mutual fund performance an analysis of quarterly portfolio holdings this article employs the 1975 84 quarterly holdings of a sample of mutual funds to construct an estimate of their gross returns this sample which is not subject to survivorship bias is used in conjunction with a sample that contains the actual net returns of the mutual funds in addition to allowing the authors to estimate the bias in measured performance that is due to the survival requirement and to estimate total transaction costs the sample is used to test for the existence of abnormal performance the tests indicate that the risk adjusted gross returns of some funds were significantly positive copyright 1989 by the university of chicago

on the comparative performance of socially responsible and islamic mutual funds this is the first study to provide comprehensive analyses of the relative performance of both socially responsible investment sri and islamic mutual funds the analysis proceeds in two stages in the first the performance of the two categories of funds is measured using partial frontier methods in the second stage we use quantile regression techniques by combining two variants of the free disposal hull fdh methods order m and order in the first stage of analysis and quantile regression in the second stage we provide detailed analyses of the impact of different covariates across methods and across different quantiles in spite of the differences in the screening criteria and portfolio management of both types of funds variation in the performance is only found for some of the quantiles of the conditional distribution of mutual fund performance we established that for the most inefficient funds the superior performance of sri funds is significant in contrast for the best mutual funds this evidence vanished and even islamic funds perform better than sri these results show the benefits of performing the analysis using quantile regression

debt in industry equilibrium this article shows 1 how entry and exit of firms in a competitive industry affect the valuation of securities and optimal capital structure and 2 how given a trade off between tax advantages and agency costs a firm will optimally adjust its leverage level after it is set up we derive simple pricing expressions for corporate debt in which the price elasticity of demand for industry output plays a crucial role when a firm optimally adjusts its leverage over time we show that total firm value comprises the value of discounted cash flows assuming fixed capital structure plus a continuum of options for marginal increases in debt article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

strategic debt and patent races abstract most traditional studies of rd under a flow cost model debt induces lower rd that is in a more general model where debt has other uses the total debt level is reduced when the strategic effect is included our empirical study gives support to the fixed up front r d result that higher debt levels are associated with lower overall r d expenditures

bankruptcy costs and the theory of oligopoly this paper examines the relationship between financial decisions and output decisions in oligopolistic markets assuming a duopoly market structure in which financial decisions and output decisions follow in sequence the authors analyze how bankrupt cy costs which are incurred when the firm is unable to meet current debt obligations affect the firm s behavior in output markets with fixed bankruptcy costs firms have an incentive to increase output le vels if they take on more debt proportional bankruptcy costs lead to a u shaped relationship between output and debt foresighted owners of firms are led to take into account the strategic output effects of financial structure when considering an optimal financial structure for the firm

corporate taxes and the demand for labor and capital in developing countries this article provides evidence about the impact of corporate taxation on both labor and capital demand by private companies in a developing economy using firm level data from chile our results show that higher corporate tax rates reduce not only the demand for capital but also the demand for labor due to complementarities between both inputs an interesting element of the results presented in this article is the asymmetry between the effects of taxation according to company size the impact on labor demand is significantly higher in large corporations than in small enterprises while the demand for capital is more responsive to corporate tax changes in small firms we can explain these results based on differences in credit constraints according to firm size

non parametric frontier estimates of mutual fund performance using c and l moments some specification tests there is a burgeoning literature using non parametric frontier methods to measure mutual fund performance these articles measure the relationship between the various characteristics mainly return information and some costs of ownership of these specialized financial products to establish a ranking using some efficiency measure we argue in favor of the use of the shortage function which is compatible with general investor preferences and question some of the often maintained hypotheses in this line of research the empirical part employs a large database of us and european mutual funds to offer extensive tests of the underlying modeling assumptions using various frontier estimators

product market competition and optimal debt contracts the limited liability effect revisited abstract this paper shows that asymmetric information between lenders and borrowers plays a crucial role in the existence of interactions between financial decisions and output market strategies lenders offer an optimal renegotiation proof financial contract which resembles a standard debt contract computing cournot equilibria debt causes firms to compete less aggressively the usual positive limited liability effect on quantities is offset by a negative one due to endogenous financial costs

