the economics of a blend mandate for biofuels a biofuel blend mandate may increase or decrease consumer fuel prices with endogenous oil prices depending on relative supply elasticities biofuel tax credits always reduce fuel prices tax credits result in lower fuel prices than under a mandate for the same level of biofuel production if tax credits are implemented alongside mandates then tax credits subsidize fuel consumption instead of biofuels this contradicts energy policy goals by increasing oil dependency co 2 emissions and traffic congestion while providing little benefit to either corn or ethanol producers these social costs will be substantial with tax credits costing taxpayers 28 7 billion annually by 2022 copyright 2008 oxford university press

the ex dividend day behavior of canadian stock prices tax changes and clientele effects with some simple assumptions the ex dividend day price drop and the associated dividend can be used to measure the market s marginal tax rate previous research has estimated the implied tax rate for the u s this paper extends the analysis to canada where the tax treatment of dividends and capital gains is completely different from that in the u s the paper also presents estimates from 1970 80 to include four distinct periods when the tax treatment was different hence we include an implied test of market efficiency as well as those for the relevance of taxes and the existence of tax based dividend clienteles

comparing consumption based asset pricing models we make use of a recently developed method to estimate the intertemporal mar ginal rate of substitution consistent with the fluctuations of asset return data from the toronto stock exchange these estimates are then used to evaluate various parametric specifications for preferences often used in empirical studies of consumption and asset returns in contrast to existing studies we are able to perform a formal statistical comparison of these models we consider six extensions of the usual power utility model and we find that none can be said to be a demonstrable improvement on the standard model

multivariate tests of the zero beta capm abstract a cross sectional regression test csrt of the capm is developed and its connection to the hotelling t2 test of multivariate statistical analysis is explored algebraic relations between the csrt the likehood ratio test and the langrange multiplier test are derived and a useful small sample bound on the distribution function of the csrt is obtained an application of the csrt suggests that the crsp equally weighted index is inefficient but that the inefficiency is not explained by a firm size effect from february to december

a joint test of market segmentation and exchange risk factor in international capital market market segmentation and exchange risk are two main factors that distinguish international financing and investment decisions from domestic ones existing studies of market segmentation have been conducted within a framework in which exchange risk is not explicitly recognized this paper performs a joint test of market segmentation and exchange risk pricing based on individual stock data from seven major countries outside of the u s for the period january 1981 to december 1989 the theoretical framework used is a multifactor model with domestic and world market factors and an exchange risk factor the maximum likelihood method is used to estimate risk premia and factor analysis is used to provide additional evidence on the pricing of risk factors the results indicate that a the factor structure of asset returns is internationally heterogeneous b many national capital markets can be described as partially segmented rather than the polar cases of complete segmentation or integration and c exchange risk is a significant factor affecting asset returns in addition to the domestic and world market risk factors

welfare impacts of alternative biofuel and energy policies an open economy equilibrium model is derived to investigate the effects of energy policy on the u s economy with emphasis on corn based ethanol a second best policy of a fuel tax and ethanol subsidy is found to approximate fairly closely the welfare gains associated with the first best policy of an optimal carbon tax and tariffs on traded goods the largest economic gains to the u s economy from these energy policies arise from their impact on u s terms of trade particularly in the oil market conditional on the current fuel tax an optimal ethanol mandate is superior to an optimal ethanol subsidy copyright 2011 oxford university press

the impact of mergers and acquisitions on company employment in the united kingdom abstract this paper provides a systematic empirical analysis of the effects of take over and merger activity on firm employment in the united kingdom using a specially constructed database for the period 1967 1996 our results indicate that significant rationalisations in the use of labour occur as firms reduce joint output and increase efficiency post merger these effects are particularly pronounced in the case of related and especially hostile mergers

