Psychological research documents that individuals are more likely to resort to superstitious practices when operating in environments dominated by uncertainty, high stakes, and perceived lack of control over the outcomes. Based on these findings, we suggest that the stock market represents an ideal breeding ground for superstition and then test whether superstition-induced behavior affects inve...

Generally, determining the size and magnitude of the omitted variable bias (OVB) in regression models is challenging when multiple included and omitted variables are present. Here, I describe a convenient OVB formula for treatment effect models with potentially many included and omitted variables. I show that in these circumstances it is simple to infer the direction, and potentially the magnit...

We provide a general class of tests for correlation in time series, spatial, spatio-temporal and cross-sectional data. We motivate our focus by reviewing how computational and theoretical di¢ culties of point estimation mount as one moves from regularly-spaced time series data, through forms of irregular spacing, and to spatial data of various kinds. A broad class of computationally simple test...

Common knowledge of a Borel event is shown to be a co-analytic event, and is therefore universally measurable. An extension of Aumann’s “agreement theorem” regarding common knowledge of posterior probabilities is proved in the framework of a measure space defined on a complete, separable, σ-compact metric space. JEL classification: D82, D83, D84

We find that augmenting a regression of excess bond returns on the term structure of forward rates with a rolling estimate of the mean realized jump size—identified from high-frequency bond returns using the bi-power variation technique—substantially increases the R2 of the regression. This result is consistent with the setting of an unspanned risk factor in which the conditional distribution o...

We use the adaptive LASSO from the statistical learning literature to identify economically connected industries in a general predictive regression framework. The framework permits complex industry interdependencies, including both direct and indirect sectoral links. Consistent with gradual information diffusion across economically connected industries, we find extensive evidence that lagged re...

This paper investigates market perceptions of the risk of large exchange rate movements by using information gleaned from risk reversal contracts and macroeconomic news surprises. We focus on the height of the carry trade period in Japan (March 2004 through December 2006). Concerns about sharp yen appreciation were particularly evident during the period of heavy carry trade activity and are mor...

We study how total factor productivity (TFP), energy prices, and the Great Moderation are linked. First we estimate a joint stochastic process for the energy price and TFP and establish that until the second quarter of 1982, energy prices negatively affected productivity. This spillover has since disappeared. Second, we show that within the framework of a dynamic stochastic general equilibrium ...