efficiency of mutual funds and portfolio performance measurement a non parametric approach abstract in finance portfolio performance assessment is an important area of research the two popular indices of performance are the jensen s alpha and the sharpe index however there are a number of shortcomings of the above measures that have been highlighted in the literature we propose a new measure of performance that seeks to address the limitations of the earlier indices the new index is calculated by employing a well known method in operations research called data envelopment analysis we show the benefits of the proposed approach and assess the performance of mutual funds we compare the results with traditional indices of performance an interesting result we obtain is that the mutual funds are all approximately mean variance efficient

taxation and entrepreneurship in a welfare state does tax policy affect the rate of self employment in a modern welfare state this question is analyzed empirically based on swedish data for the entire postwar period available tax data indicate that payroll taxes have had a negative influence on the unincorporated rate of self employment though the effect is modest no effects from regular labor income taxation or capital gains taxation are found the paper improves upon earlier studies in that it tries to separate the effects of different taxes and uses cointegration techniques a further extension is that it studies a scandinavian high tax welfare state earlier time series studies analyzing self employment and taxation have with few exceptions been based on data from countries with relatively low tax levels and less comprehensive welfare systems notably the usa and the uk

the effect of capital structure on a firm s liquidation decision abstract a firm s liquidation can impose costs on its customers workers and suppliers an agency relationship between these individuals and the firm exists in that the liquidation decision controlled by the firm as the agent affects other individuals the customers workers and suppliers as principals the analysis in this paper suggests that capital structure can control the incentive conflict problem of this relationship by serving as a pre positioning or bonding mechanism appropriate selection of capital structure assures that incentives are aligned so that the firm implements the ex ante value maximizing liquidation policy

distribution of cost and profit efficiency evidence from indian banking this paper uses the nonparametric dea methodology to estimate cost and profit efficiency of indian banks during the post reform period the results show considerable variation in average levels of profit efficiency across various ownership categories of banks in general state owned banks are found to be more efficient than their private counter parts further efficiency tends to be low among the small banks assets up to rs 50 billion indicating that at the existing scale of operations these banks are operating far below the efficient frontier we also examine the distribution of efficiency using nonparametric kernel density estimates the analysis reveals a rightward shift of the efficiency distribution over the years a major part of this shift comes from the state owned banks based on the conditional distribution the study finds strong evidence of ownership explaining the efficiency differential of banks additionally bank size and product mix are also found to be important although to a lesser extent

financial structure and tacit collusion with repeated oligopoly competition abstract in this paper it is demonstrated how debt will reduce the ability of an oligopolistic industry to sustain tacit collusion in the context of infinitely repeated bertrand competition this is due to the negative incentive effect of debt according to which equity holders will find it profitable to deviate from collusive configurations at lower levels of industry demand as the level of financial leverage increases the optimal financial structure of an oligopolistic industry depends on the interplay between this negative incentive effect and the tax savings effect or other strategic effects of debt financing relative to equity financing

the commitment value of the debt a reappraisal abstract we analyze the strategic use of the debt in a duopoly model of cournot competition we consider a two stage model where debt acts as a commitment variable and we characterize subgame perfect equilibria we differ from several models based on the strategic value of the debt such as wanzenried wanzenried g 2003 capital structure decisions and output market competition under demand uncertainty international journal of industrial organization 21 171 200 in showing that if one assumes that the debt level acts as a commitment device it is incorrect to consider bankruptcy risk as a strategic variable we demonstrate properties concerning the influence of price volatility and product differentiation upon equilibrium values of production default risk and debt obligation

taxes and physicians use of ancillary health labor recent papers have examined the effect of taxes on the labor supply of high income individuals and on the demand for employee labor entrepreneurs decisions to hire workers are seen to be quite sensitive to changes in marginal tax rates however little is known about the applicability of these findings to physician services we posit a straightforward model of physician utility maximization where physician employers jointly choose own work effort and other labor inputs there is no theoretical prediction about the sign or magnitude of the cross price effects of changes in physicians tax rates on their choice of ancillary labor inputs we estimate the impact of taxation of physician income on both the extensive and intensive margins using state level variation in marginal income tax rates to identify the effects we also examine the sensitivity of total and per worker compensation to variation in marginal tax rates

