the mispricing of u s treasury bonds a case study this article documents an apparent pricing anomaly involving 94 percent 30 year treasury bonds during the months of may and june 1986 during this period the price of the 94s rose sharply relative to the prices of other long term treasury bonds and created a potential arbitrage opportunity in addition owners of the 94 bonds were able to borrow at a zero interest rate bypledging their bonds detailed examination reveals that this relative pricing anomaly cannot be attributed to changes in the level or term structure of interest rates or to differences between the bonds with respect to liquidity taxation or duration

taxes on tax exempt bonds implicit tax rates priced in the cross section of municipal bonds are approximately two to three times as high as statutory income tax rates with implicit tax rates close to 100 using retail trades and above 70 for interdealer trades these implied tax rates can be identified because a portion of secondary market municipal bond trades involves income taxes after valuing the tax payments market discount bonds which carry income tax liabilities trade at yields around 25 basis points higher than com parable municipal bonds not subject to any taxes the high sensitivities of municipal bond prices to tax rates can be traced to individual retail traders dominating dealers and other institutions the issue of how taxes affect asset prices is an important issue in finance accounting and economics in theoretical models examining the effect of taxes

implicit delivery options and optimal delivery strategies for financial futures contracts abstract futures contract specification usually allow the short position some variation as to when where how much and what is to be delivered in this paper we derive the optimal delivery policy for the treasury bond futures contracts and find that our policy produces profits that are positive and statistically significant this indicates that future prices are too high in that the short position can earn profits by skillfully exercising his delivery options we find the actual delivery policies of market participants depart substantially from the optimal strategy the implications of these findings for futures traders and bond dealers are discussed

salomon brothers and the may 1991 treasury auction analysis of a market corner abstract in may 1991 the treasury sold 12 29 billion in two year notes through improper bidding salomon brothers gained control of at least 86 percent of the issue this study investigates the impact of salomon s attempted corner by examining the postauction price behaviour of the two year note based on a no arbitrage relation the results show that the two year note was substantially overpriced for approximately six weeks following the auction the typical mispricing during this period is estimated at 0 16 to 0 25 percent of par in dollar terms the aggregate misvaluation averaged 20 30 million and by controlling the supply of the issue salomon stood to gain substantially from the squeeze

incentive compatible pollution control policies under asymmetric information on both risk preferences and technology this article proposes a method to accommodate asymmetric information on farmers risk preferences in designing voluntary environmental policies by incorporating stochastic efficiency rules in a mechanism design problem the government can find incentive compatible policies by knowing only the general class of risk preferences among farmers the model also accounts for hidden information on technology types and input use the method is applied empirically to simulate a pollution control program in new york results suggest that participation incentives would be inadequate for many risk averse producers if the government does not account for the diversity in risk preferences

optimal market pools for agricultural cooperatives most agricultural marketing cooperatives distribute members net revenues on a pool basis the present paper outlines various pool options and provides a framework for identifying privately and collectively optimal pooling rules individual members pool choices are found to vary according to farm enterprise and risk aversion level a collectively optimal rule depends generally on risk aversion and on the method used to aggregate individuals expressed preferences in the instance examined here however the collective optimum is somewhat insensitive to assumed risk aversion

the role of spatial scale in the timing of uncertain environmental policy the spatial scale of an environmental problem is dictated by boundaries physical boundaries limit the extent of impacts while the scale of decision making creates perceived boundaries beyond which impacts are ignored by decision makers while it is well understood that uncertainty and irreversibility will alter policy decisions aimed at alleviating environmental impacts the effect of spatial scales both physical and perceived is less understood when spatial scale is included in a real options model of environmental policy adoption results indicate that the importance and influence of spatial considerations depends on the level of uncertainty stringency of the proposed policy and flexibility of the policy decision recognizing spatial scale may force policy adoption to take place within a window of current damage when spatial scale is small or uncertainty high this window for policy adoption can close precluding policy adoption entirely this undermines well known results demonstrating that changes in uncertainty will only alter the timing of policy adoption in other instances the policy adoption window remains open but the option value increases faster than the benefits of the policy creating a scenario where it is always preferable to delay here the inclusion of an option value can prevent adoption of policies that would be adopted according to traditional cost benefit analysis in general policy decisions will be most affected by spatial considerations when the spatial scale is small damage is spreading fast and the uncertainty in damage spread is high

