This paper shows that habit formation is perhaps not what it is commonly perceived to be an extension of preference specification for the representative agent. Rather it captures a dynamic interaction between aggregate financial income and aggregate labor income. The paper also shows that existing specifications of consumption habits can...
Social Security is a financial asset whose 'purchase' is compulsory for most working individuals; the return during the individual's working lifetime is related to the rate of change of aggregate labor income. If an individual's labor income is strongly related to aggregate labor income, then the Social Security asset is...
The author studies a heterogeneous agent's economy which is calibrated to mimic the business cycle behavior of the US income distribution. Agents face aggregate and idiosyncratic risk, issue collateralized and uncollateralized debt, work and accumulate assets over time. He investigates whether the model can replicate two empirical facts: the large...
This paper examines the relationship between workforce demographics and aggregate productivity. Changes in the age structure of the workforce are found to be significantly correlated with changes in aggregate productivity. Different demo-graphic structures may be related to almost one quarter of the persistent productivity gap between the OECD and low...
The U.S. banking industry is steadily increasing its reliance on nontraditional business activities that generate fee income, trading revenue, and other types of noninterest income. This paper assesses potential diversification benefits from this shift. At the aggregate level, declining volatility of net operating revenue reflects reduced volatility of net interest...
CHICAGO -- Unitrin, Inc. (NYSE:UTR) reported today net income of $72.4 million ($1.08 per common share) for the first quarter of 2007, compared to $66.0 million ($0.96 per common share) for the first quarter of 2006. Net income increased due primarily to higher net realized investment gains and higher operating...
We study the stock market reaction to aggregate earnings news. Previous research shows that, for individual firms, stock prices react positively to earnings news but require several quarters to fully reflect the information in earnings. We find that the relation between returns and earnings is substantially different in aggregate data....
Outperforming average bond fund on a risk-adjusted basis is not a particularly difficult task for the savvy retail investor. Investing in bond funds is a flawed exercise--particularly in a low interest rate environment. High management fees on bond funds offset much of their active management and diversification benefits. Fixed-income fund...
In this paper a model of aggregate investment is derived which incorporates fixed investment costs and capital market imperfections on the micro-level. Aggregate investment reacts nonlinearly with respect to aggregate shocks to productivity and liquidity of firms. Employing non-parametric kernel estimation methods to analyze a sample of annual account data...
The Financial Accounting Standards Board FASB is divided on whether the incremental or aggregate approach should be instituted in the implementation of Statement 96, Accounting for Income Taxes. At its July 12, 1989 meeting, the FASB considered three prThe Financial Accounting Standards Board FASB is divided on whether the incremental...
This paper uses Hansen and Jagannathan's (1991) volatility bounds to evaluate models with idiosyncratic consumption risk. It show that idiosyncratic risk does not change the volatility bounds at all when consumers have CRRA preferences and the distribution of the idiosyncratic shock is independent of the aggregate state. Following Mankiw (1986),...
This financial tool shows how much you need to save, in aggregate and on a monthly basis, to create a reserve fund for unanticipated expenses or loss of income.
The idea that information frictions amplify business cycles is hard to evaluate be-cause information is not easily measured. We propose a quantifiable information friction that amplifies output fluctuations. In our simple model of decentralized trade, income dispersion measures uncertainty about buyer characteristics. Counter-cyclical income dispersion makes the asymmetric information friction...
Aggregate consumption Euler equations fit financial asset return data poorly. But they fit the return on the capital stock well, which leads to three empirical findings relating to the capital income tax burden. First, capital taxation drives a wedge between consumption growth and the expected pre-tax capital return. Second, capital...
Early research has documented that the large-scale equity market liberalizations of the last decade led the subsequent rise in aggregate equity indices, investment booms, capital flows, and economic growth. An important and unaddressed issue is the normative question of whether and how these reforms shifted the distribution of incomes in...
There exists substantial evidence that skill shortages have characterized labor relocation during the transition from plan to market. Along with technological and aggregate demand changes, this pattern of human capital relocation has been associated with unemployment and income inequality. Using a search model, it is examined that the link between...
Intuitively, the observed 'home bias' in individual portfolios plausibly explains the international capital immobility in aggregate data reported by Feldstein and Horioka as well as the survival of taxes on capital income. These intuitions are examined explicitly in a model where random consumer prices cause individuals to invest heavily in...
OLDWICK, N.J. -- U.S. banks ended the first quarter of 2006 with record earnings of $37.3 billion in aggregate (from an average of $33.9 billion in 2005), benefiting from higher fee income and lower loss provisions, which offset a continuing trend of lower net interest margins. However, the industry's profitability...
A decomposition of aggregate labor productivity based on internationally comparable data from FAO Food and Agricultural Organization and Penn World Tables reveals that high labor shares and low productivity in agriculture are mainly responsible for poor countries' current position in the world income distribution. Using a two-sector general equilibrium model,...
CAPVEST Income Corp. (the "Corporation")(TSX VENTURE: CVS) is pleased to announce that the rights offering, which expired on August 1, 2006, closed today, raising aggregate gross proceeds of $6,860,921.
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