competitive conditions and sectors productive efficiency a conditional non parametric frontier analysis abstract the scope of this paper is to build an appropriate nonparametric frontier framework by using time dependent conditional efficiency estimators to investigate how competition and time affect the process of technological change and technological catch up our empirical analysis utilizes a sample of 462 u s 6 digit manufacturing sectors over the period 1958 2009 contrary to the existing studies we apply the probabilistic approach of efficiency measurement to evaluate the dynamic effects alongside with the effects of competition on the sectors technological change and technological catch up levels moreover we estimate the sectors idiosyncratic efficiencies which are an approximation of solow s residual representing the unexplained part of the time dependent conditional measures the empirical results shed new light on the topic and signify that the dynamic effect of competitive conditions has a nonlinear effect on the sectors estimated performance specifically we unveil a u shaped curve between market concentration and technological change implying that the sectors higher concentration levels enhance their technological change levels e g innovation capacity having however a downsize effect on their technological catch up ability moreover the relationship between the sectors market concentration and technological catch up although non linear exhibits an n shaped curve with two turning points lastly the above findings remain robust when we limit our analysis to the capital intensive sectors

on the existence of an optimal capital structure theory and evidence one of the most contentious issues in the theory of finance during the past quarter century has been the theory of capital structure the geneses of this controversy were the seminal contributions by modigliani and miller 18 19 the general academic view by the mid 1970s although not a consensus was that the optimal capital structure involves balancing the tax advantage of debt against the present value of bankruptcy costs no sooner did this general view become prevalent in the profession than miller 16 presented a new challenge by showing that under certain conditions the tax advantage of debt financing at the firm level is exactly offset by the tax disadvantage of debt at the personal level since then there has developed a burgeoning theoretical literature attempting to reconcile miller s model with the balancing theory of optimal capital structure e g deangelo and masulis 5 kim 12 and modigliani 17 the general result of this work is that if there are significant leverage related costs such as bankruptcy costs agency costs of debt and loss of non debt tax shields and if the income from equity is untaxed then the marginal bondholder s tax rate will be less than the corporate rate and there will be a positive net tax advantage to corporate debt financing the firm s optimal capital structure will involve the trade off between the tax advantage of debt and various leverage related costs the upshot of these extensions of miller s model is the recognition that the existence of an optimal capital structure is essentially an empirical issue as to whether or not the various leverage related costs are economically significant enough to influence the costs of corporate borrowing the miller model and its theoretical extensions have inspired several timeseries studies which provide evidence on the existence of leverage related costs trczinka 28 reports that from examining differences in average yields between taxable corporate bonds and tax exempt municipal bonds one cannot reject the miller hypothesis that the marginal bondholder s tax rate is not different from the corporate tax rate however trczinka is careful to point out that this finding does not necessarily imply that there is no tax advantage of corporate debt if the personal tax rate on equity is positive indeed buser and hess 1 using a longer time series of data and more sophisticated econometric techniques estimate that the average effective personal tax rate on equity is statistically positive and is not of a trivial magnitude more importantly they document evidence that is consistent with the existence of significant leverage related costs in the economy

assessing the performance of alternative investments using non parametric efficiency measurement approaches is it convincing abstract dea based performance assessment in the alternative investment fund industry is often motivated by the fact that dea is capable of simultaneously handling multiple input risk and multiple output return measures thereby still offering a single real number as a performance index without utilizing subjective weights to aggregate these inputs and outputs this paper aims at investigating whether dea based performance indexes previously used to assess alternative investment fund performance are actually able to satisfy these properties and to contrast the findings using a dea based performance index with those using a traditional financial performance index

efficiency with costly information a study of mutual fund performance 1965 1984 if information is costly to collect and implement then it is efficient for trades by informed investors to occur at prices sufficiently different from full information prices to compensate them for the cost of becoming informed this notion is tested by evaluating investment performance in the mutual fund industry over a 20 year period the study finds evidence that is consistent with optimal trading in efficient markets risk adjusted returns in the mutual fund industry net of fees and expenses are comparable to returns available in index funds and portfolio turnover and management fees are unrelated to fund performance

