fiddling with value violins as an investment i introduction in this article we analyze the prices of violins using two different datasets one dataset includes 337 observations on repeat sales of the same violins at auction and at dealer sales starting in the mid nineteenth century and the other dataset includes over 2 500 observations on sales of individual violins at auction since 1980 the purpose of this article is to give some indication as to whether violins are a viable alternative investment that might be part of a diversified portfolio and to determine if some types of violins have had higher returns than other types of violins despite the growing discussion of alternative investments in the economics and finance literature the growing number of wealthy individuals funds and syndicates that invest in violins and the interest in violins as a collateralizable asset the only previous study of violin prices published in an academic journal was a study by ross and zondervan 1989 of repeat sales of 17 stradivaris this dearth of academic analysis is most likely due to the difficulty in gathering information on the sale prices of violins compared to real estate and even art the market for high end violins is thin and many violins are sold through dealers rather than auctions resulting in difficulty gathering the data to preview our results overall real returns for the dataset on repeat sales for the period 1850 2009 have been approximately 3 5 real returns to the overall portfolio of individual sales at auction since 1980 have also been about 3 3 not including transaction commissions the price path has been stable with a slightly negative correlation to stocks and bonds the overall returns mask differences in returns between different types of violins it is believed that better violins are sold through dealers rather than through auction houses indeed the real return on dealer sales for 1850 2008 was 4 32 and the real return to violins sold at auction for the same period was 2 86 since 1980 modern italian instruments sold at auction have increased steadily in price relative to old italian instruments sold at auction this article proceeds as follows the violin market is discussed in section ii and in section iii we discuss the data and our estimation methodology in section iv we present our regression results and in section v we interpret our regressions we conclude in section vi ii the market for violins a how the market works fiddles the term used by dealers and collectors to refer to even the finest violins are sold through both auction houses and dealers and also directly from one musician or collector to another the main sellers and buyers of these instruments other than dealers are musicians collectors often foundations and investors individual musicians have used various schemes to purchase a good instrument including borrowing from banks that specialize in loaning funds against musical instruments and assembling syndicates to raise money most collectors both private and institutional loan out their instruments to talented musicians the musician typically pays all insurance and maintenance costs but not a rental fee insurance costs range from about 0 5 to about 2 of the value of an instrument there are also buyers who are interested in purchasing violins primarily as an investment as part of a diversified portfolio these instruments are then also loaned out to musicians who pay insurance and maintenance violins are sold through both auction houses and dealers the relative size of the various markets is very difficult to gauge through conversations with dealers and analyzing our auction data we speculate that auction sales make up between 10 and 20 of the market one advantage of transacting through a dealer is that it is easier to borrow and try out the instrument though auction houses also accommodate a small number of potential buyers in this manner

the financial characteristics of firms and theories of merger activity there are a number of important reasons why economists have shown great interest in the analysis of merger activity in all advanced industrial societies the first is that merger activity has been a major cause of rising concentration in the case of the u k a comparison of five estimates made by different researchers led the authors of a 1978 government green paper 4 to the view that since the late 1950s mergers accounted for half of the growth in concentration the rise in concentration in turn creates concern because of the possible misallocation of resources the possible abuse of market power and the political and social impact of concentrated economic strengh in giant firms a second reason is that because mergers have been major instruments of growth by firms and often involve large scale financial outlays there is interest in the extent to which mergers have brought gains or losses to the firms involved including their shareholders there is a third reason which is connected more narrowly with the development of theories of the firm the unending debate between theories based on various kinds of maximising behaviour profit maximising growth maximising etc and as between maximising under constraints and forms of satisficing has led to attempts to formulate stable hypotheses drawn from such theories such hypotheses often involve the role of mergers in for example managerial utility functions principally directed at growth the role of the stock market as a market in control which can discipline firms to conform to profit maximising norms etc these three reasons for interest in merger analysis are clearly inter related and all create interest in the determinants of merger activity in looking at such determinants it is useful for analytical purposes to make some distinction between those approaches which focus on the relation between firms and their macro environment and those which concern themselves primarily with the characteristics of firms such as the degree of managerial shareholder control with assumptions as to the different expected behaviour or on such features as the presence of excess liquidity or high

statistical efficiency of double bounded dichotomous choice contingent valuation the statistical efficiency of conventional dichotomous choice contingent valuation surveys can be improved by asking each respondent a second dichotomous choice question which depends on the response to the first question if the first response is yes the second bid is some amount greater than the first bid while if the first response is no the second bid is some amount smaller this double bounded approach is shown to be asymptotically more efficient than the conventional singlebounded approach using data from a survey of californians regarding their willingness to pay for wetlands in the san joaquin valley we show that in a finite sample the gain in efficiency can be very substantial

implications of bid design and willingness to pay distribution for starting point bias in double bounded dichotomous choice contingent valuation surveys we examine starting point bias in double bounded dichotomous choice contingent valuation surveys we investigate 1 the seriousness of the biases for the location and scale parameters of the willingness to pay wtp in the presence of starting point bias 2 whether or not these biases depend on the distribution of wtp and on the bid design and 3 how well a commonly used diagnostic for starting point bias a test of the null that bid set dummies entered in the right hand side of the wtp model are jointly equal to zero performs under various circumstances monte carlo simulations suggest that the effect of ignoring starting point bias depends on the bid design and on the true distribution of wtp a well balanced symmetric bid design may result in very modest biases even when the anchoring mechanism is very strong the power of bid set dummies in detecting starting point bias is low they tend to account for misspecifications in the distribution assumed by the researcher for the latent wtp rather than capturing the presence of starting point bias