the turn of the year in canada a number of investigators have reported that january stock returns in the u s exceed returns for other months of the year this paper documents a similar finding for canadian stocks over the period 1951 1980 however canada did not introduce a capital gains tax until 1973 and the paper reports that january returns in canada exceed returns for other months of the year before and after this date thus these data do not support the tax loss selling pressure hypothesis as the entire explanation for the turnof the year effect in stock returns nor by implication do they support the tax lossselling pressure hypothesis as the complete explanation for the small firm effect in u s stocks returns recently keim 9 has reported that returns on nyse and ase firms with small market values exceed by significant margins returns on firms with large market values this result was previously reported by banz 1 and reinganum 11 but keim s analysis shows that most of the excess return for small firms is concentrated in january indeed it is concentrated in the first two weeks in january roll 13 also documents this phenomenon and investigates a number of possible explanations for it 2 after rejecting several possible nonexploitable explanations roll is left with year end tax loss selling pressure of the sort discussed by branch 2 dyl 5 and givoly and ovadia 6 as the most likely explanation of this result according to the tax loss selling pressure hypothesis toward the end of the year stockholders sell stocks that have declined in price during the year investors do this to take advantage of the opportunity to write off capital losses against ordinary income in computing their federal income taxes the year end sell off exerts downward pressure on stock prices as soon as the tax and calendar year ends the selling pressure is relieved and stock prices quickly rebound to their equilibrium levels roll 13 presents some evidence consistent with this hypothesis specifically he finds a negative correlation between stock returns in january and returns over the previous 12 months that is stocks that decrease in value during the year tend to be big gainers in january roll also finds that

an empirical investigation of international asset pricing we investigate several asset pricing models in an international setting we use data on a large number of assets traded in the united states japan the united kingdom and france the models together with the hypothesis of capital market integration imply testable restrictions on multivariate regressions relating asset returns to various benchmark portfolios we find that multifactor models tend to outperform single index models in both domestic and international forms especially in their ability to explain seasonality in asset returns we also find that the behavior of the models is affected by changes in the regulatory environment in international markets

removing distortions in the u s ethanol market what does it imply for the united states and brazil we analyze the impact of trade liberalization and removal of the federal tax credit in the united states on ethanol markets using a multimarket international ethanol model we find that u s trade barriers have been effective in protecting the ethanol industry under current policy there is separability of the u s ethanol market from world markets with trade liberalization the ethanol market deepens making it less susceptible to price volatility the effect of trade liberalization extends beyond ethanol markets affecting agricultural markets the results show that the impact of removal of the tax credit overrides the impact of the tariff removal copyright 2008 oxford university press

does britain or the united states have the right gasoline tax this paper develops an analytical framework to assess the second best optimal level of gasoline taxation taking into account unpriced pollution congestion and accident externalities as well as interactions with the broader fiscal system we provide calculations of the optimal taxes for the us and the uk under a variety of parameter scenarios under our central parameter values the second best optimal gasoline tax is 1 01 gal for the us and 1 34 gal for the uk current tax rates are much lower than this in the us and higher in the uk the calculations are moderately sensitive to alternative parameter assumptions the congestion externality is the largest component in both nations revenue raising needs also play a significant role as do accident externalities and local air pollution potential welfare gains from reducing the current uk tax rate are estimated at nearly one fourth the production cost of all gasoline used in the uk even larger gains could be achieved by switching to a tax on vehicle miles with equal revenue yield for the us the welfare gains from optimizing the gasoline tax are smaller but those from switching to an optimal tax on vehicle miles are very large

a multivariate garch model of international transmissions of stock returns and volatility the case of the united states and canada this study examines the short run dynamics of returns and volatility for stocks traded on the new york and toronto stock exchanges the main finding is that inferences about the magnitude and persistence of return innovations that originate in either market and that transmit to the other market depend importantly on how the cross market dynamics in volatility are modeled moreover much weaker cross market dynamics in returns and volatility prevail during later subperiods and especially for canadian stocks with shares dually listed in new york implications for international asset pricing hedging strategies and regulatory policy are discussed

intraday market price integration for shares cross listed internationally this study investigates market price integration by testing per share trade execution price or cost tep c differentials for matched intraday trades for a sample of canadian shares cross listed in the u s the tse trade price advantage over the entire time period changed significantly after both the tse s own minimum quotation increment reduction and that of its u s competitors we show that the differential tep c is equivalent to the international effective spread differential and that market quality comparisons which benchmark using the national instead of the international bbo need to compare both national effective half spread and midspread differences our cross sectional regression results support our predictions that tep c differentials can be explained by differences in national midspreads and by ex ante proxies of national effective half spreads the tep c differentials vary inversely with increasing levels of our measure of signed market nonfragmentation

