an alternative approach to housing market segmentation using hedonic price data abstract much empirical research has been devoted to housing market segmentation and the implications for the application of the hedonic price model market segmentation is demonstrated empirically in j urban econ 3 2 146 166 1976 j urban econ 7 1 102 108 1980 rev econ statist 66 3 404 406 1974 there appears to be theoretical evidence j pol econ 82 1 34 55 1974 that such empirical efforts may have been less than adequate unfortunately the empirical applications of rosen s model j environ econ manag 5 81 102 1978 j urban econ 5 3 357 369 1978 do not seem to effectively account for the complexity of the factors which cause multiple equilibria market segmentation this paper demonstrates empirically that market segments can be defined along more dimensions than hitherto have been included in any analysis

can tax loss selling explain the january seasonal in stock returns this paper analyzes the tax loss selling hypothesis as an explanation of the january seasonal in stock returns and argues that rational tax loss selling implies little relation between the january seasonal and the long term loss empirical results show that the january seasonal is as strongly related to the long term loss as it is to the short term loss the evidence is inconsistent with a model that explains the january seasonal by optimal tax trading

portfolio rebalancing and the turn of the year effect this paper finds that for the 1935 1986 period the market s risk return relation does not have a january seasonal the findings differ from those of other studies due to the use of value weighted rather than equally weighted portfolios inferences are sensitive to the weighting procedure because of the small firm return patterns in january in particular even in those januaries for which the market return is negative small firm returns are positive and they are more positive the higher is beta this is consistent with the portfolio rebalancing explanation of the turn of the year effect since at least 1926 the average return on small firms in january has been unusually high a phenomenon known as the turn of the year effect in this paper we present new evidence regarding the risk return characteristics of small firms in january we find that for small firms there is a positively sloped riskreturn relation in both up and down markets this pattern is difficult to reconcile with the belief that the high return on small firms in january is equilibrium compensation for risk bearing we show how these patterns in small firms returns have led others to conclude that the market s risk return relation has a january seasonal in particular rozeff and kinney 21 and tinic and west 22 23 among others using equally weighted portfolios formed on the basis of historical betas have found a steeper slope for the capm s risk return relation in january than in other months we demonstrate that this pattern exists only for small firms consequently statistical inferences about the risk return relation are heavily dependent upon whether equally weighted or value weighted portfolio returns are used in the estimation we show that for 1935 86 when monthly cross sectional regressions are estimated using value weighted portfolio returns there is no more of a statistically significant difference in the estimated return to risk bearing in january than in the other eleven months of the year the notion that there is a january seasonal in the capm s risk return relation for the us has rapidly become accepted knowledge for example corhay hawawini and michel 6 accept this conclusion and investigate whether other

international environmental agreements the role of foresight the present paper attempts to bridge the gap between the cooperative and the non cooperative approach employed to examine the size of stable coalitions formed to address global environmental problems we do so by endowing countries with foresightedness that is by endogenizing the reaction of the coalition s members to a deviation by one member we assume that when a country contemplates withdrawing or joining an agreement it takes into account the reactions of other countries ignited by its own actions we identify conditions under which there always exists a unique set of farsighted stable ieas the new farsighted ieas can be much larger than those some of the previous models supported but are not always pareto efficient

can good architecture meet the market test abstract architectural quality is a public good characteristic of a building for which a market failure may occur a hedonic price equation for office space in downtown chicago is estimated to determine if the value of good architecture has been internalized by tenants or owners of commercial buildings the regression results indicate that a considerable rent premium is paid for good new architecture but not for good old architecture the results also yield information about the impact on office rent of other building characteristics such as age height location and amenities

climate policy under technology spillovers we study climate policy when there are technology spillovers between countries as there is no instrument that directly corrects for these externalities without an international climate agreement the non cooperative equilibrium depends on whether countries use tradable quotas or carbon taxes as their environmental policy instruments all countries are better off in the tax case than in the quota case two types of international climate agreements are then studied one is a kyoto type of agreement where each country is assigned a specific number of internationally tradable quotas in the second type of agreement a common carbon tax is used domestically in all countries none of the cases satisfy the conditions for the social optimum even if the quota price is equal to the pigovian level r d investments will be lower than what is socially optimal in the quota case it is also argued that the quota agreement gives higher r d expenditures and more abatement than the tax agreement