art as an investment and conspicuous consumption good ments art is also a consumption good art owners take pleasure in its intrinsic value e g for aesthetic pleasure or as a storehouse of an artist s deftness and to the extent that it is a luxury good they derive additional enjoyment from the signal of wealth that owning a masterpiece transmits it is the mixture of pecuniary and nonpecuniary payoffs to ownership that makes artworks both compelling to purchase and difficult to value i exploit this insight to explain why the measured risk premium of a portfolio of artworks is low compared to other risky assets in a consumption based pricing model an asset s risk premium is a function of the covariance of its returns with agents marginal utility of consump tion agents need to be compensated if the asset pays off in a period of already high utility as a luxury good relative art demand is an increasing function of wealth therefore positive shocks to income increase the demand price and returns to art in periods of high consumption utility implying a high risk premium this intuition is at odds with empirical studies that quantify the average financial returns of paintings relative to more traditional investment vehicles these studies find that art 1 often underperforms relative to equities and bonds while there have been

measuring returns on investments in collectibles this paper considers the question of how to measure and interpret the financial return to investing in collectibles we review various methodologies for creating priced indexes and then discuss studies that explicitly calculate a rate of return to some set of collectibles while most collectibles appear to yield positive real returns the majority embody more risk and yield lower financial returns than stocks other characteristics of collectibles prices such as covariance with other asset prices are also examined

is art market behaviour predictable abstract in this paper we look for relationships between art and financial markets through econometric methods the main results indicate that financial markets influence the art market with a lag of about one year which seems plausible due to the relative sizes of both markets the vector auto regressive v a r model shows that lagged financial variables help predicting art prices even if the lag does not allow for systematic profits

does liberalization reduce agency costs evidence from the indian banking sector abstract on february 16 2002 the reserve bank of india issued a circular that signaled a policy liberalization facilitating acquisition of private sector banks in india by foreign entities portfolios of private sector and nationalized banks posted significant value gains in the days surrounding the announcement the gains by private sector banks were almost double those of nationalized banks we further analyze the firm specific abnormal returns using cross sectional regressions and find a significant relation between firm specific abnormal returns and factors typically associated with a bank s potential for takeover these results provide the first empirical support for stulz s hypothesis that one cause of the valuation gains associated with liberalization is the expected gain from a reduction of agency costs

on pricing the priceless comments on the economics of the visual art market abstract behaviour in the arts is often related to pleasure and imagination however art objects paintings pieces of sculpture and others have been traded on markets for a long time more importantly the place attributed to an artist by contemporary aesthetic judgement more or less depends upon markets we consider here different questions about art objects as commodities markets and prices the returns to art including comments on the comparison of prices of paintings and stock market fluctuations

acquisition targets and motives in the banking industry this paper uses a large sample of individual banking organizations observed from 1996 to 2005 to investigate the characteristics that made them more likely to be acquired we use a definition of acquisition that we consider preferable to that used in much of the previous literature and we employ a competing risk hazard model that reveals important differences that depend on the type of acquirer since interstate acquisitions became more numerous during this period we also investigate differences in the determinants of acquisition between in state and out of state acquirers we also employ a subsample of publicly traded banking organizations to investigate the role of managerial ownership in explaining the likelihood of acquisition the hypothesis that acquisitions serve to transfer resources from less efficient to more efficient uses receives substantial support from our results as do a number of other relevant hypotheses

art as a wartime investment conspicuous consumption and discretion the financial underperformance of art as an investment is well documented in contrast to studies conducted on peace time periods this paper shows that the art market in occupied france during wwii significantly outperformed all alternative investments bonds equities as well as currencies exchanged on the black market other than gold this suggests that art may be a good hedge against low probability disasters the paper further demonstrates that motives to purchase art consumption and investment vary over time in his theoretical model mandel 2009 attributes art s low return to the utility derived from conspicuous consumption in occupied france during wwii conspicuous consumption was impossible for artworks deemed degenerate by the nazis the price evolution of degenerate versus non degenerate artworks confirms the importance of conspicuous consumption in artworks pricing eventually the paper defines the concept of discretion the ability to store a large amount of value in small and easily transportable goods during wartime illegal activities and the risk of being forced to flee the country increased the interest for discreet assets as shown by the better performance of small and thus discreet artworks in comparison to large ones

long term comovements in international markets for paintings we study steady state relationships between prices for paintings obtained by three groups of painters impressionist modern and contemporary european masters other minor european painters contemporary us painters at public auctions in new york london and paris between 1962 and 1991 the analysis is carried out by estimating vector autoregressive models using the recent techniques developed by johansen the results show that the various markets move closely together and are even in new york led by what happens to the group of european great masters whose prices are not influenced by other prices we also examine the relation between art and stock markets we find that there is no long run relation between these two assets though in the short run financial markets do influence art markets

contingent valuation a practical alternative when prices aren t available a person may be willing to make an economic tradeoff to assure that a wilderness area or scenic resource is protected even if neither that person nor perhaps anyone else will actually visit this area this tradeoff is commonly labeled passive use value contingent valuation studies ask questions that help to reveal the monetary tradeoff each person would make concerning the value of goods or services such surveys are a practical alternative approach for eliciting the value of public goods including those with passive use considerations first i discuss the exxon valdez oil spill of march 1989 focusing on why it is important to measure monetary tradeoffs for goods where passive use considerations loom large although discussions of contingent valuation often focus on whether the method is sufficiently reliable for use in assessing natural resource damages in lawsuits it is important to remember that most estimates from contingent valuation studies are used in benefit cost assessments not natural resource damage assessments those working on benefit cost analysis have long recognized that goods and impacts that cannot be quantified are valued implicitly by giving them a limitless value when government regulations preclude certain activities or giving them a value of zero by leaving certain consequences out of the analysis contingent valuation offers a practical alternative for reducing the use of either of these extreme choices i put forward an affirmative case for contingent valuation and address a number of the concerns that have arisen

