dividend changes abnormal returns and intra lndustry firm valuations previous empirical research has established that dividend changes are associated with sig nificant abnormal returns this association is rationalized on the basis that the dividend announcement acts as a signal of future earnings another body of research has documented the existence of intra industry transfers of information where news about one firm is extrapolated to other companies in the same industry earnings information transfers have been found to be positive in nature with good news about one company leading to stock price increases for rival firms linking dividend signaling and information transfer tests were constructed to ascertain whether the dividend change of one firm is associated with the stock price performance of other companies in the same industry the results indicate there is some small positive information transfer the magnitude of information transfer is related to the degree of the dividend surprise the recent dividend history of the other companies and correlations in stock returns between the dividend announcer and the other companies information transfer is found to affect earnings and earnings growth estimates of the other firms and this leads to revisions in their stock prices

models of stock returns a comparison in this paper a discrete mixture of normal distributions is proposed to explain the observed significant kurtosis fat tails and significant positive skewness in the distribution of daily rates of returns for a sample of common stocks and indexes stationarity tests on the parameter estimates of this discrete mixture of normal distributions model revealed significant differences in the mean estimates that can explain the observed skewness and significant differences in the variance estimates that can explain the observed kurtosis an alternative explanation for the observed fat tails is the symmetric student model the result of a comparison between the models is that the discrete mixture of normal distributions model has substantially more descriptive validity than the student model for many years both financial economists and statisticians have been concerned with the description of stock market returns the form of the distribution of stock returns is a crucial assumption for mean variance portfolio theory theoretical models of capital asset prices and the prices of contingent claims for example understanding the behavior of the variance is essential to option pricing models empirical tests of asset pricing models and the efficient markets hypothesis draw statistical inferences that are also conditional on distributional assumptions the most convenient assumption for financial theory and empirical methods is that the distribution of security rates of return be multivariate normal with parameters that are stationary over time since the normal distribution is stable under addition any arbitrary portfolio of stocks will also be normally distributed with the additional assumption of risk aversion mean variance theory follows furthermore the assumptions of normality and parameter stationarity are required for most of the econometric techniques typically used in empirical research tests of the normality hypothesis on the daily returns of the dow jones industrial stocks by fama 121 revealed more kurtosis fatter tails than that predicted from a sample of independent and identically distributed normal variates fama concluded from this evidence that the distribution of price changes conforms better to the stable paretian distribution with characteristic exponent

consistent estimation of cross sectional models in event studies event studies often include cross sectional regressions of announcement effects on exogenous variables if the event is voluntary and investors are rational then standard ols and gls estimators are inconsistent consistent ml estimators are constructed for a cross sectional model of horizontal mergers relating announcement effects to exgeneous characteristics of firms and industries the ols and ml estimates differ dramatically for bidders but not for targets the evidence suggests that managers of bidders but not targets have valuable private information about the potential synergies from proposed mergers article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

economics and politics the case of sugar tariff reform we study congressional voting on sugar tariff reform in 1912 to investigate theories of constituent influence on trade policy in this setting consumer interests enjoyed substantial political efficacy moreover since a variety of producer interests competed in the political marketplace we can evaluate which producer interests were most effective we explore these issues by integrating two techniques drawn from economics and political science overcoming some common problems encountered in political economy research we first conduct an event study to ascertain the relative incidence and importance of legislative events we then conduct a roll call regression on congressional votes to determine legislator responsiveness to different interest groups we find that wealthy and concentrated groups especially shareholders were not influential large unconcentrated groups in particular beet sugar laborers and sugar beet and sugarcane farmers were the most influential producer groups strikingly these la

equilibrium pricing and portfolio composition in the presence of uncertain parameters abstract we analyze the effect of parameter uncertainty on equilibrium asset prices for the symmetric case when the amount of estimation risk is the same for all securities the existing literature argues that parameter uncertainty is largely irrelevant for equilibrium our results differ we find that symmetric estimation risk affects equilibrium values of relative asset prices expected returns market weights and betas