urban spatial variations in office commercial rents the role of spatial amenities and commercial zoning abstract the paper argues that traditional bid rent modeling is inadequate in providing the framework for empirically analyzing the whole array of location demand and most importantly supply side influences on office commercial rents within multinodal metropolises the analysis then proceeds with an alternative modeling scheme setting the stage for specifying long run reduced form office commercial rent functions differing from traditional hedonic formulations both within competitive and constrained land market settings using recent data on office commercial rents across nodes in greater los angeles the empirical analysis lends considerable support to those alternative model specifications accounting not only for firm amenities but also for worker amenities and local institutional controls

testing for the existence of office sub markets a comparison of evidence from two cities most conceptual and applied economic models of the structure of urban office markets have been developed from traditional location theory in their basic form these models tend to posit a trade of

farsighted coalitional stability abstract i define the largest consistent set a solution concept which applies to situations in which coalitions freely form but cannot make binding contracts act publicly and are fully farsighted in that a coalition considers the possibility that once it acts another coalition might react a third coalition might in turn react and so on without limit i establish weak nonemptiness conditions and apply it to strategic and coalitional form games and majority rule voting i argue that it improves on the von neumann morgenstern stable set as it is usually defined but is consistent with a generalization of the stable set as in the theory of social situations journal of economic literature classification numbers c70 c71

year end tax induced sales and stock market seasonality the paper relates two phenomena in the stock market the high return during the month of january and the apparent existence of widespread sales of stocks for tax purposes towards the end of the fiscal year the findings suggest that due to the taxinduced sales the price of many stocks over the last 35 years was temporarily depressed in december but recovered in the following january this price recovery is a major contributor to the high returns observed in january the tax effect is present in firms of all sizes but much more pronounced for small firms the analysis also indicates that a more precise identification of the tax switch candidates may prove that the taxinduced sales are in fact the sole contributor to the high january s returns the issue of seasonality in the stock market has attracted the attention of researchers for some time rozeff and kinney 13 present evidence of seasonality in the market index with the months of january and july having a peak return the seasonal movements in the average return in the market could not be fully accounted for by a corresponding seasonal pattern in the market risk they offer three explanations to this phenomenon tax induced sales release of accounting information and seasonal demand for cash the first explanation has received some support from recent research dyl 4 studied the effects of capital gain taxes on trading volumes of common stocks and concluded that capital gain taxes affect investors year end portfolio decisions and that this effect is in turn reflected in the trading volumes of common stocks in december p 174 mcenally 10 and branch 2 studied the effects of the tax induced trading on securities return and found that depressed stocks at the end of the year are likely to bounce back immediately after year end the existence of a pronounced seasonal behavior in the market might suggest some form of market inefficiency a strategy under which stocks are bought towards the end of the year and sold at the beginning of the following year might yield an abnormal return despite the seasonal behavior of stock returns it would be indeed surprising if this regularity which has not gone unnoticed by the financial community could be exploited to bring a risk adjusted excess return the objective of this paper is to examine jointly the two phenomena tax

portfolios in disguise window dressing in bond fund holdings abstract this paper builds on the limited body of research on window dressing by bond mutual funds our monthly bias free sample allows us to undertake a more comprehensive study than is possible with the quarterly data traditionally employed in otherwise similar studies we test window dressing in a straightforward manner using monthly undisclosed portfolios which makes it possible to compare changes in public debt allocations around quarterly disclosures our results support the hypothesis that window dressing patterns vary with market conditions we also conduct thorough tests that indicate the significant influence of fund size on window dressing individual analyses provide evidence that this cosmetic practice is not a widespread behaviour in the spanish bond fund industry

errors in recorded security prices and the turn of the year effect errors in recorded security prices are a source of misspecification in the market model if recorded price errors are sufficiently nonrandom they result in biased returns and in biased and inconsistent estimates of market model regression coefficients this paper argues that tax induced flow supply pressures cause end of the year recorded price errors to be nonrandom enough to create the appearance of anomalous turn of the year stock return behavior empirical tests of returns and market model regression coefficients during the turn of the year period cannot reject this errors in variables explanation of the turn ofthe year effect the turn of the year toy effect or january effect refers to the anomal ous behavior of stock returns during the last five trading days in december and the first five trading days in january this anomaly is of particular interest to financial researchers because it appears to be a small firm effect and the source of the majority of size related anomalies see keim 1985 reinganum 1981 and roll 1983a 1983b the interest in the toy effect is justified because of its implications concerning the validity of the capital asset pricing model capm and market efficiency in this paper we show that there is a price related effect operating during the toy period first we show that the magnitude of the toy return is inversely related to price when we control for price most of the size related toy effect found by reinganum 1983 and roll 1983a disappears second the data indicate that all firms have unusually high returns during the toy period compared with their returns during the rest of the year third we find seasonal shifts in the market model betas associated with the toy period furthermore we test the hypothesis that the toy effect is an errors in variables problem due to the use of the one eighth pricing convention in recording security prices and the accommodation of tax induced flow pressures by liquidity traders such as market

