Found 44 article(s) for author 'Andrei Shleifer'

Securing Property Rights

Securing Property Rights. Edward Glaeser, Andrei Shleifer, September 2016, 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 the less educated and poorer citizens in many countries feel their property rights are least secure. We then present a model of a farmer and a mine which can pollute his farm in a jurisdiction where the mine can subvert law enforcement. We show that, in this model, injunctions or other forms of property rules work better than compensation for damage or liability rules. The equivalences of the Coase Theorem break down in realistic ways. The case for injunctions is even stronger when parties can invest in power. Our approach sheds light on several controversies in law and economics, but also applies to practical problems in developing countries, such as low demand for formality, law enforcement under uncertain property rights, and unresolved conflicts between environmental damage and development.Link

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Expectations and investment

Expectations and investment. Andrei Shleifer, May 2016, Paper. “Using micro data from the Duke University quarterly survey of Chief Financial Officers, we show that corporate investment plans as well as actual investment are well explained by CFOs’ expectations of earnings growth. The information in expectations data is not subsumed by traditional variables, such as Tobin’s Q or discount rates. We also show that errors in CFO expectations of earnings growth are predictable from past earnings and other data, pointing to the extrapolative structure of expectations and suggesting that expectations may not be rational. This evidence, like earlier findings in finance, points to the usefulness of data on actual expectations for understanding economic behaviour.Link 

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Extrapolation and Bubbles

Extrapolation and Bubbles. Robin Greenwood, Andrei Shleifer, January 2016, Paper. “We present an extrapolative model of bubbles. In the model, many investors form their demand for a risky asset by weighing two signals–an average of the asset’s past price changes and the asset’s degree of overvaluation. The two signals are in conflict, and investors “waver” over time in the relative weight they put on them. The model predicts that good news about fundamentals can trigger large price bubbles. We analyze the patterns of cash-flow news that generate the largest bubbles, the reasons why bubbles collapse, and the frequency with which they occur.”  Link

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Extrapolation and Bubbles

Extrapolation and Bubbles. Robin Greenwood, Andrei Shleifer, September 2015, Paper, “We present an extrapolative model of bubbles. In the model, many investors form their demand for a risky asset by weighing two signals—an average of the asset’s past price changes and the asset’s degree of overvaluation. The two signals are in conflict, and investors “waver” over time in the relative weight they put on them. The model predicts that good news about fundamentals can trigger large price bubbles. We analyze the patterns of cash-flow news that generate the largest bubbles, the reasons why bubbles collapse, and the frequency with which they occur. The model also predicts that bubbles will be accompanied by high trading volume, and that volume increases with past asset returns. We present empirical evidence that bears on some of the model’s distinctive predictions.Link

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Investment Hangover and the Great Recession

Investment Hangover and the Great Recession. Andrei Shleifer, July 1, 2015, Paper. “We present a model of investment hangover motivated by the Great Recession. In our model, overbuilding of residential capital requires a reallocation of productive resources to nonresidential sectors, which is facilitated by a reduction in the real interest rate. If the fall in the interest rate is limited by the zero lower bound and nominal rigidities, then the economy enters a liquidity trap with limited reallocation and low output. The drop in output reduces nonresidential investment through a mechanism similar to the acceleration principle of investment…” Link

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Expectations and Investment

Expectations and Investment. Andrei Shleifer, April 2015, Paper. “Using micro data from Duke University quarterly survey of Chief Financial Officers, we show that corporate investment plans as well as actual investment are well explained by CFOs’ expectations of earnings growth. The information in expectations data is not subsumed by traditional variables, such as Tobin’s Q or discount rates. We also show that errors in CFO expectations of earnings growth are predictable from past earnings and other data, pointing to extrapolative structure of expectations and suggesting that expectations may not be rational…” Link

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Neglected Risks: The Psychology of Financial Crises

Neglected Risks: The Psychology of Financial Crises, Andrei Shleifer, December 2014, Paper, Financial crises are supposed to be rare events, yet they occur quite often. According to Reinhart and Rogoff (2009), investors suffer from “this time is different” syndrome, failing to see crises coming because they do not recognize similarities among the different pre-crisis bubbles. As a result, each crisis surprises investors. Economists typically model financial crises as responses to shocks to which investors attach a low probability ex ante, but which nonetheless materialize. Such shocks (sometimes referred to as “MIT shocks”; e.g., Caballero and Simsek 2013) are consistent with rational expectations in that investors recognize that there is a small chance that the shock might occur, but they are harder to reconcile with the Reinhart Rogoff observation that crises are not that unusual. Link

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Duisenberg school of finance Public Debate: The Financial Crisis and the Future of Capitalism

Duisenberg school of finance Public Debate: The Financial Crisis and the Future of Capitalism. Andrei Shleifer, August 12, 2014, Video. “At an in-depth public debate, organised by Duisenberg school of finance (Feb 2009), Andrei Shleifer of Harvard University discusses the causes of the financial crisis and consequences with regards to future regulation and to capitalism…” Link Verified October 19, 2014

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Banks as Patient Fixed Income Investors

Banks as Patient Fixed Income Investors. Samuel G. Hanson, Andrei Shleifer, Jeremy Stein, August 2014, Paper. “We examine the business model of traditional commercial banks in the context of their coexistence wit shadow banks. While both types of intermediaries create safe “money-like” claims, they go about this in very different ways. Traditional banks create safe claims with a combination of costly equity capital and fixed income assets that allows their depositors to remain “sleepy”: They do not have to pay attention to transient fluctuations in the mark-to-market value of bank assets. In contrast…” Link Verified October 18, 2014

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Growth in Regions

Growth in Regions. Andrei Shleifer, July 15, 2014, Paper. “We use a newly assembled sample of 1,528 regions from 83 countries to compare the speed of per capita income convergence within and across countries. Regional growth is shaped by similar factors as national growth, such as geography and human capital. Regional convergence rate is about 2% per year, comparable to that between countries. Regional convergence is faster in richer countries, and countries with better capital markets…” Link Verified October 18, 2014

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