Department of Economics, Finance & Legal Studies

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An Analysis of the Effect of Hurricanes on Economic Growth and Labor Market Outcomes
(University of Alabama Libraries, 2021) Goulbourne, Rushaine Demar; Ross, Amanda; University of Alabama Tuscaloosa
Hurricanes pose a significant threat to life and property in coastal regions across the Caribbean and the United States. Within the United States, the south coast faces an annual threat in locations that house major economic centers. The disruption in these regions can have far reaching consequences for both individuals and firms who are impacted. For the Caribbean region, the recurrence of hurricanes causes recovery from disasters to be an on-going process. This limits the extent to which these countries can grow economically. In this dissertation I aim to explore the effects of hurricanes on economic agents with the intent of impacting future policy discussions. Chapter 1 investigates the impact of hurricanes on wage and employment growth. I utilize a model of wind intensity to measure the strength of hurricanes within each Florida county. By using a measurement technique that accounts for hurricane intensity variation over time, the results reveal a less severe effect on both wage and employment growth than previously reported. In many respects, the literature supports the notion that hurricanes affect labor markets through labor supply. My results present evidence that suggests labor demand plays as much a role in post disaster labor markets outcomes as does labor supply. As a novel contribution to the literature, I further test this result by using propensity score matching while accounting for the probability of each county to experience a hurricane. My results suggest that hurricanes depress not only employment growth but in fact both employment and wage growth in affected counties. Chapter 2 explores the implications of hurricanes for economic growth in the Small Island Developing States (SIDS) of the Caribbean region. Particularly, I examine the recurrent nature of hurricanes which creates a difficult environment for economic growth to take place.The results of this study finds support for the negative impact of hurricanes on growth. Additionally, the experience of successive hurricane seasons with hurricane strikes contrary to expectations, does not contribute further to the negative impact of the initial hurricane effect in the Caribbean region. Reasons for this are discussed. Countries that experience a gap between hurricanes enjoy better growth outcomes than countries that do not have similar experiences. The findings of this study shines light on the difficulty small islands face to prepare for hurricanes while being in a state of recovery.
Applied nonparametric density and regression estimation with discrete data: plug-in bandwidth selection and non-geometric kernel functions
(University of Alabama Libraries, 2017) Chu, Chi-Yang; Henderson, Daniel J.; University of Alabama Tuscaloosa
Bandwidth selection plays an important role in kernel density estimation. Least-squares cross-validation and plug-in methods are commonly used as bandwidth selectors for the continuous data setting. The former is a data-driven approach and the latter requires a priori assumptions about the unknown distribution of the data. A benefit from the plug-in method is its relatively quick computation and hence it is often used for preliminary analysis. However, we find that much less is known about the plug-in method in the discrete data setting and this motivates us to propose a plug-in bandwidth selector. A related issue is undersmoothing in kernel density estimation. Least-squares cross-validation is a popular bandwidth selector, but in many applied situations, it tends to select a relatively small bandwidth, or undersmooths. The literature suggests several methods to solve this problem, but most of them are the modifications of extant error criterions for continuous variables. Here we discuss this problem in the discrete data setting and propose non-geometric discrete kernel functions as a possible solution. This issue also occurs in kernel regression estimation. Our proposed bandwidth selector and kernel functions perform well in simulated and real data.
Baumol’s disease and health care inflation
(University of Alabama Libraries, 2015) Mann, Christopher; Pecorino, Paul; Chen, Susan; University of Alabama Tuscaloosa
This dissertation sets out to determine if the health care sector suffers from low productivity growth and the implications on government finances in the long run. I use the condition treatment approach to measure utilization and price growth in the health care sector with the Medical Expenditures Panel Survey data from 2003-2011. While official inflation estimates are found to be biased by up to 1% per year, health care prices were still growing much faster than other prices. However, this is only true for certain segments of the population. Diseases and other medical conditions experience different productivity growth rates and are distributed uniformly across the population. I also find that much of the inflation is concentrated in ambulatory care events. I test to see if technology is driving event-level inflation by controlling for individual procedures. Contrary to other studies, I find little evidence to support the claim that technology is the main reason behind health care inflation. The results suggest that the health care sector may suffer from the Cost Disease. To study the implication on taxes, I build a theoretical model of unbalanced growth between private and publicly provided goods. As long as the two goods are not substitutable, the tax rate is pushed to the top of the Laffer Curve and redistribution is crowded out in the long-run.