a direct test of roll s conjecture on the firm size effect empirical research indicates that small firms earn higher average rates of return than large firms even after accounting for beta risk roll conjectured that the small firm effect might be attributed to improper estimation of security betas the evidence shows that while the direction of the bias in beta estimation is consistent with roll s conjecture the magnitude of the bias appears to be too small to explain the firm size effect

on the intergenerational allocation of natural resources it is known hartwick and others that under standard assumptions a society that invests in reproducible capital the competitive rents on its current extraction of exhaustible resources will enjoy a consumption stream constant in time it is shown here that this result can be interpreted as saying that an appropriately defined stock of capital including the initial endowment of resources is being maintained intact and that consumption can be interpreted as the interest on that patrimony this seems like a useful rule of thumb for policy

gradual incorporation of information pharmaceutical stocks and the evolution of president clinton s health care reform abstract we examine the effect of the evolution of president clinton s health care reform proposal over january 1992 october 1993 on pharmaceutical stock prices we identify a 52 3 percent decline in market adjusted prices which we then associate with health care reform applying a new technique isotonic regression we find most of the decline occurred gradually much of the decline occurred as the clinton plan adopted strategies to contain health care costs including managed competition and implicit regulation indirect evidence suggests that the wealth lost by pharmaceutical companies may have been largely an anticipated transfer our results are relevant to understanding the likely effects of the clinton plan and more recent proposals many other policy changes are marked by gradual public revelation of information which may not be completely observable by a researcher our approach may uncover information about the anticipated effects of policies unavailable from a traditional event study

intertemporal equity and efficient allocation of resources abstract competitive paths which are efficient are shown to satisfy a terminal cost minimization condition thereby providing a continuous time counterpart to the discrete time result due to malinvaud using this result competitive paths which are equitable and efficient are shown to satisfy hartwick s investment rule which states that the value of net investment is zero at each date our result indicates that hartwick s rule can help to signal inefficiency of competitive equitable paths journal of economic literature classification numbers c61 d90 o41

evaluation of china s electric energy efficiency under environmental constraints a dea cross efficiency model based on game relationship abstract the traditional data envelopment analysis dea model ignores the cooperation relationship among decision making units dmus so it is difficult to evaluate the dmus efficiency reasonably in this study we use a cross efficiency model considering the game relationship of dmus to evaluate and analyze the provincial electric energy efficiency of china the power industry panel data of china s 30 provinces from 2005 to 2014 are used to evaluate the energy efficiency of china s provincial power industry under environmental constraints in addition based on the obtained values of electric energy efficiency clustering analysis is implemented and the regional similarity in electric energy efficiency is analyzed the results indicate that in the past decade china s provincial electric energy efficiency has not significantly improved and efficiency values have a certain degree of volatility especially in western china in general the electric energy efficiency of eastern china is significantly higher than central and western china the clustering analysis further demonstrates that there is no polarization phenomenon in china s electric energy efficiency in recent years the electric energy efficiency of western china has been greatly improved with significant volatility it reveals that the electric energy efficiency of western china is sensitive to the environment the implementation of energy policies should be adapted to local conditions in the process of formulating policies for improving electric energy efficiency the provincial government should improve the regional opening up layout and establish effective coordination mechanisms among different regions

valuation effects of greenmail prohibitions greenmail payments are widely viewed as actions designed by managers to perpetuate their tenure in offiee this view which suggests that greenmail prohibitions would enhance shareholder wealth receives mixed empirical support in this paper the average market reaction to charter amendments prohibiting greenmail payments is weakly nega tive suggesting there is a value to maintaining managerial flexibility nonlinear maxi mum likelihood estimation however reveals a strong positive correlation between the market reaction and the firm s abnormal stock price runup over the three months just prior to the proxy mailing date for the subsample of firms with a relatively large prior runup the precommitment not to pay greenmail is value enhancing if the prior runup reflects takeover rumors then this evidence is consistent with the proposition that greenmail pay ments amidst takeover speculations are value decreasing

