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Working Paper
Politics, economics and investment: explaining plant and equipment spending by U.S. direct investors in Argentina, Brazil, and Mexico
Few economists or laymen would deny that political events can have an important, sometimes even overwhelming, impact on economic decisions in general, and investment decisions in particular. The first goal of this paper was to integrate a number of political and non-traditional economic variables into the standard theory of investment based on the maximization of the expected value of the firm. The second goal was to test this generalized investment theory on a particularly fertile field for gauging the interaction of political and economic factors: the plant and equipment spending of foreign ...
Working Paper
Interactions between domestic and foreign investment
This paper studies both the domestic and foreign fixed investment expenditures of a sample of U. S. multinational firms. In addition to explaining empirically each type of investment, an important goal is to determine whether there are significant interactions between expenditures in the different locations. ; Two types of interaction--one, financial, and the other, production-based--are explored theoretically and empirically. The financial interaction is the result of a model which assumes a risk of bankruptcy and its associated costs; under these circumstances, the firm faces an increasing ...
Working Paper
On risk, rational expectations, and efficient asset markets
The notion of asset market efficiency -- that market prices "fully reflect" all available information -- requires the operation of mechanisms that rapidly incorporate new information into asset prices. Particularly problematic -- both theoretically and empirically -- has been the case where new information is not widely shared, so-called "strong-form" efficiency. This paper examines the relevance of a mechanism for attaining strong-form efficiency based on knowledgeable investors being willing to take large positions in order to eliminate unexploited profit opportunities. We examine ...