bluuebunny/crossref_metadata_2025 huggingface dataset:
β‐2 Spectrin is involved in hepatocyte proliferation through the interaction of TGFβ/Smad and PI3K/AKT signalling
Authors: Wang Zhijun , Song Yuhu , Tu Wei , He Xingxing , Lin Jusheng , Liu Fang
Published: April 2012

Background

Transforming growth factor (TGF) β signalling pathway plays a crucial role in liver regeneration following partial hepatectomy in mice. Evidence demonstrated that β‐2 Spectrin is involved in TGFβ/Smad signalling pathway as a Smad3/4 adaptor protein.

Aim

The aim of this study was to explore the role of β‐2 Spectrin in hepatocyte proliferation.

Methods

β‐2 Spectrin expression was evaluated in mice receiving partial hepatectomy. The effect of siRNA against β‐2 Spectrin on hepatocyte proliferation was determined. The interaction between TGFβ/Smad and PI3K/Akt signalling was investigated.

Results

Hepatic β‐2 Spectrin decreased dramatically 2 days after 70% hepatectomy in mice. In AML‐12 cells, hepatocyte proliferation was inhibited after the stimulation of TGF β1 and a reduction in β‐2 Spectrin mediated by siRNA resulted in increase in proliferative response. Confocal results revealed that β‐2 Spectrin represented a key regulator in TGFβ/Smad signalling through controlling Smad3/4 subcellular localization. Moreover, Alternation of Akt phosphorylation led to the change in subcellular localization of Smad2, 3, 4 and β‐2 Spectrin, A reduction in Smad2, 3 and 4 mediated by siRNA resulted in the induction of pAkt expression.

Conclusions

These findings reveal that β‐2 Spectrin plays a crucial role in hepatocyte proliferation, which contributes to liver regeneration following hepatectomy in mice. In addition, PI3K/Akt is involved in TGFβ/Smad signalling pathway through the interaction with Smad proteins and β‐2 Spectrin.
Comparison of perinatal outcomes in small‐for‐gestational‐age infants classified by population‐based versus customised birth weight standards
Authors: Cha Hyun‐Hwa , Lee Su‐Ho , Park Jin‐Sun , Woo Sook‐Young , Kim Seon‐Woo , Choi Suk‐Joo , Oh Soo‐young , Roh Cheong‐Rae , Kim Jong‐Hwa
Published: April 2012

Aims

The objective of this study was to derive a customised birth weight standard curve in our institute and to compare the perinatal outcomes of small‐for‐gestational‐age (SGA) births classified by population‐based versus customised birth weight standards.

Methods

We surveyed 9052 normal singleton deliveries and generated customised standards by adjusting for maternal characteristics and neonatal gender. We compared adverse perinatal outcomes between SGA and non‐SGA births classified by both standards.

Results

According to the population‐based standards, mothers of SGA infants were younger, thinner and shorter and had higher rates of nulliparity and female births. We adjusted for these maternal characteristics and neonatal gender in our customised standards. Multivariate analysis revealed that there were no differences in neonatal composite morbidity between the standards. However, infants classified as SGA by the customised standards showed a significantly higher rate of neonatal intensive care unit (NICU) admission than those classified by the population‐based standards.

Conclusion

Our study showed that customised SGA made no significant differences in neonatal composite morbidity, only a modest increase in NICU admission rate compared to population‐based standard. To clarify the association of adverse perinatal outcomes with customised SGA, larger studies are required.
The Australian community overwhelmingly approves IVF to treat subfertility, with increasing support over three decades
Authors: Kovacs Gabor T. , Morgan Gary , Levine Michele , McCrann Julian
Published: April 2012

Fifteen Australia‐wide interview surveys between July 1981 and February 2011 on the community's attitudes to in vitro fertilisation (IVF) were carried out as part of regular Morgan polls. Each survey involved between 650 and 1000 respondents in urban and rural locations. The proportion of respondents who ‘approved’ or ‘disapproved’ of various aspects of IVF treatment were determined. Support for IVF to help infertile married couples increased from 77% in 1981 to 91% in 2011. Approval for IVF procedures being supported by Medicare funding rose from 70% in 1981 to 79% in 2000 and was unchanged in 2011. There has also been a marked increase in the support for single women and lesbians using donor sperm.
THE MARKET FOR CORPORATE SECURITIES A PROGRESS REPORT
Authors: Shapiro Eli
Published: April 2012

Summary

At the end of 1945 the corporate universe was characterized by a low level of capital assets relative to sales and a high degree of liquidity. The decade ending in 1955 was noteworthy for the high absolute level of investment in plant, equipment, and inventory. Corporations experienced no great financing difficulties in carrying out their expansion program; interest rates did not rise sharply during the period.