climate cooperation with technology investments and border carbon adjustment a central question in climate policy is whether early investments in low carbon technologies are a useful first step towards a more effective climate agreement in the future we introduce a climate cooperation model with endogenous r d investments where countries protect their international competitiveness via border carbon adjustments bca bca raises the scope for cooperation and leads to a non trivial relation between countries prior r d investments and participation in the coalition we find that early investments in r d render free riding more attractive therefore with delayed cooperation on emission abatement and ex ante r d investments the outcome is often characterized by high participation but inefficiently low technology investments and abatement

management of transnational commons coordination publicness and treaty formation this paper focuses on the formation of treaties to manage transnational commons when efforts must be coordinated among a minimal sized group so as to make cooperation worthwhile by focusing on mixed strategy equilibria we are con cerned with instances where the intentions of others are uncertain the number of required participants the pattern of payoffs transaction costs and the underlying technology of public supply aggregation are key factors behind the achievement of coordina tion we apply our analysis to explain the outcome of negotiations on stratospheric ozone depletion global warming acid rain and tropical deforesta tion jel q20 d70

subgame perfect cooperative agreements in a dynamic game of climate change abstract we model climate change as a dynamic game and prove existence of a unique subgame perfect nash equilibrium spne that is also markov perfect we interpret this unique spne as the business as usual bau equilibrium and show that if the countries are not sufficiently symmetric then the familiar trigger strategy equilibria may not be pareto improvements over the bau equilibrium and may even lack efficiency properties we then motivate and introduce a subgame perfect cooperative agreement as an improvement over the bau equilibrium in the sense that every country or coalition of countries is better off in every subgame irrespective of the extent of heterogeneity of the countries we characterize subgame perfect cooperative agreements and identify sufficient conditions for their existence we show that direct or indirect transfers between countries to balance the costs and benefits of controlling climate change are a necessity and not a matter of approach

investment decisions depend on portfolio disclosures a weekly database of retail money fund portfolio statistics is uneconomical for retail investors to observe so it allows direct comparison of disclosed and undisclosed portfolios this makes possible a more direct and unambiguous test for window dressing than elsewhere in the literature the analysis shows that funds allocating between government and private issues hold more in government issues around disclosures than at other times consistent with the theory that intermediaries prefer to disclose safer portfolios cross sectional comparisons locate the most intense rebalancing in the worst recent performers money managers are typically required to disclose their portfolios on prearranged dates whether investors receive new information depends on whether managers are influenced by the disclosure requirement managers can ignore the disclosure schedule when they invest in which case the disclosed portfolios will be unbiased albeit noisy estimates of their investing strategies alternatively they can plan their investing around the schedule by moving briefly into and out of the portfolios they prefer to disclose thereby reducing or destroying the power of the disclosures to reveal anything meaningful the goal of this paper is to establish which scenario best describes the behavior of money market mutual fund managers the idea that portfolio weights interact with disclosure dates surfaces now and again in the academic and trade literature surviving on circumstantial evidence rather than direct observation the odd behavior of asset prices around common disclosure dates particularly the end of the year comprises

international environmental agreements with mixed strategies and investment abstract we modify a canonical participation game used to study international environmental agreements iea considering both mixed and pure strategies at the participation stage and including a prior cost reducing investment stage the use of mixed strategies at the participation stage reverses a familiar result and also reverses the policy implication of that result with mixed strategies equilibrium participation and welfare are higher in equilibria that involve higher investment

international environmental agreements as evolutionary games this paper applies evolutionary game theory to international environmental agreements ieas contrary to stage game models barrett in j theor politics 11 519 541 1999 eur econ rev 45 1835 1850 2001 in an evolutionary equilibrium ee no signatory prefers to be outside the iea and the ee is robust to trembles with two populations there is a unique interior ee when there is decreasing returns to abatement and small asymmetry in the externality differences across populations at the interior ee transfers from the poor to the rich can increase payoffs for all nations but come at the expense of greater payoff inequality transfers can also eliminate the basin of attraction for the payoff inferior ee with decreasing returns to abatement and large asymmetry thus ieas such as the kyoto treaty predicated on the polluter pays and ability to pay principles may result in pareto inferior outcomes

