Found 46 article(s) for author 'Andrei Shleifer'

Securing Property Rights

Securing Property Rights. Edward Glaeser, Andrei Shleifer, August 19, 2019, Paper, “A central challenge in securing property rights is the subversion of justice through legal skill, bribery, or physical force by the strong—the state or its powerful citizens—against the weak. We present evidence that undue influence on judges is a common concern in many countries, especially among the poor. We then present a model of a water polluter whose discharges contaminate adjacent land. If this polluter can subvert the assessment of damages caused by his activity, there is an efficiency case for granting the landowner the right to an injunction that stops the polluter, rather than the right to compensation for the harm. If the polluter can subvert even the determination of his responsibility for harm, there is an efficiency case for regulation that restricts pollution regardless of its effects. We then conduct an empirical analysis of water quality in the U.S. before and after the Clean Water Act, and show how regulation brought about cleaner water, particularly in states with higher corruption.Link

Tags: , , , , , ,

Real Credit Cycles

Real Credit Cycles. Andrei Shleifer, July 2019, Paper, “Recent empirical work has revived the Minsky hypothesis of boom-bust credit cycles driven by fluctuations in investor optimism. To quantitatively assess this hypothesis, we incorporate diagnostic expectations into an otherwise standard business cycle model with heterogeneous firms and risky debt. Diagnostic expectations are a psychologically founded, forward-looking model of belief formation that captures over-reaction to news. We calibrate the diagnosticity parameter using micro data on the forecast errors of managers of listed firms in the US. The model generates countercyclical credit spreads and default rates, while the rational expectations version generates the opposite pattern. Diagnostic expectations also offer a good fit of three patterns that have been empirically documented: systematic reversals of credit spreads, systematic reversals of aggregate investment, and predictability of future bond returns. Crucially, diagnostic expectations also generate a strong fragility or sensitivity to small bad news after steady expansions. The rational expectations version of the model can account for the first pattern but not the others. Diagnostic expectations offer a parsimonious account of major credit cycles facts, underscoring the promise of realistic expectation formation for applied business cycle modeling.” Link

Tags: , , , ,

Diagnostic Bubbles

Diagnostic Bubbles, Andrei Shleifer, December 2018, Paper, “We introduce diagnostic expectations into a standard setting of price formation in which investors learn about the fundamental value of an asset and trade it. We study the interaction of diagnostic expectations with two well-known mechanisms: learning from prices and speculation (buying for resale). With diagnostic (but not with rational) expectations, these mechanisms lead to price paths exhibiting three phases: initial underreaction, followed by overshooting (the bubble), and finally a crash. With learning from prices, the model generates price extrapolation as a byproduct of fast moving beliefs about fundamentals, which lasts only as the bubble builds up. When investors speculate, even mild diagnostic distortions generate substantial bubbles.Link

Tags: , , ,

Europe in ‘more trouble’ than the U.S. 10 years after great recession

Europe in ‘more trouble’ than the U.S. 10 years after great recession. Andrei Shleifer, December 4, 2018, Video, “There are signs of fragility in the economy, but Harvard Professor Andrei Shleifer the U.S. is better off today than it was in 2008. He spoke with Yahoo Finance’s Alexis Christoforous about his new book, ‘A Crisis of Beliefs: Investor Psychology and Financial Fragility’Link

 

 

Tags: , , , , ,

This Market Has All The Signs Of A Bubble

This Market Has All The Signs Of A Bubble. Andrei Shleifer, September 24, 2018, Audio, “Andrei Shleifer, Professor of Economics at Harvard University, discusses his new book, “A Crisis of Beliefs: Investor Psychology and Financial Fragility,” and whether we are prepared for another financial crisis. Hosted by Pimm Fox and Lisa Abramowicz.Link

 

Tags: , , , ,

Andrei Shleifer at the Ratio Institute

Andrei Shleifer at the Ratio Institute. Andrei Shleifer, May 28, 2018, Video, “Andrei Shleifer is a Professor of Economics at Harvard University. On May 28th he gave a lecture in memory of Eli F. Heckscher at Stockholm School of Economics by invitation from EHFF and the Ratio Institute. In this Ratio dialogue with Ratio CEO Nils Karlson he discusses the Heckscher lecture 2018: ‘A Crisis of Beliefs: Investor Psychology and Financial Fragility’Link

Tags: , , , , , ,

Overreaction in Macroeconomic Expectations

Overreaction in Macroeconomic Expectations. Andrei Shleifer, December 2017, Paper, “We examine the rationality of individual and consensus professional forecasts of macroeconomic and financial variables using the methodology of Coibion and Gorodnichenko (2015), which focuses on the predictability of forecast errors from earlier forecast revisions. We document two principal findings: at the individual level, forecasters typically over-react to information, while consensus forecasts exhibit under-reaction. To reconcile these findings, we combine the diagnostic expectations model of belief formation from Bordalo, Gennaioli, and Shleifer (2018) with Woodford’s (2003) noisy information model of belief aggregation.Link

Tags: , ,

Diagnostic Expectations and Stock Returns

Diagnostic Expectations and Stock Returns. Andrei Shleifer, July 2017, Paper, “We revisit La Porta’s (1996) finding that returns on portfolios of stocks with the most optimistic analyst long term earnings growth forecasts are substantially lower than those for stocks with the most pessimistic forecasts. We document that this finding still holds, and present several further facts about the joint dynamics of fundamentals, expectations, and returns for these portfolios. We then propose a new approach to modeling belief formation and over-reaction to news that explains these facts, based on a portable psychological model of judgment by representativeness.Link

Tags: , , ,

Beliefs about Gender

Beliefs about Gender. Andrei Shleifer, December 2016, Paper, “We conduct a laboratory experiment on the determinants of beliefs about own and others’ ability across different domains. A preliminary look at the data points to two distinct forces: miscalibration in estimating performance depending on the difficulty of tasks and gender stereotypes. We develop a theoretical model that separates these forces and apply it to analyze a large laboratory dataset in which participants estimate their own and a partner’s performance on questions across six subjects: arts and literature, emotion recognition, business, verbal reasoning, mathematics, and sports.Link

Tags: , , ,