Competing political parties often declare that their economic policies are best, and try to convince voters that the winner will be able to influence the economy. One should ask, however, do markets really care about election outcomes? Are there differences in market reactions to Presidential versus Congressional elections? Can one say which branch of government is more influential for economic policy-making?
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Wharton Professor Olivia S. Mitchell answered readers' questions on how demographic changes affect financial markets and public policy, on global approaches to social security and pension reform, and on public vs. private forms of retirement savings.

The number of consumer bankruptcy filings in the United States has increased sharply in the last 30 years, from 1.4 to 8.5 per thousand working-age adults. Where do these dramatic changes come from? Are they explained by the deregulation of the consumer credit market? Do they result from increased information-sharing among lenders made possible by technological progress? Or do more bankruptcies come from the sharp increase in earnings volatility?
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How important are retail investors for the determination of stock returns? Institutional investors now account for most of the trading in stocks, and many economists expect retail investors to hold little sway in stock price formation. However, it is also reasonable to expect that small investors might have different views on the market which might lead them to influence price. Which view is correct?
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When the stock market fell ruinously in 2001 after the "dot-com" bubble, many investors wished they had been warned that enormous financial losses were possible. Yet, that was not the first financial market bubble in history to wipe out massive amounts of wealth. Nor, most likely, will it be the last one. But how do financial bubbles get formed? What factors can explain investors’ overoptimism? Does experience - or the lack thereof - play a relevant role?
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Basic economic reasoning suggests that currencies traded at a premium on forward markets should tend to appreciate over time, thereby eliminating any arbitrage opportunity. However, empirical observation shows the opposite, giving rise to a well-known puzzle. Can simple currency trading strategies exploit this anomaly and yield positive expected returns? If so, what is the magnitude of potential profits from currency speculation?
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Firms repurchase their own stock when they want to distribute free cash flows, need to fund stock option plans, believe their shares are undervalued, or adjust the firm's capital structure. Although there are several ways to undertake a repurchase, open-market repurchases have become the most common method since the 1980s, dwarfing the magnitude of other methods. Why is this type of purchase so common?
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The costs and benefits of the ongoing process of globalization of both industrialized and emerging economies is a hotly debated topic. What does pure economic theory have to say about it? In particular, what are the effects of globalization on the working of goods and asset markets? What happens when countries that heavily borrow on global financial markets cannot credibly commit to repay their debts?
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Monetary policy decisions have a large impact on capital markets. For example, interest rates and stock market prices are sensitive to announcements of changes in the target interest rate or in the money supply. In addition to this quantitative information, the monetary policy stance is communicated also through qualitative information such as statements, minutes, and speeches. Do financial markets also react to this type of information?
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There are important macroeconomic consequences to the behavior of banks, and in particular to the amount of risk they take. For this reason, many countries regulate the banking sector and impose rules of prudential behavior. What are the main factors that determine the risk-taking behavior of banks? How important are institutional factors relative to the ownership structure and corporate governance of banks?
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