does institutional ownership matter for international stock return comovement funding portuguese foundation for science and technology fct uid ges 00407 2013 ptdc iim fin 2977 2014 and european research council

providing global public goods under uncertainty abstract we study how uncertainty and risk aversion affect international agreements to supply global public goods we consider a benchmark model with homogeneous countries and linear payoffs when countries directly contribute to a public good uncertainty tends to lower signatories efforts but may increase participation despite risk aversion uncertainty may improve welfare in contrast when countries try to reduce a global public bad uncertainty tends to increase signatories efforts and decrease participation in that case an ex ante reduction of uncertainty may have a large positive multiplier effect on welfare

dynamic effects on the stability of international environmental agreements abstract in terms of the number of signatories one observes both large and small international environmental agreements the theoretical literature based on game theory discusses different concepts and mechanisms regarding stability of coalitions the conclusion has been reached that in all circumstances under farsightedness both large and small stable coalitions can occur this theory is based on behavioural reaction patterns but does not take account of the interaction with the dynamics of emission adjustments this paper shows that when these two dynamical processes are integrated large and small stable coalitions can still occur but only if the costs of emissions are relatively unimportant as compared with the costs of abatement

development aid and climate finance this paper discusses the implications of climate change for official transfers from rich countries the north to poor countries the south when the motivation for transfers is ethical rather than strategic traditional development transfers to increase income and reduce poverty are complemented by new financial flows to reduce greenhouse gas emissions mitigation transfers and become climate resilient adaptation transfers we find that in the absence of barriers to adaptation mitigation or development climate change will make isolated transfers less efficient a large part of their intended effect to increase income reduce emissions or boost climate resilience dissipates as the south reallocates its own resources to achieve the mitigation adaptation and consumption balance it prefers only in the case of least developed countries which are unable to adapt fully due to income constraints will adaptation support lead to more climate resilience in all other cases if the north wishes to change the balance between mitigation adaptation and consumption it should structure its transfers as matching grants which are tied to the south s own level of funding alternatively the north could provide an integrated climate compatible development package that recognizes the combined climate and development requirements of the south if the aim is to increase both mitigation and adaptation in the south development assistance that increases the income level can be an effective measure but only if there is an international agreement and the recipient country is not income constrained if the recipient country is very poor development aid may reduce adaptation effort

window dressing by pension fund managers this paper takes a first look at investment strategies of managers of 769 pension funds with total assets of 129 billion at the end of 1989 the data show that managers of these funds tend to oversell stocks that have performed poorly relative sales of losers accelerate in the fourth quarter when funds portfolios are closely examined by the sponsors this result supports the view that fund managers window dress their portfolios to impress sponsors and suggests that managers are evaluated on their individual stock selections and not just aggregate portfolio performance this abstract was borrowed from another version of this item

the turn of the year effect and tax loss selling by institutional investors prior studies attribute the turn of the year effect whereby small capitalization stocks earn unusually high returns in early january to tax loss selling by individual investors and window dressing by institutional investors my results suggest that a significant portion of the effect on turn of the year returns that prior studies attribute to window dressing is actually attributable to tax loss selling by institutional investors among small capitalization stocks i find that institutional investors with strong tax incentives and weak window dressing incentives realize significantly more losses in the fourth quarter than in the first three quarters of the calendar year and that their fourth quarter realized losses have a significant impact on turn of the year returns a one percentage point change in these institutional investors fourth quarter realized losses scaled by a firm s market capitalization results in an increase of 47 basis points in the firm s average daily return over the first three trading days of january which represents a 46 percent change for the mean firm

the information content of short interest a natural experiment an increase in the cost of selling short should increase the bearish information content of short interest announcements by driving relatively uninformed short sellers out of the market we extend the diamond and verrecchia 1987 model to include short selling against the box and test the extended model using a natural experiment based around the taxpayer relief act of 1997 tra97 tra97 made short selling more costly for those shorting against the box consistent with the implications of our extended model this increase in short selling costs strengthens the negative relationship between short interest and subsequent stock price performance post tra97

coalition formation in international environmental agreements and the role of institutions abstract the aim of this paper is to discuss the role played by international institutions in achieving effective international environmental agreements we emphasise the strategic nature of environmental negotiations and use a game theoretic model of coalitional bargaining to illustrate the main issues we argue that international institutions can intervene in the framing of the strategic interactions between countries i e setting the rules of the negotiation game and can influence the actual agreement reached when different outcomes of the negotiation game can be equilibria

