Evidence of discrimination in lending: an extension

Article Abstract:

We generalize the model of Ferguson and Peters (1995) to allow for unequal recovery rates in the event of default by majority borrowers versus minority borrowers. This simple extension has two direct implications: (i) a uniform credit policy, as defined by Ferguson and Peters, entails cross-subsidization across groups; and (ii) it is possible for a profit-maximizing (and therefore economically nondiscriminatory) lending policy to generate lower average default rates among minority borrowers than among majority borrowers. (Reprinted by permission of the publisher.)

Discrimination in consumer credit, Credit discrimination

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Herding among investment newsletters: theory and evidence

Article Abstract:

A model developed to investigate the incentives investment advisors face when considering whether to herd, or copy the actions of others, indicates that the incentive of one advisor to follow the market leader rises with the second-mover's initial reputation and falls with that person's ability. There are a number of theoretical explanations for why advisors herd together. These include the fact that all advisors receive the same private information and that they all act on some clear event but not explicitly on other advisors.

Beliefs, opinions and attitudes, Investment advisers

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Are tax effects important in the long-run Fisher relationship? Evidence from the municipal bond market

Article Abstract:

Research using six estimators of the Fisher effect indicates that, irrespective of the estimator used, taxes have a significant impact on the size of the estimated Fisher effect. The Fisher effect estimate is always greater for taxable securities in relation to tax-exempt securities. This conclusion contradicts the view that fiscal illusion and difference in estimators could cause low Fisher effect estimates. There is little evidence that Tobin effects and peso problems cause low Fisher estimates.

Fisher exact test, Municipal bonds

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