has discrimination lessened over time a test using baseball s all star vote i introduction the objective of this analysis is to examine changes in racial discrimination over time the labor market literature indicates that black white wage differentials have declined substantially in the last 45 years and most of that decline came before 1980 1 however the degree to which this was due to altered attitudes among whites increased productivity among blacks or corrective legislation is debated 2 most studies are not able to effectively test the hypothesis of changes in attitudes as attitudes are very difficult to observe some activities may be very indicative of attitudes though take voting for baseball s annual all star game each all star vote is cast anonymously the voter gets neither praise nor censure the cost of voting is low ballots are freely supplied at ballparks and filling them out takes but a minute or two to a large degree the reward is in the voting itself the voter is able to express his her opinion on an issue of interest there are no rules to be followed a fan can vote for a player because of his ability reputation performance team age appearance color or anything else the all star vote is as close to a pure expression of preference as is likely to be found if fans prefer white players to black all else equal black players should receive fewer votes than equivalent whites if those preferences change the vote differential should change in tandem this is the test that this article applies in an examination of all star voting from 1970 to 1996 baseball has long been a useful source of discrimination studies it has a clear and unambiguous history of discrimination in which owners players and fans have all been implicated 3 there are two particular advantages in looking to baseball for evidence of changes in discriminatory attitudes baseball has not been as directly influenced by the equal opportunity and affirmative action laws that are argued to have helped close the black white wage gap and baseball productivity can be controlled for in a relatively precise fashion while changes in the wage gap may have a variety of causes changes in an all star vote gap more plausibly reflect changes in attitudes therefore if we find the variance in all star votes unexplained by other factors and correlated with race has shrunk over time we will take it as support for the hypothesis that discriminatory attitudes have weakened the article will proceed as follows section ii discusses the all star vote and the underlying model section iii presents the analysis section iv concludes ii the all star game baseball s all star game has been played every year and twice per year for a short period since 1933 with the exception of the war year of 1945 it is held in the middle of the season and pits the best players from each of major league baseball s mlb two leagues the national and the american against each other various methods of selecting all star teams have gone in and out of vogue the game was first established through the efforts of arch ward sports editor of the chicago tribune as a special part of the 1933 chicago world s fair ballots were printed in the tribune and in several other major newspapers and fans voted for their favorite stars fan voting was dropped two years later in favor of selection by baseball s managers only to be re instituted in 1947 and abandoned a second time after ballot stuffing by cincinnati reds fans led to the election of seven reds to the starting line up in 1957 from 1958 to 1969 the starting all star line ups were chosen by a vote of the players themselves in 1970 baseball commissioner bowie kuhn re established the fan vote amid much ballyhoo the new system was a popular success and has remained in place ever since this study analyzes and compares fan votes over 26 years it begins with 1970 the year that the fan vote was re established ends with 1996 and fills in the middle with the votes of 1971 1973 1975 1977 1979 1980 1985 and 1990

investor preference for large firms new evidence on economies of size in the last several decades industrial organization literature has been replete with studies demonstrating a systematic relationship between accounting rates of return and firm size in the direction of greater and more stable accounting profits for larger firms these studies have been subject to criticism for an alarming number of statistical and conceptual problems the most important of which alleges a serious bias in accounting profit measures as proxies for economic profit 2 the criticisms have resulted in a stalemate in the interpretation of empirical evidence on firm size and performance nevertheless there is continued interest in the area ostensibly resulting from policy concerns with large firm advantages in both product and capital markets this paper provides new evidence concerning the industrial organization literature controversy of the connection between firm size and performance stock market data are used to examine the relationship between capital market returns risk and firm size the findings suggest that even if there were no advantages of large size in the product market equal rates of operating profit large firms would still have a substantial capital raising advantage over small firms this advantage is unrelated to the widely recognized floatation cost economies even after controlling for nondiversifiable risk using the capital asset pricing model capm investors still demonstrate a statistically significant and economically important preference for the securities of larger firms investors apparently place a premium on large firms which is not attributable to large firms observed lower risk as captured by the widely used measure of nondiversifiable risk beta risk this finding a fresh contribution to the

the estimation of quality adjusted auction returns with varying transaction intervals previous research has separately addressed the problem of estimating risk in the presence of infrequent trading and the problem of estimating quality adjusted returns in markets with quality variation in the observed price series this paper simultaneously addresses both problems by applying a signal extraction method for unequally spaced data to decompose the observed price series with varying times between transactions into a quality adjusted permanent component which would be observable in the absence of quality variation plus a stationary transitory quality variation component stamp auction transaction prices provide an application auction quality grading is treated in a manner analogous to bond ratings almost all of the observed variance is attributed to the auction quality variation the observed auction returns and stock index returns are not well related

s p 500 trading strategies and stock betas this paper shows that s p 500 stock betas are overstated and the non s p 500 stock betas are understated because of liquidity price effects caused by the s p 500 trading strategies the daily and weekly betas of stocks added to the s p 500 index during 1985 1989 increase on average by 0 211 and 0 130 the difference between monthly betas of otherwise similar s p 500 and non s p 500 stocks also equals 0 125 during this period some of these increases can be explained by the reduced nonsynchroneity of s p 500 stock prices but the remaining increases are explained by the price pressure or excess volatility caused by the s p500 trading strategies i estimate that theprice pressures accountfor 8 5 percent of the total variance of daily returns of a value weighted portfolio of nyse amex stocks the negative own autocorrelations in s p 500 index returns and the negative cross autocorrelations between s p 500 stock returns provide further evidence consistent with the price pressure hypothesis