institutional ownership stability and bhc performance abstract in this study the association between performance of bhcs and institutional ownership stability is investigated and contrasted to those found for the less regulated utility and industrial firms in order to determine whether regulation displaces owner monitoring we employ a simultaneous equations model treating firm performance and institutional ownership stability as endogenous variables several results are obtained first bhc performance is positively associated with institutional ownership stability second this association is weaker for bhcs than for comparable utility and industrial firms possibly because of the substitution of regulation for owner monitoring in banking third this association is stronger in the recent deregulated years and for bhcs with lower likelihood of regulatory intervention

corporate governance of banks a survey this paper reviews the empirical literature on the corporate governance of banks we start by highlighting the main differences between banks and nonfinancial firms and focus on three characteristics that make banks special i regulation ii the capital structure of banks and iii the complexity and opacity of their business and structure next we discuss the characteristics of corporate governance in banks and how they differ from the governance of nonfinancial firms we then review the evidence on three governance mechanisms i boards ii ownership structures and iii executive compensation our review suggests that some of the empirical regularities found in the literature on corporate governance of nonfinancial institutions such as the positive negative association between board independence size and performance do not hold for banks also existing work provides no conclusive results regarding the relationship between different governance mechanisms and various measures for banks performance we discuss potential explanations for these mixed results

energy projects in iceland advancing the case for the use of economic valuation techniques to evaluate environmental impacts decision making in iceland has occurred without reference to economic valuations of the environmental impacts of energy projects environmental impact assessments a legal requirement for nearly all energy projects in iceland since 1994 have played an important role in identifying the environmental impacts of energy projects and proposing mitigation measures however a purely qualitative description of environmental impacts is insufficient to ensure that they are accounted for equivalently with all of the other costs and benefits of a proposed project instead as monetary information concerning the welfare gains or losses of proposed projects is not currently required to be provided to the licensing body orkustofnun there is the potential for sub optimal decision making to occur as this paper sets out a broad variety of non market valuation techniques already exist and could be applied to estimate the value of environmental benefits sacrificed to accommodate such developments these methods and their outcomes could be incorporated within mandatory cost benefit assessments for proposed icelandic energy projects communicating an estimate of the full welfare implications of approvals to decision makers and the public alike and fulfilling an oecd demand for the country to commence such processes

selling online versus live a seller choosing between auctioning online and live faces a tradeoff lower transaction costs online against more rents left with the bidders we model this tradeoff and apply the theory to auctions of art the crucial parameter for whether the seller does better online than live is not the expected price but the valuation uncertainty

scale and scope economies in the multi product banking firm abstract the multi product nature of the banking firm is examined utilizing the translog cost function this analysis indicates that contrary to conventional wisdom natural monopoly scale economies and product specific decreasing costs are not robust characterizations of the banking industry there is however evidence that the cost function is characterized by economies of scope the implications of these results are discussed and extensions of this approach suggested

the contingent valuation study of the wind farm burfellslundur willingness to pay for preservation abstract following the success of two trial wind turbines the national power company of iceland landsvirkjun proposed a wind farm at burfellslundur on the edge of the icelandic highlands the farm would comprise of 67 turbines with combined production capacity of 200 mw the environmental impact assessment for the development raised concerns about the visual impacts of the proposals on the surrounding countryside in this study the contingent valuation method was applied to evaluate preferences and estimate willingness to pay to preserve burfellslundur this study represents only the third contribution in the international academic literature concerning the economic value of the environmental costs of developing wind farms and the first focused on onshore resources in addition this paper fulfills a call by the oecd who have requested that iceland commence economic valuation of the environmental impacts of energy projects a web based contingent valuation survey was developed and issued by the university of iceland s social science research institute receiving 690 respondents of these 28 were willing to pay for preservation interval regression using log transformation was applied to estimate mean willingness to pay which was 12 549 isk approximately us 128 when scaled up to the icelandic population of taxpayers the economic value of preserving burfellslundur was estimated to be 3 17 billion isk approximately us 32 3 million these results are of a scale that could have a significant impact on the social welfare gains or losses associated with burfellslundur and inform the international land use management debate concerning the trade offs of developing wind farms

sale rates and price movements in art auctions this paper examines the relationship between sale rates and price shocks in art auctions using data on contemporary and impressionist art we show that while sale rates appear to have little relationship to current prices there exists a strong negative relationship of sale rates to unexpected price shocks which is reminiscent of a phillips curve we estimate an empirical model that suggests that the reserve price is set on average at about 70 of the low estimate

how auctions work for wine and art interview auctioneers and even to buy a little wine in the meantime i have also had the opportunity with john abowd 1988 to observe and collect data on the auction sale of impressionist and contemporary paintings this paper reports on some of the empirical regularities that i and others have observed in the actual operation of the auction markets for these items in view of the rich and diverse array of theoretical literature on auctions it seems high time economists began to spell out precisely what facts it is meant to explain 2

scale economies in banking a restructuring and reassessment the issue of scale economies in banking has a rich history most earlier studies report modest operating cost scale economies for small institutions those with less than about 50 million of deposits in 1968 dollars but are unclear where these economies might end if at all unfortunately these studies are limited in four important respects first those that were well specified did not measure the total cost of banking operations but concentrated on estimating scale economies for individual banking functions e g demand deposits separately from commercial loans second an average cost curve that could take a u shape over the full range of banks was not fitted either because larger banks were not included or because of the functional form used cobb douglas consequently the optimum or minimum cost size of a bank or office could not be determined third the variables measuring the costs of branching were misspecified fourth the branch

