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Using data from five major stock markets and a vector autoregression estimation procedure underpinned by the traditional intertemporal capital asset pricing model, initial evidence suggests that the UK investing community is particularly prejudiced in terms of short‐termist behaviour. The observed UK myopic outlook, however, may be more apparent than real. We hypothesize that UK investors are highly sensitive to uncertainty over future cash flows—a feature which is not being captured by traditional theoretical models. Motivated by the 'option value' approach, the evidence shows that uncertainty about UK economic conditions, as proxied by the spread between mortgage rates and base rates, can go some way in explaining the reported UK anomaly.

Using British county data for full‐time male manual workers we extend earlier work to investigate wage and earning curves. We distinguish between total earnings and hourly wages for standard hours, uncontaminated by overtime premium. Using data from 1980–1995 we find that earnings behaviour is dominated by volatile hours in the short run, while wage growth is highly sensitive to the level of unemployment as in the classical Phillips curve with macro data. Macro evidence for sticky wages is thus confirmed at the local level, and the wage curve of rapid adjustment is rejected for normal hourly wages.

Using British county data for full-time male manual workers, we extend earlier work to investigate wage & earning curves. We distinguish between total earnings & hourly wages for standard hours, uncontaminated by overtime premium. Using data from 1980-1995, we find that earnings behavior is dominated by volatile hours in the short run, while wage growth is highly sensitive to the level of unemployment as in the classical Phillips curve with macrodata. Macroevidence for sticky wages is thus confirmed at the local level, & the wage curve of rapid adjustment is rejected for normal hourly wages. 5 Tables, 1 Figure, 1 Appendix, 23 References. Adapted from the source document.