Jack L. Treynor Volume 1, Number 1, First Quarter 2003 Inflation entails a loop running from prices to wages and back again from wages to prices. Change in inflation rates result from two types of intervention in that otherwise closed loop. Inflation surprise intervenes when the labor productivity of the marginal plant, hence the real… Read more
First Quarter (2003)
Estimating Default Probabilities Implicit in Equity Prices
Tibor Janosi, Robert Jarrow, and Yildiray Yildirim This paper uses a reduced form credit risk model to estimate default probabilities implicit in equity prices. For a cross-section of firms, a time-series regression of monthly equity returns is estimated. We show that it is feasible to infer the firm’s probability of default implicit in equity returns… Read more
INSIGHTS: Don’t Count On It! The Perils of Numeracy
John C. Bogle Volume 1, Number 1, First Quarter 2003 Author John C. Bogle argues that the Information Age has given birth to a worship of hard numbers, and, in turn, the attitude that “If you cannot measure it, it doesn’t matter.” Mr. Bogle disagrees with this syllogism, and offers four “Perils of Numeracy,” detailing… Read more