evaluating the food and agriculture act of 1977 with firm quadratic risk programming federal agricultural commodity programs generally have been assumed to reduce the income risk for farm firms but limited empirical research exists on this proposition this paper presents a study of the impact of the food and agriculture act of 1977on income risk for a representative farm in georgia the model is used to derive an e v frontier for a firm not participating in the program and for the same firm that is participating in the program results indicate that participation dominates nonparticipation except for higher level of expected net income

revenue insurance purchase decisions of farmers the objective of this study is to evaluate farm household and financial characteristics of cash grain farmers decisions of whether to purchase revenue insurance using farm level data these characteristics were identified by estimating a logit model of revenue insurance purchase decisions by farm operators results indicate that farm operators with the ability to self insure through accumulation of sufficient wealth reserves measured in terms of the ratio of debts to assets operators with off farm income and participation in production and marketing contracts are more likely to pursue these strategies as a substitute for federal revenue insurance programmes further study finds that older and wealthy cash grain farmers are less likely to buy revenue insurance

risk efficient irrigation strategies for wheat abstract agricultural production is risky when farmers are risk averse they are likely to put a premium on production methods that reduce perceived risks irrigation is generally believed to be a risk reducing input by using the concept of stochastic dominance risk efficient irrigation policies for wheat grown in central india are identified and quantitative estimates of benefits due to risk reduction are obtained such benefits were found to be of a large order of magnitude the more common methods such as mean variance analysis tended to over estimate the benefits

the economic impacts of climate change evidence from agricultural output and random fluctuations in weather fisher et al 2012 hereafter fhrs have uncovered coding and data errors in our paper deschenes and greenstone 2007 hereafter dg we acknowledge and are embarrassed by these mistakes we are grateful to fhrs for uncovering them we hope that this reply will also contribute to advancing the literature on the vital question of the impact of climate change on the us agricultural sector fhrs main critiques of dg are as follows i there are errors in the weather data and climate change projections used by dg ii the climate change projections are based on the hadley 2 model and scenarios rather than the more recent hadley 3 model and scenarios iii standard errors are biased due to spatial correlation iv the inclusion of state by year fixed effects does not leave enough weather variation to obtain meaningful estimates of the relationship between agriculture profits and weather v storage and inventory adjustment in response to yield shocks invalidate the use of annual profit data and vi fhrs argue that a better specified hedonic model produces robust estimates unlike the results reported in dg four of these critiques have little basis and we respond to them here in the introduction specifically with respect to ii the more recent daily climate predictions were not available when we wrote dg nevertheless the most important issue is providing the reliable estimates of climate change and in this note we report estimates based on the climate model we used in dg and a more recent one that we gained access to in the meantime iii in the primary table on agricultural profits dg reports two sets of standard errors with the first clustered at the county level and the second based on a variance covariance matrix that accounts for spatial correlation using the method proposed in conley 1999 thus the claim of fhrs 2012 seems overblown nevertheless to ease comparisons of papers in this literature this note will adopt the fhrs convention of reporting estimated standard errors clustered at the county and state levels we find that inference is largely unaffected by the choice between these different assumptions about the variance covariance matrix

global warming discounting is not the issue but substitutability is the cost benefit study of nordhaus 1994 is representative for the neoclassical approach towards global warming nordhaus found that no substantial emission cuts are warranted most of his critics have concentrated on the issue of discounting and demanded that a lower discount rate should be applied these criticisms first miss the point and second lead to ethically dubious inconsistent conclusions and inefficient policy choices they miss the point because the real problem of nordhaus s methodology is his implicit underlying assumption of perfect substitutability between natural and other forms of capital given the validity of this assumption lowering the rate of discount is inconsistent with current savings behaviour is ethically dubious because future generations will be much richer than the current one anyway and is inefficient because scarce financial resources are channelled into emissions abatement that exhibits rates of return far inferior to alternative public investments any call for aggressive emission abatement must therefore directly attack the perfect substitutability assumption of neoclassical economics the real disagreement is about whether consumption growth can compensate for environmental degradation caused by global warming discounting is not the issue but substitutability is