conducting event studies with thinly traded stocks abstract procedures for measuring abnormal performance around events when securities do not trade daily are examined a rank test patterned after the statistic proposed by corrado corrado c j 1989 a nonparametne test for abnormal security price performance in event studies journal of financial economics 23 385 395 is derived the empirical frequency distributions of the rank test statistic and a conventional test statistic are assessed under different rules for handling missing stock returns the results suggest that the traditional procedures are reasonably well specified for thickly and moderately traded stocks but misspecified for thinly traded stocks the rank test however performs well for all trading frequencies and trade to trade returns are the best way to handle missing returns

why do black basketball players work more for less money abstract we explore kahn and sherer s finding that national basketball association players salaries are lower for black than white players in general we do not find evidence that this salary differential is due to the racial preferences of fans specifically we observe that black players actually play more than comparable white players we offer a theory of price discrimination based on relative supplies and supply elasticities in lieu of the racial discrimination argument as an explanation for the black white wage differential

a pseudo criterion for security betas in the finnish stock market because of nonsynchronous trading the traditional estimates for systematic risk are biased especially in small security markets a pseudo criterion is applied to evaluate ten different systematic risk estimates beta coefficients in the thin finnish stock market

new evidence on beta stationarity and forecast for belgian common stocks abstract based on a comprehensive sample of 170 securities traded continuously on the brussels stock exchange from december 1966 to december 1983 this paper presents evidence which indicates that the stationarity of beta coefficients is not as strong as reported in previous studies which were based on smaller samples it is shown however that beta forecast can be generally improved using an adjustment method and that the improvement is highest for portfolios of increasing size

size seasonality and stock market overreaction recent research finds that the prior period s worst stock return performers losers outperform the prior period s best return performers winners in the subsequent period this potential violation of the efficient markets hypothesis is labeled the overreaction phenomenon this paper shows that the tendency for losers to outperform winners is not due to investor overreaction but to the tendency for losers to be smaller sized firms than winners when losers are compared to winners of equal size there is little evidence of any return discrepancy and in periods when winners are smaller than losers winners outperform losers

time aggregation and the estimation of the market model empirical evidence data for heavily and lightly traded firms are used to evaluate the effects of temporal aggregation on beta estimates t values and r 2 estimates in addition to our analysis of the standard market model dynamic and random coefficient models are estimated this study evaluates differences in the short term and long term dynamic relationships between the market and each type of firm it is found that temporal aggregation has important effects on both the specification of a market model and the stability of beta estimates

the explanatory power of the market model an international comparison the various published studies of the market model and the capital asset pricing model are examined with the objective of seeing if any pattern emerges in terms of its explanatory power r 2 and the various circumstances specific to each study several factors are identified as being associated with high values of r 2in these studies

portfolio serial correlation and nonsynchronous trading common stock portfolios of large heavily traded firms exhibit daily first order serial correlation in excess of what would be expected given the individual security coefficients further this correlation rises as the number of securities in the portfolio increases the direct implication of this finding is that nonsynchronous trading is not the only cause of correlation in daily market indices related implications are also discussed

a transactions data analysis of nonsynchronous trading weekly returns of stock portfolios exhibit substantial autocorrelation analytical studies suggest that nonsynchronous trading is capable of explaining from 5 to 65 of the autocorrelation the varying importance of nonsynchronous trading in these studies arises primarily from differing assumptions regarding nontrading periods of stocks we simulate the effects of nonsynchronous trading by sampling stock returns from a return generating process using transactions data to obtain the precise time of each stock s last trade we find that simulated weekly portfolio returns exhibit autocorrelations that are roughly 25 that of their observed crsp weekly returns article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

further international evidence on asset pricing the case of the spanish capital market abstract a multivariate framework is used in order to study the price formation of risky assets in the spanish capital market issues regarding the efficiency of the spanish value weighted stock market index the validity of equilibrium considerations the size effect and the nature of the return generating process during january are analyzed

the size effect on stock returns is it simply a risk effect not adequately reflected by the usual measures abstract one of the satisfactory explanations of the size effect would seem to be in the inadequacy of the usual measure of risk as an appropriate ex ante proxy for risk one of the ex ante measures is provided by the standard and poor s quality rankings for common stocks and is examined in this paper it is shown that the quality rankings assigned by security analysts are superior over beta and variance measures of risk in explaining returns and in subsuming the size effect these results are consistent with the hypothesis that the size effect mainly reflects a risk effect and that a significant part of the latter is not caught by the usual beta and variance measures

u k financial market returns 1955 2000 we present and analyze new monthly index series for u k financial assets covering equities bonds bills and inflation the data are consistent with the crsp ibbotson series for the united states we use our indices to estimate equity and bond premia and to make international comparisons especially with the united states germany and japan we illustrate potential uses of the new series by investigating stock market seasonality inflation linked bonds real dividend growth rates and the small firm effect while some of our findings resemble u s results we also report differences between u k and u s stock market behavior copyright 2001 by university of chicago press

customer racial discrimination in major league baseball most studies of racial discrimination concentrate on identifying the existence rather than the source of discrimination in contrast this paper tests directly for racial discrimination by major league baseball customers by examining the market for baseball cards in tobit regressions the market prices of cards consistently reflect player performance records and other demand variables when interactive race productivity variables are included in the models a significant and complex pattern of fan discrimination against black pitchers and black hitters is found discrimination against latin players is not found

factor related and specific returns of common stocks serial correlation and market inefficiency one of the most basic tests of market efficiency is the test for serial correlation of returns if the return on a typical stock in period t is correlated with its return in period t 1 then the best unbiased minimum mean square error prediction for the return in period t equals the prior return multiplied by the correlation coefficient an investor concerned only about the mean and variance of portfolio return would use the prediction to improve the mean variance trade off of portfolio return by shading the portfolio toward stocks predicted to have high returns and away from stocks predicted to have low returns hence using knowledge about the previous month s returns the investor produces a portfolio with superior mean variance performance this violates the weak form of market efficiency fama 1 in the sense that the expected return for each stock based upon knowledge of the previous month s return is different from the expected return based only upon the current stock price the same argument may be applied to any component of returns as distinct from total return for example in a linear multiple factor plus specific return model of security returns total excess return is decomposed into factor related return and specific return the empirical results in this paper find positive serial dependence in the factor related component and negative serial dependence in the specific component which nearly offset one another resulting in zero correlation in total excess returns formally