The bulk of corporate investment was financed from internal sources of funds—retained profits and depreciation allowances—with internal sources more important in the first half of the ten‐year period. The relationship between internal and external financing was primarily dependent on cyclical variations in business activity. In periods of rising business activity short‐term borrowing and new security issues were utilized to supplement internal funds. In periods of declining economic activity long‐term financing through security issues was continued on a reduced scale and short‐term bank debt was reduced. Over the decade ending in 1955 there was an increasing trend toward long‐term securities issued to finance investment in plant, equipment, and inventories. All bonds outstanding for non‐financial corporations more than doubled from $23 billion at the end of 1945 to $54 billion at the end of 1955. There was some evidence to suggest that reduction in spreads between stock and bond yields encouraged stock financing in the latter years of the period.

The most striking phenomenon in the long‐term debt market was the precipitous decline in the importance of individuals as holders of corporate bonds. In less than twenty years individuals' holdings of outstanding corporate bonds fell from two‐thirds to about one‐fifth. The largest holders of corporate bonds were life insurance companies who accounted for 50 per cent of all issues outstanding. Directly placed corporate securities—almost entirely bonds—accounted for about 40 per cent of gross security issues in the postwar decade. Life insurance companies held over 90 per cent of directly placed securities outstanding.

In 1955 and particularly in 1956 growing tightness was evident in the capital market. The liquidity of corporations was worked down and the rate of increase in corporate internal sources of funds also fell. Capital outlays continued to rise. Accessibility to the capital market became critical to insure accomplishment of investment programs. Corporations entered the capital market on an enlarged scale at a time of continued high demands for funds from other sectors of the economy. The fall in liquidity of financial institutions plus the pursuit of a restrictive monetary policy by the central bank served to intensify the rise in yields and led to sharp increases in new financing costs and tightening of contract terms.
YIELDS ON RECENTLY ISSUED CORPORATE BONDS: A NEW INDEX*
Authors: Kaplan Mortimer
Published: April 2012

The writer is indebted to the following individuals, who were kind enough to examine the yields series on recently issued corporate bonds and provide helpful comment: Professor Roger F. Murray, of Columbia University; Dr. James J. O'Leary, of the Life Insurance Association of America; Dr. Frank E. Morris, of the Investment Bankers Association of America; Dr. Roland I. Robinson, of the Federal Reserve Board; Mr. George J. Morrissey, editor, The Commercial and Financial Chronicle; Mr. Eliot H. Sharp, editor, Investment Dealers' Digest; Mr. James Coggeshall, Jr., president, The First Boston Corporation; and Mr. Mead A. Lewis, partner, Dick & Merle‐Smith. To the last‐named, the writer owes a special debt of gratitude for his generous correspondence in response to a series of queries on the mechanics of the capital markets. No responsibility attaches to any of these persons for the opinions expressed in the article.

Grateful acknowledgment is made to Moody's Investors Service for granting permission to use the corporate and municipal bond‐yield data presented in Moody's Bond Survey.

To his associates in the Federal Housing Administration, Mrs. Audrey L. Williams, who compiled and organized the yields‐series data, and Mr. George J. Levine, who supervised the yield computations, the writer wishes to express his indebtedness.
THE STRONG CASE FOR THE GENERALIZED LOGARITHMIC UTILITY MODEL AS THE PREMIER MODEL OF FINANCIAL MARKETS
Authors: Litzenberger Robert , Rubinstein Mark
Published: April 2012

This paper begins by comparing the available well‐developed micro‐economic models in finance which recognize uncertainty. It is argued that models whose distinctive simplifying assumption restricts utility functions are superior to those which instead restrict probability distributions, both with respect to the realism of their assumptions and richness of their conclusions. In particular, the most successful model, based on generalized logarithmic utility (GLUM), is a multiperiod consumption/portfolio and equilibrium model in discrete‐time which (1) requires decreasing absolute risk aversion; (2) tolerates increasing, constant, or decreasing proportional risk aversion; (3) assumes no exogenous specification of the contemporaneous or intertemporal stochastic process of security prices; (4) tolerates heterogeneity with respect to wealth, lifetime, time‐and risk‐preference and beliefs; (5) results in a complete specification of consumption/portfolio decision and sharing rules which include nontrivial multiperiod separation properties and explains demand for default‐free bonds of various maturities and options; (6) leads to a solution to the aggregation problem; (7) results in a complete specification of the contemporaneous and intertemporal process of security prices which reveals necessary and sufficient conditions for an unbiased term structure and the market portfolio to follow a random walk as a natural outcome of equilibrium; (8) provides an empirically testable aggregate consumption function relating per capita consumption to per capita wealth and the present value of a perpetual default‐free annuity which does not require inferences of ex ante beliefs from ex post data; (9) provides a nontrivial multiperiod extension of popular single‐period security valuation models which is empirically testable; (10) yields a simple multiperiod valuation formula for an uncertain income stream even when this income is serially correlated over time.
An Empirical Investigation of the Arbitrage Pricing Theory
Authors: ROLL RICHARD , ROSS STEPHEN A.
Published: April 2012