pricing capital assets in an international setting an introduction this paper shows how differences across countries of 1 inflation rates 2 consumption baskets of investors and 3 investment opportunity sets of investors matter when one applies capital asset pricing models in an international setting in particular the fact that countries differ is shown to affect the portfolio held by investors the equilibrium expected returns of risky assets and the financial policies of firms

globalization and the value of us listing revisiting canadian evidence abstract as capital markets become integrated the value of foreign listing and consequently the number of foreign listings should be expected to decline the dramatic surge in foreign listings on us stock exchanges in recent years suggests that motivations and value of listing may also be changing as markets become increasingly globalized we explore this issue by comparing both short and long run valuation effects of canadian listings in the us in pre and post 1990 periods we document that the positive price and liquidity effects for canadian stocks surrounding us listing have declined over time the analysis of long run performance however shows that canadian firms list in the us after a strong market performance but underperform canadian market indexes by 13 30 over the three years after the listing in both pre and post 1990 periods further the determinants of long run performance appear to be significantly different from that in the short run our evidence suggests that valuation effects of us listing may be driven by several factors including liquidity and industry factors that vary cross sectionally and over time

integration vs segmentation in the canadian stock market this paper examines the issue of integration versus segmentation of the canadian equity market relative to a global north american market we compare the international and domestic versions of the capm and find that integration or the mean variance efficiency of the global market index is rejected by the data segmentation is the preferred model based on a maximum likelihood procedure correcting for thin trading we further divide the sample into securities that are interlisted in canada and the u s and those that are not integration is rejected for both groups which indicates that the source of segmentation can be traced to legal barriers based on the nationality of issuing firms empirical studies of international capital markets have left the issue of segmentation versus integration largely unresolved yet the question of national or international pricing of assets has crucial implications for financial decisions if national stock markets are segmented then international portfolios should display superior risk adjusted performance because some of the priced domestic systematic risk is diversifiable also with segmentation many irrelevance propositions for corporate financial strategy break down home firms face optimal hedging decisions as well as optimal foreign versus home borrowing decisions finally criteria for capital budgeting decisions will be quite different under national and international pricing the purpose of this paper is to shed some light on this integration versus segmentation question for the canadian equity market vis a vis a global north american market in this paper integration is defined2 as a situation where investors earn the same risk adjusted expected return on similar financial instruments in different national markets the key problem of course is the pricing

international listings of stocks the case of canada and the u s the globalization of financial markets has seen ever increasing numbers of firms choosing to list their stocks on foreign exchanges we examine whether the extent of economic and financial market integration or segmentation between a firm s home country and listing country influences stock price reaction by examining the case of two similar countries the u s and canada during the 100 days before the week of interlisting in the u s risk adjusted stock prices of canadian firms rise on average by over 9 4 rise by an additional 2 around the interlisting date but follow with a corresponding drop of 9 7 in the 100 days after interlisting we interpret this evidence to be consistent with the financial market segmentation between canada and the u s however a subsample of canadian resource firms does not exhibit these stock price effects suggesting industry related factors may also be an important determinant of integration we also find average trading volume in interlisted stocks more than doubles in the months following interlisting

the employment consequences of private equity acquisitions the case of institutional buy outs there is a growing controversy as to the impact of private equity acquisitions especially in terms of their impact on employment and subsequent organizational performance it has been suggested that closer owner supervision and the injection of a new management team revitalize the acquired organization and unlock dormant capabilities and value however both politicians and trade unionists suggest that private equity acquirers may significantly reallocate value away from employees to short term investors typically through layoffs and reduced wages which may undermine future organizational sustainability this article investigates this in the context of a sample of institutional buy outs ibos undertaken in the uk between 1997 and 2006 specifically we examine the impact of ibos on both employment and remuneration against two control groups of non acquired firms in designing our study we follow the empirical approach taken by conyon et al 2001 and conyon et al 2002 in investigating the employment consequences of regular takeovers our main finding is a significant loss in employment in firms subject to an ibo in the year immediately following the acquisition as well as lower wage rates when compared to either of the two control groups furthermore we find no evidence of a subsequent improvement either in productivity or profitability in the acquired businesses