measuring investment performance in a rational expectations equilibrium model much research has been concerned with evaluating the performance of managed portfolios e g mutual funds and examining whether portfolio managers display in some sense superior performance superior performance would seemingly turn on the possession of superior information that is utilized in managing portfolios in general a fund s asset holdings or portfolio weights might not be observable to an outsider whether they are or not however they are likely to change over time this happens especially when better performance is a result of superior information since managers will change their portfolio composition on obtaining private information since such changes must be taken into account the problem of measuring performance of managed portfolios is inherently different from that of evaluating the performance of individual assets groups of assets or generally portfolios with constant and known composition

the capital structure of a regulated firm we examine the equilibrium price investment and capital structure of a regulated firm using a sequential model of regulation we show that the firm s capital structure has a significant effect on the regulated price consequently the firm chooses its equity and debt strategically to affect the outcome of the regulatory process in equilibrium the firm issues a positive amount of debt and the likelihood of bankruptcy is positive debt raises the regulated price thus mitigating regulatory opportunism however underinvestment due to lack of regulatory commitment to prices persists in equilibrium

data envelopment analysis of mutual funds based on second order stochastic dominance abstract although data envelopment analysis dea has been extensively used to assess the performance of mutual funds mf most of the approaches overestimate the risk associated to the endogenous benchmark portfolio this is because in the conventional dea technology the risk of the target portfolio is computed as a linear combination of the risk of the assessed mf this neglects the important effects of portfolio diversification other approaches based on mean variance or mean variance skewness are non linear we propose to combine dea with stochastic dominance criteria thus in this paper six distinct dea like linear programming lp models are proposed for computing relative efficiency scores consistent in the sense of necessity with second order stochastic dominance ssd the aim is that being ssd efficient the obtained target portfolio should be an optimal benchmark for any rational risk averse investor the proposed models are compared with several related approaches from the literature

portfolio performance evaluation old issues and new insights this article presents a model that provides insights about various measures of portfolio performance the model explores several criticisms of these measures these include the problem of identifying an appropriate benchmark portfolio the possibility of overestimating risk because of market timing ability and the failure of informed investors to earn positive risk adjusted returns because of increasing risk aversion the article argues that these need not be serious impediments to performance evaluation

energy efficiency measurement in agriculture with imprecise energy content information abstract measuring energy efficiency is crucial when planning energy reduction policies however decision makers are understandably reluctant to act in the absence of solid data and results supporting a policy position this paper proposes a methodology to measure the energy efficiency of farms based on the data envelopment analysis dea approach in a manner similar to the cost framework we decompose energy efficiency measurements into technical and allocative efficiencies in energy contents of inputs in this study we replace input prices used in traditional economic efficiency measurements by their energy content we use the energy efficiency model to explore the optimal input mix that produces the current outputs at minimum energy consumption we demonstrate that this decomposition can help policy makers design accurate energy policies however the uncertainty of the data and more particularly the energy content of the inputs leads us to recommend using the methodologies to calculate the bounds of efficiency to obtain more plausible and robust results based on our analysis energy efficiency is not a fixed value and policy makers should consider it with caution we use a 2007 database of french farms specialised in field crops for empirical illustration

a conditional directional distance function approach for measuring regional environmental efficiency evidence from uk regions abstract this paper by using conditional directional distance functions as introduced by simar and vanhems j econometrics 166 2012 342 354 modifies the model by fare and grosskopf eur j operat res 157 2004 242 245 and examines the link between regional environmental efficiency and economic growth the proposed model using conditional directional distance functions incorporates the effect of regional economic growth on regions environmental efficiency levels the results from uk regional data reveal a negative relationship between regions gdp per capita and environmental inefficiency up to a certain gdp per capita level after that level it appears that the relationship becomes positive as an overall result the regional environmental inefficiency gdp per capita relationship appears to have a u shape form