the capm and equity return regularities differential returns on dividend and capital gains income systematic abnormal returns surrounding ex dividend dates excess returns on small versus large capitalization stocks excess returns on low versus high price earnings ratio stocks these are among the recent findings that cast doubt on the traditional capital asset pricing model and tease investors with the promise of systematic excess returns some of these effects are undoubtedly related tests indicate for example that the higher a portfolio s price to book ratio the higher the corresponding values of market capitalization pie and stock price furthermore p e dividend yield price and pie effects all experience significant january seasonals what has not been conclusively determined is whether the effects are additive so far it appears that the dividend yield and size effects are not mnutually exclusive investors may want to use a strategy employing several of these characteristics rather than one efforts to explain the size effect have focused on january because the effect is concentrated in that month the most common hypothesis attributes this to year end tax loss selling but the evidence is less than conclusive evidence strongly suggests however that among small firms those with the largest abnormal returns tend to be the firms that have recently become small that either don t pay dividends or have higher dividend yields and that have lower prices and low pie ratios

corrections for trading frictions in multivariate returns when observed stock returns are obtained from trades subject to friction it is known that an individual stock s beta and covariance are measured with error univariate models of additive error adjustment are available and are often applied simultaneously to more than one stock unfortunately these multivariate adjustments produce nonpositive definite covariance and correlation matrices unless the return sample sizes are very large to prevent this restrictions on the adjustment matrix are developed and a correction is proposed which dominates the uncorrected estimator the estimators are illustrated with asset opportunity set estimates where daily returns have trading frictions a number of univariate nonsynchronous trading adjustments are available for beta but no multivariate adjustment has been specifically designed for a general covariance matrix for example the univariate trading friction adjustment of cohen hawawini maier schwartz and whitcomb chmsw 1983 is a generalization of scholes and williams 1977 the chmsw procedure adjusts beta to account for price adjustment delays exceeding one period where a portion of the true return is reflected in lagged returns the procedure is extended and applied in shanken 1987 to estimation of the daily multivariate covariance matrix of stocks returns observed covariances significantly understated true covariances by a factor of two suggesting that a daily covariance adjustment is necessary because of a large number of studies which employ multivariate daily stock returns it is therefore important that the adjustment results in a good estimator of the covariance matrix while no evidence is available regarding other properties it is shown in chmsw that their univariate adjusted estimator has the desirable statistical properties of consistency and unbiasedness unfortunately when the adjusted covariance estimator is applied in finite samples the resulting adjusted covariance matrix may not be a covariance matrix and the implied adjusted correlation matrix independently may not be a correlation matrix because the adjustment does not restrict the covariance and correlation matrices to be positive definite 1 when these matrices are not positive definite functions of these matrices can produce very unreliable inference results this paper provides empirical examples of the violations of the positive definite

consumption benefits of national hockey league game trips estimated from revealed and stated preference demand data this paper examines the demand for hockey game trips among metropolitan and nonmetropolitan residents of alberta canada using data on both revealed and stated preference game trip behavior from a telephone survey conducted throughout alberta we estimate the effect of ticket prices team quality arena amenities and capacity on the latent demand for national hockey league hockey games we nd that lower ticket prices higher team quality and additional capacity encourage attendance in the status quo scenario consumer surplus per game is 50 for those who had attended hockey games and about 50 less for those who had not attended games exploiting the stated preference data we develop a number of other consumer surplus estimates we also include travel costs in the estimation of the demand function and estimate the full value of the game trip considering both ticket prices and travel costs sold out arenas in calgary and edmonton generate annual consumption bene ts of 40 and 35 million when only ticket prices are used to calculate consumer surplus i e excluding travel costs considering the full price consumer surplus for the calgary flames of 103 per game trip the annual consumption bene ts may be as high as 82 million jel r22 l83 d61

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

friction in the trading process and the estimation of systematic risk abstract this paper considers how estimates of the market model beta parameter can be biased by friction in the trading process information decision and transaction costs that a leads to a distinction between observed and true returns b causes observed returns to be generated asynchronously for a set of interdependent securities and c thereby introduces serial cross correlation into security returns several propositions are derived from which consistent estimators of beta are obtained and the effect of differencing interval length on beta estimates is specified the formulation is contrasted with the related analyses of scholes williams 1977 and dimson 1979

the application of errors in variables methodology to capital market research evidence on the small firm effect errors in variables due to nonsynchronous trading and benchmark error are significant problems for capital market research this paper develops the use of direct and reverse regression to bound true coefficient estimates when the data exhibit error structures arising from these two sources both separately and jointly the approach appears to have broad applicability for capital markets research as an example the paper reexamines the small firm effect to show that it cannot be attributed to nonsynchronous trading or benchmark error in the estimated variance of the market portfolio this result is shown to hold even when the tax selling effect is controlled for by excluding january returns

hedge funds risk and return from a database that is relatively free of bias this article provides measures of the returns of hedge funds and of the distinctly nonnormal characteristics of the data the results include risk adjusted measures of performance and tests of the degree to which hedge funds live up to their claim of market neutrality the substantial attrition of hedge funds is examined the determinants of hedge fund demise are analyzed and results of tests of return persistence are presented the conclusion is that hedge funds are riskier and provide lower returns than is commonly supposed

