bluuebunny/crossref_metadata_2025_split huggingface dataset:
The Impact of Federal Interest Rate Regulations on the Small Saver: Further Evidence
Authors: LAWRENCE EDWARD C. , ELLIEHAUSEN GREGORY E. 
Published: April 2012

ABSTRACTThis 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

ABSTRACTEmpirical 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

ABSTRACTThe 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

ABSTRACTComplete 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

ABSTRACTThis 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

ABSTRACTThree 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

ABSTRACTA 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

ABSTRACTA 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

ABSTRACTThis 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

ABSTRACTThis 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

ABSTRACTThis 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

ABSTRACTDo 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

ABSTRACTEmpirical 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

ABSTRACTThis 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

ABSTRACTThis 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

ABSTRACTThis 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

ABSTRACTThe 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

ABSTRACTThis 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

ABSTRACTTests 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

ABSTRACTA 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

ABSTRACTThe 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

ABSTRACTPast 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

ABSTRACTThis 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

ABSTRACTThis 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

ABSTRACTWe 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

ABSTRACTThis 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

ABSTRACTContrary 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.
Bond Systematic Risk and the Option Pricing Model
Authors: WEINSTEIN MARK I. 
Published: April 2012

ABSTRACTIn 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

ABSTRACTThis 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

ABSTRACTThis 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.