Empirical tests are reported for Ross' [48] arbitrage theory of asset pricing. Using data for individual equities during the 1962–72 period, at least three and probably four priced factors are found in the generating process of returns. The theory is supported in that estimated expected returns depend on estimated factor loadings, and variables such as the own standard deviation, though highly correlated (simply) with estimated expected returns, do not add any further explanatory power to that of the factor loadings.
The Investment Banking Contract For New Issues Under Asymmetric Information: Delegation And The Incentive Problem
Authors: BARON DAVID P. , HOLMSTRÖM BENGT
Published: April 2012

In placing a new security issue, an investment banker has an opportunity to obtain private information by conducting preselling activities during the registration period. The task of the issuer is to design a contract that both induces the banker to use this information to the issuer's advantage and provides a disincentive for the banker to price the issue too low in order to reduce the effort required to sell the issue. This paper characterizes the class of price response functions that the issuer can induce the banker to choose under a delegation scheme and demonstrates that delegating the pricing decision to the banker can be optimal.
Valuation of GNMA Mortgage‐Backed Securities
Authors: DUNN KENNETH B. , McCONNELL JOHN J.
Published: April 2012

GNMA mortgage‐backed pass‐through securities are supported by pools of amortizing, callable loans. Additionally, mortgagors often prepay their loans when the market interest rate is above the coupon rate of their loans. This paper develops a model for pricing GNMA securities and uses it to examine the impact of the amortization, call, and prepayment features on the prices, risks and expected returns of GNMA's. The amortization and prepayment features each have a positive effect on price, while the call feature has a negative impact. All three features reduce a GNMA security's interest rate risk and, consequently, its expected return.
The Impact of Federal Interest Rate Regulations on the Small Saver: Further Evidence
Authors: LAWRENCE EDWARD C. , ELLIEHAUSEN GREGORY E.
Published: April 2012

This paper provides further evidence on the distributional impact of interest rate ceilings on the small saver. Cross‐section data from the 1977 Consumer Credit Survey was used to estimate the implicit losses imposed on different income classes by government regulations. Our findings generally support earlier studies which found the implicit burden to be regressive among income classes. However, the degree of regressivity showed a marked decrease since 1970. These results may be explained by portfolio adjustments of households and financial innovations in response to deposit rate ceilings and accelerating inflation during the 1970s.
Forward and Futures Prices: Evidence from the Foreign Exchange Markets
Authors: CORNELL BRADFORD , REINGANUM MARC R.
Published: April 2012

Empirical studies of the Treasury Bill markets have revealed substantial differences between the futures price and the implied forward price. These differences have been attributed to taxes, transaction costs, and the settling up procedure employed in the futures market. This paper examines the forward and futures prices in foreign exchange in an attempt to distinguish between the competing explanations.
Market Interest Rates and Commercial Bank Profitability: An Empirical Investigation
Authors: FLANNERY MARK J.
Published: April 2012

The widespread notion that commercial banks “borrow short and lend long” implies that sharp market interest rate increases may induce a significant number of banking failures. This paper develops a method for estimating average asset and liability maturities for a sample of large money center banks. Regression models are tested to determine if market rate fluctuations have a significant impact on bank profitability. The conclusion is negative: large banks have effectively hedged themselves against market rate risk by assembling asset and liability portfolios with similar average maturities.
On Diversification Given Asymmetry in Returns
Authors: CONINE THOMAS E. , TAMARKIN MAURRY J.
Published: April 2012

Complete diversification is the rational investment strategy for a risk averse individual in a homogeneous securities market who considers only the first two moments of return. Observed behavior of market participants, however, demonstrates that the majority of individual investors hold imperfectly diversified portfolios.

The purpose of the present study is to examine one potential cause for this behavior which does not rely on imperfection in the capital market. Specifically, we show that given the existence of, and investor preference for, positive skewness, a rational investor may hold an optimal limited number of homogeneous risk assets.
Federal Deposit Insurance, Regulatory Policy, and Optimal Bank Capital*
Authors: BUSER STEPHEN A. , CHEN ANDREW H. , KANE EDWARD J.
Published: April 2012

This paper seeks to explain the combination of explicit and implicit pricing for deposit insurance employed by the FDIC. Essentially, the FDIC sells two products—insurance and regulation. To span the product space, it must and does set two prices. We argue that the need to establish regulatory disincentives to bank risk‐taking is the heart of the controversy over the adequacy of bank capital and that the ability to close risky banks before exhausting their charter value (i.e., the value of their right to continue in business) stands at the center of these disincentives and in front of the FDIC's insurance reserves.
An Analysis of Countercyclical Policies of The FHLBB
Authors: KENT RICHARD J.
Published: April 2012

Three policies of the Federal Home Loan Bank Board, the Specially Priced Advances Program in 1970–1, a program of advances at a reduced interest rate in 1974, and changes in the minimum liquidity ratio, are analyzed. A model of portfolio allocation is developed and estimated for savings and loan associations. Most of the net increase in advances borrowed under the first two programs have not been lent in the mortgage market. Reductions in the minimum liquidity requirement have resulted in an increase in mortgage lending, but substantial effects are not felt until a year after the liquidity requirement is reduced.
Notes on Multiperiod Valuation and the Pricing of Options
Authors: BHATTACHARYA SUDIPTO
Published: April 2012