seasonality in canadian stock prices a test of the tax loss selling hypothesis a popular hypothesis to explain the anomalous january returns of common stocks is based on the argument that there is considerable tax loss selling by investors toward the end of the year the purpose of this study is to test the tax loss selling hypothesis with data on canadian stocks although the introduction of capital gains tax in canada seems to have affected the behavior of stock returns the findings do not support the proposition that taxinduced trading is the sole cause ofthe seasonality in stock returns in canada i introduction over the past several years a number of studies have shown that the returns on common stocks in general and the stocks of small companies in particular tend to be abnormally high during the month of january keim 10 demonstrated quite clearly that a very high percentage of the abnormal positive returns gener ated on stocks with low market capitalizations occurs during january with the returns during the first five trading days of the year accounting for most of the anomalous behavior his results were recently confirmed by roll 14 who re ported that around 37 percent of the annual differences in the returns on the equally weighted and value weighted indices of nyse and amex stocks is ac counted for by what happens in the five trading days from the last trading day in december through the fourth trading day in january a popular hypothesis to explain the so called january effect in stock re turns is based on the argument that there is considerable end of the year tax lossselling by investors originally proposed by wachtel 19 it asserts that inves tors try to realize losses towards the end of the year to reduce their taxes thereby putting downward pressure on stock prices according to the hypothesis once

tax induced trading and the turn of the year anomaly an intraday study this study tests the tax induced trading hypothesis as an explanation of the turn of the year anomaly using canadian and u s intraday data since the canadian tax year end precedes the calendar year end by five business days tax effects may be isolated we find the anomaly is related to the degree of seller and buyer initiated trading and depends upon the incidence of the taxation year end seller initiated transactions at bid prices dominate until the tax year end after which buyer initiated trades at ask prices dominate the anomaly is a function of bid ask prices

a direct test of methods for inferring trade direction from intra day data this study directly tests the ability of several competing methods to identify market buy and sell orders using intra day quote and trade prices and identifies factors that affect the accuracy of the methods lee and ready s 1991 algorithm performs about the same as the tick test but the performance of both methods is worse than expected the results show that the use of either algorithm to classify trades can lead to significantly biased estimates of effective spreads and signed volume but the tick test provides better estimates of effective spreads and signed volume than lee and ready s method i introduction the use of intra day prices in empirical studies of securities markets is increasingly common and studies frequently require trades be identified as buyer or seller initiated unfortunately most data sets do not identify trade direction methods have however been proposed that allow trade direction to be inferred from adjacent prices and quotes the accuracy of these methods and the implica tions for microstructure research are still unresolved issues in large part because trade direction is unobservable in most financial data sets this study directly tests the ability of several competing methods to iden tify market buy and sell orders using intra day quote and trade prices the tests are conducted using the torq database a unique data set the new york stock exchange makes available to researchers that contains information on trades quotes and orders using the tick tests and lee and ready s lr hereafter 1991 method to classify trades as buys or sells and comparing the results to the direction of the actual orders i directly test the accuracy of the classification algorithms the tests also identify the factors that affect the accuracy of the clas sification methods additional tests demonstrate that using these algorithms can lead to biased inferences in two of their most common applications estimating effective spreads and signed volume trading test results also show that the tick

institutions and the turn of the year effect evidence from actual institutional trades abstract using a large proprietary database of institutional trades we investigate whether institutional investors drive the turn of the year toy effect institutions that engage in window dressing tax loss selling or risk shifting will contribute to the toy effect by selling small poorly performing stocks at the end of december and or buying those same stocks at the beginning of january we find abnormal pension fund selling in small stocks with poor past performance during the final trading days in december providing some support for the window dressing hypothesis however we find little evidence that institutional tax loss selling or risk shifting trading strategies contribute to toy returns furthermore stocks with no institutional trading around the year end exhibit considerably stronger toy return patterns than stocks in which institutions trade taken together our results suggest that institutions play a limited role in driving the toy effect

causes and seasonality of momentum profits with januaries a month in which lagged losers typically outperform lagged winners excluded the average monthly return to a momentum strategy for u s stocks was found to be 59 bps for non quarter ending months but 310 bps for quarter ending months the pattern was stronger for stocks with high levels of institutional trading and was particularly strong in december the results suggest that window dressing by institutional investors and tax loss selling contribute to stock return momentum investors using a momentum strategy should focus on quarter ending months and securities with high levels of institutional trading