Cointegration tests with smooth breaks and co-movements of international reserves
(University of Alabama Libraries, 2019) Banerjee, Piyali; Lee, Junsoo; University of Alabama Tuscaloosa
In the first essay, we propose a new Autoregressive Distributive Lag (ADL) cointegration test in the presence of structural breaks approximated by a Fourier function. The test offers a simple way to capture a smooth structural change in time series data. Exact break dates are not required, and the suggested methodology can accommodate various types of models with an unknown number and form of gradual structural changes. An empirical example of real oil prices, oil production, and real economic activity using the new test shows that these variables are cointegrated, while a conventional ADL test ignoring structural breaks yields an opposite result. In the second essay, we develop a new Fourier Engle-Granger (FEG2) co-integration test to approximate structural breaks in time-series. We note that a common-factor-restriction (CFR) is imposed in the Engle-Granger (EG) test. The restriction implies the identical long-run and short-run dynamics in the relationship among the variables of interest. This chapter develops a new Engle-Granger (FEG2) co-integration test that not only prevents the power loss issue from the existing EG test but also accommodates underlying nonlinearity in the data through a Fourier transformation. We allow for different long-run and short-run dynamics of the variables. The new EG2 co-integration test with a Fourier approximation detects the co-integration relationship among the crude oil price, crude oil production, and real economic activity even when the data is subject to higher frequencies. In contrast, the conventional EG test with a Fourier function fails to detect the co-integration in a similar situation due to the restrictive assumption of the CFR. In the third and final essay, we examine global co-movements of international reserves (IR) and their effects on the variations of IR holding in each country. To begin with, we evaluate how pervasive global co-movements of international reserves are. For this, we estimate the global, regional and country-specific factors of international reserves by using a dynamic factor model with time-varying factor loadings and stochastic volatility. We find that a global factor is a dominant component and it causes co-movements among international reserves in the world. Then the degree of association of each country’s reserve holding with the common global factor is analyzed. Results show that after the great financial crisis (GFC) the correlation of each country with the global factor drops remarkably compared to the pre-crisis period. Following the fact, we examine the driving forces of the IR through the estimated global factors of key macro-economic variables and notice that the dynamics of the driving forces become opposite after the financial crisis. Lastly, we examine the inter-temporal effects of the global factor of IR with the global factors of the key control variables by using a VAR model.
The distribution of returns to education
(University of Alabama Libraries, 2019) Souto, Anne-Charlotte; Henderson, Daniel J.; University of Alabama Tuscaloosa
In this work, we revisit the traditional human capital framework and infer that risk as measured by the shape of the returns to education's distributions should be included. While education is often considered to be an investment good, human capital models often ignore the impact of risk on education investment decisions. This thesis has two aims. First, we want to find out how our different measures of risk evolved through time and between different groups. Second, we want to find out if those risks impacted education investment decisions through changes in the expected returns. That is, we investigate whether there exist risk-return trade-offs in education. In the first chapter, we overview nonparametric (spline and kernel) regression methods and illustrate how they may be used in labor economic applications. We focus our attention on issues commonly found in the labor literature such as how to account for endogeneity via instrumental variables in a nonparametric setting. We showcase these methods via data from the Current Population Survey. In the second chapter, we estimate the risk-return trade-off in the context of education. If education is treated like any other investment good, risk could play an important role in individual’s educational decisions. As portfolio theory predicts, there could be a trade-off between returns to education and risks concerning the returns: higher risks are generally associated with higher returns. We contribute to the literature by proposing various measures of risk based on the distribution of returns to education, which are in turn based on nonparametric regression results using the Current Population Survey dataset (1980-2015). We infer that risk-averse individuals prefer distributions with positive skewness and low kurtosis. Our results confirm the findings of the literature, i.e. we observe compensation for variance. We also find statistically significant compensation for the higher moments: skewness and kurtosis. Interestingly, we find that the relationship between expected returns and the higher moments skewness and kurtosis is non-linear. In the third chapter, we build on the second chapter to test two hypothesis: first whether there is heterogeneity in the risk of educational investments and if so whether there is compensation for that risk. We use our individual-level estimated rates of return to education and split them in three different ways: by occupation, by region and race, and by region and education-level. We infer that there is heterogeneity, not only in the expected returns (1st moment), but also in the risk faced by individuals (higher moments). We also add to the second chapter by testing whether risk-return trade-offs exist between occupations, whites and non-whites, and different education-level. We expect, for example, occupations that retain higher risk to be compensated by higher mean returns. Generally, we find risk-return trade-offs exist between states, occupations, whites and non-whites, and different education-level, for all three measures of risk. Surprisingly, we find that kurtosis matters more than skewness as a measure of risk. Moreover, the trade-offs between skewness, kurtosis, and expected returns are not always in the directions predicted by theory on decision making under uncertainty.