will u s agriculture really benefit from global warming accounting for irrigation in the hedonic approach will u s agriculture really benefit from global warming accounting for irrigation in the hedonic approach wolfram schlenker w michael hanemann and anthony c fisher there has been a lively debate about the potential impact of global climate change on u s agriculture most of the early agro economic studies predict large damages see for example richard m adams 1989 harry m kaiser et al 1993 and adams et al 1995 in an innovative paper robert mendelsohn william d nordhaus and daigee shaw 1994 hereafter mns propose a new approach using the variation in temperature and precipitation across u s counties to estimate a reduced form hedonic equation with the value of farmland as the dependent variable a change in temperature and or precipitation is then associated with a change in farmland value which can be interpreted as the impact of climate change adams et al 1998 characterize the hedonic approach as a spatial analogue approach and acknowledge that the strength of the spatial analogue approach is that structural changes and farm responses are implicit in the analysis freeing the analyst from the burden of estimating the e ects of climate change on particular region speci c crops and farmer responses on the other hand one of the potential disadvantages of the hedonic approach is that it is a partial equilibrium analysis i e agricultural prices are assumed to remain constant 1 while year to year uctuations in annual weather conditions certainly have the potential to impact current commodity prices especially for crops produced only in a relatively localized area such as citrus fruits which are grown mainly in california and florida changes in long run weather patterns i e changes in climate might have a smaller e ect on commodity prices because of the greater potential for economic adaptation particularly shifts in growing regions 2 the hedonic approach as implemented by mns predicts that existing agricultural land on average might be more productive and hence result in bene ts for u s farmers 3 the hedonic approach has received considerable attention in our judgment in part because the conclusions are at variance with those of some other studies

payment limitations and acreage decisions under risk aversion a simulation approach payment limits have played an important role in u s farm policy deliberations for the last thirty years current limits are largely nonbinding proposals to strengthen and enforce limits are currently in discussion we evaluate the likely effects of such proposals on acreage for corn soybeans wheat cotton and rice in several important producing states our results generally indicate that payment limits are unlikely to significantly affect acreage in most cases exceptions occur for cotton and rice where the probability that limits would be binding is much greater and thus more likely to affect production copyright 2009 oxford university press

are negative option prices possible the callable u s treasury bond puzzle market prices for callable treasury bonds often imply negative values for the implicit call option the author considers a variety of possible explanations for these negative values including the treasury s track record in calling bonds optimally tax related effects tax timing options and bond liquidity none of these factors accounts for the negative values although the costs of short selling may explain why these apparent arbitrage opportunities persist over time why these implicit call values become negative in the first place remains a puzzle copyright 1992 by university of chicago press

an international study of tax effects on government bonds it is shown that coupon bonds alone are not sufficient to span time dated claims on ordinary income capital gains and non taxable wealth in an incomplete bond market where the pure dated claims are not spanned by existing bonds marginal rates of substitution between present consumption and pure dated claims on ordinary income capital gains income and non taxable wealth respectively can differ across bondholders however the relative pricing of coupon bonds in each of these countries is shown to be consistent with the tax status of the major non tax exempt holders of government debt

testing for nonnormality in farm net returns cash returns from farming are expected to be nonnormally distributed under a wide range of joint price yield distributions adequate testing for such nonnormality requires use of proper whitening procedures as well as appropriate statistics with tests and sample sizes commonly employed a false imputation of normality often will be made however positive correlation between skewness and kurtosis reduces the likelihood of associated decision errors these results are illustrated with data for

