This paper estimates the fraction of the variance in aggregate stock returns that can be attributed to various kinds of news. First, we consider macroeconomic news and show that it is difficult to explain more than one third of the return variance from this source. Second, to explore the...

This paper uses data on the abnormal returns earned by the shareholders of Texaco and Pennzoil to examine whether resources were "lost" in the course of the litigation. We find that the leakage involved in the forced transfer is enormous: each dollar of value lost by Texaco's shareholders has...

The issue of dynamic efficiency is central to analyses of capital accumulation and economic growth. Yet the question of what operating characteristics of an economy subject to productivity shocks should be examined to determine whether or not it is efficient has not been resolved. This paper...

Policymaking for posterity involves current decisions with distant consequences. Contrary to conventional prescriptions, we conclude that the greater wealth of future generations may strengthen the case for preserving environmental amenities; lower discount rates should be applied to the far...

This paper summarizes our earlier research documenting the characteristic speculative dynamics of many asset markets and suggests a framework for understanding them. Our model incorporates "feedback traders," traders whose demand is based on the history of past returns rather than the...

This paper presents evidence on the characteristic speculative dynamics of a wide range of asset returns. It highlights three stylized facts. First, returns tend to be positively serially correlated at high frequency. Second, returns tend to be negatively serially correlated over long horizons....