stock market anomalies abstract this paper reports evidence documenting the presence of a number of irregularities in stock price behaviour of firms on the london stock exchange the size effect is not only not the sole anomaly but is not even the most dominant one specifically investment strategies based on dividend yield pe ratios and share prices appear as profitable if not more as a strategy concentrating on firm size although there is a large degree of interdependency between all four effects it is still apparent that the dividend yield and pe ratios subsume the size and share price effects

the cournot oligopoly and competitive equilibria as solutions to non linear complementarity problems abstract the cournot oligopoly and competitive equilibria are identified with solutions to non linear complementarity problems which leads to integration of the existence and stability proofs of these equilibria

forecasting systematic risk estimates of raw beta that take account of the tendency of beta to change and the heteroskedasticity of residual returns in the application of modern portfolio theory the systematic risk of a security is of central importance beta the future regression coefficient of the return of the security on the return of the market is an index of that risk since the future is yet to be revealed nonclairvoyant practitioners and researchers must rely on estimated rather than actual values of beta and the estimates must be based on data that are currently available

an econometric model of serial correlation and illiquidity in hedge fund returns the returns to hedge funds and other alternative investments are often highly serially correlated in sharp contrast to the returns of more traditional investment vehicles such as long only equity portfolios and mutual funds in this paper we explore several sources of such serial correlation and show that the most likely explanation is illiquidity exposure i e investments in securities that are not actively traded and for which market prices are not always readily available for portfolios of illiquid securities reported returns will tend to be smoother than true economic returns which will understate volatility and increase risk adjusted performance measures such as the sharpe ratio we propose an econometric model of illiquidity exposure and develop estimators for the smoothing prole as well as a smoothing adjusted sharpe ratio for a sample of 908 hedge funds drawn from the tass database we show that our estimated smoothing coecien ts vary considerably across hedge fund style categories and may be a useful proxy for quantifying illiquidity exposure

friction in the trading process and risk measurement abstract when stock returns are non synchronous ols estimates of market model parameters are biased we show that the unbiased estimators for beta which have recently been proposed are for practical purposes the same as the dimson 1979 estimator the choice of estimation method is therefore largely a matter of computational convenience

hypothesis testing with the sharpe and treynor portfolio abstract using the scholes and williams 1977 model consistent estimates of the variances and covariances of security returns under conditions of non synchronous trading are derived the effects of using such corrected estimates on the measurement of portfolio performance are illustrated by assessing the performance of a value and equally weighted portfolio of all the stocks issued under the quebec stock savings plan qssp

market and industry structure and corporate cost of capital the impact of the structural attributes of industries on the cost of capital to constituent firms is examined within the framework of the capital asset pricing model capm the relationship between industry structure and systematic risk which the capm posits as the sole determinant of security returns is investigated using regression methodology the results show that industry characteristics such as capital intensity capital to labour ratio and entry barriers such as advertising have a significant influence on systematic risk and hence on the cost of capital to firms recent us studies e g sullivan 1982 have investigated the relationship between market power and the stock market return on equity using the capital asset pricing model capm within the capm framework investor required return is a linear function of systematic risk the impact of industry structure on expected return is therefore likely to be transmitted through investors perceptions of the relationship between the structural variables and firm systematic risk some recent theoretical studies have attempted to model such a relationship this paper reports an empirical examination of the predictions resulting from these and other related models for a sample of uk firms our results show that industry structural characteristics e g capital intensity have a significant influence on systematic risk and hence cost of capital of firms although the predictions of the extant theoretical models are only partly confirmed the next section identifies a number of microeconomic determinants of corporate systematic risk section iii discusses the methodology employed in the study section iv describes the sampling procedure and explanatory variables results are discussed in section v the final section provides a summary and the conclusions

beta market power and wage rate uncertainty this paper derives the formal relationship between a firm s beta and tobin s q ratio with both price and wage uncertainty present wage uncertainty is shown to affect the sign and magnitude of the relationship with q interpreted as an index of the market power while previous models suggest that systematic risk and market power are negatively related this result depends either on excluding wage uncertainty or on introducing it with unrealistic restrictions by deriving a more ambiguous relationship than other authors a plausible explanation of why empirical research has produced conflicting evidence of the sign of this relationship is provided copyright 1994 by blackwell publishing ltd

estimating betas on daily data for a small stock market abstract this paper examines the properties of different market risk beta measures computed on daily data for a thin security market i e the helsinki stock exchange in finland in accordance with the results by dimson and marsh 1983 the paper shows that differences in trading frequency between different stocks produce a serious bias towards what appears to be stability in estimated betas furthermore the paper shows that when betas are computed the exclusive use of stock prices based on actual trades will not solve the problem of a thin trading bias in measured stability of these beta estimates in fact other methods proposed to cope with the thin trading problem seem to be at least as efficient as use of trade to trade returns finally betas corrected for differences in trading frequency are still shown to be statistically related for firm size

misspecification of capital asset pricing this study documents empirical anomalies which suggest that either the simple one period capital asset pricing model capm is misspecified or that capital markets are inefficient in particular portfolios based on firm size or earnings price e p ratios experience average returns systematically different from those predicted by the capm furthermore the abnormal returns persist for at least two years this persistence reduces the likelihood that these results are being generated by a market inefficiency rather the evidence seems to indicate that the equilibrium pricing model is misspecified however the data also reveals that an e p effect does not emerge after returns are controlled for the firm size effect the firm size effect largely subsumes the e p effect thus while the e p anomaly and value anomaly exist when each variable is considered separately the two anomalies seem to be related to the same set of missing factors and these factors appear to be more closely associated with firm size than e p ratios