the recreational value of lake mckenzie fraser island an application of the travel cost method lake mckenzie is one of the most highly used and popular visitor destinations of all fraser island s natural sites attracting 2000 visitors a day in peak periods many consider this level of visitation to be unsustainable and the management authority is currently considering a range of management options to address this issue in assessing the alternatives it is useful to have some idea of the recreational use value of the lake under the current regime as it is this value that is at risk if visitor numbers are to be reduced this paper using the zonal travel cost method estimates the recreational use value of fraser island and lake mckenzie for australian resident independent visitors

how did japanese investments influence international art prices we test the luxury consumption hypothesis of ait sahalia parker and yogo 2004 using a unique international art price import export flow and stock market data set we find that the demand for art by japanese collectors is positively correlated with art prices and japanese stock prices this correlation is magnified during the bubble period of the japanese economy the mid 1980s to the early 1990s and gains even further strength for works of art typically favored by japanese collectors our results suggest that japanese investors or japanese asset markets indeed affect international art prices especially during the bubble period and its aftermath

takeover activity among financial mutuals an analysis of target characteristics abstract this paper presents an empirical investigation of the merger process among mutuals using a large pooled cross section time series sample of uk building societies between 1981 and 1993 the financial services industry is probably unique in having a substantial mutual sector coexisting with and competing against joint stock firms however given the severely attenuated system of ownership claims in the financial mutual it has been widely predicted that this form will exhibit strong behavioural differences from the stock sector it is surprising therefore that despite the important governance role accorded to mergers in the corporate literature the merger process among financial mutuals has been almost totally ignored this paper explores the mutual merger process via an examination of the targets characteristics it finds little support for the natural selection view of mutual acquisitions but it does reveal the importance of the regulatory process above all the results show a surprising similarity to those from studies of the merger process in joint stock firms

acquisition targets and motives the case of the banking industry findings do not indicate poorly managed firms are more likely to be acquired than well managed firms the analysis uses a sample of 1 046texas banks that existed in 1970 out of which 201 were acqui red during the period 1970 82 a multinomial logit procedure is used to estimate the relationship between the likelihood of acquisition and the characteristics of the target firm and its market additional results suggest that firms with la rge market shares low capital asset ratios and operations in urban areas are r elatively likely to be acquired but not firms with low profits or low growth copyright 1987 by mit press

art market inefficiency art is often used as an investment vehicle given the importance of market efficiency in finance we use a large auction based index to test whether the art market is weakly efficient evidence reveals that returns on artworks exhibit high positive auto correlation we attribute this result to price truncation resulting from unobservable reserve prices in auctions we conclude that the art market is not efficient mainly because price formation is opaque to outsiders who lack information on unsold artworks

art as an investment the market for modern prints repeat sales of modern prints at auction are used to estimate a semiannual index of prices for the period 1977 92 as in other studies of art as an investment prints do not compare favorably to traditional financial assets there is substantial noise in auction prices but little or no support for the proposition that some artists command higher prices in certain countries or that masterpieces outperform the market one puzzle is the continuing tendency for prices realized at certain auction houses to exceed those realized at others notably at sotheby s relative to christie s in new york copyright 1993 by american economic association

universal health insurance in the clinton plan coverage as a tax financed public good the financing arrangements embodied in the clinton health reform plan involve some important differences in the way in which public goods are usually financed the subsidies to small low wage firms mandated to provide benefits distort markets in both labor and products and offer incentives for the creation of small firms in addition the financing scheme implicitly envisions a head tax on families at modest income levels but offers a possible rationale for it nevertheless the main reason for many of the financing features appears to be an attempt to hold down the apparent budgetary cost of universal coverage

the rate of return on investment in wine joyce p jacobsen is wine an investment alternative to stocks and bonds first we review prior studies regarding the pecuniary rate of return to wine and other alternatives to financial assets next we calculate the rate of return to holding red bordeaux wine from 1986 to 1996 using a repeat sale regression finally we contrast the financial performance of wine both on an aggregate basis and for various portfolios to that of other asset classes we conclude that wine does not yield greater returns than financial assets especially when the volatility of returns and transaction costs are taken into account jel d44 g12 c43 investments in art and other collectibles are generally deemed profitable but empirical examinations of the relative attractiveness of noncapital good tangible assets relative to financial instruments have shown that art and other collectibles are not sound investments from a financial point of view there is a large body of literature that calculates the rate of return on alternative asset classes and concludes with few exceptions that nonfinancial assets are not good financial investments however in the case of wine the evidence is mixed collectors often maintain that the pecuniary rate of return on investments in wine is comparable to or exceeds investments in stocks and bonds and economists have not reached a consensus vis a vis the relative attractiveness of wine in this article we consider 1 how investment grade wine compares to other alternative asset classes and 2 whether wine might be a viable investment alternative to stocks or bonds first we consider the results drawn from empirical investigations regarding the relative attractiveness of paintings and other collectibles as investments next we review prior econometric evidence regarding the pecuniary rate of return to wine finally we calculate the return on wine from 1986 to 1996 using a repeat sale regression and contrast wine s financial performance both for an aggregate portfolio and for selected submarkets to that of other asset classes i most investments in collectibles cannot be justified as purely monetary there is a virtual consensus in the economic literature of the arts that financial assets dominate less traditional tangible assets as investments because art and other collectibles embody a compensating differential in the form of a user benefit burton and jacobsen 1999 offer a survey of this literature that finds that most quantitative examinations of the markets for art and other collectibles have concluded that the high risk low return characteristics of noncapital good tangible assets effectively proscribe retaining them as financial investments a seminal study by baumol 1986 for example estimated the real annual rate of return on paintings over the period 1652 to 1961 to be only 0 55 frey and pommerehne 1989 who subsequently extended baumol s data set up through 1987 and expanded it by including sales from more countries also concluded that paintings were relatively unattractive investment instruments yielding only about 1 4 between 1635 and 1949 and 1 6 between 1950 and 1987 on an annual inflation adjusted basis more recent studies have only confirmed that investments in other forms of art and collectibles compare unfavorably to investments in traditional financial assets especially when the rate of return is risk adjusted 1 pesando 1993 for example constructed a price index of modem prints over 1977 to 1992 and estimated that the average real annual rate of return on an aggregate print portfolio was only 1 51 well below the concomitant real return on stocks moreover pesando noted that the risk as measured by the standard deviation of real returns associated with investing in prints was comparable to or even exceeded investments in stocks or long term bonds ii but what about wine