climate change irrigation and israeli agriculture will warming be harmful the authors use a ricardian model to test the relationship between annual net revenues and climate across israeli farms they find that it is important to include the amount of irrigation water available to each farm in order to measure the response of farms to climate with irrigation water omitted the model predicts that climate change is strictly beneficial but with water included the model predicts that only modest climate changes are beneficial while drastic climate change in the long run will be harmful using the atmospheric oceanic global circulation models scenarios the authors show that farm net revenue is expected to increase by 16 percent in 2020 while in 2100 farm net revenue is expected to drop by 60 390 percent varying between the different scenarios although israel has a relatively warm climate a mild increase in temperature is beneficial due to the ability to supply international markets with farm products early in the season the findings lead to the conclusion that securing water rights to the farmers and international trade agreements can be important policy measures to help farmers adapt to climate change

an analysis of the stabilizing and welfare effects of intervention in spot and futures markets this paper analyzes the effects of three alternative rules on the long run distributions of both the spot and futures prices ina single commodity market in which the key behavioral relationships are derived from the optimizing behavior of producers and speculators the rules considered include i leaning against the wind in the spot market ii utility maximizing speculative behavior by the stabilization authority in the futures market iii leaning against the wind in the futures market since the underlying model is sufficiently complex to preclude analytical solutions the analysis makes extensive use of simulation methods as a general proposition we find that intervention in the futures market is not as effective in stabilizing either the spot price of the futures price as is intervention in the spot market indeed rule iii while stabilizing the futures price may actually destabilize the spot price furthermore the analogous type of rule undertaken in the spot market will always stabilize the futures price to a greater degree than it does the spot price the welfare implications of these rules are also discussed our analysis shows how these can generate rather different distributions of welfare gains including the overall benefits this abstract was borrowed from another version of this item

determinants of the decreasing term structure of relative yield spreads for taxable and tax exempt bonds the empirical finding that the relative yield spread for taxable and tax exempt bonds decreases across the term structure is usually attributed to tax differentials and or arbitrage opportunities using monthly data it is found that the decresing term structure of relative yield spreads is determined by the decreasing forward marginal tax rate increasing default risk premium increasing tax timing option premium and expected rate of inflation

participation in farm commodity programs a stochastic dominance analysis comment in a 1981 journal article kramer and pope kp examine benefits of participation in farm commodity programs using a normative risk model based on stochastic dominance theory it will be shown here that the absolute risk aversion coefficients which they use are not applicable to their data set kp state in their footnote to table 3 that the rankings are for returns in thousands of dollars p 125 they state p 124 the values in table i were selected so as to cover the range of risk aversion coefficients reported in previous studies they apparently scaled down their net returns table 2 p 124 by a factor of 1 000 before carrying out the stochastic dominance calculations and this led to the use of inappropriate boundaries for their absolute risk aversion coefficients they present absolute risk aversion coefficients ranging from 0 04 to 0 03 for 12 groups of decision makers these risk aversion coefficients enclose a degree of risk aversion which is not likely to be applicable to decision makers considering distributions of possible returns for representative kern county farms the absolute risk aversion coefficients used

soil conservation with uncertain revenues and input supplies shortle and stefanou provide a conceptual extension of the single period static generalized meanvariance model gmvm to the multiperiod dynamic case in doing so they illustrate the linkage between the selection of activities in the first period to production opportunities in the second and by extension subsequent time periods in the context of analyzing the adoption of soil loss control practices they correctly argue that the static model employed in our analysis ignores any benefits that adopting these practices might have on future production opportunities their criticisms however are essentially no different than those levied against static models used in other types of analyses regardless of the type of risk attitudes attributed to the representative decision maker that is their comments hold equally well for risk neutral static models of soil conservation behavior the purpose of our work however was to demonstrate the effects of uncertainty and risk aversion on the selection of crop and soil loss control activities as compared to the risk neutral case our purpose was not to analyze the time path of bmp adoption or erosion although we agree that this is an interesting research topic in the context of our