estimating and adjusting for the intervalling effect bias in beta the concept of beta as the measure of systematic risk has been widely accepted in the academic and financial community increasingly betas are being used to estimate the cost of capital for corporations despite this however biases are generally present in ordinary least squares ols estimates of beta in particular empirical estimates of beta are affected by friction in the trading process which delays the adjustment of a security s price to informational change and hence leads to an intervalling effect bias in this paper we present and empirically test two procedures for correcting this bias the first is to estimate the asymptotic value that ols beta approaches as the differencing interval is lengthened without bound the second procedure is to infer the value of beta by adjusting ols beta for cross sectional differences in the intervalling effect as a function of the depth of the market for a security as measured by its value of shares outstanding our results suggest that a substantial correction is needed to get true beta estimates from short differencing interval data

predicting risk some new generalizations existing adjustment techniques for forecasting systematic risk of individual firms have been based on relatively uniformative prior knowledge about the cross sectional distribution of risk estimates this study introduces prior information in the form of size and industry based cross sectional distributions of risk estimates such information is incorporated into forecasts using familiar and generalized adjustment techniques the latter being based on recently developed multiple shrinkage methods improved forecast performance results

the stability of uk risk measures and the problem of thin trading this paper examines the problems of estimating risk measures and their stability in thin markets it shows analytically that conventional approaches used in previous studies can lead to serious overestimates of the stability of risk measures when shares are subject to thin trading it then demonstrates using uk data that this is in fact a serious practical problem and that the resultant biases are of precisely the form predicted finally the paper presents reliable evidence on the stability of uk risk measures by using an estimation method designed to avoid thin trading bias using this approach risk measures are found to be as stable in the uk as they are in the usa this paper examines the stability of risk measures in the uk the focus is on providing reliable evidence in a market where many of the shares suffer from thin trading this is important because thin trading can seriously distort stability measures leading to incorrect conclusions indeed this is a problem which has almost certainly afflicted many previous studies of stability the paper makes four main contributions first it shows analytically that thin trading can lead to serious overstatements about stability second it uses uk data to illustrate that this is in fact a serious practical problem and that the biases are of precisely the form predicted this is important for anyone who wishes to interpret previous claims on beta stability in thin markets third the paper presents reliable evidence on the stability of uk betas by using an estimation method designed to avoid thin trading bias besides avoiding bias our

customer racial discrimination in the market for memorabilia the case of baseball because consumer discrimination can reduce productivity it is often impossible to tell whether differential productivity is the effect of discrimination or of differential ability detailed data for the sports labor market make it possible to separate consumer discrimination from ability we use a unique approach to determine whether the entertainment value of baseball players is related to their race we examine whether race directly affects the value of a player in the market for baseball cards in contrast to studies that use salaries there is no room for owner or coworker discrimination our evidence supports the hypothesis of consumer discrimination

the intervalling effect bias in beta a note abstract based on a comprehensive sample of domestic securities traded on the brussels stock exchange this paper points out the intervalling effect in the estimated betas and examines the speed of convergence of these the results reveal that the estimated betas seem to converge to their asymptotic values and that their value depends on what day the differencing interval starts it also appears that the magnitude of the intervalling effect is inversely related to the market value of the firms

the relation between the return interval and betas abstract the size effect is sensitive to the length of the return interval used in estimating betas beta changes with the return interval because an asset s covariance with the market and the market s variance do not change proportionately as the return interval is changed we document beta sensitivity to the return interval evidence from cross sectional regressions of returns on monthly and annual betas is inconsistent with beta changes stemming only from the higher standard errors of the longer interval betas we provide evidence that the size effect becomes statistically insignificant when risk is measured by betas estimated using annual returns

capital requirements for securities firms regulatory authorities set capital requirements to cover the position risk of securities firms and to protect against losses arising from fluctuations in the value of their holdings the requirements may be set using the comprehensive approach required by the u s securities and exchange commission the building block approach required by the european community or the portfolio approach required by the united kingdom we compare these three alternatives using a large sample of u k equity trading books the portfolio approach systematically specifies larger requirements for riskier books and vice versa it is more efficient than the building block approach and far more efficient than the comprehensive approach

seasonality estimation in thin markets the greater availability of daily data in the u s has led to a number of studies of the seasonality of daily stock index returns while the studies recognized the potential impacts of nontrading and price adjustment delays in general no formal analyses of such impacts were presented in this paper analytic results are presented for the articulation between these phenomena the implications of the analysis are discussed and shown to be consistent with a sample of u k index data a modified form of the negative weekend effect is found to be present in the u k data analyzed tests for the presence of seasonality in equity returns have been carried out by a number of authors at both the monthly and daily return levels at the monthly level rozeff and kinney 18 discovered evidence of seasonality in the u s while officer 15 detected the presence of seasonality in australian data fama 7 carried out some early work on u s daily data and more recent contributions have been made by cross 5 french 9 and gibbons and hess 10 while these studies recognized the presence of thin trading and its potential impacts upon the experimental results no formal analyses were presented in this paper we derive analytic results for the articulation between seasonality and nontrading effects section i the implications of this analysis are tested using a sample described in section ii of u k daily index data2 in section iii section iv discusses the implications of the results for capital market efficiency finally

marginal stockholder tax effects and ex dividend day price behavior evidence from taxable versus nontaxable closed end funds almost all research on the movement of stock prices on ex dividend days has found that prices decline by less than the dividend though this is consistent with tax effects several papers have argued that this phenomenon could be caused by market microstructure effects in this paper we make use of a natural experiment that provides support for the tax explanations of ex dividend behavior some closed end funds have taxable and some have nontaxable dividend distributions both types are subject to taxes on capital gains the implication of this for ex dividendday price behavior is very different between these two types of funds if taxes matter this paper demonstrates that the direction of ex dividendday price behavior is consistent with a tax explanation and that ex dividend day price behavior changes as theory would suggest with changes in the tax law

