Correlations of record events as a test for heavy-tailed distributions

A record is an entry in a time series that is larger or smaller than all previous entries. If the time series consists of independent, identically distributed random variables with a superimposed linear trend, record events are positively (negatively) correlated when the tail of the distribution is heavier (lighter) than exponential. Here we use these correlations to detect heavy-tailed behavior in small sets of independent random variables. The method consists of converting random subsets of the data into time series with a tunable linear drift and computing the resulting record correlations.Comment: Revised version, to appear in Physical Review Letter

Should I Stay or Should I Go? Gender Gaps in the Lateral Market for SEC Lawyers

This article examines the gender gap in the lateral market for government lawyers. Using data on lawyers from the Enforcement Division of the Securities and Exchange Commission (SEC), from 2004 to 2016, we find the following: First, gender gaps in pay and promotion appear to be minimal. Second, and confounding the first finding, we find significant gaps in assignments, with men receiving the more challenging and career-enhancing projects. Third, men are more likely than women to move laterally; and when they do, are more likely than the women to move to lucrative private sector jobs

Fraud by Hindsight

In securities-fraud cases, courts routinely admonish plaintiffs that they are not permitted to rely on allegations of fraud by hindsight. In effect, courts disfavor plaintiffs\u27 use of evidence of bad outcomes to support claims of securities fraud. Disfavoring hindsight evidence appears to tap into a well known, well-understood, and intuitively accessible problem of human judgment of 20/20 hindsight. Events come to seem predictable after unfolding, and hence, bad outcomes must have been predicted by people in a position to make forecasts. Psychologists call this phenomenon the hindsight bias. The popularity of this doctrine among judges deciding securities cases suggests that judges actively seek techniques that enable them to correct for psychological biases that might otherwise affect their decision-making. This paper assesses the hypothesis that judges have adopted the fraud-by-hindsight doctrine so as to avoid erroneous judgment infected with the hindsight bias. We find that although judges have identified a real problem in human judgment, they are not developing a doctrine to remedy the influence of hindsight on judgment. Rather, they are using this problem of human judgment as the justification for expanding their authority to manage the complex, high-stakes securities cases that come before them. The result provides judges with the greater case-management authority they seek, but leaves the securities litigation without a meaningful doctrine to ameliorate the influence of hindsight on judgment

Fraud by Hindsight

In securities-fraud cases, courts routinely admonish plaintiffs that they are not permitted to rely on allegations of fraud by hindsight. In effect, courts disfavor plaintiffs\u27 use of evidence of bad outcomes to support claims of securities fraud. Disfavoring hindsight evidence appears to tap into a well known, well-understood, and intuitively accessible problem of human judgment of 20/20 hindsight. Events come to seem predictable after unfolding, and hence, bad outcomes must have been predicted by people in a position to make forecasts. Psychologists call this phenomenon the hindsight bias. The popularity of this doctrine among judges deciding securities cases suggests that judges actively seek techniques that enable them to correct for psychological biases that might otherwise affect their decision-making. This paper assesses the hypothesis that judges have adopted the fraud-by-hindsight doctrine so as to avoid erroneous judgment infected with the hindsight bias. We find that although judges have identified a real problem in human judgment, they are not developing a doctrine to remedy the influence of hindsight on judgment. Rather, they are using this problem of human judgment as the justification for expanding their authority to manage the complex, high-stakes securities cases that come before them. The result provides judges with the greater case-management authority they seek, but leaves the securities litigation without a meaningful doctrine to ameliorate the influence of hindsight on judgment

Investigating the Contract Production Process

Contract law and theory have traditionally paid little attention to the processes by which contracts are made. Instead, contracts among sophisticated parties are assumed to be full articulations of the desires of the parties; whatever the process, the outcome is the same. This article compares sovereign debt contracts from US and UK firms, with different production processes, that are trying to do the same thing under very similar legal regimes. We find that that the production process likely matters quite a bit to the final form that contracts take

