We introduce a method for detecting the presence of time variation and instabilities in the parameters of predictive regressions linking noisy variables such as stock returns to highly persistent predictors such as stock market valuation ratios. Our proposed approach relies on the least squares...

We develop tests for detecting possibly episodic predictability induced by a persistent predictor. Our framework is that of a predictive regression model with threshold effects and our goal is to develop operational and easily implementable inferences when one does not wish to impose a priori...

The value of information is examined in a single-agent environment with unawareness. Although the agent has a correct prior about events he is aware of and has a clear understanding of his available actions and payoffs, his unawareness may lead him to commit information pro- cessing errors and...

Using French survey data, we explore empirically whether earnings uncertainty and borrowing constraints decrease households demand for risky assets, consistent with theoretical predictions. A major empirical problem is the potential endogeneity bias of income risk, as more risk averse households...

This paper studies the use of the overlapping blocking scheme in unit root autoregression. When the underlying process is that of a random walk, the blocks’ initial conditions are not fixed, but are equal to the sum of all the previous observations’ error terms. When non-...

Ordinary least squares (OLS) is well-known to produce an inconsistent estimator of the spatial parameter in pure spatial autoregression (SAR). This paper explores the potential of indirect inference to correct the inconsistency of OLS. Under broad conditions, it is shown that indirect inference...

Global games and Poisson games have been proposed to address equilibrium indeterminacy in Coordination games. The former assume that agents face idiosyncratic uncertainty about economic fundamentals, whereas the latter model the number of actual players as a Poisson random variable to capture...

We investigate experimentally the impact of cognitive and affective empathy on behavior. A novelty of the study is that we do so directly without invoking responses to questionnaires, but by manipulating the state of hunger of participants in the single-shot Dictator game during the holy month...

The design and evaluation of environmental policy requires the incorporation of time and risk elements as many environmental outcomes extend over long time periods and involve a large degree of uncertainty. Understanding how individuals discount and evaluate risks with respect to environmental...

In the 1990s, in many countries, wages became a more convex function of education: returns to college increased and returns to intermediate education declined. This paper argues that an important cause of this convexification was a two-stage demand-supply interaction: an increased demand for...