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The Digest

A free monthly publication featuring non-technical summaries of research on topics of broad public interest
Many financial advisers suggest that homeowners...speed up their debt payments, either by paying down their 30-year mortgage early or by taking out shorter-term mortgages. But by examining a large subset of these homeowners, the authors find that nearly 4 in 10 (38 percent) of them would save money by ignoring the advice. In their push to reduce their debt, many homeowners are missing a low-risk opportunity to increase their wealth. The reason? They're making extra...

Research Summaries

While other studies have established that foreign firms are increasingly attractive for U.S. institutional investors as they conform to U.S. accounting principles, this study establishes that the premium on transparency applies to all U.S. portfolio investors and to a much larger universe of foreign equities than has been captured in earlier studies. U.S. investors exhibit a strong "home bias" for stocks in their country but the keys reasons for this -- and the...
Bonus depreciation appears to have had a powerful effect on the composition of investment. Capital that benefited substantially from the policy -- namely equipment with long tax lives -- saw sharp increases in investment. In contrast, there is no evidence that market prices increased because of the policy. In Temporary Investment Tax Incentives: Theory with Evidence from Bonus Depreciation (NBER Working Paper No. 12514), authors Christopher House and Matthew Shapiro...
Although the level of business volatility is relatively high at privately held firms, it has trended downward. In contrast, the level of business volatility is relatively low at publicly traded firms, but it has trended upward. This pattern of 'volatility convergence' holds in every major industry. In the past quarter century, the ups and downs of the American economy - that is, its business cycle volatility - have decreased. That's a good thing: it means less severe...

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