I present a model that can transform discounts on closed-end mutual funds into a measure of investor sentiment about the ability of fund managers to beat the market. This measure of sentiment varies positively with capital flows into actively managed open-end mutual funds, but negatively with capital flows into passively managed index funds. Investors appear to re-allocate their portfolios between actively and passively managed investment vehicles based on expectations about by how much managers will beat or trail the market.

Does the well established positive association between education and investment in health hold for education beyond college? This study examines the effect of having a postgraduate degree on investment in health, using an original data set composed of samples of several alumnae classes of women educated at the same undergraduate institution. The probability that a woman will have a biannual general physical, gynecological examination, mammogram, or a flu shot is modeled as a function of her education level and demographic and socioeconomic characteristics. Whether those with post-graduate education behave differently with respect to other health-related life style choices is also investigated.

The return of large government budget deficits should encourage us to resume analysis of their effects. Two topics deserving further attention are the importance of correctly modeling the form of intergenerational relationships and clarification of the extent to which deficits crowd out private investment.
This paper presents an overlapping generations model in which children seek to manipulate the size of the end-of-life bequest they receive from the parent – similar to the manipulation observed in the Samaritan's dilemma. I first use numerical simulations to show this intergenerational strategic behavior does not negate the debt neutrality assertions of Ricardian equivalence.
Then, by introducing capital gains and inheritance taxes, I show the crowding out effect of government debt is notably smaller in models with strategic behavior; manipulation by children increases the importance of bequests, which forces parents to save (and bequeath) a larger portion of a debt-financed tax cut. In spite of the neutrality of debt under lump sum taxes, including intergenerational strategic behavior can significantly influence the outcome of government tax policies. Given the restrictive nature of the conditions required for Ricardian equivalence to hold, it may be more useful to measure how near to or far from Ricardian equivalence a particular policy or economy comes rather than simply determining whether or not it holds in that environment.

Previous papers find no relationship between interest rates and the discounts of US closed-end funds before 1985. This is taken as evidence against management fees being a cause of discounts because a negative relationship is expected: if interest rates rise, you would expect to see discounts fall as the present value of future fees is reduced. But from 1985 forward, there has been a strong positive relationship between interest rates and fees. This supports an alternative view in which the discount varies positively with interest rates because bond yields are an alternative return against which closed-end funds must compete.

The reaction of closed-end fund share prices to changes in portfolio values is on average the same whether funds are trading at discounts or premia and whether the changes in portfolio values are positive or negative. If closed-end fund discounts and premia do correctly measure investor sentiment, then these results suggest that investor sentiment does not affect the market's reaction to news about fundamentals. Alternatively, discounts and premia may not in fact measure investor sentiment, or sentiment may play no role at all in closed-end fund pricing. Noise-trader risk and trading costs also fail to explain the observed behavior.

The behavior of US closed-end funds is very different from that of the UK funds studied by Gemmill and Thomas (2002). There is no evidence that their discounts are constrained by arbitrage barriers, no evidence that higher expenses increase discounts and no evidence that replication risk increases discounts—but strong evidence that noise-trader risk is priced. The differences between US and UK funds may be due to the fact that small investors dominate US funds while institutional investors dominate UK funds, or because the sample selection method for the UK funds chooses only funds that are relatively easy to arbitrage.

This paper explores the influence of Japan and the United States over the geographic distribution of Asian Development Bank (ADB) funds. Although nominally an independent, multilateral organization, the ADB is widely regarded as bowing to the interests of its two most influential donors. Estimation using panel data for less developed Asian countries from 1968 to 2002 suggests significant donor influence with inconsistent weight placed on humanitarian criteria given limited funding for the region's largest countries, China and India. Comparing the results with research on World Bank loan allocation suggests donor interests are relatively more important in the ADB. This finding justifies the existence of the ADB on political grounds but calls into question its relative merits on economic grounds.

Arbitrage positions that benefit from the reversion of closed-end fund discounts to rational levels show excess returns that increase in magnitude the more funds are mispriced. At the same time, fund trading volumes and bid-ask spreads more than double as funds become increasingly mispriced. These behaviors suggest that non-diversifiable noise-trader risk increases the more funds are mispriced and that market participants are not only aware of this unique risk factor but demand a compensatory rate of return that varies with its magnitude.

This paper presents structural estimates of the probability of validity, and the probability of Type I and Type II errors by courts in patent litigation. Patents are modeled as uncertain property rights, and implications of the model are tested using stock market reactions to patent litigation decisions. While court errors are inherently unobservable, the estimation quantifies beliefs about patent validity and court errors in a Bayesian context by relying on observable win rates and stock market reactions.
I estimate that the underlying beliefs about validity average from 0.55 to 0.70 for litigated patents. For a number of different specifications, I show that Type I errors (finding a valid patent invalid) occur with an estimated probability of 0.20 to 0.25. The range for Type II errors (finding an invalid patent valid) varies more broadly, from near zero probability to as high as 0.40. Additional implications of the model address patent value.