A mean‐variance risk‐return tradeoff relationship is derived for the diffusion process limiting case of a state‐preference model, with aggregate consumption serving as a pivotal variable. The model is compared to other recent models along the dimensions of generality and tractable implementation. The incorporation of stochastic interest rates in general equilibrium and arbitrage‐based valuation models is examined, and an extension to earlier methods is discussed, in connection with the implementation of “robust” general valuation procedures.
A Note on Concentration and Checking Account Prices
Authors: OSBORNE D. K. , WENDEL JEANNE
Published: April 2012

A recent survey (Rhoades, 1977b) of StructureConductPerformance studies in banking lists twelve studies of the effect of concentration on checkingaccount prices. All twelve rely on proxies for price instead of actual price. Here we evaluate this practice by comparing the three most widely used proxies with the prices actually charged by a sample of 154 Texas banks.
Pension Funding, Share Prices, and National Savings
Authors: FELDSTEIN MARTIN , SELIGMAN STEPHANIE
Published: April 2012

This paper examines empirically the effect of unfunded pension obligations on corporate share prices and discusses the implications of these estimates for national saving, the decline of the stock market in recent years, and the rationality of corporate financial behavior. The analysis uses the information on inflation‐adjusted income and assets which large firms were required to provide for 1976 and subsequent years.

The evidence for a sample of nearly 200 manufacturing firms is consistent with the conclusion that share prices fully reflect the value of unfunded pension obligations. Since the conventional accounting measure of the unfunded pension liability has a number of problems (which we examine in the paper), it would be more accurate to say that the data are consistent with the conclusion that shareholders accept the conventional measure as the best available information and reduce share prices by a corresponding amount.

The most important implication of the share price response is that the existence of unfunded private pension liabilities does not necessarily entail a reduction in total private saving. Because the pension liability reduces the equity value of the firm, shareholders are given notice of its existence and an incentive to save more themselves. For this reason, unfunded private pensions differ fundamentally from the unfunded Social Security pension and the other unfunded federal government civilian and military pensions.
A Theoretical Framework for Evaluating the Impact of Universal Reserve Requirements
Authors: SPRENKLE CASE M. , STANHOUSE BRYAN E.
Published: April 2012

This paper provides an appropriate framework to evaluate the impact of the universal reserve requirements called for by the new DIDMC Act of 1980. We derived the optimal reserve ratios for a dual banking system under the objective of controlling the monetary aggregates and the level of output. Then optimal reserve requirements were calculated from illustrative money market and macroeconomic parameters since the usual comparative statics were not useful. The results, generally, suggested optimal reserve ratios which were significantly higher than the old dual or the new universal reserve regimes for all targets. However, the calculation of values for the loss functions under various reserve regimes suggests that attainment of and may not be imperative, since the discrepancy between losses for optimal and various nonoptimal reserve schemes were not large. A major result of this paper, observed for both monetary and real targets, was that the differences in the instability of the targets for the old dual reserve ratios and the Fed's new universal reserve scheme were small. This result clearly suggests that although the DIDMC Act may solve the Federal Reserve's membership problem, it will not significantly enhance the Fed's effectiveness in controlling monetary or real sector aggregates.
Merger Announcements and Insider Trading Activity: An Empirical Investigation
Authors: KEOWN ARTHUR J. , PINKERTON JOHN M.
Published: April 2012

This paper provides evidence of excess returns earned by investors in acquired firms prior to the first public announcement of planned mergers. The study is distinguished from earlier merger studies in its use of daily holding period returns for the 194 firms sampled. The results confirm statistically what most traders already know. Impending merger announcements are poorly held secrets, and trading on this nonpublic information abounds. Specifically, leakage of inside information is a pervasive problem occurring at a significant level up to 12 trading days prior to the first public announcement of a proposed merger.
Tests for Price Effects of New Issues of Seasoned Securities
Authors: HESS ALAN C. , FROST PETER A.
Published: April 2012

Do new issues of seasoned securities cause significant price movements in the neighborhood of the issue day? This paper presents an empirical comparison of three competing hypotheses: the SEC view that a new issue causes a permanent price decline; the underwriter view that there is only a temporary price decline during the distribution period; and the efficient market hypothesis (EMH) that implies the absence of any price effects. Several empirical tests of the competing hypotheses using data on new issues of utility stocks traded on the NYSE reject the SEC and underwriter views in favor of the EMH.
A Direct Test of Roll's Conjecture on the Firm Size Effect
Authors: REINGANUM MARC R.
Published: April 2012

Empirical research indicates that small firms earn higher average rates of return than large firms, even after accounting for beta risk. Roll conjectured that the small firm effect might be attributed to improper estimation of security betas. The evidence shows that while the direction of the bias in beta estimation is consistent with Roll's conjecture, the magnitude of the bias appears to be too small to explain the firm size effect.
Common Stock Returns and Rating Changes: A Methodological Comparison
Authors: GRIFFIN PAUL A. , SANVICENTE ANTONIO Z.
Published: April 2012