additional evidence on integration in the canadian stock market this paper reexamines the integration of the canadian and u s stock markets in the 1977 86 period that is relatively free from capital controls the study employs both the capm and the apt frameworks under both models the evidence is consistent with segmentation in the 1977 81 subperiod but supports integration in the 1982 86 subperiod using the apt framework we also find that the canadian stocks interlisted on the u s exchanges and nasdaq are priced in an integrated market and segmentation is predominant for the non interlisted canadian stocks in a study using an international capm framework jorion and schwartz 1986 find strong evidence of segmentation in the pricing of canadian stocks relative to a north american market comprising the canadian and u s stock markets the rejection of integration holds for canadian stocks that are interlisted on the u s stock exchanges and nasdaq as well as for domestic canadian stocks that are listed only on the canadian stock exchanges their results are surprising since the canadian and u s economies are highly integrated and the structure and regulation of security markets in the two countries are similar as well the canadian stocks interlisted on the u s stock exchanges list under the same regulation as the domestic u s stocks thus ex ante we would expect the canadian and u s stock markets to be integrated especially for the interlisted stocks 1 this study reexamines the integration in the canadian market employing both the capm and the apt frameworks since tests of market integration are joint tests of a specified model and market integration a relevant question is whether the two models produce different inferences pertaining to the integration issue in addition we explore this issue in a period that is

a unified beta pricing theory abstract this paper derives ross s mutual fund separation theory and a new equilibrium version of ross s arbitrage pricing theory as special cases of a general theory the paper also reveals that the two theories are identical in their predictions of asset prices and portfolio returns the capital asset pricing model a restricted case of the mutual fund separation theory receives special treatment

the economic effects of climate change greenhouse gas emissions are fundamental both to the world s energy system and to its food production the production of co2 the predominant gas implicated in climate change is intrinsic to fossil fuel combustion specifically thermal energy is generated by breaking the chemical bonds in the carbohydrates oil coal and natural gas and oxidizing the components to co2 and h2o one cannot have cheap energy without carbon dioxide emissions similarly methane ch4 emissions an important greenhouse gas in its own right are necessary to prevent the build up of hydrogen in anaerobic digestion and decomposition one cannot have beef mutton dairy or rice without methane emissions climate change is the mother of all externalities larger more complex and more uncertain than any other environmental problem the sources of greenhouse gas emissions are more diffuse than any other environmental problem every company every farm every household emits some greenhouse gases the effects are similarly pervasive weather affects agriculture energy use health and many aspects of nature which in turn affects everything and everyone the causes and consequences of climate change are very diverse and those in low income countries who contribute least to climate change are most vulnerable to its effects climate change is also a long term problem some greenhouse gases have an atmospheric life time measured in tens of thousands of years the quantities of emissions involved are enormous in 2000 carbon dioxide emissions alone and excluding land use change were 24 billion metric tons of carbon dioxide tco2

valuation effects of foreign company listings on u s exchanges this study examines post listing equity price performance of foreign firms which cross listed sponsored american depository receipts adrs on the new york and the american stock exchanges during the period 1982 1992 we use three valuation metrics price to book price to cash earnings and price to earnings which are adjusted for the home country and world industry indices to which the listing firm s stock belongs we find positive valuation effects associated with cross listing for both country benchmarked and industry benchmarked price ratios variables that proxy for home country characteristics such as governance styles disclosure quality market liquidity and so forth are unable to explain the cross sectional variation in the data our results thus suggest that cross listing in the u s enhances valuations for listing firms by simply reducing the overall effect of segmentation among different national securities markets

the welfare economics of a biofuel tax credit and the interaction effects with price contingent farm subsidies a framework is developed to analyze the effects of a biofuel consumer tax exemption and the interaction effects with a price contingent farm subsidy ethanol prices rise above the gasoline price by the amount of the tax credit corn farmers gain directly while gasoline consumers only gain from any reduction in world oil prices due to the extra ethanol production domestic oil producers lose historically the intercept of the ethanol supply curve is above the gasoline price hence part of the tax credit is redundant and represents rectangular deadweight costs that dwarf triangular deadweight cost measures of traditional farm subsidies copyright 2007 oxford university press