Do participation rates vary with participation payments in laboratory experiments?
(University of Alabama Libraries, 2024) Zhong, Huizhen; Deck, Cary; Henderson, Daniel
This paper reports a series of experiments designed to evaluate how the advertised participation payment impacts participation rates in laboratory experiments. Our initial goal was to generate variation in the participation rate as a means to control for selection bias when evaluating treatment effects in common laboratory experiments. Initially, we varied the advertised participation payment to 1734 people from $5 to $15 using standard email recruitment procedures, but found no statistical evidence this impacted the participation rate. A second study increased the advertised payment up to $100. Here, we find marginally significant statistical evidence that the advertised participation payment affects the participation rate when payments are large. To combat skepticism of our results, we also conducted a third study in which verbal offers were made. Here, we found no statistically significant increase in participation rates when the participation payment increased from $5 to $10. Finally, we conducted an experiment similar to the first one at a separate university. We found no statistically significant increase in participation rates when the participation payment increased from $7 to $15. The combined results from our four experiments suggest moderate variation in the advertised participation payment from standard levels has little impact on participation rates in typical laboratory experiments. Rather, generating useful variation in participation rates likely requires much larger participation payments and/or larger potential subject pools than are common in laboratory experiments.
An econometric analysis of cocaine use by methadone
(University of Alabama Libraries, 2013) Nichols, Ezekiel Andrew; Cover, James P.; University of Alabama Tuscaloosa
This dissertation uses proprietary drug screening data, illicit drug prices from the DEA STRIDE database, and national and local macroeconomic variables to measure the price responsiveness and treatment effectiveness of methadone maintenance therapy (MMT) on patients in a voluntary, methadone-treatment program in a rural Alabama county. This is done using conventional, myopic, and rational models of demand. The demand for illicit drugs is found to be sensitive to national drug prices as estimated from the Drug Enforcement Agency's System to Retrieve Drug Evidence (STRIDE), length of time in treatment, previous consumption, and the local unemployment rate. An important innovation in this paper is the use of temperature data from coca-plant-growing regions as an instrument for the cocaine prices taken from the DEA STRIDE database. Use of this instrument yields estimation results more in line with the predictions one obtains from economic theory. The estimation results imply that methadone maintenance therapy is a substitute for all illicit drugs under analysis. The implied price elasticity of cocaine use by MMT patients ranges from -0.0003 to -0.01284 and the unemployment elasticity of cocaine use is -0.00385.
An economic analysis of abstinence-only sex education in Alabama
(University of Alabama Libraries, 2011) Collins, Sondra; Hoover, Gary Allen; University of Alabama Tuscaloosa
The purpose of this dissertation is to assess the demand for effectiveness of, and economic impact of Alabama's Title V funded abstinence-only sex education programs. The specific outcomes to be examined in this study are gonorrhea, Chlamydia, birth, and abortion rates among Alabama teens. The particular programs assessed in this study were created by Title V Section 510 of the Social Security Act and authorized under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. The funding for Title V abstinence-only sex education programs became available from the federal government in 1998. The focus of this study is to determine what characteristics lead Alabama counties to adopt this particular type of sex education, the extent to which the decline in negative teen outcomes observed from 1998-2007 can be attributed to Title V funded abstinence-only sex education programs and the amount of public funds that were saved as a result of adopting these programs.