This paper examines the adjustments in a firm's common stock price during the eleven months before and during the month of announcement of a bond rating change. Based on several different measures of abnormal security return, the findings are consistent with the proposition that bond downgradings convey information to common stockholders. For bond upgradings, the price adjustments were statistically insignificant in the month of announcement, although in the eleven preceding months, upgraded firms exhibited positive abnormal returns. While the results do not fully support earlier research, we stress that the main contribution of this article lies in the scrutiny it gives to issues of methodology in assessing the possible price effects of bond reclassifications.
The Choice Between Equity and Debt: An Empirical Study
Authors: MARSH PAUL
Published: April 2012

This empirical study of security issues by UK companies between 1959 and 1974 focuses on how companies select between financing instruments at a given point in time. It throws light on a number of interesting questions. First, it demonstrates that companies are heavily influenced by market conditions and the past history of security prices in choosing between debt and equity. Second, it provides evidence that companies appear to make their choice of financing instrument as if they have target levels of debt in mind. Finally, the results are consistent with the notion that these target debt levels are themselves a function of company size, bankruptcy risk, and asset composition.
Bank Forward Lending in Alternative Funding Environments
Authors: DESHMUKH SUDHAKAR D. , GREENBAUM STUART I. , KANATAS GEORGE
Published: April 2012

This paper examines the effects of loan commitments on bank lending behavior in both deposit‐funding and liability management environments. Assuming that the bank lends exclusively under commitments and that the number of commitments exercised is uncertain, the bank must choose its supply of commitments. Given this choice, the bank becomes a passive lender to commitment holders. Our focus on forward credit markets sheds new light on the private bankers' assertion that they do not directly determine their level of lending, but merely “accommodate” the credit needs of their customers. Similarly, the central banker's claimed inability to control monetary aggregates in the short‐run becomes understandable in a new context. It is shown that the advent of liability management will reduce the volume of loan commitments and the expected size of the bank and of the banking system. It is also shown that increased uncertainty regarding borrower takedown behavior diminishes the volume of commitments, expected bank and banking system size.
An Analysis of the Impact of Interest Rate Ceilings
Authors: VILLEGAS DANIEL J.
Published: April 2012

The first aim of this study is to estimate the interest rates paid for motor vehicle loans. The second aim is to identify those potential borrowers most likely to be rationed out of the market by the imposition of rate ceilings. Rate ceilings constrain the rates paid by successful loan applicants to be no greater than the applicable ceiling level. These constraints are dealt with by treating the interest rate paid as a variable truncated at the ceiling level. Assuming the dependent variable is truncated normal, consistent estimates are obtained by employing the maximum likelihood method of Hausman and Wise.
A Model of the Demand for Investment Banking Advising and Distribution Services for New Issues
Authors: BARON DAVID P.
Published: April 2012

This paper presents a theory of the demand for investment banking advising and distribution services for the case in which the investment banker is better informed about the capital market than is the issuer, and the issuer cannot observe the distribution effort expended by the banker. The optimal contract under which the offer price decision is delegated to the better‐informed banker in order to deal with the adverse selection and moral hazard problems resulting from the informational asymmetry and the observability problem is characterized. The model demonstrates a positive demand for investment banking advising and distribution services and provides an explanation of the underpricing of new issues.
On Unit Roots and the Empirical Modeling of Exchange Rates
Authors: MEESE RICHARD A. , SINGLETON KENNETH J.
Published: April 2012

Tests are conducted for the presence of unit roots in the autoregressive representations of the logarithms of spot and forward exchange rates. The results from these tests provide one explanation for some of the conflicting conclusions which emerge from recent empirical papers on the foreign exchange market.
A Multivariate Linear Regression Test for the Arbitrage Pricing Theory
Authors: JOBSON J. D.
Published: April 2012

A test for the arbitrage pricing theory which employs a multivariate linear regression model is developed. Given a sample of return premiums for a set of N assets which includes a subset of k linearly independent portfolios, the k factor APT hypothesis is accepted if the intercept term is zero in the multivariate regression of the returns on the k portfolios. The test may be carried out simply, by using univariate multiple regression software. The relation of this test to the concept of performance potential and Sharpe's measure of performance is also discussed. If the performance potential of the k portfolios is not significantly less than the performance potential of the complete set of N assets, then the k factor APT hypothesis is accepted.
Option Prices as Predictors of Equilibrium Stock Prices
Authors: MANASTER STEVEN , RENDLEMAN RICHARD J.
Published: April 2012

The Black‐Scholes option pricing model, modified for dividend payments, is used to calculate jointly implied stock prices and implied standard deviations. A comparison of the implied stock prices with observed stock prices reveals that the implied prices contain information regarding equilibrium stock prices that is not fully reflected in observed stock prices. The implications of this finding are discussed.
The Ex‐Dividend Day Behavior of Stock Prices: A Re‐Examination of the Clientele Effect
Authors: KALAY AVNER
Published: April 2012