ethnicity productivity and salary player compensation and discrimination in the national hockey league the paper considers the impact of potential minority francophone american european ethnic language culture discrimination on salary determination in the national hockey league using player salary data for the 1989 90 season a regression model of salary determination is constructed which includes variables measuring productivity skills market structure and allows for several ethnic influences including minority discrimination ethnically shaped consumer preferences and reservation wages the basic conclusion is that wages are principally determined by productivity and market structure and the only evidence of discrimination is found in the ethnically influenced consumer preference of american as opposed to canadian teams

the reaction of bank stock prices to the international debt crisis abstract in this paper we develop a cross sectional regression approach to estimate the impact of foreign loan exposure on the pricing of u s bank stocks a new approach is required because news about foreign loan problems may arrive incremently over time rather than reaching the market on a few specific dates the way earnings and dividend announcements do consistent with this interpretation we find that foreign loan exposure had a significant impact on the pricing of u s bank stocks during the years 1982 and 1983 but that the stock prices adjusted continually over the two year period rather than jumping on a few particular days

fund manager herding a test of the accuracy of empirical results using u k data the portfolio holdings of 268 u k equity mutual funds are employed to test the accuracy of the lakonishok shleifer and vishny 1992 measure of herding and test for herding among u k mutual fund managers after adjusting for the biases in the lsv herding measure the results reveal the existence of a modest amount of fund manager herding in the largest and smallest individual u k stocks but little herding in other stocks or stocks aggregated by industry contrary to previous u s results we find that u k mutual fund managers tend to herd out of large stocks after high excess returns

options taxes and ex dividend day behavior a novel way of estimating the expected as opposed to the actual share price fall off is developed using option prices this method is applied to the uk traded options market using data from 1979 to 1984 the results show that a the average expected fall off implicit in option prices is around 55 to 60 of the dividend and significantly different from it the fall off also varied inversely with the dividend yield which is consistent with the prediction of the tax clientele hypothesis b the estimates of the expected fall off were not significantly different from the actual fall off c finally the results imply that the usual assumption made in valuing options on dividend paying stocks that the fall off is equal to the dividend would lead to downward biased estimates of the option value

functional forms and the capital asset pricing model the functional form model in the context of the returns for 85 mutual funds their findings document the presence of significant transformation parameters how ever the impact on estimates of systematic risk does not appear to be substantial the purposes of this paper are twofold the first purpose is to derive and test a more generalized form of the capm more general with respect to functional form and also within the context of investment horizons the second purpose is to investigate nonlinearities as in 4 and to extend the analysis to a large sam ple of individual securities the functional form models to be empirically tested are derived in section ii section iii discusses the estimation techniques applied to the proposed models and describes the data used in the study the results are presented in section iv along with a discussion of their implications for the horizon problem and the estimation of systematic risk a summary of the pertinent findings of the study appears in section v

on the impact of infrequent trading on the apt systematic risk components evidence from a thin security market abstract the purpose of this note is to analyze the effects of infrequent trading on the apt systematic risk components using finnish data infrequent trading is reported to influence especially the first systematic risk component produced by factor analysis on stock returns

racial discrimination in professional basketball evidence from nielsen ratings using data on nielsen ratings for locally televised nba basketball games we find strong evidence that viewership increases when there is greater participation by white players this finding controls for a wide variety of other factors that could systematically affect nielsen ratings and signifies the presence of customer discrimination in the market for nba players we also find that higher nielsen ratings allow nba teams to realize greater advertising revenues meaning that the marginal revenue product of white players exceeds that of comparable black players this factor explains much of the race based salary gap that exists in professional basketball

customer preferences attendance and the racial structure of professional basketball teams this paper examines the importance of customer based discrimiantion in professional basketball over the 1980 81 to 1985 86 seasons empirical rsesults offer strong support of the hypothesis that if fans prefer to see players of their own race teams will be influenced in their selection of players by the racial composition of their market area by the same token attendance is found to be positively related to the extent to which the racial composition of the team matches that of the corresponding market area

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

the relation between common stock returns trading activity and market value this study examines the relation between common stock returns trading activity and market value our results indicate that although firm size and trading activity are highly correlated differences in trading activity are not the underlying reason for the firm size anomaly the finding of systematic differences in risk adjusted returns across stocks of firms of different size recent empirical research has revealed systematic differences in risk adjusted returns for common stocks of firms of different sizes as measured by the market value of outstanding common stock see banz 1 and reinganum 5 roll 7 in a recent paper has suggested that the firm size anomaly may result from errors in risk measurement in particular roll suggested that because small firms trade less frequently than large firms risk measures obtained from daily or weekly returns data may seriously underestimate the risk associated with holding a portfolio of small firms in response to roll s conjecture reinganum 6 examined the risk adjusted returns of portfolios formed on the basis of firm size using both the scholes williams 8 and the dimson 2 aggregated coefficient method of estimating portfolio betas and found that regardless of the beta estimation technique employed differences in estimated betas were insufficient to account for differences observed in the returns of size ranked portfolios if reinganum s 6 finding is correct that the firm size effect is not attributable to a misassessment of risk and if smaller firms trade less frequently than do larger firms then firm size may merely proxy for trading activity 1 thus the observed firm size effect may be explained in terms of a liquidity premium associated with inactively traded shares the purpose of this paper is to determine whether or not the firm size anomaly is explicable in terms of differences in the trading activity of common stocks a liquidity premium would provide a logically appealing explanation for the firm size effect tinic 11 demsetz 3 and others have argued that transactions costs vary inversely with trading activity as measured by average number of