The economic implications of the prospective Free Trade Agreement between the United States and Egypt
(University of Alabama Libraries, 2010) El-Karaksy, Hoda; Pecorino, Paul; University of Alabama Tuscaloosa
Abstract Egypt is a fairly large country with a struggling economy, like many others in the region. An improved economic performance in both Egypt and other countries in North Africa and the Middle East has the potential to raise the living standards of millions of people; this in turn could improve the region's political climate. Understanding how factors such as trade policy can affect Egypt is important for policy decisions in the US and Egypt. This issue is thus investigated in three essays that quantify the impact of a prospective bilateral Free Trade Agreement (FTA) between Egypt and the United States (US). In the first essay, I provide an econometric estimate of the effects of accessing the US market as well as the effects of Egyptian institutional quality on trade. I apply the gravity model to Egypt's trade flows for 2004 and find that the FTA could increase aggregate exports to the US between 140 and 157%. In the second essay, I examine the effects of participation in the FTA on the inward Foreign Direct Investment (FDI) to Egypt from the US and the rest of the world. I estimate gravity models of bilateral investment for 2005 and find evidence that this prospective FTA would be associated with a reduction of inward FDI to Egypt between 28% and 34% of the 2005 level. In the third essay, I investigate the current debate over US aid to Egypt, to identify whether participation in an FTA would be a complement or a substitute to US foreign aid. The analysis is based on a country-pair foreign aid difference regression model for 1980 and the years 2004 and 2007. The empirical evidence supports the complementary relationship between US foreign aid and this prospective FTA: The FTA would lead to increased foreign aid from the US to Egypt.
Empirical essays on uncertainty and economic behavior
(University of Alabama Libraries, 2014) Jones, Paul; Enders, Walter; University of Alabama Tuscaloosa
My dissertation looks at the new and growing field of macroeconomic uncertainty. It consists of three empirical essays on different measures of macroeconomic uncertainty and how uncertainty affects macroeconomic behavior. The first essay uses a new uncertainty index from Baker et al. (2012). We evaluate the time-varying correlation between macroeconomic uncertainty, inflation, and output. Estimation results from a multivariate DCC-GARCH model reveal that the sign of the correlation between macroeconomic uncertainty and inflation changed from negative to positive during the late 1990s, whereas the correlation between uncertainty and output is consistently negative. In the second essay, we propose domestic uncertainty shocks may serve as a channel through which business cycles are transmitted internationally. To quantify uncertainty, we use two measures from the current literature and estimate structural vector autoregressions to evaluate the effects U.S. uncertainty shocks have on the Japanese and British economies. Our results suggest U.S. uncertainty shocks have international effects consistent with a demand shock in the context of an open-economy IS/LM model with sticky prices. For the final essay we estimate a number of macroeconomic variables as logistic smooth transition autoregressive (LSTAR) processes with uncertainty as the transition variable. Nonlinear estimation allows us to answer several interesting questions left unanswered by a linear model. For a number of important macroeconomic variables, we show (i) a positive shock to uncertainty has a greater effect than a negative shock, and (ii) the effect of the uncertainty shock is highly dependent on the state of the economy. Hence, the usual linear estimates concerning the consequences of uncertainty are underestimated in circumstances such as the recent financial crisis.
Endogeneity and dynamics in the impact of free trade agreements on trade and foreign direct investment
(University of Alabama Libraries, 2010) Lira, Cristina; Lee, Junsoo; Reed, Robert R.; University of Alabama Tuscaloosa
In the study of the impact of Free Trade Agreements on Foreign Direct Investments and on trade flows, there are some econometric issues that have not been fully addressed. This research aims to provide a discussion of these econometric issues and to present, using the most advanced econometric tools, new empirical results useful for understanding the relationship among regional integration, FDI and trade of goods. The research results in three self-contained, closely related papers. The first paper analyzes the relationship between FTA and FDI, focusing on the estimation bias that arises when the researcher does not consider the endogeneity of FTA, the fact that the relationship between FTA and FDI is dynamic, and the potential correlation between the current level of FDI and future participation in trade agreements as an additional source of endogeneity. This source of endogeneity did not receive attention in the international trade literature. Using the dynamic panel estimation method, the results show that, when the sources of bias are controlled for, trade agreements do not promote FDI in the way supported by previous empirical analysis and some theoretical arguments. The second paper focuses on the relationship between FTA and trade flows. Also in this case, not controlling for the econometric issues presented above produces a biased estimation of the impact of trade agreements. The paper addresses endogeneity, combining matching and difference-in-differences estimation. In addition, it applies two modifications of this methodology to evaluate the delayed impact of FTA and to control for the correlation between the current level of trade and future participation in trade agreements. The results show that the impact of trade agreements depends on the anticipated policy environment and that the benefits of trade agreements extend over time. The third paper analyzes the impact of FTA on FDI using a different methodology in order to strongly support a result in contrast to standard findings. Using matching combined with dynamic panel models, the results confirm that FTA does not promote FDI. This paper also illustrates the necessity of a dynamic specification, because the non-reversibility of the investments affects the impact of other variables.