estimating the use and preservation values of national parks tourism resources using a contingent valuation method abstract the korean national parks authority has questioned whether natural resources have enough economic value to justify an increase in admission fee in the case of inadequate assistance from the government alternatively they also question whether the national parks have sufficient value to contribute to citizens welfare in order to receive continuing support from the government hence the purpose of this research is to estimate the use and preservation values of natural and or cultural resources in five distinctive national parks using a dichotomous choice contingent valuation method the empirical results show that natural and or cultural resources of the sample national parks possessed considerable use and preservation values outweighing current admission fees and maintenance costs per visitor thus these values provide enough justification for the national park authority to increase admission fees to maintain the quality of natural environment and avoid degrading natural resources in the event of no assistance by the government the findings may provide guidance to national park managers and practitioners who establish pricing policies the results also show that values of natural and or cultural resources were different across five distinctive national parks indicating the possibility of employing differential admission fees according to park characteristics

economic consequences of deregulation evidence from the removal of voting cap in indian banks abstract we examine the effect of the 2005 banking regulation amendment bill and the 2011 banking laws amendment bill proposals for removal of the 10 percent voting rights cap in indian banks the 2011 banking laws bill was first introduced in 2005 but lapsed with the dissolution of the 14th lok sabha the bill was passed in december 2012 and raised the voting cap in private sector banks from 10 to 26 percent we present evidence that the removal of the voting cap enhances the value of votes of bank stocks by reducing the wedge between cash flow and control rights thus increasing monitoring and the probability of takeover post deregulation analysis reveals that the passage of the bill was followed by increasing blockholders number and percentage of shares held in larger and government banks furthermore a stronger negative relationship between banks profitability and size as well as share of non performing loans is observed this study makes an important contribution to the growing literature on the valuation impact and efficiency gains of liberalization of ownership restrictions in emerging markets as well as the rich literature on corporate governance and control relating to the value of voting privilege in companies with disparate voting rights

valuing a wind farm construction a contingent valuation study in greece abstract our analysis is based on data from a double bounded dichotomous choice contingent valuation study implemented to elicit public attitudes towards renewable energy generation and their willingness to pay for the construction of a wind farm in the area of messanagros in the island of rhodes greece results indicate that there are significant positive values deriving from the proposed project respondents report a mean willingness to pay a premium in their bi monthly electric bills of 8 86 for the sole purpose of the construction of the wind farm the estimated economic benefits to the local population are weighed against the investment cost in a cost benefit analysis to inform policy making and implications for eu energy policy are provided

volatility of price indices for heterogenous goods with applications to the fine art market price indices for heterogeneous goods such as real estate or fine art constitute crucial information for institutional or private investors considering alternative investment decisions in times of financial markets turmoil classical meanvariance analysis of alternative investments has been hampered by the lack of a systematic treatment of volatility in these markets in this paper we propose a hedonic regression framework which explicitly defines an underlying stochastic process for the price index allowing to treat the volatility parameter as the object of interest the model can be estimated using maximum likelihood in combination with the kalman filter we derive theoretical properties of the volatility estimator and show that it outperforms the standard estimator we show that extensions to allow for time varying volatility are straightforward using a local likelihood approach in an application to a large data set of international blue chip artists we show that volatility of the art market although generally lower than that of financial markets has risen after the financial crisis of 2008 09 but sharply decreased during the recent debt crisis

information and the concept of option value this paper examines the arrow fisher henry concept of option value and analyzes its properties including its relationship to the value of information and the effects of increasing uncertainty about the future consequences of irreversible development it is shown that this option value is distinct from but bounded by the value of information in the overall decision problem also it is distinct from a concept of option value that appears in b s bernanke quart j econom 98 85 106 1983 however when there is a continuum of development levels rather than a binary choice between full development and no development some of these conclusions need to be modified

auctions and the price of art the value of most important works of art is established by public auction either directly by an actual sale or indirectly by reference to other sales how the auction system works is thus a critical determinant of how the public s preferences are translated into the evaluation of artistic work the auction system is central in the determination of the incentives for artistic work and the efficiency of the auction system is a key determinant of the cost of creating and distributing works of art this paper contains a review of the burgeoning new research of the last decade that has been designed to shed light on how the art auction system actually works what it indicates about price formation and how well it performs we begin our discussion in section 2 with a short description of the mechanics of the auction system and then organize the remainder of our discussion around two major topics the first topic concerns how auction prices can be used to determine and compare overall price movements within the art market and other markets and the second topic concerns how the auction mechanism influences prices we

