Behavioral Finance.

• Position: Bureau News

The NBER's Working Group on Behavioral Finance met in Chicago on April 12. Nicholas Barberis and Richard H. Thaler, both of NBER and University of Chicago, organized the meeting. These papers were discussed:

Alan B. Krueger, NBER and Princeton University, and Kenneth N. Fortson, Princeton University, "Do Markets Respond More to More Reliable Labor Market Data?"

Discussant: Anil K Kashyap, NBER and University of Chicago

Ming Dong, York University; David Hirshleifer and Siew Hong Teoh, Ohio State University; and Scott Richardson, University of Pennsylvania, "Does Investor Misvaluation Drive the Takeover Market?"

Matthew Rhodes-Kropf and David T. Robinson, Columbia University, and S. Viswanathan, Duke University, "Valuation Waves and Merger Activity: The Empirical Evidence"

Discussant: Steven N. Kaplan, NBER and University of Chicago

Markus K. Brunnermeier, Princeton University, and Jonathan A. Parker, NBER and Princeton University, "Optimal Expectations"

Discussant: Sendhil Mullainathan, NBER and MIT

Louis K.C. Chan, University of Illinois; Jason Karceski, University of Florida; and Josef Lakonishok; NBER and University of Illinois, "Analysts' Conflict of Interest and Biases in Earnings Forecasts"

Discussant: Russell Fuller, Fuller and Thaler Asset Management

Asim Ijaz Khwaja, Harvard University, and Atif Mian, University of Chicago, "Price Manipulation and Phantom Markets: An In-depth Exploration of a Stock Market"

Discussant: Pete Kyle, Duke University

Krueger and Fortson note that since 1979, the Bureau of Labor Statistics (BLS) has nearly quadrupled the size of the sample used to estimate monthly employment changes. Although first-reported employment estimates are still noisy, the magnitude of sampling variability has declined in proportion to the increase in the sample size. Still, a regression analysis of changes in interest rates on the day the employment data are released finds no evidence that the bond market's reaction to employment news intensified in the late 1980s or 1990s; indeed, in the late 1990s and early 2000s the bond markets hardly reacted to unexpected employment news. For the time period as a whole, an unexpected increase of 200,000 jobs is associated with about a 6 basis point increase in the interest rate on 30-year Treasury bonds, and an 8 basis point increase in the interest rate on 3-month bills, all else equal. Additionally, unexpected changes in the unemployment rate and revisions to past months' employment...