the effect of corporate divestments on shareholder wealth the uk experience this is the first known study of stockmarket reaction to u k sell off announcements earlier u s studies have found positive market reaction to sell off announcements various of these have aimed to relate the magnitude of marketreaction to factors such as price declaration completion of agreement and financial strength of divestor this study also explores the impact of the above factors and their inter relationships typical event study methodology is used in estimating the size of the unexpected market reaction the so called abnormal return separate analysis of sub samples is undertaken in this study to help enhance our understanding of market response to corporate sell offs examples of such sub samples are price no price groups and completion intention groups this analysis provides explanations for some of the seemingly contradictory u s study results a measure of financial distress namely the z score is introduced to explore the bankruptcy avoidance hypothesis we find a degree of financial distress prior to divestment to be inversely related to abnormal return a result consistent with market approval for such distress sales relative size of divested part to parent is also shown to be positively related to abnormal returns price declaration seems to be vitally important in generating positive market response announcements of completed sell offs along with the price is even more welcome by the market announcement of completed sell offs with undisclosed price seems to induce market uncertainty and thus negative abnormal returns announcement of intended sell offs with price disclosure as well as our overall sample results both provide statistically significant positive shareholder gains this latter finding is in harmony with u s studies

anomalies in security returns and the specification of the market model we examine the hypothesis originally advanced by roll 12 that observed anomalies in excess returns can be explained by misspecification of the market model used to estimate systematic risk we find substantial misspecifications in the model systematically related to size and period of listing of the securities in question there is some evidence that these misspecifications are associated with systemic biases in measured betas used to construct excess returns

unique non boundary equilibria in the morishima system abstract in the extensive literature on the morishima system the issue of the uniqueness and positiveness of equilibria has been neglected it is shown that three conditions known to be sufficient for local stability also imply unique non boundary equilibria other implications of these three conditions such as numeraire independence and global stability are also discussed

event study methodologies and the size effect abstract this study of 862 press recommendations demonstrates that the size effect can distort longer term performance measures and hence event studies relative to similar sized companies post publication performance is neutral however market adjustments the capm and market model with equally or capitalization weighted indexes all produce biased results event studies are most exposed to such bias when the measurement interval is long event securities differ systematically in size or weighting from the index constituents the size effect is large and or volatile and when capm type methodologies are used these distortions are avoided by explicitly controlling for size

exit discrimination in the nba a duration analysis of career length exit discrimination is defined as the involuntary termination of employment due to racial characteristics holding productivity constant we test for exit discrimination in the national football league nfl using a panel study on career length our analysis focuses on six positional groups defensive backs defensive linemen linebackers running backs tight ends and wide receivers in our analysis in addition to race we include performance variables to determine their importance in determining career length using both parametric and semi parametric hazard models we find no evidence of exit discrimination in the nfl

on the perils of financial intermediaries setting security prices the mutual fund wild card option economic distortions can arise when financial claims trade at prices set by an intermediary rather than direct negotiation between principals we demonstrate the problem in a specific context the exchange of open end mutual fund shares mutual funds typically set fund share price nav using an algorithm that fails to account for nonsynchronous trading in the fund s underlying securities this results in predictable changes in nav which lead to exploitable trading opportunities a modification to the pricing algorithm that corrects for nonsynchronous trading eliminates much of the predictability however there are many other potential sources of distortion when intermediaries set prices copyright the american finance association 2001

data frequency and the number of factors in stock returns abstract determining the number of factors that explain stock returns plays an important role in empirical tests of the arbitrage pricing theory this paper examines the sensitivity of the number of factors to different data frequencies using daily weekly and monthly returns the empirical results are consistent with the null hypothesis that the number of factors is the same for different data frequencies once daily returns are adjusted for nonsynchronous trading the evidence also identifies only one or two factors

existence of competitive equilibria via smith s non linear complementarity result abstract it is well known that competitive equilibria are identified with a solution to a non linear complementarity problem however the standard existence results for this class of problems are overly restrictive in their assumptions on the excess demand functions this note illustrates the use of smith s 1984 existence result to generalize the conditions under which a competitive equilibrium is guaranteed to exist in the non linear complementarity framework

the analytic relationship between intervaling and nontrading effects in continuous time empirical studies in finance generally use data defined over the shortest re turn period available originally data bases such as crsp tended to have data collected over monthly periods and most analyses tended to use monthly data rather than data compounded over periods greater than a month with the implicit argument that the more data the better since the development of data bases with data collected over shorter differencing intervals there has been a growing tendency in finance to use returns data defined over increasingly shorter differ encing intervals 1 this development is desirable but is not without problems the problem with using data defined over shorter differencing intervals is that although greater estimating efficiency will be achieved 2 nontrading effects could be introduced into the analysis these will lead to biased beta estimators and biases in tests of capital market efficiency the purpose of this paper is to investi gate analytically the interrelation of the intervaling and nontrading effects both in estimating beta factors and in testing capital market efficiency levhari and levy 9 demonstrated theoretically and empirically that beta will be dependent upon the return interval length when returns are measured in discrete time in continuous time this dependency will be removed due to the additivity of the return variables in this domain however several studies carried out on u s 15 french 1 and u k data 7 16 have demonstrated that beta factors estimated in continuous time increase with the differencing interval seemingly contradicting this invariance property this paper will demonstrate analytically how this phenomenon can arise in the presence of nontrading ef fects and how this intervaling effect relates to the estimators developed by scholes and williams 14 and dimson 7 for handling the nontrading problems manchester university england the author is grateful to two anonymous referees for their

