LOCAL AND STATEWIDE SMOKE‐FREE LAWS IN NEBRASKA: THE EFFECTS ON KENO ESTABLISHMENTS

This study examines how smoke‐free laws influence cross‐border keno shopping in Nebraska. We exploit smoke‐free law variation in timing and location to identify keno revenue gains and losses between neighboring smoke‐free and smoke‐friendly areas. We find the Lincoln municipal smoke‐free law reduced keno revenue by 23.5% in Lincoln and increased keno revenue by 30.0% in smoke‐friendly Surrounding Lincoln counties. The Omaha municipal smoke‐free law reduced keno revenue by 14.8% in Omaha and increased keno revenue by 7.1% in smoke‐friendly Surrounding Omaha counties. Following the Nebraska statewide law, no Nebraska areas had a smoke‐friendly advantage and keno revenue fell by an insignificant 1.0% and 5.2% in the surrounding Lincoln and Omaha counties, respectively. Our results may be of interest to local policy makers interested in understanding the amount of business activity and tax revenue that may be migrating out of a community or even the state. (JEL l18, K32)     

A Historical Analysis of the Taylor Curve

Taylor (1979) shows that there is a permanent trade‐off between the volatilities of the output gap and inflation. Although a number of papers argue that the so‐called Taylor curve is a policy menu, we use it as an efficiency locus to gauge the appropriateness of monetary policy. We examine the efficiency of U.S. monetary policy from 1875 onward by measuring the orthogonal distance between the observed volatilities of the output gap and inflation from the Taylor curve. We also identify time periods in which the variability of the U.S. economy changed by observing shifts in this efficiency frontier.     

Stockholders’ Unrealized Returns and the Market Reaction to Financial Disclosures

Using both investor‐ and stock‐level data, I examine the relation between stockholders’ unrealized returns since purchase and the market response to earnings announcements. I demonstrate that stockholders’ unrealized gain/loss position moderates their trading behavior in response to earnings announcements. I also find that this behavior generates a short‐window return underreaction to earnings news. My results are generally consistent with predictions from prospect theory regarding the manner in which stockholders’ unrealized returns moderate their trading response to belief shocks. However, my results also suggest that an emotional component (i.e., regret‐avoidance/pride‐seeking) is necessary to explain the observed investor behavior.     

Impact of Earnings,Dividends and Cash Flows on Stock Returns: Case of Taiwan's Stock Market

The study uses Taiwan's stock market, a newly developed market with different characteristics from that of the U.S., as an experimental case to examine the influences of the market's characteristics on the relationship between stock returns and fundamental accounting information, such as earnings, dividends and cash flows. The testing period is from 1990 to 1994, right after the promulgation of Taiwan's accounting standard for statement of cash flows in 1989.Similar to the findings of U.S. studies, the study shows that earnings data is key information for investors. Unlike the U.S. results, however, both operating income and non-operating income are positively related to stock returns. The usefulness of non-operating income to explain stock returns is due mainly to its recurrent characteristic in Taiwan. The market views non-operating income, mostly from disposal of real-estate and short-term equity investments, as a complementary factor to operating income. It is a possible common phenomenon in a booming economy. Unlike from the results of U.S. studies, Taiwan's stock returns are strongly associated with stock dividends. Cash dividends, however, are relatively less important information to the market. The fast booming economy as well as Taiwan's free tax rate on capital gains are the explanations for the different findings. The results also support McNicholes and Dravid's (1990) and etc. results that stock dividends may act as a signal for favorable future earnings. Examining the association between stock returns and cash flow information, the results indicate that stock returns are positively associated with cash flows from both operating and financing activities. The phenomenon implies that the market appreciates not only the cash inflows from operating activities, but also cash inflows from new issues of bonds or stocks for further expansion. It is consistent to Taiwan's booming economy. The finding also supports Ross (1977) and Leland and Pyles' (1977) signaling hypothesis.The study concludes that the relationships between stock returns and fundamental variables are subject to the market's characteristics. The case of the Taiwan stock market shows that usefulness of accounting information depends upon the different roles of the information in the tested market. The results of the study also indicate that directly applying the U.S. experiences without any adjustment may cause incorrect conclusions for empirical studies.