Contractual Arbitrage

Contracts are inevitably incomplete. And standard-form or boilerplate commercial contracts are especially likely to be incomplete because they are approximations; they are not tailored to the needs of particular deals. Not only do these contracts contain gaps but, in an attempt to reduce incompleteness, they often contain clauses with vague or ambiguous terms. Terms with indeterminate meaning present opportunities for strategic behavior well after a contract has been concluded. This linguistic uncertainty in standard form commercial contracts creates an opportunity for “contractual arbitrage”: parties may argue, ex post, that the uncertainties in expression mean something that the contracting parties, ex ante, didn’t contemplate. We argue that the scope for contractual arbitrage is a direct function of the techniques that courts use to resolve ambiguities in boilerplate language. Using the much discussed case of NML v. Argentina, we show how traditional contract doctrine, which uses a model of interpretation that essentially treats all contracts as finely tailored, can produce a fertile setting for the growth of contractual arbitrage in standard form commercial contracting when courts give indeterminate terms idiosyncratic meaning. When this practice occurs in contexts where individual parties are reluctant due to collective action problems to revise boilerplate terms that are given idiosyncratic meaning, the continued use of the terms can lead to a dramatic increase in social costs

Variation in Boilerplate: Rational Design or Random Mutation?

Standard contract doctrine presumes that sophisticated parties choose their terminology carefully because they want courts or counterparts to understand what they intended. The implication of this “Rational Design” model of rational behavior is that courts should pay careful attention to the precise phrasing of contracts. Using a study of the sovereign bond market, we examine the Rational Design model as applied to standard-form contracting. In NML v. Argentina, federal courts in New York attached importance to the precise phrasing of the boilerplate contracts at issue. The industry promptly condemned the decision for a supposedly erroneous interpretation of a variant of a hoary boilerplate clause. Utilizing data on how contracting practices responded to the decision, we ask whether the market response indicates that parties in fact intended for the small variations in their contract language to embody a particular meaning. We find the data supports a model closer to random mutation rather than rational design

The Black Hole Problem in Commercial Boilerplate

Rote use of a standard form contract term can erode its meaning, a phenomenon made worse when the process of encrustation introduces various formulations of the term. The foregoing process, when it occurs, weakens the communicative properties of boilerplate terms, leading some terms to lose much, if not all, meaning. In theory, if a clause is completely emptied of meaning through this process it can create a contractual “black hole.” The more frequent and thus potentially more pervasive problem arises when, as the term loses meaning, random variations in language appear and persist, resulting in what we term a “grey hole.” The question that follows is what interpretive strategy courts should use when parties exploit these variations, persuading a court to adopt an interpretation of the grey hole term that (a) surprises the market that previously had disregarded the term and (b) results in an interpretation that the market disavows. Traditional doctrine holds that even if the court errs, parties have an incentive to revise the standard language to exclude the aberrant interpretation. But what if the assumptions about the costs and motivations to revise this type of boilerplate are wrong? We seek to gain purchase on this question with a study of the pari passu clause, a standard provision in sovereign debt contracts that almost no one seems to understand. This clause gained fame in 2011 because of a series of court decisions in New York arguably misinterpreting a particular variation of the clause. Even though the courts’ interpretation put at risk a multi-trillion dollar debt market, meaningful revisions to the language of the boilerplate term did not begin to appear until late 2014. Market forces, in other words, worked very slowly to remedy a major systemic problem, leading to considerable costs. We ask, therefore, whether courts might not do more to avoid the problem at the front end rather than depend on market forces to correct court error at the back end

Attention control in autism: Eye-tracking findings from pre-school children in a low- and middle-income country setting

Alterations in the development of attention control and learning have been associated with autism and can be measured using the ‘antisaccade task’, which assesses a child’s ability to make an oculomotor response away from a distracting stimulus, and learn to instead anticipate a later reward. We aimed to assess these cognitive processes using portable eye-tracking in an understudied population of pre-school children with and without a diagnosis of autism spectrum disorder in community settings in New Delhi, India. The eye-tracking antisaccade task was presented to children in three groups (n = 104) (children with a clinical diagnosis of autism spectrum disorder or intellectual disability and children meeting developmental milestones). In accordance with findings from high-income, laboratory-based environments, children learnt to anticipate looks towards a reward, as well as inhibit eye-movements towards a distractor stimulus. We also provide novel evidence that while differences in inhibition responses might be applicable to multiple developmental conditions, a reduced learning to anticipate looks towards a target in this age group may be specific to autism. This eye-tracking task may, therefore, have the potential to identify and assess autism specific traits across development, and be used in longitudinal research studies such as investigating response to intervention in low-resource settings

Cytokine profiles in patients with lower limb ischaemia

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