estimating the effects of information surprises and trading on stock returns using a mixed jump diffusion model i present a methodology that uses the mixed jump diffusion model for stock returns to estimate the separate effects of information surprises and strategic trading around corporate events using simulation techniques i show that for events with multiple announcements spread over a long time the estimators derived from the mixed jump diffusion model are more powerful compared to the traditional cumulative abnormal return estimators the new methodology is used to study the separate effects of information surprises and strategic trading associated with blockholdings and subsequent targeted repurchases i find that for more than 93 percent of the firms in our sample the mixed jump diffusion model is statistically superior to the pure diffusion model in describing stock returns more important i find a statistically significant negative effect due to trading while the average effect around announcements is statistically insignificant in contrast the standard cumulative abnormal return is not statistically different from zero article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the hartwick rule myths and facts we shed light on the hartwick rule for capital accumulation and resource depletion by providing semantic clarifications and investigating the implications and relevance of this rule we extend earlier results by establishing that the hartwick rule does not indicate sustainability and does not require substitutability between man made and naturalcapital we use a new class of simple counterexamples i to obtain the novel finding that a negative value of net investments need not entail that utility is unsustainable and ii to point out deficiencies in the literature

investigating security price performance in the presence of event date uncertainty abstract this paper introduces an event study method that incorporates the possibility of a random event date consistent with empirical evidence we assume an event may affect not only the conditional mean of a security s return but also its conditional variance we compare the statistical power and efficiency of our maximum likelihood method with the standard application of traditional event study methods to multiday security returns assuming a two day event period our empirical results provide evidence that the multiday approach is robust we use our maximum likelihood method to investigate the valuation effects of stock splits and stock dividends

characterizing sustainability the converse of hartwick s rule this note offers a general proof of the converse of hartwick s rule namely that in an economy with stationary instantaneous preferences and a stationary technology an efficient constant utility path is characterized by the value of net investments being zero at each point in time in a one consumption economy with two stocks a stock of a natural resource and a stock of man made capital this means that if consumption remains constant at the maximum sustainable level then the accumulation of man made capital always exactly compensates in value for the depletion of the natural resource

market rationality and dividend announcements abstract we investigate stock market rationality by examining the timeliness and unbiasedness of the market s response to dividend announcements our initial findings for market timeliness show a sluggish market reaction to dividend announcements however when the ex dividend effect is controlled for we find no evidence of a sluggish market reaction we examine the unbiasedness of the market s response by testing whether the net announcement effect across a sample that is devoid of ex post selection bias sums to zero we observe a significant positive net announcement effect and examine several plausible conjectures for this puzzling phenomenon but none provides a satisfactory explanation

genuine savings and sustainability genuine savings gs has emerged as the leading economic indicator of sustainable economic development at the country level it derives from the literatures on weak sustainability wealth accounting and national income accounting we discuss the theoretical underpinnings of gs focusing on the relationship between changes in a nation s extended capital stock and the future path of consumption the indicator has entered widespread use propelled by the world bank s publications despite its varying performance as a predictor for future consumption notwithstanding the extensive body of literature reviewed promising future research avenues are identified

hartwick s rule and maximin paths when the exhaustible resource has an amenity value abstract this paper studies the maximin paths of the canonical dasgupta heal solow model when the stock of natural capital is a direct argument of well being besides consumption hartwick s rule then appears as an efficient tool to characterize solutions in a variety of settings we start with the case without technical progress we obtain an explicit solution of the maximin problem in the case where production and utility are cobb douglas when the utility function is ces with a low elasticity of substitution between consumption and natural capital we show that it is optimal to preserve forever a critical level of natural capital determined endogeneously we then study how technical progress affects the optimal maximin paths in the cobb douglas utility case on the long run path of the economy capital production and consumption grow at a common constant rate while the resource stock decreases at a constant rate and is therefore completely depleted in the very long run a higher amenity value of the resource stock leads to faster economic growth but to a lower long run rate of depletion we then develop a complete analysis of the dynamics of the maximin problem when the sole source of well being is consumption and provide a numerical resolution of the model with resource amenity the economy consumes produces and invests less in the short run if the resource has an amenity value than if it does not whereas it is the contrary in the medium and long runs however and without surprise the resource stock remains for ever higher with resource amenity than without