does urgency affect price at market an analysis of u s treasury short term finance like all economic agents government must actively manage its cash position in order to meet obligations in the u s when the short term cash position is not adequate treasury offers bills that are not previously scheduled cash management bills using data from treasury s proprietary domestic finance database this paper finds unscheduled bills have consistently higher yields than normally scheduled bills suggesting the more inelastic demand represented by this type of finance has an impact on costs several factors are identified which contribute to the costs of cash management for treasury

an analysis of irrigated agricultural outcomes under the prior appropriation doctrine hypotheses and applications this article measures irrigated agricultural outcomes under the prior appropriation doctrine by developing a model of farmers land allocations in response to water supply change the modelling approach considers the institutional factors of water rights and permits the inclusive determination of water and land allocations we utilize farm level data of irrigated agriculture in water district 1 in idaho to examine the predictions from our theoretical model the water rights priority date is consolidated at the farm level and used to differentiate farmers responses we test a set of hypotheses that relate to water supply and crop revenue our results suggest that the water rights priority has a profound impact on agricultural outcomes indicating strong institutional effects and weak influence of market based approaches farmers respond to both long term and seasonal water supply change and variation and they respond to seasonal water supply forecasts in varied ways depending on their water rights portf

securityholder taxes and corporate restructurings previous studies have found that positive abnormal stock returns are associated with corporate spin offs and divestitures using a simplified model of the process of investor tax trading we show that an improvement in the value of the tax timing option component of securities prices is a likely contributing factor to those abnormal returns the analysis indicates that the same phenomenon also may be part of the explanation for the generally higher returns observed for spin offs than for divestitures both when leverage is and is not present in the restructuring transactions

participation in farm commodity programs a stochastic dominance analysis grube correctly argues that mini max and maximax criteria can help analysts determine the interval in which for a given set of preferences there will be changes in the preferred distribution the criteria is of less value when simulations are used to generate distributions without exact a priori knowledge of the random draw of order statistics we will argue that in most cases one can go even further and solve for the specific break even level of risk aversion this should simplify the procedures commonly used to rank risky prospects the author calculates that for the data presented the mini max critical value is 0 000003 for risk preferrers and 0 000002 for risk avoiders he concludes that these are low values when compared to the range originally considered 0 04 to 0 03 since his numbers fall within our range this suggests that our range could have been narrower than it was but clearly our range did contain the values he calculated it is noteworthy that when the smaller coefficients were used the relative rankings of choices remained unchanged grube concludes that kp s results are correct in the sense that they give a correct ranking of the order in which alternatives would be chosen by decision makers with varying absolute risk aversion coefficients since ultimately risk analysts are interested in the relative ranking of risky prospects this would suggest that our results are more robust than the author implies in his remarks while grube has suggested a means of identifying the interval of interest we would argue that in many cases one could go further and solve for the break even level of risk preference the break even level would be that value at which there is a switching in the dominance of one distribution over another using results developed by hammond it should be possible to simplify both the calculation and presentation of stochastic dominance results by solving for the break even level two conditions must be satisfied in order to apply hammond s results first constant risk aversion must be assumed while the use of utility functions exhibiting decreasing risk aversion has been advocated in the theoretical literature and supported somewhat by empirical studies which have assessed utility functions in most applications constant risk aversion is assumed this is largely because wealth data is frequently unavailable or of questionable accuracy thus risk analysts typically assume that a decision maker s utility function can be approximated over the relevant range by a constant risk aversion function such as the negative exponential function u x 1 e ax