Essays in applied spatial microeconomics
(University of Alabama Libraries, 2020) Herndon, James Dennis; Ross, Amanda; University of Alabama Tuscaloosa
In the first essay, I examine the price behavior of consumer goods in the strategically vital country of Pakistan. Results show that prices converge both temporally and spatially. A wage-adjusted Consumer Price Index shows that Pakistani cities have converging costs of living. Finally, a novel measure of cointegration ranks the most and least economically integrated cities. Divergence does not occur along provincial, linguistic, or ethnic boundaries. In the second essay, paper I examine private sector job growth in cities across the United States from 1990 to 2018. Defining “concentration” as a city’s sectoral Herfindahl-Hirschman Index, I find that cities with greater economic concentration subsequently experience more job growth than comparable cities with less concentration. However, the skewed distribution of job growth by sector means that cities face a trade-off between risk and reward analogous to an investment portfolio. In the third and final essay, we examine how changes in rainfall affect the persistence of conflict in Africa using fine-grained grid cell level data. Using Markov transition matrices, we examine the persistence of conflict in grid cells across the African continent and the likelihood of transitioning into and out of conflict. We incorporate the Markov probabilities into a panel logit model to analyze how monthly variations in rainfall affect the probability that an area transitions from peace to conflict. We find that peace is highly persistent across Africa, while violence is more transient. We also find that insufficient rainfall early in the wet season is associated with conflict in several regions.
Essays in Corporate Finance
(University of Alabama Libraries, 2021) Luo, Shikong; Cook, Douglas O.; University of Alabama Tuscaloosa
Despite the importance of understanding the interaction between financial markets and the real economy, the indirect effects of secondary markets on corporate outcomes, however, are not well understood. This dissertation comprises three essays that aim to shed some light on this issue by exploring the unintended consequences for firms in response to trading activities in equity and derivative markets. Uninformative stock price fluctuations induced by volatile mutual fund flows may inflict a hidden financial cost on firms. The first essay proposes a measure of stock-level passive equity mutual fund flow-induced volatility pressure and find it to positively affect bond yield spread at issuance through higher perceived risks revealed by increased equity volatility. Although flow-induced volatility is costly to the borrowing firm, it has no significant association with future firm fundamental risk, in contrast to equity volatility. This study empirically reveals a dark side of passive investing. The second essay examines the effects of options trading activities on corporate liquidity management. Based on a large sample of U.S. non-financial firms, it documents a positive relationship between equity options trading intensity and corporate cash holdings. Along with the instrumental variable approach, the CBOE's Penny Pilot Program as an exogenous shock and the extensive margin analysis using option listings corroborate a causality interpretation of the baseline results. The relationship is mainly driven by firms where financial distress risk is high and debt-financed investments are constrained by liquidity issues. Overall, these results suggest a precautionary saving motive due to active options markets that provide risk-shifting incentives to firms. During 2005-2007, SEC conducted a pilot program that relaxed short-selling restrictions. Using a difference-in-differences methodology and a hand-collected dataset of derivatives usage from a sample of U.S. oil and gas producing firms, the third essay finds a relative increase in hedging intensity among pilot firms compared to non-pilot firms during the pilot program period. This effect is stronger when firms face higher financial distress risk and when managers' incentives are more closely tied to firm value. These results indicate that managers are incentivized to smooth operating income due to concerns about a rise in the cost of financial distress under short-selling pressures.
