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120
Resurrecting the (C)CAPM: A CrossSectional Test When Risk Premia Are TimeVarying
 Journal of Political Economy
, 2001
"... This paper explores the ability of conditional versions of the CAPM and the consumption CAPM—jointly the (C)CAPM—to explain the cross section of average stock returns. Central to our approach is the use of the log consumption–wealth ratio as a conditioning variable. We demonstrate that such conditio ..."
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Cited by 137 (4 self)
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This paper explores the ability of conditional versions of the CAPM and the consumption CAPM—jointly the (C)CAPM—to explain the cross section of average stock returns. Central to our approach is the use of the log consumption–wealth ratio as a conditioning variable. We demonstrate that such conditional models perform far better than unconditional specifications and about as well as the FamaFrench threefactor model on portfolios sorted by size and booktomarket characteristics. The conditional consumption CAPM can account for the difference in returns between lowbooktomarket and highbooktomarket portfolios and exhibits little evidence of residual size or booktomarket effects. We are grateful to Eugene Fama and Kenneth French for graciously providing the
2004), “Income variance dynamics and heterogeneity
 Econometrica
"... Recent theoretical work has shown the importance of measuring microeconomic uncertainty for models of both general and partial equilibrium under imperfect insurance. In this paper the assumption of i.i.d. income innovations used in previous empirical studies is removed and the focus of the analysis ..."
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Cited by 106 (14 self)
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Recent theoretical work has shown the importance of measuring microeconomic uncertainty for models of both general and partial equilibrium under imperfect insurance. In this paper the assumption of i.i.d. income innovations used in previous empirical studies is removed and the focus of the analysis is placed on models for the conditional variance of income shocks, which is related to the measure of risk emphasized by the theory. We first discriminate amongst various models of earnings determination that separate income shocks into idiosyncratic transitory and permanent components. We allow for education and timespecific differences in the stochastic process for earnings and for measurement error. The conditional variance of the income shocks is modelled as a parsimonious ARCH process with both observable and unobserved heterogeneity. The empirical analysis is conducted on data drawn from the 1967–1992 Panel Study of Income Dynamics. We find strong evidence of sizeable ARCH effects as well as evidence of unobserved heterogeneity in the variances.
The bootstrap
 In Handbook of Econometrics
, 2001
"... The bootstrap is a method for estimating the distribution of an estimator or test statistic by resampling one’s data. It amounts to treating the data as if they were the population for the purpose of evaluating the distribution of interest. Under mild regularity conditions, the bootstrap yields an a ..."
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Cited by 73 (1 self)
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The bootstrap is a method for estimating the distribution of an estimator or test statistic by resampling one’s data. It amounts to treating the data as if they were the population for the purpose of evaluating the distribution of interest. Under mild regularity conditions, the bootstrap yields an approximation to the distribution of an estimator or test statistic that is at least as accurate as the
Information Theoretic Approaches to Inference in Moment Condition Models
 Econometrica
, 1998
"... Onestep efficient GMM estimation has been developed in the recent papers of Back and Brown (1990), Imbens (1993) and Qin and Lawless (1994). These papers emphasized methods that correspond to using Owen's (1988) method of empirical likelihood to reweight the data so that the reweighted sample obeys ..."
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Cited by 61 (2 self)
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Onestep efficient GMM estimation has been developed in the recent papers of Back and Brown (1990), Imbens (1993) and Qin and Lawless (1994). These papers emphasized methods that correspond to using Owen's (1988) method of empirical likelihood to reweight the data so that the reweighted sample obeys all the moment restrictions at the parameter estimates. In this paper we consider an alternative KLIC motivated weighting and show how it and similar discrete reweightings define a class of unconstrained optimization problems which includes GMM as a special case. Such KLIC motivated reweightings introduce M auxiliary `tilting' parameters, where M is the number of moments; parameter and overidentification hypotheses can be recast in terms of these tilting parameters. Such tests, when appropriately conditioned on the estimates of the original parameters, are often startlingly more effective than their conventional counterparts. This is apparently due to the local ancillarity of the original parameters for the tilting parameters. 1.
Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States, 1967—2006 ∗
, 2009
"... We conduct a systematic empirical study of crosssectional inequality in the United States, integrating data from the Current Population Survey, the Panel Study of Income Dynamics, the Consumer Expenditure Survey, and the Survey of Consumer Finances. In order to understand how different dimensions o ..."
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Cited by 47 (5 self)
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We conduct a systematic empirical study of crosssectional inequality in the United States, integrating data from the Current Population Survey, the Panel Study of Income Dynamics, the Consumer Expenditure Survey, and the Survey of Consumer Finances. In order to understand how different dimensions of inequality are related via choices, markets, and institutions, we follow the mapping suggested by the household budget constraint from individual wages to individual earnings, to household earnings, to disposable income, and, ultimately, to consumption and wealth. We document a continuous and sizable increase in wage inequality over the sample period. Changes in the distribution of hours worked sharpen the rise in earnings inequality before 1982, but mitigate its increase thereafter. Taxes and transfers compress the level of income inequality, especially at the bottom of the distribution, but have little effect on the overall trend. Finally, access to financial markets has limited both the level and growth of consumption inequality.