tax arbitrage and the existence of equilibrium prices for financial assets in models where both investors and securities are subject to differential taxation there may be no set of prices that rule out infinite gains to trade or tax arbitrage this paper characterizes the joint restrictions on financial asset returns and investors tax schedules that preclude tax arbitrage in the absence of short sale constraints the authors show that if there exists any configuration of marginal tax rates on investors tax schedules that rule out infinite gains to trade then no tax arbitrage prices will exist they also show that the existence of no tax arbitrage prices ensures the existence of equilibrium prices the effects of differential taxation on the equilibrium prices of financial assets have attracted much attention from financial economists in recent years otherwise identical securities that contribute to taxable income to different degrees will in general be valued differently by taxable investors as a result tax considerations have been useful in helping explain the effect of dividend yield on stock returns the effect of coupon levels and term to maturity on bond prices 2 the timing of investors portfolio transactions 3 and the observed capital structures of firms 4 while a rich set of observed behaviors can be better understood by reference to differential taxation there are well known difflculties in dealing with taxes in a general equilibrium setting to clear markets relative prices must reflect the marginal rates of substitution of all agents simultaneously when tax rates differ across investors however this condition can be impossible to achieve to illustrate consider a world of perfect certainty with two assets a tax exempt municipal bond and a taxable government bond to equate marginal rates of substitution the rate of return on the government bond rg must equal that on the municipal rm grossed up by one minus the investor s marginal tax rate ti that is rg rm 1 ti if there are investors in more than one tax bracket this condition will obviously be impossible to satisfy for all of them simultaneously both authors from graduate school of industrial administration carnegie mellon university we wish to thank scott richard steven spear and an anonymous referee for helping us sort through the issues considered here seminar participants at columbia wharton the johnson symposium on asset pricing at the university of wisconsin madison and the 1986 western finance association meeting also provided valuable comments we are also grateful for the financial support provided by the center for public policy research carnegie mellon university all errors are our own responsibility

liquidity taxes and short term treasury yields this article investigates differences in yields on identical treasury notes and bills and shows that they reflect differences in liquidity immediacy risk and taxes it proposes an empirical measure for differences in the liquidity risk of notes and bills the volatility ofthe underlying rate times the ratio of bills turnover to notes turnover because differential taxes affect sellers but not buyers of bills and notes the results reject free of informational problems the hypothesis that the notes demand curve is horizontal note bill yield differences also decrease with inventories of notes the less liquid asset

adapting natural resource enterprises under global warming in south america a mixed logit analysis this paper develops an integrated model of adapting natural resource intensive enterprises in latin america to future climate changes based on about 2 000 rural household surveys we model six specialized and diversified resource enterprises across seventeen land covers we estimate random coefficients of climatic parameters with a mixed logit model by 2020 under a hotter and drier ccc scenario crops only and cropforests enterprises are predicted to fall by 6 2 and 0 6 respectively offsetting these losses livestock only enterprise increases by 5 5 and crops livestock forests enterprise increases by 0 7 these changes magnify over time through 2060 by which time the crops livestock enterprise increases by more than 5 adaptation measures should be designed in a manner that captures the unique characteristics of latin american ecosystems

the decline in idiosyncratic values of us treasury securities abstract unique features and market frictions can lead to idiosyncratic pricing for some us treasury securities this study uses a linear programming lp model to measure aggregate idiosyncratic pricing of t notes and t bonds from 1980 to 2016 we document an average idiosyncratic pricing of 0 11 per 100 par as compared to an average bid ask spread of 0 08 further idiosyncratic pricing declined dramatically from the early 1980s to the 2010s empirical evidence suggests that the 1986 tax reform act increasing issue sizes and improving market liquidity contribute to the decline at the individual security level we identify factors contributing to and mitigating idiosyncratic pricing

a reexamination of the value of tax options this article reexamines the value of tax trading when the tax rate on long term realizations is less than that on short term realizations in particular the value of the option to realize long term capital gains and repurchase stock in order to increase one s tax basis and restart the option to realizefuture losses short term is examined empirically our estimate of the incremental value of restarting which is based on the results of simulations of several alternative tax trading policies over a large number of independent return sequences is generally much smaller than that reported by constantinides 1984 the incremental value of restarting is shown to depend critically on the particular pattern of realized returns and the assumed tax treatment of unrealized capital gains at the end of the simulation period the effects of stockprice volatility transaction costs portfolio offset rules and realization cutoff levels on the value of tax trading are also investigated