investment and market power abstract this paper argues that the degree of market power within an industry is an important determinant of interindustry differences in investment behavior a neoclassical investment model is analyzed to show that market power is positively associated with capital stock flexibility the intuition for the result is that firms adjust their stocks and investment plans quickly in response to new conditions so as to capture the rents asssociated with their market power

are small stock returns achievable returns of the small company universe an examination of actual small company passive portfolios sheds some light on this issue these small stock portfolios deliver the returns of their targets within statistically acceptable bounds there are however significant differences across their returns and these differences appear to be related to management style pure indexers try to maintain perfect index like portfolio compositions minimizing trading cost is of secondary importance to them these portfolios have the lowest returns at the other extreme some portfolios emphasize minimizing trading costs at the expense of perfect portfolio composition these portfolios have the highest returns

when cheaper is better fee determination in the market for equity mutual funds abstract in this paper we develop a model of the market for equity mutual funds that captures three key characteristics of this market first there is competition among funds second fund managers ability is not observed by investors before making their investment decisions third some investors do not make optimal use of all available information the main results of the paper are that 1 price competition is compatible with positive mark ups in equilibrium and 2 worse performing funds set fees that are greater or equal to those set by better performing funds these predictions are supported by available empirical evidence

the impact of debt financing on entry and exit in a duopoly this article investigates the interaction between market entry company foreclosure and capital structure in a duopoly we find that the order in which firms foreclose is determined not only by differences in firm specific factors but also by common economic factors such as the interest rate and the market profit volatility we extend the exit model by allowing financially distressed firms to renegotiate their debt contracts through a one off debt exchange offer we find that firms with high bankruptcy costs or with prospects of profit improvement can get bigger reductions on their debt repayments investigating market entry we find that financial vulnerability of the incumbent induces earlier entry article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

efficiency with costly information a reinterpretation of evidence from managed portfolios we investigate the informational efficiency of mutual fund performance for the period 1965 84 results are shown to be sensitive to the measurement of performance chosen we find that returns on s p stocks returns on non s p stocks and returns on bonds are significant factors in performance assessment once we correct for the impact of non s p assets on mutual fund returns we find that mutual funds do not earn returns that justify their information acquisition costs this is consistent with results for prior periods coauthors are martin j gruber sanjiv das and matthew hlavka article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

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

when to initiate an international vertical merger the impact of negative demand shock this paper develops an extended hotelling type product and technology differentiated model with two upstream and two downstream firms the us upstream respectively downstream firm is technologically more advanced than the chinese upstream respectively downstream firm the locations of the upstream firms and the us downstream firm are fixed and the chinese downstream firm chooses its product location the downstream firms compete with each other in us market we aim to explore the conditions under which an international vertical merger between the chinese downstream firm and the us upstream firm occurs and its welfare implications we show that the incentive for the chinese downstream firm to initiate a technology acquiring international vertical merger crucially depends on the market conditions of the united states as compared to exporting or domestic vertical merger international vertical merger is by no means an optimal choice for the chinese downstream firm when there is no negative demand shocks to us market this result remains to hold when the us downstream firm also has the option of initiating a merger with the us upstream firm nevertheless in the case of a negative demand shock a profitable international vertical merger may occur however such mergers worsen the social welfare of the united states

my first employee an empirical investigation the challenge for solo entrepreneurs to add their first employee is arguably the single biggest growth event facing any growing firm to understand how this event affects performance and the antecedents of hiring we analyse danish matched employer employee data those who hire enjoy superior sales outcomes in subsequent years while the dispersion in profits increases furthermore those that hire enjoy faster sales growth in the previous year suggesting that sales growth precedes the first hire finally we show that founders with a stronger profile in terms of education and previous income are more likely to increase profits while the characteristics of the employee are less important the latter finding is important from a job creation perspective in light of the suggested sorting of more marginalized employees into new and established firms