sustainable development the hartwick rule and optimal growth defining sustainable development as non declining utility the consistency of this concept with the hartwick rule and optimal growth is explored when resources are exhaustible a simple proof that a generalized hartwick rule is necessary and sufficient for constant consumption is derived the existence of a maximal constant consumption path is shown to depend critically on the elasticity of substitution if this is less than 1 consumption declines if it is greater than 1 then consumption is not maximal if it is equal to 1 the cobb douglas case then existence is proved consumption can increase along an optimal path if the pure rate of time preference is 0 if it is non zero then consumption declines

risk aversion uncertain information and market efficiency abstract this paper develops and tests the uncertain information hypothesis as a means of explaining the response of rational risk averse investors to the arrival of unanticipated information the theory predicts that following news of a dramatic financial event both the risk and expected return of the affected companies increase systematically and that prices react more strongly to bad news than good an empirical investigation of over 9000 marketwide and firm specific events produces results consistent with these predictions we conclude that the market reacts to uncertain information in an efficient if not instantaneous manner

constant savings rates and quasi arithmetic population growth under exhaustible resource constraints in the dasgupta heal solow stiglitz dhss model of capital accumulation and resource depletion we show the following equivalence if an efficient path has constant gross and net of population growth savings rates then population growth must be quasi arithmetic and the path is a maximin or a classical utilitarian optimum conversely if a path is optimal according to maximin or classical utilitarianism with constant elasticity of marginal utility under quasi arithmetic population growth then the gross and net of population growth savings rates converge asymptotically to constants

differential interpretation of public signals and trade in speculative markets most models of trade in speculative markets assume that agents interpret public information identically we provide empirical evidence on the relation between the volume of trade and stock returns around public announcements and we argue that the evidence is inconsistent with this assumption we then develop a model of trade around public announcements that incorporates differential interpretations and is consistent with the observed volume return relation then we test the standard model of belief revision underlying most models of trade using stock brokerage research analysts earnings forecasts the hypthesis of identical interpretations seems inconsistent with the forecast revisions in these data

intertemporal equity and hartwick s rule in an exhaustible resource model in a standard exhaustible resource model it is known that if along a competitive path investment in the augmentable capital good equals the rents on the exhaustible resource known as hartwick s rule then the path is equitable in the sense that the consumption level is constant over time in this paper we show the converse of this result if a competitive path is equitable then it must satisfy hartwick s rule

event studies in economics and finance the event study is an important research tool in economics and finance the goal of an event study is to measure the effects of an economic event on the value of firms event study methods exploit the fact that given rationality in the marketplace the effects of an event will be reflected immediately in security prices thus the impact can be measured by examining security prices surrounding the event in this paper event study methods are described including some of the potential complications an example is included to illustrate the approach

the evaluation of electric energy consumption in the brazilian residential sector a technological improvement proposal in order to increase its efficiency abstract in light of brazil s socio economic development in the last 20 years the population has greater access to consumer goods hence impacting the escalating growth in electricity demand thereby resulting in the need for substantial investments in electricity generation and transmission in contrast government institutions have not taken effective measures to increase the energy efficiency of the most impactful energy consuming appliances which would reduce the need for energy investments through econometric models brazil s residential electricity consumption was projected up to 2030 and it is predicted that results can be achieved if through tax exemption the government can promote the use of more energy efficient technologies through an economic and financial evaluation our study analyzes the potential effects of a decrease in tax revenues for the state in light of lower investment needs in energy generation and distribution

