A. Steven Holland

Inflation and Uncertainty: Tests for Temporal Ordering

For the postwar United States, increases in the rate of inflation tend to precede increases in the level of inflation uncertainty. The finding suggests that higher inflation uncertainty is part of the welfare cost of inflation. Possible explanations are (1) a high rate of inflation increases uncertainty about future monetary policy and (2) there is uncertainty about the persistence of inflation. Copyright 1995 by Ohio State University Press.

Efficiency in the NFL betting market: modifying and consolidating research methods

Modifying and consolidating previous research methods to generate more reliable estimates, some fairly weak evidence is found of inefficiency in the NFL betting market resulting from a bias favouring home underdog (against away favourite) teams. In contrast to previous research, no evidence is found that ‘momentum strategies’ generate significant returns in this market.

The baby boom and the housing market: Another look at the evidence

Abstract Based on tests for cointegration, the growth of housing demand resulting from the Baby Boom appears to be the major factor behind increased real residential investment, but not the major factor behind increased real housing prices in the postwar U.S. The housing market also passes a simple test for efficiency.

Inflation and Wage Indexation in the Postwar United States

This paper examines the relationship between inflation and wage indexation in the postwar United States using data on the prevalence of cost-of-living adjustments in major collective bargaining agreements. The author finds that increases in inflation precede increases in wage indexation but reductions in inflation do not precede reductions in wage indexation. There is virtually no evidence that wage indexation affects inflation. Copyright 1995 by MIT Press.

The Role of the Federal Reserve as "Lender of Last Resort" and the Seasonal Fluctuation of Interest Rates

The Federal Reserves role as a lender of last resort may explain why the seasonal fluctuation of interest rates appeared to decline around 1914. The creation of the Fed reduced the seasonal fluctuation of both the probability of a bank receiving an emergency loan and the probability of a financial panic. The seasonality of real interest rates could, therefore, have declined regardless of whether the Fed conducted seasonal open market operations. The evidence is consistent with the lender-of-last-resort model. Copyright 1991 by Ohio State University Press.

Duration of Poor Performance, Fund Flows and Risk-Shifting by Hedge Fund Managers

A typical hedge fund manager receives greater compensation when the fund has a strong absolute or relative performance. Asymmetric performance fees and fund flow-performance relationship may create incentives for risk-shifting, estimated in our study by the change in fund return volatility in the middle of the year. However, hedge funds that cannot attract new funds or have had poor performance for a long period may face different incentives. The combination of these two observations confronts hedge fund managers with a complex strategic decision regarding the optimal level of their funds’ return volatility. While an increase in return volatility generally increases the expected payoff of the compensation contract, excessive volatility is not sustainable. This paper empirically examines the factors that affect hedge fund managers’ decisions to risk-shifting. We show that (1) if the fund has had prior poor performance, the magnitude of risk-shifting is larger; (2) as the duration of poor performance increases, risk-shifting is reduced; (3) if the fund is experiencing capital outflows, the magnitude of risk-shifting is smaller and (4) funds that have outflows and also use leverage or have short redemption notice periods display a smaller degree of risk-shifting.

Market Closings and Concentration of Stock Trading: An Empirical Analysis

We adopt a power law framework to measure the concentration of daily trading among the different stocks on the US market. Our analysis of the trends of daily concentration over the last five decades reveals that trading concentration is lower on Mondays and the day after a long weekend. These findings are supportive of the hypothesis that firms manage information release. We also find lower concentration at the end of December and in January. The results are consistent with our expectations for a stock market that comprises multiple groups of traders with unique trading behaviour and timing patterns.