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MISCELLANEA

March 21, 2017 Comments (0)


ANNOUNCEMENTS

March 21, 2017 Comments (0)


Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis

March 19, 2017 Comments (0)

ABSTRACT
During the 2008 to 2009 financial crisis, firms with high social capital, as measured by corporate social responsibility (CSR) intensity, had stock returns that were four to seven percentage points higher than firms with low social capital. High‐CSR firms also experienced higher profitability, growth, and sales per employee relative to low‐CSR firms, and they raised more debt. This evidence suggests that the trust between a firm and both its stakeholders and investors, built through...

Do Funds Make More When They Trade More?

March 19, 2017 Comments (0)

ABSTRACT
We model fund turnover in the presence of time‐varying profit opportunities. Our model predicts a positive relation between an active fund's turnover and its subsequent benchmark‐adjusted return. We find such a relation for equity mutual funds. This time‐series relation between turnover and performance is stronger than the cross‐sectional relation, as the model predicts. Also as predicted, the turnover‐performance relation is stronger for funds trading less‐liquid stocks and funds...

Advance Refundings of Municipal Bonds

March 19, 2017 Comments (0)

ABSTRACT
The advance refunding of debt is a widespread practice in municipal finance. In an advance refunding, municipalities retire callable bonds early and refund them with bonds with lower coupon rates. We find that 85% of all advance refundings occur at a NPV loss, and that the aggregate losses over the past 20 years exceed $15 billion. We explore why municipalities advance refund their debt at loss. Financially constrained municipalities may face pressure to advance refund since it allows...

A Labor Capital Asset Pricing Model

March 19, 2017 Comments (0)

ABSTRACT
We show that labor search frictions are an important determinant of the cross‐section of equity returns. Empirically, we find that firms with low loadings on labor market tightness outperform firms with high loadings by 6% annually. We propose a partial equilibrium labor market model in which heterogeneous firms make dynamic employment decisions under labor search frictions. In the model, loadings on labor market tightness proxy for priced time‐variation in the efficiency of the...

Income Insurance and the Equilibrium Term Structure of Equity

March 18, 2017 Comments (0)

ABSTRACT
Output, wages, and dividends feature term structures of variance ratios that are respectively flat, increasing, and decreasing. Income insurance from shareholders to workers explains these term structures. Risk‐sharing smooths wages but only concerns transitory risk and hence enhances short‐run dividend risk. As a result, actual labor‐share variation largely forecasts the risk, premium, and slope of dividend strips. A simple general equilibrium model in which labor rigidity affects...