the effects of market segmentation and investor recognition on asset prices evidence from foreign stocks listing in the united states non u s firms cross listing shares on u s exchanges as american depositary receipts earn cumulative abnormal returns of 19 percent during the year before listing and an additional 1 20 percent during the listing week but incur a loss of 14 percent during the year following listing we show how these unusual share price changes are robust to changing market risk exposures and are related to an expansion of the shareholder base and to the amount of capital raised at the time of listing our tests provide support for the market segmentation hypothesis and merton s 1987 investor recognition hypothesis the globalization of u s capital markets has accelerated dramatically in the past decade increasing numbers of companies from overseas have chosen to either raise capital through global equity issues or prepare for future capital raising by way of cross listings on u s exchanges as of 1997 about 1 300 non u s companies have listed their shares for trading on the new york stock exchange nyse the american exchange amex the national association of securities dealers automation quotation nasdaq system or

compensation across executive labor markets what can we learn from cross listed firms there is wide consensus that chief executive officers ceos of us firms earn significantly more than their canadian counterparts using a matched sample we find that the majority of this difference is due to us ceos earning 50 more than ceos of canadian non cross listed firms we find no such us premium for canadian cross listed firms because the use of options allows the cross listed firms to keep pace with their neighbors to the south while firms that list only in canada compete in the labor market defined by their national boundary cross listed firms appear to be competing directly with their us counterparts for executive talent in investigating alternative explanations for the elimination of the compensation differential for canadian cross listed firms we find evidence consistent with both the bonding and the rent extraction hypotheses

emerging market exchange rate exposure abstract we estimate the exposure of emerging market companies to fluctuations in their domestic exchange rates we use an instrumental variable approach that identifies the total exposure of a company to exchange rate movements yet abstracts from the influence of confounding macroeconomic shocks in the sub period of 1999 2002 we find that depreciations tend to have a negative impact on emerging market stock returns in the sub period of 2002 2006 this tendency has largely disappeared since we estimate the exchange rate exposure of firms from different countries with a common set of instruments we can make coherent cross country comparisons of their determinants we find that the impact of various measures of debt on exchange rate exposure which is negative and significant in the early sub period becomes insignificant and even reverses sign in the recent sub period

general factor models and the structure of security returns based on markowitz s pioneering study 40 sharpe 56 and lintner 38 advanced the first positivist formulations of the capital asset pricing model capm their models were subsequently refined by mossin 45 fama 15 black 1 and others even though the capm has been studied extensively it has not been empirically validated according to roll 48 the capm cannot be tested in an unambiguous fashion because of a number of intractable measurement and computational difficulties and the joint nature of the hypotheses to be tested

capital controls and international capital market segmentation the evidence from the japanese and american stock markets the paper focuses on two countries japan and the u s to test the integration of capital markets in japan the enactment of the foreign exchange and foreign trade control law in december of 1980 amounted to a true regime switch that virtually eliminated capital controls using multifactor asset pricing models we show that the price of risk in the u s and japanese stock markets was different before but not after the liberalization this evidence supports the view that governments are the source of international capital market segmentation the notion that world capital markets are perfectly integrated is central to most theoretical developments in both international finance and macroeconomics indeed it also lies behind much of the recent international policy discussion capital markets are integrated if assets with perfectly correlated rates of return have the same price regardless of the location in which they are traded 1 segmentation may arise either because of government impediments to capital movements or because of individuals attitudes or irrationality if the hypothesis that the international capital markets are integrated is rejected there is still an important empirical question left unanswered which is related to the source of segmentation while there is a rich body of theoretical research on international market integration only a few studies have tried to investigate this important question empirically a first group of empirical studies on market integration has generally adopted

automobile externalities and policies this paper discusses the nature and magnitude of externalities associated with automobile use including local and global pollution oil dependence traffic congestion and traffic accidents it then discusses current federal policies affecting these externalities including fuel taxes fuel economy and emissions standards and alternative fuel policies summarizing insofar as possible the welfare effects of those policies finally we discuss emerging pricing policies including congestion tolls and insurance reform and summarize the appropriate combination of policies to address automobile externalities

an investigation of the determinants of manufacturing employment in the united kingdom in this paper we present and estimate an adjustment cost model of industry employment which takes explicit account of both expectations and aggregation over different labour types the resulting model is subject to a large number of tests and is a highly robust representation of the data finally forecasts are produced for manufacturing employment up to 1990