a new linear programming approach to bond portfolio management this paper derives and tests a new linear programming lp approach to bond portfolio management the model elicits possible tax clientele effects in the pricing of u s gov ernment coupon bonds and simultaneously derives the optimal tax specific bond portfolio analytically the model derives these results by exploiting for a given tax bracket the price differential of an after tax stream of cash flows it accomplishes this objective by purchasing at the ask price underprieed bonds for the specific tax bracket while sim ultaneously selling at the bid price overpriced bonds the model requires that the net cash flow inclusive of purchased and sold bonds be nonnegative at all future dates the problem s formulation standardizes the position taken in each bond to a maximum of one unit one of the model s appealing features is the parsimonious number of required calcu lations only one lp program need be run per tax bracket in addition to obtaining an optimally chosen tax specific bond portfolio the model also measures the after tax term structure of spot u s government interest rates for both tax exempt and taxable investors finally the superior monthly holding period rates of return on the optimal taxspecific bond portfolio demonstrate an important property ofthe model s output

modeling government program participation decisions at the farm level changes in the u s farm economy during the 1980s have caused many farmers to give careful consideration to participation in the government farm program analytical techniques to identify optimal participation and resulting crop mix strategies at a whole farm level can aid farmers faced with these decisions this paper presents a mathematical programming approach adaptable to farm level decision analysis an empirical example involving a texas farm suggests that resource levels base acreage endowments limited cross compliance and returns outside the program can influence participation decisions government program participation decisions heavily influence the crop mix decision on many farms in the united states features such as base acreage limited cross com

effects on a corn soybean farm of uncertainty about the future of farm programs dynamic programming techniques are used to evaluate effects of uncertainty about continuation of farm programs on planting decisions during the last year of the 1990 farm bill results indicate farm level decisions are affected by uncertainty only when the farmer s subjective probability if the continuation of farm programs is very low the optimal value functions in different versions f the model can also be used to estimate the implicit value of base acreage

estimating supply response in the presence of farm programs previous empirical research on crop supply response has given insufficient attention to the fundamentally different nature of supply response under farm programs versus competitive markets a simple theoretical model is presented which highlights the program participation option in the farmer s acreage allocation decision the model also provides the basis for different expected supply elasticities under free market and farm program regimes for corn and soybeans econometric supply estimation for corn belt states for 1948 80 using a temporally disaggregated approach confirms a greater supply elasticity for corn and a lower supply elasticity for soybeans under acreage restricting feed grain programs

a comparative analysis of water price support versus drought compensation scheme abstract this paper examines the preferred governmental intervention towards crops growing methods in semi arid regions these regions are characterized by an average amount of rain which is sufficient to grow the crop but it is also very risky the farmers attitude towards risk motivates the government to encourage them to shift to more profitable and riskier crop rotations the paper analyses two alternatives of which the government can work through drought compensation scheme dcs and water price support wps the semi arid region in israel is analyzed and policy conclusions are derived in particular it is shown that for different sub regions within the semi arid region different mechanisms are preferred by the government and the farmers sometimes these mechanisms coincide and sometimes they do not a welfare analyzes compares the different situations

use of life insurance to fund the farm purchase from heirs general stochastic dominance is used to analyze the use of life insurance versus installment payments to fund the purchase of a decedent s business interest from off farm heirs generally a risk preferrer prefers an installment purchase the percentage of insurance funding preferred increases as aversion to risk increases higher income tax rates lower discount rates and lower premium costs move the preference for greater percentages of life insurance to lower levels of risk aversion the funding decision clearly depends upon the characteristics of the individuals involved in the business nevertheless partial funding with life insurance appears optimal in many cases the importance of an orderly transfer of farm property to on farm heirs is well known harl thomas and boehlje although equal devolution has been popular in rural areas it creates problems for on farm heirs as they attempt to purchase or control business shares of offfarm heirs harris this paper analyzes the use of life insurance to fund the purchase of the farm business from nonfarm heirs upon the death of a parent or other property owner the policy owner is the on farm heir not the insured individual and upon death the proceeds are used to purchase the business from the off farm heirs this use differs from the typical