Past studies have documented an ex‐dividend day price drop which is less than the dividend per share and positively correlated with the corresponding dividend yield. In contrast to prior work, we show that, without additional information, the marginal tax rates cannot be inferred from this phenomenon which is, therefore, not necessarily the result of a tax induced clientele effect. Despite adjustments for potential biases in earlier work, however, the correlation between the ex‐dividend relative price drop and the dividend yield is still positive which is consistent with a tax effect and a tax induced clientele effect.
Municipal Bond Pricing and the New York City Fiscal Crisis
Authors: KIDWELL DAVID S. , TRZCINKA CHARLES A.
Published: April 2012

This paper's findings suggests that the New York City fiscal crisis by itself did not lead to a fundamental change in risk perceptions of investors, resulting in higher interest rates in the municipal bond market. The monthly prediction errors generated by time series tests were relatively small and none were statistically significant. Only the signs on the prediction errors for June, July, and August were consistent with a New York City effect. Thus, if the New York City default had an impact on aggregate interest rates, it was at most small and of short duration.
The Bank Capital Decision: A Time Series—Cross Section Analysis
Authors: MARCUS ALAN J.
Published: April 2012

This paper seeks to explain the dramatic decline in capital to asset ratios in U.S. commercial banks during the last two decades. It is hypothesized that the rise in nominal interest rates during this period might have contributed substantially to the fall in capital ratios. Time series‐cross section estimation supports the hypothesis regarding the interest rate.
The Allocation of Capital Between Residential and Nonresidential Uses: Taxes, Inflation and Capital Market Constraints
Authors: HENDERSHOTT PATRIC H. , HU SHENG CHENG
Published: April 2012

We have constructed a simple two‐sector model of the demand for housing and corporate capital. Economic growth and an increase in the inflation rate were then simulated with a number of model variants. The model and simulation experiments illustrate both the tax bias in favor of housing and the manner in which the increase in inflation between 1965 and 1978 magnified it. The existence of capital‐market constraints offsets the bias against corporate capital, but it introduces a sharp, inefficient reallocation of housing from less wealthy, constrained households to wealthy households who do not have gains on mortgages and are not financially constrained.
Consensus Beliefs Equilibrium and Market Efficiency
Authors: EASLEY DAVID , JARROW ROBERT A.
Published: April 2012

This paper presents an analysis of the concept of consensus beliefs and its relation to market efficiency. We show that unless traders have rational expectations, the two published interpretations of consensus beliefs are not useful for considerations of market efficiency. One interpretation (see Verrecchia [6]) has no implication for market efficiency. Under the second interpretation (see Verrecchia [7], [8]) consensus beliefs equilibria are efficient, but they typically do not exist unless traders have rational expectations.
The Fiscal and Monetary Linkage between Stock Returns and Inflation
Authors: GESKE ROBERT , ROLL RICHARD
Published: April 2012

Contrary to economic theory and common sense, stock returns are negatively related to both expected and unexpected inflation. We argue that this puzzling empirical phenomenon does not indicate causality.

Instead, stock returns are negatively related to contemporaneous changes in expected inflation because they signal a chain of events which results in a higher rate of monetary expansion. Exogenous shocks in real output, signalled by the stock market, induce changes in tax revenue, in the deficit, in Treasury borrowing and in Federal Reserve “monetization” of the increased debt. Rational bond and stock market investors realize this will happen. They adjust prices (and interest rates) accordingly and without delay.

Although expected inflation seems to have a negative effect on subsequent stock returns, this could be an empirical illusion, since a spurious causality is induced by a combination of: (a) a reversed adaptive inflation expectations model and (b) a reversed money growth/stock returns model.

If the real interest rate is not a constant, using nominal interest proxies for expected inflation is dangerous, since small changes in real rates can cause large and opposite percentage changes in stock prices.
Stock Prices and Financial Analysts' Recommendations
Authors: BJERRING JAMES H. , LAKONISHOK JOSEF , VERMAELEN THEO
Published: April 2012

The recommendations of a Canadian brokerage house are evaluated by a number of techniques. The results reveal that an investor following the recommendations would have achieved significantly positive abnormal returns, even after allowing for transactions cost.
Bond Systematic Risk and the Option Pricing Model
Authors: WEINSTEIN MARK I.
Published: April 2012

In this paper we examine the behavior of the systematic risk of corporate bonds. A model that assumes β is constant is compared with a model that allows systematic risk to vary in a manner consistent with the Black‐Scholes‐Merton Options Pricing Model. This procedure captures some fundamental properties of the movement of bond β and provides a starting point for improved models of the process generating bond returns.
Deviations from Purchasing Power Parity in the Long Run
Authors: ADLER MICHAEL , LEHMANN BRUCE
Published: April 2012