the effect of tax based savings incentives on the self employed abstract the u s individual income tax allows employers to make tax deferred contributions to qualified pension plans for their employees and in the case of the self employed on their own behalf we examine the effect of these tax based savings incentives on the self employed for this purpose we use a panel of sole proprietors constructed from the statistics of income soi individual income tax files for 1985 1989 and 1993 we find that taxes have a substantial effect on both the dichotomous decision to contribute and the amount contributed to tax deferred retirement savings plan by the self employed in general our estimates suggest a tax price elasticity of contributions around 2 0 this finding is surprisingly robust to a number of alternative specifications

the performance of us equity mutual funds the paper examines the performance of us no load equity mutual funds fund performance is derived using stochastic frontier analysis for a flexible functional form this analysis allows us to derive parametric estimates of efficiency scores for each fund in our sample for the first time in the literature our results indicate that us no load equity funds display varying levels of efficiency over time but also depending on size and on investment style robustness analysis reaffirm the efficiency scores remain consistent across different selections of inputs and outputs as well as the underlying distribution of the return having estimated each fund s efficiency in the sample we unveil their underlying dynamics also with respect to risk and operational characteristics such as flows assets and morningstar star ratings panel var estimations reveal that the response of funds efficiency to a shock in risk is positive and substantial some evidence of reverse causality is also observed finally we extend our analysis to investigate the relationship between funds performance and key covariates across subgroups defined by size

income taxes and entrepreneurs use of labor we investigate the effect of entrepreneurs personal taxes on their use of labor analyze the tax returns of sole proprietors before and after the tax reform act of 1986 and determine how the substantial reductions in marginal tax rates affected their hiring decisions and wage bills individual income taxes exert a statistically and quantitatively significant influence on the probability of hiring workers raising the entrepreneur s tax price by 10 raises the mean probability of hiring by about 12 further taxes influence total wage payments to workers the tax price elasticity of the median wage bill is about 37

efficiency assessment of primary care providers a conditional nonparametric approach this paper uses a fully nonparametric approach to estimate efficiency measures for primary care units incorporating the effect of exogenous environmental factors this methodology allows us to account for different types of variables continuous and discrete describing the main characteristics of patients served by those providers in addition we use an extension of this nonparametric approach to deal with the presence of undesirable outputs in data represented by the rates of hospitalization for ambulatory care sensitive condition acsc the empirical results show that all the exogenous variables considered have a significant and negative effect on efficiency estimates

irreversible investment financing and bankruptcy decisions in an oligopoly this paper examines a firm s debt level investment timing and investment scale choices in a continuous time model where the output price of a good that the firm produces depends on a stochastic demand shift variable and the total industry supply of the good using the simple symmetric cournot nash equilibrium assumption that all firms are identical and therefore follow the same financing and investment strategies we show that competition decreases the output price and hence encourages a firm to wait for a higher demand level before it is profitable to invest we also demonstrate how uncertainty bankruptcy costs and corporate taxation affect the firm s financing and investment decisions

a robust nonparametric approach to evaluate and explain the performance of mutual funds the topic of the measurement of mutual funds performance is receiving an increasing interest both from an applied and a theoretical perspective beside the traditional financial literature a growing body of studies has started to apply the tools of frontier analysis for benchmarking comparisons in portfolio analysis our paper contributes to this literature proposing a robust nonparametric approach for analysing mutual funds it is based on the concept of order m frontier cazals c florens j p simar l 2002 nonparametric frontier estimation a robust approach journal of econometrics 106 1 25 and on a probabilistic approach daraio c simar l 2005 introducing environmental variables in nonparametric frontier models a probabilistic approach journal of productivity analysis 24 1 93 121 to find out the factors explaining mutual funds performance within this framework a decomposition of conditional efficiency is proposed and its usefulness for economic interpretation analysed our approach is illustrated by using us mutual funds data grouped for category by objective economies of scale slacks and market risks are investigated a comparison of traditional nonparametric and robust performance measures is also offered

the tax effect on taxable income from privately held businesses the implications of the tax elasticity of taxable income have been widely discussed in the literature this study uses the reported rate of return to capture the effects of tax changes on taxable income from privately held businesses households decisions concerning reporting rates of return are embedded in a selection model of business investment decisions with 1983 1989 survey of consumer finances panel data the tax elasticity of the reported rates of return on privately held businesses is found to be positive and large the tax elasticity of taxable income from privately held businesses is thus crucial for policy evaluation several reasons for the high tax elasticity and the implications of it are also discussed