efficiency dynamics in indian banking a conditional directional distance approach abstract the paper contributes to the contemporary research on bank efficiency in india we analyze the efficiency dynamics of the indian banking industry from 2004 to 2012 based on the recent methodological developments of the conditional and unconditional directional distances introduced by daraio and simar 2014 we apply a conditional directional distance estimator in order to analyze the dynamic effects of industry s performance levels the results indicate that foreign banks perform better compared to national and domestic private banks there is also evidence of technological change at the period before the global financial crisis however during and after the global financial crisis these gains diminished the evidence suggests that national banks fail to sustain their high performance levels gained after the industry s restructuring period finally the findings support the view that ownership structure affects banks technical efficiency levels

are art auction estimates biased this article considers whether presale auction estimates are unbiased predictors of price when no sales are considered utilizing a newly constructed sample of over 500 works by eight early twentieth century american artists unbiased presale auction estimates in predicting price while expected are generally not supported in previous work but these studies excepting one do not include no sales in the calculations in order to study the question we employ a standard approach that uses an inverse mills ratio arising from a sample selection probit to correct for selection bias we find that controlling for selection bias presale auction estimates appear to be biased downward and we offer possible reasons for this result

deregulation and the adaptation of governance structure the case of the u s airline industry deregulation provides a natural experiment for examining how governance adapts to structural changes in the business environment we investigate the evolution of governance structure characterized by ownership concentration compensation policy and board composition in the u s airline industry during a 22 year period surrounding the airline deregulation act of 1978 consistent with theory we nd that after deregulation i equity ownership is more concentrated ii ceo pay increases iii stock option grants to ceos increase and iv board size decreases airlines governance structures gravitate toward the system of governance mechanisms used by unregulated rms the adaptation process is gradual however suggesting that it is costly to alter organizational capital we also present evidence on the relation between governance structure and rm survival 1999 elsevier science s a all rights reserved jel classixcation g32 g38 j33 l93

vested interest and biased price estimates evidence from an auction market this study employs a new data set from art auctions to examine the relationship between auctioneer presale price estimates and the long term performance of artworks we find that the price estimates for expensive paintings have a consistent upward bias over a long period of 30 years high estimates at the time of purchase are associated with adverse subsequent abnormal returns moreover the estimation error for individual paintings tends to persist over time these results are consistent with the view that auction house price estimates are affected by agency problems and that

why do banks merge the banking industry is consolidating at an accelerating pace yet no conclusive results have emerged on the benefits of mergers and acquisitions in order to investigate the motives and results of each type of deal we consider separately acquisitions that is the purchase of the majority of voting shares and mergers using italian data mergers seek to improve income from services but the increase is offset by higher staff costs return on equity improves because of a decrease in capital acquisitions aim to restructure the loan portfolio of the acquired bank improved lending policies result in higher profits

the market value of rarity abstract most theories of demand assume that consumers value the characteristics of products but are unconcerned with how many other consumers also consume the product however several theories of demand argue that consumers can value the exclusivity of possessing a rare object we test this implication on a particular collectible rare coins our paper examines the case of coins of a given type and identical quality that have mintages in different quantities this allows us to exclude the common case in which rarity or price itself is an indicator of quality for our sample rarer coins command higher prices rarity in the form of original mintage more strongly influences the market price than does collectibility as represented by the rarest coins of each mint mark or year we also point out that here may be other goods such as automobiles for which rarity may influence market demand

reputation price and death an empirical analysis of art price formation i introduction art prices are often claimed to substantially increase when the artist dies these claims appear to be largely based on anecdotal evidence they are promulgated by hearsay and sometimes cleverly insinuated by art dealers who attempt to convince naive customers that it is justified to mark up the artwork of recently deceased artists this study provides a theory guided empirical analysis of the so called death effect on art prices the analysis employs hedonic price regressions and makes use of a dataset which exceeds the sample size of traditional studies in cultural economics by an order of magnitude thereby shedding a new light on previous investigations of art price formation even though the literature on art auctions art price indices and rates of return in the visual arts market is by now quite voluminous see respectively ashenfelter and graddy 2006 ginsburgh mei and moses 2006 frey and eichenberger 1995 the death effect has not received much attention so far to be sure there are a few empirical studies which allow for a death effect but these studies do so in a rather cursory and off hand manner by merely including in their regressions a dummy variable that distinguishes between works of art created by living and late artists see e g agnello 2002 worthington and higgs 2006 the first investigation that has squarely addressed death induced changes in art prices is by ekelund ressler and watson 2000 these authors go some way in providing a theoretical underpinning of the death effect by pointing out that artists produce durable goods under market conditions of monopolistic competition thus given rational actors in the art market the coase conjecture applies coase 1972 even though artists have in principle some discretion in setting prices they cannot exert market power because they are unable to credibly commit to not lowering their prices in the future by spoiling the market with an inflationary increase in production during an artist s lifetime prices will therefore settle well below the monopoly price death of course is the ultimate device to commit to discontinuing production art prices thus increase when the artist dies because her oeuvre all of a sudden becomes scarcer than originally anticipated after having laid this theoretical foundation ekelund ressler and watson proceed to empirically identify the death effect with the help of a hedonic price regression their data consists of a panel of auction records relating to the work of 21 latin american artists who died near or during the observation period 1977 1996 the prices are shown to peak in the years immediately following an artist s death thus lending support to the existence of a death effect from a theoretical point of view the main concern with this pioneering analysis relates to the artists age at death since the probability of dying increases with age the information of an old artist s death is not very surprising and should therefore already be largely reflected in the price implying a small death effect the death of an old artist moreover causes a relatively small reduction in the anticipated size of her oeuvre which again translates into a relatively small price increase when her death is made public assuming rational expectations one would therefore expect the death effect to decrease with the artist s age at death a formal rendering of this argument is shown by itaya and ursprung 2008 who investigate the death effect in an infinite horizon dynamic general equilibrium setting it therefore stands to reason that the death effect depends on the age at death neglecting this relationship in empirical investigations may of course give rise to a seriously misspecified econometric model a recent study by maddison and jul pedersen 2008 acknowledges that the prices of an artist s works should depend on the expected total supply which in turn depends on the artist s conditional life expectancy at the time of sale

