Search Results
Working Paper
Soft information in earnings announcements: news or noise?
This paper examines whether the "soft" information contained in the text of management's quarterly earnings press releases is incrementally informative over the company's reported "hard" earnings news. We use Diction, a textual-analysis program, to extract various dimensions of managerial net optimism from more than 20,000 corporate earnings announcements over the period 1998 to 2006 and document that unanticipated net optimism in managers' language affects announcement period abnormal returns and predicts post-earnings announcement drift. We find that it takes longer for the market to ...
Speech
Factors affecting efforts to limit payments to AIG counterparties
Testimony before the Committee on Government Oversight and Reform, U.S. House of Representatives.
Working Paper
Optimal monetary policy in a model of money and credit
The authors study optimal monetary policy in a model in which fiat money and private debt coexist as a means of payment. The credit system is endogenous and allows buyers to relax their cash constraints. However, it is costly for agents to publicly report their trades, which is necessary for the enforcement of private liabilities. If it is too costly for the government to obtain information regarding private transactions, then it relies on the public information generated by the private credit system. If not all private transactions are publicly reported, the government has imperfect public ...
Report
Central bank transparency, the accuracy of professional forecasts, and interest rate volatility
Central banks worldwide have become more transparent. An important reason is that democratic societies expect more openness from public institutions. Policymakers also see transparency as a way to improve the predictability of monetary policy, thereby lowering interest rate volatility and contributing to economic stability. Most empirical studies support this view. However, there are three reasons why more research is needed. First, some (mostly theoretical) work suggests that transparency has an adverse effect on predictability. Second, empirical studies have mostly focused on average ...
Speech
U.S. experience with bank stress tests
Based on remarks at the Group of 30 plenary meeting, Bern, Switzerland.
Working Paper
Why do U.S. cross-listings matter?
This paper investigates the underlying determinants of home bias using a comprehensive sample of U.S. investor holdings of foreign stocks. We document that U.S. cross-listings are economically important, as U.S. ownership in a foreign firm roughly doubles upon cross-listing in the United States. We explore the cross-sectional variation in this "cross-listing effect" and show that increases in U.S. investment are largest in firms from weak accounting backgrounds and in firms that are otherwise informationally opaque, indicating that U.S. investors value the improvements in disclosure ...
Report
Deferred compensation, risk, and company value: investor reactions to CEO incentives
Many commentators have suggested that companies pay top executives with deferred compensation, a type of incentive known as inside debt. Recent SEC disclosure reforms greatly increased the transparency of deferred compensation. We investigate stockholder and bondholder reactions to companies' initial reports of their CEOs' inside debt positions in early 2007, when new disclosure rules took effect. We find that bond prices rise, equity prices fall, and the volatility of both securities drops upon disclosures by firms whose CEOs have sizable defined benefit pensions or deferred compensation. ...
Report
Central bank transparency and the crowding out of private information in an experimental asset market
Central banks have become increasingly communicative. An important reason is that democratic societies expect more transparency from public institutions. Central bankers, based on empirical research, also believe that sharing information has economic benefits. Communication is seen as a way to improve the predictability of monetary policy, thereby lowering financial market volatility and contributing to a more stable economy. However, a potential side-effect of providing costless public information is that market participants may be less inclined to invest in private information. Theoretical ...