a probit analysis of the changes in the financial characteristics of newly quoted small firms 1970 73 and 1980 83 an important reason for the establishment of the uk unlisted securities market was to provide capital for promising small firms this paper makes two comparisons a between selected financial characteristics of a sample of small firms that took advantage of this opportunity and a sample of firms that did not and b between any differences in these characteristics and those between a sample of small firms that were floated on the stock market between 1970 73 and a sample of small firms that remained unfloated probit was employed the results suggest floated firms were on average more profitable and faster growing though with the latter relationship not particularly strong there was little significant difference in gearing or liquidity the owners of floated firms were prepared to take less remuneration than average during the 1970s but not during the 1980s

the october 1987 s p 500 stock futures basis five minute changes in the s p 500 index and futures contract are examined over a ten day period surrounding the october 1987 stock market crash since nonsynchronous trading problems are severe in these data new index estimators are derived and used the estimators use the complete transaction history of all 500 stocks nonsynchronous trading explains part of the large absolute futures cash basis observed during the crash the remainder may be due to disintegration of the two markets even after adjustment for nonsynchronous trading the index displays more autocorrelation than does the futures and the futures leads the index

beta changes around stock splits revisited recent papers by lamoureux and poon 1987 and brennan and copeland 1988 document a significant permanent increase in average beta subsequent to stock split ex dates this paper demonstrates that the shift in estimated beta following ex dates decays as the measurement interval is lengthened there is no statistically significant difference between pre and post split betas using the scholes williams 1977 estimator and weekly return data or using monthly returns we conclude that lamoureux and poon s and brennan and copeland s results can be attributed to a bias created by using too short a return measurement interval to estimate beta

customer discrimination in professional basketball evidence from the trading card market this paper presents evidence on the existence of customer racial discrimination in professional basketball from recent prices for the trading cards of former players in the national basketball association data were collected on the 258 active roster players in the nba during the 1976 77 season 133 of whom had cards issued that year maximum likelihood estimation of a card price equation is carried out accounting both for the nonrandom selection of the players for whom cards exist and for left censoring of the dependent variable overall the empirical results suggest the absence of customer racial discrimination in the pricing of basketball trading cards however there is some evidence that the effect of career length on trading card prices is lower for whites than for blacks and that the card price premium for players who subsequently coached in the nba is lower for blacks than for whites

the impact of the return interval on common factors in stock returns evidence from a thin security market abstract the purpose of this paper is to analyze the effect of the return interval on common factors estimated in finnish stock returns firstly common factors are identified by factor analysis using daily weekly and monthly return intervals the similarity of these factors is then studied applying transformation analysis it is discovered that the factors produced by alternative return intervals significantly differ from each other an exception is the first factor representing the market index of securities

a closing call s impact on market quality at euronext paris abstract the paris bourse currently euronext paris refined its trading system to include electronic call auctions at market closings in 1996 for its less liquid continuous b stocks and in 1998 for its more actively traded continuous a stocks this paper analyzes the effects of the innovation on market quality our empirical analysis of price behavior for two samples of firms 50 b stocks and 50 a stocks for two different calendar dates 1996 and 1998 indicates that introduction of the closing calls has lowered execution costs for individual participants and sharpened price discovery for the broad market we further observe that market quality is improved at market openings albeit to a lesser extent we suggest that a positive spillover effect explains the closing call s more pervasive impact

impact of bovine spongiform encephalopathy on agribusiness in the united kingdom results of an event study of equity prices this article assesses the impact on agribusinesses of the united kingdom government s announcement of a possible link between bovine spongiform encephalopathy and human health three approaches are employed to derive benchmark models against which abnormal returns are estimated a simple market model scholes williams approach and an autoregressive distributed lag model abnormal returns are estimated for single firms and for subsectors over an eight day event window the autoregressive distributed lag model performs best and indicates significant negative abnormal returns in the beef pet food animal feed and dairy sectors and positive abnormal returns in the other meats sector

volume and turn of the year behavior abstract this paper studies the trading characteristics of listed companies by size and year end behavior there were no transactions on nearly 25 of the days for the smallest decile even at the turn of year which is an active trading period for small companies as a result of low levels of trading and the regulations governing exchange specialists transaction prices and quotations of small listed companies may require several days to fully reflect equilibrium price changes the data confirm the existence of a year end seasonal pattern in rates of return for small companies and suggest that there may be a seasonal pattern for large companies as well

media influences on social outcomes the impact of mtv s 16 and pregnant on teen childbearing this paper explores the impact of the introduction of the widely viewed mtv reality show 16 and pregnant on teen childbearing our main analysis relates geographic variation in changes in teen childbearing rates to viewership of the show we implement an instrumental variables iv strategy using local area mtv ratings data from a pre period to predict local area 16 and pregnant ratings the results imply that this show led to a 4 3 percent reduction in teen births an examination of google trends and twitter data suggest that the show led to increased interest in contraceptive use and abortion jel d12 j13 j16 l82 z13 it is a longstanding and open question how exposure to media images affects viewers behavior policy advocates and cultural observers worry in particular about the impact of exposure to sexual and violent content on adolescent behaviors in some circles the idea that teenagers respond to media content is a foregone conclusion but determining whether media images themselves cause teens to behave in certain ways is a difficult empirical task 1 this paper examines the impact of the mtv show 16 and pregnant on teen childbearing this show purports to show the difficult reality of becoming a teen mother as we document below 16 and pregnant has drawn large audiences among relevant subpopulations could exposure to these media images of pregnant teens and very young new moms have had an impact on how teens behave leading to changes in the likelihood of becoming teen mothers themselves

seasonal and size anomalies in the japanese stock market little attention has been paid by the academic community in the united states to the japanese stock market and its structure japan has the second largest economy in the western world and the tokyo stock exchange tse is second only to the new york stock exchange nyse in terms of aggregate market values and sales volume analysis of the japanese stock market is useful given its relative importance but in addition examination of the japanese market may offer insights into controversies surrounding u s markets this study focuses on two such current controversies the january and size anomalies