a multi attribute comparative evaluation of relative risk for a sample of banks abstract this paper proposes a comparative analysis of five different attributes of commercial banks liabilities that may be thought of as either directly measuring the default risk or are perceived by the market as impacting upon that default risk two of these attributes are credit ratings assigned by moody s and standard and poor s to debt issues the third attribute that we consider is yield to maturity which is typically assumed to be positively related to default risk the fourth attribute that is proposed is the fair value risk adjusted deposit insurance premium derived from option theoretic modeling and estimated from the daily data on equity prices finally we propose a term structure adjusted difference in yield between the risky debt and default free government debt as a more precise and theoretically sound measure of the default risk premium and develop a methodology for eliciting it on a composite basis for a given bank from the market prices of its various bond issues this term structure adjusted risk premium provides an analytical approximation to the valuation of corporate bonds call features and sinking fund provisions in view of the ordinality of the credit ratings given by the investment agencies spearman s rank correlation coefficient is employed as an analytical tool the analysis

investment returns and yields to holders of insurance this article demonstrates how investment returns can affect yields to holders of insurance policies in a competitive market and empirically tests whether such effects are present data for u s stock property liability insurers during 1950 82 are consistent with insurance yields reflecting returns from taxable bonds also the article shows how the pre 1987 u s tax code creates an opportunity for arbitrage by insurers between the market for property liability insurance and the market for tax exempt securities tests for the effect of this arbitrage indicate that tax exempt taxable yield ratios for bond maturities lying near five and ten years also have affected yields to holders of insurance copyright 1989 by the university of chicago

arbitrage pricing transaction costs and taxation of capital gains abstract this paper examines one of the few cases of seemingly redundant securities sets of three government bonds with the same maturity date within the bounds on relative bond prices established by tax exempt investors in a market with proportional transaction costs the taxation of capital gains on the basis of realization has a significant impact on relative prices the empirical evidence supports the tax option effect discussed by constantinides and ingersoll but does not generally support the segmented tax clientele equilibrium discussed by schaefer

immunization as a maxmin strategy the purpose of this paper is to broaden the analysis of immunization when it is viewed as amaxmin strategy several results are demonstrated which provide a new interpretation of maxmin strategy by using a more general theory of lagrangians we clarify the exact assumptions required for the duration strategy and the maxmin strategy to be equivalent in a world with taxes it is shown that in a world with taxes the immunization strategy requires the portfolio to satisfy a constraint about the bond to be included in addition to the duration constraint

a ricardian model of climate change in canada a comparative static ricardian model is used to establish relationships between climate and agricultural land value in canada from these relationships agricultural costs of climate change scenarios are estimated this study is motivated partly by evidence of potential agricultural benefits of climate change from a similar analysis of the united states by mendelsohn nordhaus and shaw and partly by the void of canadian studies furthermore it extends the analysis to non uniform climate change scenarios its finding of a slightly positive upper bound on the agricultural benefits from climate change within a wide margin of error is motivation for further analysis un modele ricardien de changement climatique au canada l auteur utilise un modele statique ricardien classique pour etablir des relations entre le climat et la valeur des terres agricoles au canada a partir de ces relations on calibre les couts agricoles de divers scenarios de changement climatique cette etude a pris forme en partie en reaction aux resultats d une analyse similaire de mendelsohn nordhaus et shaw aux etats unis et en partie en reponse a un manque d etudes de ce genre au canada cet article etend les analyses aux scenarios de changements climatiques non uniformes les resultats suggerent qu il existe une sorte de borne positive superieure aux avantages agricoles du changement climatique a l interieur d une marge d erreur assez vaste voila qui encourage a poursuivre les analyses

a programming model with stochastic technology and prices the case of australian agriculture risk associated with stochastic input output coefficients and prices is modeled in a programming specification based upon mean variance analysis and chance constrained programming the algorithm which exploits the features of minos a commercially available computer program is developed and applied to australian agriculture convergence of the algorithm is discussed with the data used the thirty runs of this problem achieved a fast convergence with no more than five cycles the model was used to derive supply response functions of export commodities of australian agriculture the relevant information was generated via parametric variations of prices selected according to a suitable experimental design