paper
The role of schools in the production of achievement

What explains differences in pre-market factors? Three types of inputs are believed to determine the skills agents take to the labor market: ability, family inputs and school inputs. Therefore to answer the previous question it is crucial to understand first the importance of each of those inputs. The literature on the production of achievement has not been able to provide an estimation that can take the three factors into account simultaneously at the student level. This paper intends to fill this gap by providing an estimation of the production function of achievement where both types of ...
Working Papers , Paper 2010-042

Working Paper
The FOMC directive and the Treasury-bill futures market: could inside information produce profits?

Working Papers , Paper 1983-007

Working Paper
Comparing time-series and survey forecasts of weekly changes in money: a methodological note

Working Papers , Paper 1983-013

Working Paper
The Postwar Conquest of the Home Ownership Dream

Post-World War II witnessed the largest housing boom in recent history. This paper develops a quantitative equilibrium model of tenure choice to analyze the key determinants in the co-movement between home-ownership and house prices over the period 1940-1960. The parameterized model matches key features and is capable of accounting for the observed housing boom. The key driver in understanding this boom is an asymmetric productivity change that favors the goods sector relative to the construction sector. Other factors such as demographics, income risk, and government policy are important ...
Working Papers , Paper 2016-7

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