The Harris-Todaro hypothesis and the Heckscher-Ohlin-Samuelson trade model : A synthesis

We report a model of the Harris-Todaro variety in which capital is mobile and the urban wage is endogenous. Our model subsumes several other models presented in the literature. We extend the central theorems of trade to our model and also present formulae for the shadow wage and shadow rental. Our principal findings include (a) nonexistence of equilibrium in an important specialization of the model; (b) a factor-price and unemployment rate equalization theorem: and (c) an identical subsidy to labor but a differential subsidy to capital for obtaining a second-best optimum.     

Exact arbitrage, well-diversified portfolios and asset pricing in large markets

For a market with an atomless continuum of assets, we formulate the intuitive idea of a “well-diversified” portfolio, and present a notion of “exact arbitrage”, strictly weaker than the more conventional notion of “asymptotic arbitrage”, and necessary and sufficient for the validity of an APT pricing formula. Our formula involves “essential” risk, one based on a specific index portfolio constructed from factors and factor loadings that are endogenously extracted to satisfy an optimality property involving a finite number of factors. We illustrate how our results can be translated to markets with a large but finite number of assets.     

Self-Interest, Self-Deception and the Ethics of Commerce

On taking the common distinction between the legal and the ethical as a point of departure, and in an effort to understand Marshall's approach to self-interest, and thereby to his conception of an ethics of commerce, I read three of his essays in the light of some non-technical writings of Frank Hahn and three other Cambridge intellectuals. My larger project connects self-interest and self-deception to a possible ethics of theorizing in economics, and thereby to the ethics of the relationship between the theorist and the theorized, the analyst and the analyzed.     

Entrepreneurship and international business

Henry Wai‐chung Yeung. 2002. Entrepreneurship and the Internationalisation of Asian Firms: An Institutional Perspective. Northampton, MA: Edward Elgar Publishing Limited. 311 pages. ISBN 1‐84064‐734‐5. Victoria E. Bonnell & Thomas B. Gold (Eds.). 2002. The New Entrepreneurs of Europe and Asia: Patterns of Business Development in Russia, Eastern Europe and China. Armonk, NY: M.E. Sharpe. 357 pages. ISBN 0‐7656‐0775‐1.     

Dual Domestic Listing, Market Structure and Shareholder Wealth

This paper examines the impact of dual domestic listing of common stocks on shareholder wealth. The sample contains 137 AMEX- and NYSE-listed companies that dually listed their common stocks on the Pacific and Midwest Stock Exchanges between 1984 and 1988. Because the sample stocks do not have unlisted trading privileges, dual listing changes the market structure in which the stocks traded. Changes in market structure may affect stock returns through the liquidity services provided by the competing markets and through the possible nonhomogeneous clientele across markets. Using standard event methodology to examine stock market behavior around dual listing shows that the net effect of dual listing on returns is negative. Such negative returns suggest that corporate managers have reasons for dual domestic listing other than increasing shareholder wealth.     

Determinants of Corporate Dividend Policy: A Factorial Analysis

This paper re-examines the dividend policy issue by conducting a simultaneous test of the alternative explanations of corporate payout policy using a two-step procedure that involves factor analysis and multiple regression. Several new proxies for theoretical attributes that have appeared in the literature are introduced, including the role of managerial dimensions in determining dividend policy. Strong support is found for the transaction cost/residual theory of dividends. pecking order argument, and the role of dividends in mitigating agency problems. Strong support is also found for the role of managerial consideration in affecting the firm's payout policy; specifically, firms that maintain stable dividend policies and firms that enjoy financial flexibility pay higher dividends. The results appear to support the tax clientele argument.     

Should the government directly intervene in stock market during a crisis?

Unlike foreign exchange markets where central banks frequently intervene, the governments strive not to intervene in the stock markets since intervention transmit negative signals and carry market-related side effects. The main reasons often cited in support of intervention are to bring price stability and to restore investors’ confidence. During the recent economic turmoil, opportunities for the governments to intervene in the stock markets were mainly exploited in emerging and developing countries. We study the outcome of the Russian government's intervention in its major stock market between September and October 2008. This intervention was intended to reverse the sudden and swift declining trend in traded security prices by altering the market's expectations. By using a combination of event study and a multivariate GARCH model, our findings does not support direct government intervention in the stock market during a crisis.     

The relationship between South Asian stock returns and macroeconomic variables

This article investigates whether economic variables have explanatory power for share returns in South Asian stock markets. In particular, using data for four South Asian emerging stock markets over the period 1998–2012, the article examines the influence of a selection of local, regional and global economic variables in explaining equity returns; most previous studies that have examined this issue have tended to focus on only local and/or global factors. Important factors are identified by distilling the macroeconomic variables into principal components. Economic activities, real interest rates, real exchange rates and the trade balance represent local factors. Regional factors are represented by interregional trade and regional economic activity while global factors are represented by world financial asset returns and world economic activity. The vector autoregression results suggest that the South Asian markets examined are not efficient. Both local and regional factors can directly and indirectly explain Bangladeshi, Pakistani and Sri Lankan stock returns while the lagged returns of the Pakistani stock market and world economic activity can explain Indian stock returns.     

EXCHANGE LISTINGS AND DELISTINGS: THE ROLE OF INSIDER INFORMATION AND INSIDER TRADING

We examine whether insiders systematically exploit their private information before exchange listings and delistings they are likely to know about before outsiders/investors. Analyzing a comprehensive sample of over-the-counter (OTC) firms, which listed on the New York Stock Exchange (NYSE) or American Stock Exchange (AMEX) during 1977–93, we find evidence that insiders act on their private information of an impending exchange listing by purchasing or postponing the sale of stock on private account. For firms delisting from the NYSE or AMEX, we find that insiders of these firms sell stock on private account before delisting. Overall, the evidence indicates that insiders act on their private information before exchange listings and delistings.