This paper demonstrates that deviations from purchasing power parity reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible rate periods, for a wide variety of countries, and in both monthly and annual data. Since this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage, the paper proposes an alternative explanation which instead relies on financial arbitrage in bonds as the underlying mechanism.
The Determinants of Default on Insured Conventional Residential Mortgage Loans
Authors: CAMPBELL TIM S. , DIETRICH J. KIMBALL
Published: April 2012

This paper presents empirical evidence on the determinants of default for insured residential mortgages. A multinomial logit model is specified and estimated for regional aggregates constructed from cross sectional and time series data. The results document the independent statistical significance of contemporaneous payment/income and loan/ value ratios and unemployment rates as well as more commonly studied determinants of default such as age and the original loan/value ratio.
The Ex‐Dividend Day Behavior of Canadian Stock Prices: Tax Changes and Clientele Effects
Authors: BOOTH L. D. , JOHNSTON D. J.
Published: April 2012

With some simple assumptions the ex‐dividend day price drop and the associated dividend can be used to measure the market's marginal tax rate. Previous research has estimated the implied tax rate for the U.S. This paper extends the analysis to Canada, where the tax treatment of dividends and capital gains is completely different from that in the U.S. The paper also presents estimates from 1970–80 to include four distinct periods when the tax treatment was different. Hence, we include an implied test of market efficiency as well as those for the “relevance” of taxes and the existence of tax based dividend clienteles.
Investigating the Valuation Effects of Announcements of Voluntary Corporate Selloffs
Authors: ALEXANDER GORDON J. , BENSON P. GEORGE , KAMPMEYER JOAN M.
Published: April 2012

While there has been an abundance of empirical research on the subject of mergers and acquisitions, little research exists on a closely related topic—voluntary corporate selloffs. This study examines the effect on shareholder wealth of the announcement by management of an investment decision to voluntarily sell part of its operations to another firm. Positive abnormal returns are found to occur on the announcement date. However, it is found that such selloffs generally occur after a period of abnormally negative returns, suggesting the announcement is preceded by the release of negative information about the firm.
Option Pricing Bounds in Discrete Time
Authors: PERRAKIS STYLIANOS , RYAN PETER J.
Published: April 2012

Upper and lower bounds are derived for call options traded at discrete intervals. These bounds are independent of assumptions on the stock price distribution other than a restriction satisfied by the stock being “non‐negative beta.” The development of the bounds relies on the single‐price law and arbitrage arguments. Both single‐period and multiperiod results are produced, and put option bounds follow by extension. The bounds exist as equilibrium values given a consensus on stock price distribution; they are also valid for empirical studies, being adjustable for dividends and commissions.
Municipal Bond Demand Premiums and Bond Price Volatility: A Note
Authors: STOCK DUANE , SCHREMS EDWARD L.
Published: April 2012

The behavior of different components of municipal bond yields may have a significant impact upon bond price behavior. Specifically, demand premiums created by banks may stabilize bond yields in some maturity ranges but not in others; for example, short‐term municipals may be stabilized but not long‐term. This research implies that bank demand behavior may create demand premiums that stabilize prices of short‐term municipal bonds relative to those of Treasury bonds of like maturity. While this implication is inconsistent with the residual theory of bank demand, it is consistent with the tax‐shield theory attributed to Hendershott and Koch [3, 4].
Expectations, Surprises and Treasury Bill Rates: 1960–82
Authors: HENDERSHOTT PATRIC H.
Published: April 2012

Changes in six‐month bill rates over semiannual periods in the 1960s and 1970s are successfully related to expected changes and to surprises. The latter include unanticipated changes in expected inflation, in the growth of industrial production and base money, and in inflation uncertainty. Estimation of the basic equation through the middle of 1983 does not suggest any change in structure. Moreover the equation “explains” 60 percent of the extraordinarily high level of real rates since late 1980, largely owing to an excess of unexpected net increases in anticipated inflation over actual increases.

Our estimates provide some support for the expectations theory; there appears to be information content in six–month forward rates. While this content is swamped by the impact of surprises in equations explaining rate changes in terms of forward rates alone, the content is clear when proxies for the surprises are included in the equations.
Capital Structure Equilibrium under Market Imperfections and Incompleteness
Authors: SENBET LEMMA W. , TAGGART ROBERT A.
Published: April 2012

This paper generalizes Miller's supply‐side equilibrium argument to other forms of capital market imperfections and incompleteness. If corporations possess a comparative advantage in dealing with these imperfections, they have an incentive to act as financial intermediaries. Corporations' attempts to profit from these intermediation activities dictate an optimal capital structure for the corporate sector as a whole, but in equilibrium the capital structure of any single firm is a matter of indifference. In addition, the positive role that corporate finance plays in completing the market restores standard perfect market results on asset pricing and the associated portfolio separation properties.
Commodity Bonds and Consumption Risks
Authors: O'HARA MAUREEN
Published: April 2012