financially constrained entry in a game with incomplete information in an earlier paper we presented an entry game with a monopolist and a potential entrant facing financial constraints in which the unique perfect equilibrium involved no entry here we consider a one sided incomplete information variant of the game in which the monopolist allows for the possibility that the entrant is committed to endure a price war to the limit of his capability we find a unique sequentially perfect equilibrium in which entry sometimes occurs when it does predatory price wars may result with the incumbent sometimes driving out the entrant but other times eventually abandoning the fight

profit sharing with workers facilitates collusion among firms we show how profit sharing by firms with workers facilitates collusion among firms in a dynamic oligopoly environment with uncertain demand we first show that firm profits can always be increased by tying wages to market conditions the optimal agreement takes the form of an option and features partial sharing because increased sharing raises the expected price wage differential but reduces price wage variability we then show that given any cartel there exist market conditions such that simply giving some expected profit to workers raises expected firm profits via the transfer s impact on the incentive to cheat on the cartel

dea frontier improvement and portfolio rebalancing an application of china mutual funds on considering sustainability information disclosure abstract data envelopment analysis dea has been a widely used methodology for evaluating the relative performance of portfolios extensive work has appeared for realizing the role of dea in the aspect of assessing portfolio performance and deriving the relative rankings however the role of providing realizable benchmarks is not fully explored in the existing literatures most importantly the dea based portfolio performance evaluation methods developed in the existing literatures can hardly provide support for fund managers in pursuing sustainability performance in this paper we first propose a dea frontier improvement approach under the mean variance framework this approach provides investor with a rebalancing strategy as well as an improved dea frontier which approximates the portfolio efficient frontier better than the traditional dea model does then this approach is extended to a general return risk framework our in sample simulation results verify the effectiveness of the proposed approach for a wide range of applications in addition the out of sample tests show that the rebalancing investment strategies can achieve higher sharpe ratios and sortino ratios than those of the original ones finally we apply the proposed approach to evaluate mutual fund performance in china with the consideration of sustainability information disclosure we construct a disclosure index to indicate the extent of sustainable information disclosure of each mutual fund the results show that the proposed approach provides not only investment recommendations but also references for constructing sustainable green funds

the effect of income taxation on consumption and labor supply we estimate the incentive effects of income taxation in a life cycle model of consumption and labor supply without intratemporal strong separability we find that consumption and hours worked are direct complements in utility both increase with a compensated increase in the net wage the compensated net wage elasticity is about 0 3 nearly double estimates for u s men from a linear labor supply specification estimated intertemporal elasticities indicate significant intertemporal smoothing of utility the estimated marginal welfare cost of government revenue is 6 20 which is about half the estimated welfare cost when additivity between consumption and leisure is incorrectly imposed

capacity investment timing by start ups and established firms in new markets we analyze the competitive capacity investment timing decisions of both established firms and start ups entering new markets which have a high degree of demand uncertainty firms may invest in capacity early when uncertainty is high or late when uncertainty has been resolved possibly at different costs established firms choose an investment timing and capacity level to maximize expected profits whereas start ups make those choices to maximize the probability of survival when a start up competes against an established firm we find that when demand uncertainty is high and costs do not decline too severely over time the start up takes a leadership role and invests first in capacity whereas the established firm follows by contrast when two established firms compete in an otherwise identical game both firms invest late we conclude that the threat of firm failure significantly impacts the dynamics of competition involving start ups this paper was accepted by yossi aviv operations management

physician behavioural responses to variation in marginal income tax rates longitudinal evidence the longitudinal component of the young physicians surveys 1987 1991 is used to examine the impact of changes in marginal tax rates on key indicators of physician behaviour following the federal tax reform act of 1986 many states marginal income tax rates changed this variation is used to estimate the responsiveness of work hours hmo contracting and practice size to changes in taxes

