Researchers in economics of education usually assume that parents choose schools for their high academic performance, with some support from revealed preference evidence based on local house prices. However, anecdotal evidence and common sense suggest that school quality is not one-dimensional...

In this paper, we extend the literature on crash prediction models in three main respects. First, we relate explicitly crash prediction measures and asset pricing models. Second, we present a simple, effective statistical significance test for crash prediction models. Finally, we propose a...

In this paper we study how the use of collateral is evolving under the influence of regulatory reform and changing market structure. We start with a critical review of the recent empirical literature on the supply and demand of collateral which has focussed on the issue of ‘collateral...

The optimal capital growth strategy or Kelly strategy, has many desirable properties such as maximizing the asympotic long run growth of capital. However, it has considerable short run risk since the utility is logarithmic, with essentially zero Arrow-Pratt risk aversion. Most investors favor a...

This paper approaches the PPP puzzle by using the Bitcoin/US Dollar exchange rate. The use of the virtual currency as macroeconomic laboratory allows us to remove frictions that previously impeded the empirical demonstration of the law of one price. We show that price adjustments are still far...

This paper shows that the current market infrastructure systemically prevents investors, both shareholders and bondholders, from exercising their rights against issuers. Equity and debt securities are now normally held through a chain of custodians. These custodians are connected with each other...

This paper evaluates the model risk of models used for forecasting systemic and market risk. Model risk, which is the potential for different models to provide inconsistent outcomes, is shown to be increasing with and caused by market uncertainty. During calm periods, the underlying risk...

This paper argues that there is nothing anomalous about the flypaper effect. I develop a simple median voter model of government spending with costly tax collection that predicts the flypaper effect and provide a quantifiable measure of its magnitude. Using the model insights and previous...

The latest CEP Election Analysis gives an overview of the research evidence on education policy, one of the key battlegrounds of the 2010 General Election.