A Utility-Based Model of Common Stock Price Movements

This paper develops and tests a nonlinear utility-based econometric model of the temporal behavior of aggregate stock price movements based on a constant relative risk aversion utility function and an observable information set consisting of aggregate consumption, aggregate dividends, and past stock prices. The stochastic process derived from time-series analyses of consumption and dividends measured over annual intervals is used to derive and empirically test a closed-form solution for stock-price movements. The endogenization of discount rate changes in the utility-based model is shown to be more consistent with aggregate stock price movements over a twenty-year holdout period than constant discount rate models. The model is also used to estimate the representative investor's relative risk aversion. The estimate of 4.22 is consistent with that used by Grossman and Shiller in their perfect foresight model and is significantly higher than the relative risk aversion of 1.0 implied by logarithmic utility.     

EFFECTS OF PRICE AND AVAILABILITY ON ABORTION DEMAND

Over 1.5 million legal abortions were performed in the United States in 1988. State-level regulation affecting the price or availability of abortion services may expand given recent Supreme Court decisions. This paper uses state-level data pooled over time to estimate abortion demand. Using single cross-sections of state data, past studies find abortion demand per 1,000 pregnancies to be price inelastic and find income elasticity to be positive and significant. The analysis here shows that price elasticity estimates in a single cross-section are sensitive to the choice of state characteristics used to control for "abortion attitudes" within a state. Ajixed-efects model design with pooled data gives more robust abortion demand price elasticity estimates. The results suggest that any new state regulations that increase the costs of obtaining abortions will reduce abortion use and increase unintended fertility .     

The Relative Signalling Power of Dutch-Auction and Fixed-Price Self-Tender Offers and Open-Market Share Repurchases

We compare three forms of common stock repurchases. Dutch-auction self-tender offers and open-market share repurchase programs are weaker signals of stock undervaluation than fixed-price self-tender offers. The price increase from buyback announcements is greater when insider wealth is at risk, greater following negative net-of-market stock returns, and unrelated to prior market returns. Buyback announcement returns are also increasing in the fraction of shares sought, which is consistent with both signalling and an upward-sloping supply curve for stock.     

A Test for the Number of Factors in an Approximate Factor Model

An important issue in applications of multifactor models of asset returns is the appropriate number of factors. Most extant tests for the number of factors are valid only for strict factor models, in which diversifiable returns are uncorrelated across assets. In this paper we develop a test statistic to determine the number of factors in an approximate factor model of asset returns, which does not require that diversifiable components of returns be uncorrelated across assets. We find evidence for one to six pervasive factors in the cross-section of New York Stock Exchange and American Stock Exchange stock returns.     

Modelling the Role of Government Policy in Post-War Australian Immigration*

The authors develop and estimate a model of post-war Australian migration which highlights an endogenous treatment of government policy and includes three equations explaining the emigration rate, the Government's Immigration Programme rate, and the immigration rate. The model permits the separate identification of long-run population growth influences vis-à-vis short-run economic considerations in explaining migration. Short-run labour market conditions are found to be more important in explaining government behaviour than are long-run population considerations. Immigrant behaviour appears to be affected by both short-run and long-run influences. Very little unexplained variation remains in the estimated regressions.     

The Relation Between Common Stock Returns Trading Activity and Market Value

This study examines the relation between common stock returns, trading activity and market value. Our results indicate that although firm size and trading activity are highly correlated, differences in trading activity are not the underlying reason for the firm size anomaly, the finding of systematic differences in risk adjusted returns across stocks of firms of different size.     

Housing Interest Rate Deregulation and the Campbell Report*

It is argued that deregulation of housing interest rates would, under plausible assumptions, substantially increase the cost of housing finance in Australia, contrary to the impression created by the Final Report of the Australian Financial System Inquiry (the Campbell Report). Characteristics of the market for owner-occupier housing finance, on both the demand and supply sides, suggest that the deregulated market rate will be approximately equal to the uncontrolled rate under regulation. The weighted average interest rate for owner-occupier housing finance at December 1981 is more than three percentage points below the uncontrolled rate. The authors conclude that while this result does not of itself constitute an argument against deregulation, it does imply that deregulation would have a substantial distributional impact .