do ethics imply persistence the case of islamic and socially responsible funds we analyse the performance persistence of islamic and socially responsible investment sri mutual funds we adopt a multi stage strategy in which in the first stage partial frontiers approaches are considered to measure the performance of the different funds in the sample in the second stage the results yielded by the partial frontiers are plugged into different investment strategies based on a recursive estimation methodology whose persistence performance is evaluated in the third stage of the analysis results indicate that for both types of funds performance persistence actually exists but only for the worst and most notably best funds this result is robust not only across methods and different choices of tuning parameters within each method but also across both sri and islamic funds although in the case of the latter persistence was stronger for the best funds the persistence of sri and islamic funds represents an important result for investors and the market since it provides information on both which funds to invest in and which funds to avoid last but not least the use of the aforementioned techniques in the context of mutual funds could also be of interest for the non conclusive literature

combining momentum with reversal in commodity futures this paper examines profitable trading strategies that jointly exploit momentum and reversal signals in commodity futures while the single sort momentum strategies returns 11 14 per annum on average a consistent reversal pattern of momentum profits is pronounced from 12 to 30 months after portfolio formation combining the observed reversal pattern with the momentum signal our double sort strategy returns 20 24 per annum which significantly outperforms single sort strategies the proposed strategy is robust to seasonality effects and sample adjustments in commodity futures the profitability of the double sort strategy cannot be explained by standard risk factors term structure market volatility investor sentiment data mining or transaction costs but appears to be related to global funding liquidity as a consequence the double sort strategy in commodity futures may be employed as a portfolio diversification tool

evaluating fiscal effort in heterogeneous contexts using a conditional nonparametric frontier approach abstractthe aim of this paper is the estimation of a measure of the fiscal effort made by certain countries taking into account the heterogeneous contexts in which they operate over a ten year peri

capital structure decisions and output market competition under demand uncertainty abstract we consider a two stage differentiated goods duopoly model with demand uncertainty linking firms capital structure choice with their output market decisions the firms compete in quantities or prices on the market we explain how firms capital structure depends on specific output market characteristics such as substitutability between products and demand volatility we investigate whether strategic use of debt is able to mimic stackelberg leadership finally we consider the welfare effects of debt issue this paper contributes to the understanding of the firms capital structure decisions while specifically emphasizing the strategic use of debt it investigates the relationships between firms output market and capital structure decisions with respect to specific demand and supply characteristics

on timing and selectivity the dichotomy between timing ability and the ability to select individual assets has been widely used in discussing investment performance measurement this paper discusses the conceptual and econometric problems associated with defining and measuring timing and selectivity in defining these notions we attempt to capture their intuitive interpretation we offer two basic modeling approaches which we term the portfolio approach and the factor approach we show how the quality of timing and selectivity information can be identified statistically in a number of simple models and discuss some of the econometric issues associated with these models in particular a simple quadratic regression is shown to be valid in measuring timing information

geometric representation of the mean variance skewness portfolio frontier based upon the shortage function the literature suggests that investors prefer portfolios based on mean variance and skewness rather than portfolios based on mean variance mv criteria solely furthermore a small variety of methods have been proposed to determine meanvariance skewness mvs optimal portfolios recently the shortage function has been introduced as a measure of e ciency allowing to characterize mvs optimal portfolios using non parametric mathematical programming tools while tracing the mv portfolio frontier has become trivial the geometric representation of the mvs frontier is an open challenge a hitherto unnoticed advantage of the shortage function is that it allows to geometrically represent the mvs portfolio frontier the purpose of this contribution is to systematically develop geometric representations of the mvs portfolio frontier using the shortage function and related approaches

how does industry affect firm financial structure we examine the importance of industry to firm level financial and real decisions we find that in addition to standard industry fixed effects financial structure also depends on a firm s position within its industry in competitive industries a firm s financial leverage depends on its natural hedge its proximity to the median industry capital labor ratio the actions of other firms in the industry and its status as entrant incumbent or exiting firm financial leverage is higher and less dispersed in concentrated industries where strategic debt interactions are also stronger but a firm s natural hedge is not significant our results show that financial structure technology and risk are jointly determined within industries these findings are consistent with recent industry equilibrium models of financial structure copyright 2005 oxford university press