optimal stock trading with personal taxes implications for prices and the abnormal january returns abstract the tax law confers upon the investor a timing option to realize capital losses and defer capital gains with the tax rate on long term gains and losses being about half the short term rate the law provides a second timing option to realize losses short term and gains long term if at all our theory and simulation over the 1962 1977 period establish that taxable investors should realize long term gains in high variance stocks and repurchase stock in order to realize potential future losses short term tax trading does not explain the small firm anomaly but predicts a seasonal pattern in trading volume which maps into a seasonal pattern in stock prices the january anomaly only if investors are irrational or ignorant of the price seasonality

do capital gain tax rate increases affect individual investors trading decisions abstract this paper examines individual investors short and long term trading reactions to the 1986 tax reform act s tra 86 capital gain tax rate increase consistent with a tax induced trading model we document a december 1986 change in year end trading patterns tra 86 also had long term effects on individual investors trading decisions the results suggest that individual investors were less more willing to sell accrued gain loss stocks after tra 86 our ability to document predicted trading behavior is in part due to our trading metric which captures individual investors selling activity better than the volume based metrics used in prior research

evidence on tax motivated securities trading behavior tax loss selling by investors in common stocks near the end of calendar years has been proposed as an explanation for the turn of the year effect in stock returns past analyses of this hypothesis have relied on inferential data we provide here some direct data from a compilation of over 80 000 actual common stock investment round trips by a sample of 3000 individual investors we find strong evidence of a concentration of loss taking trades late in the year and milder evidence of a concentration just prior to the dates when investments become eligible for long term tax treatment the question as to whether and in what manner the impostion of a tax on realized capital gains affects the securities trading behavior of investors who are subject to the tax has been a longstanding topic of research in the financial ecomonics literature the original attention devoted to the matter was motivated primarily by a concern about resource allocation and federal tax revenue consequences and was directed toward the phenomenon of what has been termed the lock in effect of a gains tax that issue has remained an important public policy one and continues today as part of the ongoing debate about appropriate strategies for reducing the federal budget deficit particular additional interest in the topic has emerged in recent years however because securities transactions undertaken systematically for tax reasons have also been proposed as part of the explanation for certain observed anomalies in historical common stock returns most prominently the well documented turn of the year effect our purpose here is to provide some new evidence that decisions by investors as to the timing of the realization of capital gains and losses from their common stock investments are significantly affected by tax considerations this evidence indicates that a difference in the tax rates applicable to realizations classified as short and long term influences the timing of individual investors trades and further that there is a clear tendency for trades by individuals which give rise to losses to be concentrated near the end of calendar which for them are also tax years while we cannot conclude that

portfolio disclosures and year end price shifts commercial paper sells at an extra discount if it matures in the next calendar year but treasury bills do not the discount is apparent in downward price shifts before the year end and upward price shifts at the turn of the year that are significantly correlated with the simultaneous returns to small stocks and that cannot reflect tax loss selling cross sectional and time series tests on prices as well as flow of funds evidence on trades by institutional investors indicate that both the debt and equity patterns reflect agency problems related to portfolio disclosures financial research has brought considerable analysis to bear on the turn of the year in the equity market but not the money market extant literature starting with keim and stambaugh 1986 reports similarities between equity market and money market price shifts in january but has not examined time series and cross sections of money market prices at the high resolution common in studies of the equity market repeating tests from the equity literature on money market prices this article finds a more precise and robust characterization of the price shifts this characterization combined with observations of year end shifts in money market holdings supports the view that intermediaries move prices with strategic responses to portfolio disclosures the main empirical result is that commercial paper pays a higher yield if it matures across the end of the year that is it imputes a forward premium for the holding period from the last trading day of one year to the first trading day of the next this premium is even higher for issues with more default risk and longer maturity as measured at the end of the year and has a substantial impact on yield spreads i argue that the forward premium reflects an abnormally high market price for bearing risk across the year end and that this high price reflects the disutility to intermediaries of showing risky portfolios to claimholders or regulators the connection between portfolio disclosures and price shifts was proposed by haugen and lakonishok hl 1988 as an explanation of the equity market january effect as originally documented by keim 1983 with monthly data

risk and return abstract this paper examines the seasonality in the basic relationship between expected return and risk during 1935 82 the results reveal that the positive relationship between return and risk is unique to january the risk premiums during the remaining eleven months are not significantly different from zero