Essays in global comovements
(University of Alabama Libraries, 2020-12) Isomitdinov, Hasan; Lee, Junsoo; University of Alabama Tuscaloosa
This dissertation looks into comovements in the global macroeconomic aggregates across countries by applying Bayesian econometric models. The first essay provides new results on the significance and relative importance of global and regional comovements in sovereign credit risk. I employ a dynamic factor model with time-varying stochastic volatility to examine the time-varying effects of global comovements. I find that the effects of the global comovements on individual countries are smaller than commonly perceived, especially after the end of the Eurozone debt crisis. Moreover, contrary to previous findings, I find that the net effects of the global and regional factors are greater than those of global macroeconomic variables. The second essay provides evidence of significant international co-movements of public debt in the form of the common global and regional factors. International events such as the global financial crisis and Eurozone sovereign debt crisis suggest the existence of global and regional factors that can generate synchronizations of public debt across countries. In contrast with previous studies that are focused mostly on domestic economic fundamentals in explaining public debt, I find distinct global factors in the public debt-to-GDP ratio, from both principal components analysis and the Bayesian dynamic factor model. I show that the global factor accounts for a significant fraction of the variation of public debt often more substantial than those explained by domestic variables in many countries. In the third and final essay, I develop a new panel cointegration model based on the well-known autoregressive distributed lag (ADL) models. I adopt the generalized method of moments procedure of Arellano and Bond, noticing that the ADL cointegration model is a special case of dynamic panel data models. The suggested procedure can overcome the difficulties found in the studies based on the panel vector auto-regressive models, which can be biased in the presence of cointegration. I apply the suggested procedure to the issue of defense-growth relationship, while capturing the inter-temporal dynamic relation between military spending and economic growth. The results reveal that there are multiple cointegrating vectors in the relationship of military spending and growth.
Essays in macroeconomics
(University of Alabama Libraries, 2011) Patterson, Bradford; Cover, James P.; Jindapon, Paan; University of Alabama Tuscaloosa
We investigate three topics in this dissertation. In Chapter 1 we investigate a matter related to Chapter 7 non-business bankruptcy in the United States. We find that state homestead exemptions tend to have a positive effect on state-level Chapter 7 non-commercial bankruptcy filing rates and tend generally to be statistically significant at the five-percent level or lower. Additionally, consistent with existing literature, we tend to find a positive and marginally statistically significant effect of past divorce rates on current filing rates. Moreover, our results suggest that unemployment has a positive effect on filing rates, while home prices have a negative effect. We use a balanced panel data set of U.S. states from the beginning of 2006 until the end of 2008. Homestead exemptions are chosen as a proxy for total asset exemptions. In Chapter 2 we investigate total U.S. household-sector debt and its relationship to several other variables using a vector error correction model and vector autoregression models. We find that per-capita household debt levels appear to be reduced by positive shocks to intermediate- and long-term interest rates. In addition, the permanent income hypothesis is corroborated in up to two areas. First, in some specifications consumption shocks, representing permanent income shocks, have a modest positive effect on debt levels. Second, shocks to home prices increase borrowing. Error variance decompositions suggest that current debt levels have a large portion of the predictive power for future debt levels. In Chapter 3 we investigate U.S. consumer revolving credit unsecured by real estate and its relationships to several other variables using vector autoregressions. We make several findings. For example, we find evidence that an increase in the average interest rate faced by credit card holders has no discernible downward effect on debt levels but that an increase in the federal funds rate does have a downward effect. Increases in the unemployment rate also seem to reduce credit use, probably due to supply constraints. Increases in permanent income, represented by consumption, and in asset prices have positive effects on credit use.
