Twenty-fourth NBER Summer Institute held in 2003.

• Position: Bureau News - National Bureau of Economic Research

In the summer of 2003, the NBER held its twenty-fourth annual Summer Institute. More than 1200 economists from universities and organizations throughout the world attended. The papers presented at dozens of different sessions during the four-week Summer Institute covered a wide variety of topics. A complete agenda and many of the papers presented at the various sessions are available on the NBER's web site by clicking Summer Institute 2003 on our conference page, found at: www.nber.org/confer.

Promising emerging equity markets often witness investment herds and frenzies, accompanied by an abundance of media coverage. Complementarity in information acquisition can explain these anomalies. Because information has a high fixed cost of production, its equilibrium price is low when its quantity is high. Investors all buy the most popular information because it has the lowest price. Given two identical asset markets, investors herd: asset demand is higher in the market with abundant information because information reduces risk. By lowering risk, information raises the asset's price. Transitions between low-information/low-asset-price and high-information/high-asset-price equilibriums raise price volatility and create price paths resembling periodic frenzies. Using equity data and a new panel data set of news counts for 23 emerging markets, Veldkamp shows that when asset market volatility, increases, news coverage intensifies, and that more news is correlated with higher asset prices.

Brunnermeier and Parker introduce a tractable structural model of subjective beliefs. Forward-looking agents care about expected future utility flows, and hence are happier now if they believe that better outcomes are more likely. On the other hand, expectations that are biased towards optimism worsen decisionmaking, leading to poorer realized outcomes on average. Optimal expectations balance these forces by maximizing the lifetime well-being of an agent. The authors apply their optimal expectations framework to three different economic settings. In a portfolio choice problem, agents overestimate the return on their investment and may invest in an asset with negative expected excess return if sufficiently positively skewed. In general equilibrium, agents' prior beliefs are endogenously heterogeneous, leading to gambling. Finally, in a consumption-saving problem with stochastic income, agents are both overconfident and overoptimistic, and consume more than implied by rational beliefs early in life.

Guvenen studies the asset pricing implications of a parsimonious two-agent macroeconomic model with two key features: limited...