seasonalities in nyse bid ask spreads and stock returns in january using end of month bid ask spreads for 540 nyse stocks over the period 1982 1987 we document a seasonal pattern in which both relative and absolute spreads decline from the end of december to the end of the following january cross sectional regressions do not however provide evidence of a significant correlation between changes in spreads at the turn of the year and january stock returns either there is no cause and effect relation between the coincidental seasonals in bid ask spreads and january returns for nyse stocks or the data are too noisy to reveal any relation bid ask spreads hatve played and continue to play an important role in explanations of the january effect in stock returns for example roll 1983 argues persuasively that high january returns are the result of tax loss selling pressure that occurs throughout the year which is released right after the beginning of the new tax year once the selling pressure is released stocks rise in price which results in high january returns however these predictable excess january returns cannot be exploited fully by arbitrageurs because of round trip transactions costs in the form of the bid ask spread this inhibitor to arbitrage is especially great for small or low priced stocks where historically high january returns have been most pronounced stoll and whaley 1983 take a different tack they do not focus on january returns per se but argue that the excess returns on small stocks are a result of higher proportional bid ask spreads in low priced stocks in their view the bid ask spread itself is the cause of the higher returns on small stocks that is because of the higher proportional cost of transacting in small stocks investors demand a higher rate of return in response keim 1983 and schultz 1983 point out that small stock excess returns are concentrated in january and a seasonal in stock returns cannot be explained by the bid ask spread unless there is a seasonal in the bid ask spread as well schultz 1983 compares bid ask spreads in december with those in june plus round trip commissions for a sample of 40 small capitalization new york stock exchange nyse stocks and finds no signifi

climate treaties and breakthrough technologies an effective climate change treaty must promote the joint supply of two global public goods climate change mitigation and knowledge of new technologies that can lower mitigation costs r d is especially needed to bring about substantial long term reductions in atmospheric concentrations of greenhouse gases for this will require the development and diffusion of revolutionary breakthrough technologies martin i hoffert et al 2002 in principle such an outcome could be realized by the kyoto protocol approach if that agreement were strengthened over time however that response may be inadequate kyoto makes no provision for r d and as i shall demonstrate unlikely to succeed can a treaty system relying directly on targeted r d and the adoption of breakthrough technologies perform better in this same setting of anarchic international relations i will show that as a general rule the answer is no essentially the same forces that undermine kyoto also challenge the r d and technology approach there is one exception to this rule r d leading to breakthrough technologies exhibiting increasing returns can improve dramatically on the kyoto approach even when these technologies are otherwise inferior to the alternatives available this suggests that our approach to treaty design should be strategic

british planning policy and access to housing some empirical estimates there is evidence that the implementation of the planning system creates scarcity rents for land in different uses by acting as a constraint on land supply this paper provides for 1984 estimat

information manipulation and climate agreements it appears that news media and some pro environmental organizations have the tendency to accentuate or even exaggerate the damage caused by climate change this article provides a rationale for this tendency by using a modified international environmental agreement iea model with asymmetric information we find that the information manipulation has an instrumental value as it ex post induces more countries to participate in an iea which will eventually enhance global welfare from the ex ante perspective however the impact that manipulating information has on the level of participation in an iea and on welfare is ambiguous

are seasonal anomalies real a ninety year perspective in recent years there has been a proliferation of empirical studies documenting unexpected or anomalous regularities in security rates of return in addition to the widely studied relation between firm size and rate of return 1 these include seasonal regularities related to the time of the day harris 1986 the day of the week see ball and bowers 1986 cross 1973 french 1980 gibbons and hess 1981 jaffe and westerfield 1985 keim and stambaugh 1984 and lakonishok and levi 1982 the time of the month ariel 1987 and the turn of the year see haugen and lakonishok 1988 jones pearce and wilson 1987 lakonishok

starting on the wrong foot seasonality in mutual fund performance abstract we document a systematic seasonal component in the aggregate underperformance of active mutual funds at the aggregate level active funds underperform the market and other passive benchmarks only in the first month of a quarter this intra quarter performance seasonality holds across fund sizes and investment styles the pattern is consistent with short term stock return reversal effects along with aggregate window dressing and to a lesser extent nav inflation practices around quarter ends we find marginal or no evidence of microstructure biases fund investor flows or cash distributions as sources of this seasonality our findings highlight new features of the active management underperformance puzzle