Essays in real estate
(University of Alabama Libraries, 2013) Stelk, Steven; Zumpano, Leonard V.; University of Alabama Tuscaloosa
This study exploits the recent financial crises as a unique natural experiment to examine relationships in residential real estate brokerage and real estate investment through three essays. The first essay examines the impact of agency disclosure on residential restate transactions in the post-financial crises period and extends the literature with three key findings. First, the overall proportion of buyers that report receipt of agency disclosure has not improved since previous studies were completed. Second, there is no evidence that buyers who do not report receipt of agency disclosure pay different prices for homes than buyers who do report receiving agency disclosure. Finally, there is evidence that the timing of agency disclosure matters. Among buyers that do receive agency disclosure, those receiving disclosure at a time other than the first contact with a broker are associated with 3.2% higher home prices. The results demonstrate the need for continued improvement in mandatory disclosure statutes. The second essay investigates the real estate brokerage market's impact on home prices in both a seller's market (2006) and a buyer's market (2009). In both years, homes sold with brokerage assistance realized higher prices when compared to homes sold without the aid of a broker, even after controlling for selection bias in the seller's choice to use a broker. This is the first study using a national dataset that finds evidence of price segmentation in the residential real estate market. The findings may be the result of the extreme market conditions housing market participants faced in 2006 and 2009. The third essay examines the impact of REITs on the Value-at-Risk (VaR) of a mixed asset portfolio surrounding the financial crises using a new, more accurate method of estimating VaR, conditional autoregressive value at risk (CAViaR). The more accurate VaR estimates show that adding REITs to the portfolio has no significant impact on VaR until after the financial crises begins in 2006. After 2006, adding REITs to a portfolio of stocks and bonds dramatically increases VaR. The results have significant implications for portfolio selection.
Essays in real estate market issues
(University of Alabama Libraries, 2012) Richardson, Heather Renea; Zumpano, Leonard V.; University of Alabama Tuscaloosa
This dissertation consists of three separate essays in the area of real estate. The first essay examines the continuing evolution of the Internet and the resulting effects on the efficiency of buyer search. The second essay evaluates the menu of alternatives for sellers of commercial real estate who encounter detrimental conditions. Finally, the third essay examines how publicly listed banks perform as sellers of commercial real estate as compared to non-bank sellers. The first essay includes market conditions indicative of both a buyer's market and a seller's market. The results indicate that as Internet usage increased search duration increased, whether a buyer's or seller's market. This research finds that the Internet increased buyer search intensity only when market conditions are more favorable to buyers. The second essay considers short sales, REO sales, and auction sales. Properties sold by each method are found to be significantly discounted relative to properties that are sold under normal conditions. REOs have the greatest discounts, followed by short sales, while properties sold at auction experience the smallest discount. Property characteristics, geographic contagion, market timing, and statutory rights of redemption are each found to have an impact on the relative pricing of properties sold under detrimental conditions, depending on the procedure. The third essay examines how publicly listed banks perform when compared to non-bank sellers. The non-bank sellers include non-institutional sellers (individuals and developers), corporate sellers, REITs, and financial institutions (equity funds, insurance companies, investment managers, and pension funds). The results indicate that bank sellers do tend to sell properties at a discount. Abnormal returns around the transaction date are estimated using a generated benchmark Bank companion Index and are found to be positive and significant. Determinants of these cumulative abnormal returns, assets, return on assets, Tobin's Q, coverage ratio, debt reduction, preferred dividends, and invested capital are considered. The return on assets and debt reduction are found to positively affect abnormal returns, whereas invested capital is negatively related to invested capital.
Essays on Attention Deficit Hyperactivity Disorder
(University of Alabama Libraries, 2018) Hampton, James; Chen, Susan; University of Alabama Tuscaloosa
In the first essay, we use stochastic dominance techniques to understand how the reporting of behavioral problems as well as ADHD prevalence has changed between 2000 and 2004. This time period coincides with changes in national educational policy which we hypothesize may have influenced the reporting of behavioral problems in children and a change in ADHD prevalence. We use stochastic dominance techniques and find that the distribution of behavioral problems in 2004 first-order stochastically dominates that of 2000. We then use decomposition techniques to study the primary drivers of changes in mother reported behavioral problems. We find evidence that changes in the educational policy between 2000 to 2004 led mothers of elementary school children to alter their reporting of child hyperactivity. In the second essay, we explore whether the introduction of school accountability policies can account for changes in ADHD diagnosis. We exploit differences across states and time in the introduction of school accountability laws to estimates differences in mean ADHD diagnosis. The results from our analysis suggest that one policy, state-level rewards given to high-performing schools, leads to approximates a 3 percentage point increase in the probability of an ADHD diagnosis among children. We find that the children most impacted by the policy are those whose mothers’ reported zero behavioral problems in the pre-policy period, perhaps indicating that prior to the policy these mothers did not believe that their child had behavioral problems. In the third and final essay, I study the impact of child ADHD on parental labor market and relationship dissolution outcomes. As unobserved characteristics may simultaneously impact the likelihood of having a child diagnosed with ADHD and outcomes of the parent, results using OLS estimation are likely biased. I mitigate issues of endogeneity using an instrumental variables framework where I utilize state-level educational policy as an instrument for child ADHD diagnosis. To be a valid instrument, the educational policy should be correlated with child ADHD, while exogenous to parental outcomes. While in several specifications, I find negative effects of child ADHD on parental outcomes using OLS, interestingly, IV estimates all lead to a switching of sign and are largely insignificant. Findings indicate that parental labor market and marital status outcomes are not impacted by child ADHD.