This paper analyzes the economic role of commodity bonds by examining the nature of the demand for these securities. I show that while commodity bonds protect against relative price changes, they do so by introducing variability into the future real income stream. This variability limits the desirability of using commodity bonds to provide “price insurance” for future consumption. However, this variability may allow commodity bonds to hedge risks to consumption caused by stochastic changes in income. The analysis also suggests that it is this “income insurance” rather than “price insurance” that is important in hedging risks to future consumption.
Arbitrage Pricing Theory and Utility Stock Returns
Authors: BOWER DOROTHY H. , BOWER RICHARD S. , LOGUE DENNIS E.
Published: April 2012

This paper presents some new evidence that Arbitrage Pricing Theory may lead to different and better estimates of expected return than the Capital Asset Pricing Model, particularly in the case of utility stock returns. Results for monthly portfolio returns for 1971–1979 lead to the conclusion that regulators should not adopt the single‐factor risk approach of the CAPM as the principal measure of risk, but give greater weight to APT, whose multiple factors provide a better indication of asset risk and a better estimate of expected return.
The Leasing Puzzle
Authors: ANG JAMES , PETERSON PAMELA P.
Published: April 2012

Prevailing theories in finance and economics suggest that leases and debt are substitutes; an increase in one should led to a compensating decrease in the other. In particular, there are three views on the magnitude of the substitution coefficient. Standard finance theory treats cash flows from lease obligations as equivalent to debt cash flows, thus describing the tradeoff between debt and leases as one‐to‐one. Others are willing to use a tradeoff of leases for debt which is less than, but close to, one. The rationale for a dollar of leases using less of debt capacity than a dollar of debt obligation is based upon the differences in the terms and nature of lease and debt contracts. Finally, there are some who argue that since leased assets may be firm‐specific, the risk of moral hazard may be great, resulting in a tradeoff of greater than one‐to‐one; that is, a dollar of a lease obligation uses more of debt capacity than a dollar of a debt obligation.

A series of empirical tests are performed in this study on samples of approximately 600 firms, covering the years 1976 through 1981, with none of the three views supported by the results. Instead, the results indicate that leases and debt are complements; greater use of debt is associated with a greater use of leasing. This finding reappears consistently for each year, each definition of leverage ratios, and each approach to analysis. This complementary relationship persists even after refinements are made to the estimation technique.
Continuous Maturity Diversification of Default‐Free Bond Portfolios and a Generalization of Efficient Diversification
Authors: HEANEY W. JOHN , CHENG PAO L.
Published: April 2012

This paper presents a method for solving the mean‐variance portfolio selection problem that is applicable to the case where the number of securities is nondenumerably infinite. Necessary conditions for the existence of an optimal portfolio density are obtained and an expression for the efficient frontier is derived. The conditions for the existence of an optimal portfolio of continuously maturing bonds when their covariance matrix is singular are used to derive an arbitrage‐free bond pricing equation. A method for estimating the covariance matrix and the associated efficient frontier is presented.
The Effect of Interest Rate Changes on the Common Stock Returns of Financial Institutions
Authors: FLANNERY MARK J. , JAMES CHRISTOPHER M.
Published: April 2012

This paper examines the relation between the interest rate sensitivity of common stock returns and the maturity composition of the firm's nominal contracts. Using a sample of actively traded commerical banks and stock savings and loan associations, common stock returns are found to be correlated with interest rate changes. The co‐movement of stock returns and interest rate changes is positively related to the size of the maturity difference between the firm's nominal assets and liabilities.
A Theoretic Framework for the Analysis of Credit Union Decision Making
Authors: SMITH DONALD J.
Published: April 2012

This paper presents a formal theoretic framework to analyze credit union interest rates on loans and savings deposits. The unique motivational and institutional features of a credit union, in particular its structure as a financial service cooperative, are used to develop the objective function. This is based on a comparison of the credit union's rates to alternatively available market rates and includes parameters to recognize the possibility of borrower‐saver conflict. The principal result is that the optimal rates and reactions to exogenous changes depend critically on the preference of the organization toward financial gain to the borrowing and saving members.
Taxes and the Theory of Trade Debt
Authors: BRICK IVAN E. , FUNG WILLIAM K. H.
Published: April 2012

In this paper, we show that taxes motivate the flow of trade credit without involving the assumption of credit market imperfections. The direction of trade credit flow depends on the distribution of marginal tax rates among buyers and sellers. In equilibrium, the trade credit decision follows a tax‐induced clientele on both the supply and demand side.
An Analysis of Brokers' and Analysts' Unpublished Forecasts of UK Stock Returns
Authors: DIMSON ELROY , MARSH PAUL
Published: April 2012

This paper describes an empirical study of over 4000 specific share return forecasts made by 35 UK stockbrokers and by the internal analysts of a large UK investment institution. A comparison of forecast and realised returns reveals a small but potentially useful degree of forecasting ability. A large part of the information content of the forecasts, however, appears to be discounted in the market place within the first month. Nevertheless, an analysis of some 3000 transactions motivated by, and executed at the time of, the forecasts shows that the apparent predictive ability of the recommendations could be translated into superior performance by the fund's investment managers. Differences in forecasting ability between brokers do not appear to persist over time, but predictive accuracy can be improved by pooling simultaneous forecasts from different sources.