The macroeconomic implications of rising wage inequality in the United States
 Journal of Political Economy. forthcoming
, 2010
"... This paper explores the macroeconomic and welfare implications of the sharp rise in U.S. wage inequality (19671996). In the data, crosssectional earnings variation increased substantially more than wage variation, due to a sharp rise in the wagehours correlation. At the same time, inequality in h ..."
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Cited by 45 (3 self)
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This paper explores the macroeconomic and welfare implications of the sharp rise in U.S. wage inequality (19671996). In the data, crosssectional earnings variation increased substantially more than wage variation, due to a sharp rise in the wagehours correlation. At the same time, inequality in hours worked and consumption remained roughly constant through time. Using data from the PSID, we decompose the rise in wage inequality into changes in the variance of permanent, persistent and transitory shocks. With the estimated changes in the wage process as the only primitive, we show that a standard calibrated OLG model with incomplete markets can successfully account for all these patterns in crosssectional U.S. data. Through a set of counterfactual experiments, we assess the role of each component of the wage process for the evolution in the various dimensions of inequality. The model also allows us to investigate the welfare costs of the rise in inequality: we find that the unconditional expected welfare loss is equivalent to a 5 percent decline in lifetime income for the worstaffected cohorts, those entering the labor market in the mid 1980’s. Ex post, these costs are widely dispersed across agents, due both to differences in permanent individual attributes and to differences in labor market histories. An extensive sensitivity analysis verifies the robustness of our results to alternative preferences and borrowing limits, and to the inclusion of female labor force participation.
Racial and economic factors in attitudes to immigration", CEPR working paper n° 2542 Espenshade T. and Hempstead K.(1996), "Contemporary American attitudes toward U.S
, 2000
"... Hostilitytowards minorities may sometimes haveeconomicrather thanracial motives. Labour market fears, or concerns about the welfare system, may manifest themselves in hostile remarks and actions against population groups that are considered to be competitors for these resources, as well as political ..."
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Cited by 35 (2 self)
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Hostilitytowards minorities may sometimes haveeconomicrather thanracial motives. Labour market fears, or concerns about the welfare system, may manifest themselves in hostile remarks and actions against population groups that are considered to be competitors for these resources, as well as political radicalisation. The question of what are the components of (often hostile) attitudes of majority populations towards minority related questions, like attitudes towards further immigration, are of great importance for implementing appropriate policies, and to identify the sources of hostility seems crucial for understanding the e±cacy of political actions. We try to isolate the components of such attitudes. Our analysis is based on the British Social Attitudes Survey, which includes questions on attitudes towards immigration from di®erent minority groups, as well as attitudes towards related concerns, like job security and bene¯t expenditures. This information allows us to explore the components of attitudes towards immigration. We specify and estimate a multifactor model. The correlation between answers to questions on immigration and on related issues help us separate di®erent aspects to attitudes.
Estimating Returns to College Quality with Multiple Proxies for Quality
 Journal of Labor Economics
, 2006
"... We thank Art Goldberger for helpful pointers to the literature. Estimating the Returns to College Quality with Multiple ..."
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Cited by 34 (1 self)
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We thank Art Goldberger for helpful pointers to the literature. Estimating the Returns to College Quality with Multiple
Consumption inequality and partial insurance
 American Economic Review
, 2008
"... This paper uses panel data on household consumption and income inquality to evaluate the degree of insurance to income shocks. Our aim is to describe the transmission of income inequality into consumption inequality. Our framework nests the special cases of selfinsurance and the complete markets as ..."
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Cited by 30 (0 self)
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This paper uses panel data on household consumption and income inquality to evaluate the degree of insurance to income shocks. Our aim is to describe the transmission of income inequality into consumption inequality. Our framework nests the special cases of selfinsurance and the complete markets assumption. We assess the degree of insurance over and above selfinsurance through savings by contrasting shifts in the distribution of income growth with shifts in the distribution of consumption growth, and analyzing the way these two measures of household welfare correlate over time. We combine panel data on income from the PSID with consumption data from repeated CEX crosssections using a demand analysis approach. Our results point to some partial insurance but reject the complete markets restriction. We Þnd a greater degree of insurance for transitory shocks and differences in the degree of insurance over time. We also document the importance of durables and of taxes and transfers as a means of insurance.
Insurance within the Firm
 Journal of Political Economy
, 2005
"... We evaluate the allocation of risk between firms and their workers using matched employeremployee panel data. Unlike previous contributions, this paper focuses on idiosyncratic shocks to the firm, which are the correct empirical counterpart of the theoretical notion of diversifiable risk. We allow ..."
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Cited by 27 (5 self)
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We evaluate the allocation of risk between firms and their workers using matched employeremployee panel data. Unlike previous contributions, this paper focuses on idiosyncratic shocks to the firm, which are the correct empirical counterpart of the theoretical notion of diversifiable risk. We allow for both temporary and permanent shocks to output and find that firms absorb temporary fluctuations fully but insure workers against permanent shocks only partially. Risksharing considerations can account for about 15 percent of overall earnings variability, the remainder originating from idiosyncratic shocks to in