Essays on behavioral corporate finance
(University of Alabama Libraries, 2017) Shen, Mi; Cicero, David C.; Mobbs, Houston Shawn; University of Alabama Tuscaloosa
This dissertation examines the behavioral traits of business executives that lead to financial misconduct. The first essay investigates whether executives act more honestly when ethical considerations are made to stand out in an obvious way. In behavioral experiments, individuals are less likely to cheat when the saliency of dishonesty is increased (Mazar et al. 2008; Gino et al. 2009). We test this hypothesis in a real world setting by treating news about high-profile political scandals as shocks to the salience of unethical/illegal behavior. Analyzing corporate insiders’ stock trading activity, we find evidence of a reduction in inappropriate behavior during these periods. Insiders’ stock sales are less profitable and they are less likely to sell stock ahead of large price declines, suggesting less illegal insider trading. The results are concentrated in months with high levels of local media attention to political scandals, supporting an interpretation that the salience of these events affects insiders’ behavior. The relation is also stronger when an executives’ firm is aligned politically with the accused politician, suggesting that a scandal is more salient to “in-group” executives. However, the behavioral changes appear to be largely transitory and evidence of suspect trading resumes in subsequent years. The second essay examines the effect of envy on executive misbehavior. We provide evidence that envy can lead to executive misbehavior in the form of insider trading. Insiders at underperforming firms headquartered where more other firms are performing well demonstrate greater evidence of informed insider trading. Their stock trades generate higher abnormal returns, and they are more likely to sell stock ahead of a large price decline. We find similar evidence of profitable insider sales when CEOs suffer large pay gaps from their local peers. Envy motivated trading is more apparent in locations where household give less to charities, which may indicate higher levels of greed on average.
Essays on CEO behavior
(University of Alabama Libraries, 2015) Mills, Jackson; McLeod, Robert W.; University of Alabama Tuscaloosa
This dissertation is composed of two essays that examine the feedback between firm financial characteristics and CEO behavioral tendencies. The first essay examines the relationship between CEOs’ facial width-to-height ratios (fWHR) and firms’ financial policies. Greater facial width is considered to be a masculine physical trait and has been linked to increased aggressive behavior and greater risk tolerance. I find that high-fWHR CEOs pursue more aggressive financial policies, including increased leverage and reduced cash holdings. Additionally, I find that high-fWHR CEOs tend to maintain smaller ownership shares of their firms, suggesting that these CEOs place relatively lower importance on signaling alignment with shareholders. I also show that acquisition attempts led by high-fWHR CEOs are more likely to be unsuccessful. Despite that these managerial characteristics in high-fWHR CEOs are not offset by greater profitability, I find that high-fWHR CEOs do not face a greater risk of forced turnover. In the second essay, I examine CEOs’ option-exercise decisions. The retention of deep in-the-money stock options has been ascribed to managers’ overconfidence in their ability to increase firm value. I find that this behavior is predicted by non-private firm financial information and macroeconomic conditions. Specifically, managers are more likely to retain deep in-the-money stock options when their firms are more profitable, less financially constrained, and have greater growth opportunities. This behavior is also more frequently exhibited during periods of macroeconomic expansion. Given its apparent reactionary nature, this behavior seems to be a reflection of managers’ optimism regarding the near-term financial prospects of their firms and is not necessarily attributable to managerial overconfidence.

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