the impact of ceo turnover on equity volatility this study investigates the effect on stock price volatility of a significant event in the life of the firm a change in its ceo we find significant long lived increases in volatility following ceo turnover after controlling for firm characteristics and marketwide volatility these increases are larger after forced departures and outside successions following voluntary departures stock prices also respond more strongly to earnings announcements following turnovers these results are consistent with more informative signals of value driving the increased volatility helping resolve two sources of uncertainty possible changes in the firm s strategy and doubt about the successor ceo s ability

predictable events and excess returns the case of dividend announcements abstract this paper hypothesizes that the risk per unit of time and the required rate of return are higher than normal during an event period whose timing can be predicted consistent with this hypothesis this paper presents empirical evidence indicating that the unconditional mean rate of return the variance of stock returns and their systematic risk are higher than usual during dividend announcement periods however the documented increases in the systematic risk are not large enough to fully explain the excess returns this finding is puzzling and hard to reconcile with existing theory

estimating the structure of market reaction to news information events and lumber futures prices we develop a new event study technique the distributional event response model derm appropriate to relatively slowly evolving information events we apply the model to twelve years of daily lumber futures prices and analyze the effects of three different types of information releases a monthly housing starts estimates b aperiodic administrative and judicial announcements about u s canada trade disputes and c novel and unprecedented court decisions related to the endangered species act esa the information releases are different in ways that predict their relative speeds of impoundment in prices we find that housing start events are absorbed more quickly than trade events which are absorbed more quickly than esa events

event studies in management research theoretical and empirical issues we examined the use of event studies in management research and found that there was inadequate attention paid to theoretical and research design issues this lack of attention may lead to false in

a normative empirical analysis of state duties and corporate responsibilities related to adverse human rights impacts on the amazonian minerals energy frontier abstract the article probes the existence of a minerals energy complex mec a concept developed in south africa to describe the strong interlinkages between the mining and energy sector in the brazilian amazon within the framework of the mec the authors conduct a normative analysis based on the united nations guiding principles for business and human rights ungps of the state duties and corporate responsibilities for adverse human rights impacts in the complex the authors use a single in depth case study approach focussing on the case of the belo monte hydroelectric dam in the amazonian state of para the mec proves to be a useful framework for studying the advancement of hydroelectricity and mining projects on the amazonian frontier the analysis indicates that the brazilian minerals and energy sectors are mutually dependent and have overlapping interests and decision making structures applying the mec framework to the belo monte case serves to clarify and detangle the relationships between the various actors associated with the dam s adverse impacts this provides a foundation for the normative analysis of the responsibilities and actions required of each actor based on the internationally accepted standards in the ungps by applying the mec as an analytical research framework and drawing on the ungps for normative guidance the present study contributes to the academic literature on corporate responsibility as well as providing policy and decision makers with a normative empirical analysis that can be drawn upon to improve policy and ensure that corporate activity contributes to sustainable development

interpreting common stock returns around proxy statement disclosures and annual shareholder meetings numerous studies have analyzed the stock market reaction to information released in proxy statements two possible biases in proxy statement research are suggested frequently misspecification of the return benchmark and a sample selection bias from analyzing only clean events this paper presents evidence that most of the conclusions of existing studies are not affected by these potential biases a significantly positive abnormal return was found around a random sample of shareholder meeting dates the result indicates that interpreting event study results for announcements occurring around annual shareholder meetings must be conducted carefully the results are consistent with the findings of kalay and loewenstein 14 who argue that risk and expected return can increase around predictable information producing events alternatively the study can be viewed as being consistent with several recent studies that find anomalous results using daily return data and large samples

trading behavior and the unbiasedness of the market reaction to dividend announcements this article examines the price formation process during dividend announcement day using daily closing prices and transactions data we find that the unconditional positive excess returns first documented by kalay and loewenstein 1985 are higher for small firm and low priced stocks price volatility and trading volume also increase during this period examination of trade prices relative to the bid ask spread and volume of trades at bid and asked prices shows that the excess returns cannot be attributed to measurement errors or to spillover effects of tax related ex day trading rather the price behavior is related to the absorption of dividend information