boards of directors ownership and regulation in this paper we examine whether regulation can be used to substitute for internal monitoring mechanisms percentage of outside directors officer and director common stock ownership and ceo chair duality to control for agency conflicts in a firm we find that in general the percentage of outside directors is negatively related to insider stock ownership but is not affected by ceo chair duality ceo chair duality is however less likely when insider stock ownership increases we find these internal monitoring mechanisms to be significantly less related with regulated firms banks and utilities we conclude that to the extent that regulations reduce the impact of managerial decisions on shareholder wealth effective internal monitoring of managers becomes less important in controlling agency conflicts 2002 elsevier science b v all rights reserved

fishing quota markets abstract in 1986 new zealand responded to the open access problem by establishing the world s largest individual transferable quota itq system using a 15 year panel dataset from new zealand that covers 33 species and more than 150 markets for fishing quotas we assess trends in market activity price dispersion and the fundamentals determining quota prices we find that market activity is sufficiently high in the economically important markets and that price dispersion has decreased we also find evidence of economically rational behavior through the relationship between quota lease and sale prices and fishing output and input prices ecological variability and market interest rates controlling for these factors our results show a greater increase in quota prices for fish stocks that faced significant reductions consistent with increased profitability due to rationalization overall this suggests that these markets are operating reasonably well implying that itqs can be effective instruments for efficient fisheries management

state passage of interstate banking legislation an analysis of firm legislative and economic characteristics abstract forty nine states and the district of columbia enacted legislation reducing interstate banking restrictions between july 1982 and april 1993 for these 50 banking bills deregulation increased the average price of bank stocks returns vary cross sectionally by firm characteristics regulatory features and economic conditions returns are positively related to the characteristics of acquisition targets furthermore returns are positively related to legislative features that increase the bargaining power of potential targets and economic conditions that are likely to encourage bank acquisition these findings are consistent with the relaxation of geographic restrictions increasing activity in the corporate control market

endogenously chosen boards of directors and their monitoring of the ceo author s hermalin benjamin e abstract this paper develops a model in which the effectiveness of a board s monitoring of the ceo depends on the board s independence the independence of new directors is determined through negotiations implicit or explicit between the existing directors and the ceo the ceo s bargaining position and thus influence over the board selection process depends on an updated estimate of the ceo s ability based on prior performance many empirical findings about board structure and performance arise as equilibrium phenomena in this model we also explore the implications of this model for proposed regulations of corporate governance structures please contact the program in law and economics at boalt hall school of law uc berkeley berkeley ca 94720 for a copy of this paper

buying beauty on prices and returns in the art market this paper investigates the price determinants and investment performance of art we apply a hedonic regression analysis to a new data set of more than one million auction transactions of paintings and works on paper based on the resulting price index we conclude that art has appreciated in value by a moderate 3 97 per year in real u s dollar terms between 1957 and 2007 this is a performance similar to that of corporate bonds at much higher risk a repeat sales regression on a subset of the data demonstrates the robustness of our index next quantile regressions document larger average price appreciations and higher volatilities in more expensive price brackets we also find variation in historical returns across mediums and movements finally we show that measures of high income consumer confidence and art market sentiment predict art price trends this paper was accepted by wei xiong finance

cost benefit analysis and environmental policy the use of cost benefit analysis cba in british environmental policy has gone through several stages early applications of cba tended to ignore environmental impacts altogether leave them for a subsidiary impact analysis or provide only a partial monetization of impacts currently cba is the subject of renewed interest in government departments in the environment agency and among other agencies providing guidance and advice to government while the amount of cba being undertaken has increased its influence on policy making is open to question obstacles remain much cba is expensive and this means that benefits transfer is widely regarded as essential currently however the validity of much benefits transfer is questionable other problems arise from misunderstandings about the nature of economic values and the links to individuals self interest and from concerns that cba results will crowd out flexibility in decision making especially the likely context of multiple political objectives over and above economic efficiency none the less cba has begun to have influence in the setting of environmental taxes and alternative decision rules appear to suffer as many if not more shortcomings as those faced by cba copyright 1998 by oxford university press

corporate acquisitions a theory of special cases a review of event studies applied to acquisitions mergers occur when an acquiring firm and a target firm s agree to combine under legal procedures established in the states in which the merger participants are incorporated a tender offer is an offer to purchase a proportion of the outstanding shares of the target firm at specified terms on or before a specified date those shareholders not tendering their shares retain an ownership interest in the firm the term acquisition is used in a generic sense to refer to any takeover economists especially those specializing in industrial organization have theories to explain the motivations for horizontal acquisitions and to a lesser extent vertical acquisitions however conglomerate acquisitions appear to present problems to some economists and governmental organizations the literature on mergers is replete with studies which evaluate the impact of acquisitions on the participants the original studies consider the impact of mergers on the risk of the resulting firm and on its profitability in investigating these isssues the pre and post acquisition behaviour of both bidders and targets is examined and there is an attempt to isolate and measure the impact of the acquisition from other events that affect the firm performance measures are based either on accounting data or on stock price reactions to the acquisition to identify acquisition specific influences comparisons of the merger sample to a non merger control group are used these studies are seriously compromised for the following reasons accounting data do not provide information on the expected long run impacts of the acquisition on the participants there are serious problems in defining a comparable control group and the comparison group does not provide information on how the specific firms would have performed without the acquisition this review focuses on those studies which utilize stock market data and measure the performance of merger participants over the acquisition period as

