It is common in empirical research to use what appear to be sensible rules of thumb for cleaning data. Measurement error is often the justification for removing (trimming) or recoding (winsorizing) observations whose values lie outside a specified range. This paper considers identification in a...

The appeal of expected utility theory as a basis for a descriptive model of risky decision making has diminished is a result of empirical evidence which suggests that individuals do not behave in a manner consistent with the prescriptive tenets of EUT. In this paper, we explore the influence of...

We establish that the recursive, state-space methods of Kalman filtering and smoothing can be used to implement the Doan, Litterman, and Sims (1983) approach to econometric forecast and policy evaluation. Compared with the methods outlined in Doan, Litterman, and Sims, the Kalman algorithms are...

This study develops a model of endogenous growth based on increasing returns due to firms' technology choices. Particular attention is paid to the implications of these choices, combined with the substitution of capital for labor, on economic growth in a general equilibrium model in which the...

High-frequency financial data are not only discretely sampled in time but the time separating successive observations is often random. We analyze the consequences of this dual feature of the data when estimating a continuous-time model. In particular, we measure the additional effects of the...

Most markets clear through a sequence of sales rather than through a Walrasian auctioneer. Because buyers can decide between buying now or later, rather than only now or never, buyers' current 'willingness to pay' is much more sensitive to price than is the demand curve. A consequence is that...

When a k period future return is regressed on a current variable such as the log dividend yield, the marginal significance level of the t-test that the return is unpredictable typically increases over some range of future return horizons, k. Local asymptotic power analysis shows that the power...

This paper develops a sequential bargaining model of the negotiations in corporate reorganizations under Chapter 11. We identify the expected outcome of the bargaining process and examine the effects of the legal rules that shape the bargaining. We determine how much value equity holders and...

An elementary exposition is presented of a convenient and practical solution procedure for a broad class of linear rational expectations models. The undetermined-coefficient approach utilized keeps the mathematics very simple and permits consideration of alternative solution criteria.

This paper considers the estimation of the variance of coefficients in time varying parameter models with stationary regressors. The maximum likelihood estimator has large point mass at zero. We therefore develop asymptotically median unbiased estimators and confidence intervals by inverting...