tax loss selling and the january effect evidence from municipal bond closed end funds this paper provides direct evidence supporting the tax loss selling hypothesis as an explanation of the january effect examining turn of the year return and volume patterns for municipal bond closed end funds which are held mostly by tax sensitive individual investors we document a january effect for these funds but not for their underlying assets we provide evidence that this effect can be largely explained by tax loss selling activities at the previous year end moreover we find that funds associated with brokerage firms display more tax loss selling behavior suggesting that tax counseling plays a role among the numerous stock return anomalies probably none has generated more interest than that of the turn of the year or january effect the phenomenon in which small capitalization stocks realize unusually high returns in early january 1 the literature offers a number of hypotheses to explain this phenomenon including the tax loss selling hypothesis the window dressing hypothesis the insider trading information release hypothesis and the seasonality of the risk return relation hypothesis given existing evidence in some support for the first two hypotheses the debate continues with respect to which of these the tax loss selling of individual investors or the window dressing of

the effect of holdings data frequency on conclusions about mutual fund behavior abstract a number of articles in financial economics have used quarterly or semi annual mutual fund holdings data to test hypotheses about investment manager behavior this article reexamines four well known hypotheses in finance to determine whether the results of prior tests of these hypotheses remain valid when higher frequency monthly holdings data are employed the areas examined are momentum trading tax motivated trading window dressing and tournament behavior we find that the use of monthly holdings data rather than quarterly holdings data or in the case of tournament behavior holdings data rather than monthly return data change and in some cases reverse previous results this occurs because monthly holdings data capture a large number of trades missed by quarterly data 18 5 of the trades and permit a more precise estimation of the timing of trades

the participation decision versus the level of participation in an environmental treaty a spatial probit analysis abstract this paper represents treaty participation as a two stage game for which nations first decide whether or not to participate and then they choose their level of participation the resulting subgame perfect equilibrium is used to derive a reduced form equation for estimating and separating the influences of the variables at the two decision stages this spatial probit equation forms the basis for a full information maximum likelihood estimator that accounts for the simultaneity bias associated with public good spillins at both stages when the procedure is applied to the helsinki protocol we find that the strategic influence of a variable may drastically differ depending upon which stage is scrutinized

participation games and international environmental agreements a non parametric model abstract we examine the size of stable coalitions in a participation game that has been used to model international environmental agreements cartel formation rd based on these examples a consensus has emerged that in this kind of game the equilibrium coalition size is small except possibly when the potential benefits of cooperation are also small in this paper we develop a non parametric approach to the problem and demonstrate that the conventional wisdom is not robust in a general setting we identify conditions under which the equilibrium coalition size can be large even when potential gains are large contrary to previously examined leading special cases we show that reductions in marginal abatement costs in an international environmental game can increase equilibrium membership and we provide a measure of the smallest reduction in costs needed to support a coalition of arbitrary size

institutions and individuals at the turn of the year this article evaluates the tax loss selling hypothesis against the window dressing hypothesis as explanations for turn of the year anomalies we examine differences between securities dominated by individual investors versus those dominated by institutional investors and find that the effect is more pervasive in the former controlling for capitalization we find that in early january late december stocks with greater individual investor interest outperform underperform stocks with greater institutional investor interest these results hold for both stocks that previously appreciated in value and stocks that previously depreciated in value the results are most consistent with the tax loss selling hypothesis as an explanation for the turn of the year effect

participation and duration of environmental agreements we analyze participation in international environmental agreements in a dynamic game in which countries pollute and invest in green technologies if complete contracts are feasible participants eliminate the holdup problem associated with their investments however most countries prefer to free ride rather than participate if investments are noncontractible countries face a holdup problem every time they negotiate but the free rider problem can be mitigated and significant participation is feasible participation becomes attractive because only large coalitions commit to long term agreements that circumvent the holdup problem under well specified conditions even the first best outcome is possible when the contract is incomplete

does voluntary participation undermine the coase theorem abstract the coase theorem states that costless enforcement of voluntary agreements yields efficient outcomes we argue that previous treatments fail to recognize the full meaning of voluntary it requires a two stage game a non cooperative participation decision followed by coaseian bargaining only among those who choose to participate we illustrate this in a simple public goods model and find outcomes ranging from extremely inefficient to fully efficient however the efficient equilibrium is not robust to even very small transaction costs thus we cast doubt on coaseian claims of universal efficiency finally we outline a kind of coercion that restores efficiency

the design of stable international environmental agreements economic theory and political economy international environmental agreements typically strive for the solution of a common property resource dilemma since the sovereignty of states precludes external enforcement international environmental agreements must be self enforcing game theoretical models explain why rewards and punishments imposed through the environmental externality generally fail to enforce full cooperation therefore environmental treaties incorporate provisions that enhance the incentives for participation such as transfers sanctions and linkage to other negotiation topics in international politics moreover interaction with markets and governments as well as the rules and procedures adopted in the negotiation process influence the design and the effectiveness of an international environmental agreement