on the rate of return in the art market survey and evaluation abstract existing estimates of rates of return on single art objects and whole collections are surveyed and critically evaluated the psychic benefits from art are in the few cases they are considered at all derived from the difference to financial returns on other markets this paper discusses determinants of psychic benefits and suggests rental fees and willingness to pay studies as a possible way to analyze and estimate the psychic benefits from art

the art of benchmarking picasso prints and auction house performance the influence of the auction house on the price of comparable art objects is an issue in the economics of arts literature the standard approach has been to run hedonic price regressions including the auction house as a dummy variable the approach in this paper is to apply benchmarking tools developed in the efficiency and productivity literature directly to the auction house as a unit new performance indices are developed based on a dea benchmarking technique to analyse auction houses the new indices discriminate well between auction houses by allowing one to identify both contemporaneous and inter temporal performances additional best performance results are obtained for specific attributes

inference and optimal design for a welfare measure in dichotomous choice contingent valuation this paper considers the use of contingent valuation to estimate non market benefits from separately valued nested goods survey respondents were asked referendum wtp questions regarding either a scheme to protect the whole area of a wetland or a

the impact of reserve prices on the perceived bias of expert appraisals of fine art we examine whether the expert appraisals provided to bidders before major art auctions are unbiased indicators of market value despite a strong grounding in theory this aspect of optimal auction design has been frequently challenged in previous empirical research particularly in the market for fine art we adopt a valuation benchmark that incorporates sellers reservation prices as well as high bids and recognize latent censoring due to works that fail to make reserve although the auction houses never divulge sellers reserve prices which are therefore unobservable we exploit the fact that they can be observed indirectly via their impact on buy in rates using the set of french impressionist paintings brought to auction from 1985 to 2001 we estimate the distribution of seller reserve prices establish their link to a proper valuation benchmark and isolate the selection bias due to bought in works on the perceived market value of fine art works brought to auction after controlling for the impact of reservation prices and considering all works brought to auction and therefore all works appraised we find no evidence of bias in the experts pre sale estimates

the structure of ownership and the theory of the firm the separation of ownership from control produces a condition where the interests of owner and of ultimate manager may and often do diverge and where many of the checks which formerly operated to limit the use of power disappear in creating these new relationships the quasi public corporation may fairly be said to work a revolution it has divided ownership into nominal ownership and the power formerly joined to it thereby the corporation has changed the nature of profit seeking enterprise 1

the auction market for modern prints confirmations contradictions and new puzzles using a large data set with 80 214 repeat sales we find that the real return on a diversified portfolio of modern prints sold at auctions worldwide averaged a modest 1 51 during the period 1977 2004 we address several issues regarding the performance of modern prints as investments the selection bias arising from the self interest of auction houses the impact of an ever expanding universe of auction houses on investment returns the masterpiece effect or whether more expensive works of art outperform the market as a whole and the differences in returns that arise due to random fluctuations in collector tastes jel z11 g11 g14

do bank regulations affect board independence a cross country analysis abstract based on the hand collected board structure data of 277 listed banks across 55 countries and the bank regulation and supervision database compiled by the world bank this paper provides the first cross country assessment of the impacts of bank regulations on board independence of banks in line with beck et al 2006 we examine the effects of two types of regulation policies the first involving the empowerment of supervisory agencies to monitor and discipline banks directly and the second focusing on encouraging private monitoring of banks through requiring disclosure of more accurate and complete information we find that empowering official supervisory agencies to discipline banks directly reduces board independence but encouraging private sector monitoring of banks increases it the findings suggest that the first type of regulations tends to crowd out the internal governance of banks while the second crowds in it we also find that the legal system with better investor rights protection and better contracts enforcement not only increases board independence but also enhances the crowding in effect of promoting private monitoring and decreases the crowding out effect of direct official supervision on board independence

institutional investment mergers and the market for corporate control the increasing importance of institutional investors as shareholders in individual companies has led to an important debate on their impact on corporate performance in this paper we focus on their role in the market for corporate control this has so far been the subject of very little systematic investigation despite its theoretical and practical significance we consider the impact of financial institutions using two u k merger samples and employing both univariate and multivariate techniques of analysis in the first sample drawn from the low merger period 1981 1983 pre and post merger differences are found between merging companies with and without a significant institutional presence however in the takeover boom year of 1986 from which the second sample is drawn all such distinctions become blurred

auctions market efficiency and the trade in second hand and antique silver using a new large unique database relating to silver goods sold at two major uk auction houses we show that the scrap value of silver plays a significant role in determining the realised prices of items sold at silver auctions however although scrap silver can be sold for cash at guaranteed prices almost immediately arbitrage opportunities are extremely limited just over 6 of silver goods sell below scrap value but once the buyer s premium is allowed for the opportunity for profit is tiny

does realism matter in contingent valuation surveys the importance of stressing the realism or policy relevance of a contingent valuation cv survey is commonly recognized by cv researchers this paper focuses on the relationship between the probability that a subject s response will result in real consequences and the subject s accurate reporting of willingness to pay results from experiments support the argument that efforts to make contingent valuation surveys real are important however our results also suggest that the connection between the survey and the likelihood of a payment must be rather powerful before surveys generate accurate reporting of willingness to pay for a public good

contingent valuation from dubious to hopeless abstract approximately 20 years ago peter diamond and i wrote an article for this journal analyzing contingent valuation methods at that time peter s view was that contingent valuation was hopele