Making pro formas perform

Regulators are trying to clear up the muddle created by earnings-report adjustments called "pro formas" that companies issue. Constraining such reporting, as the regulators seem bent on doing, isn't the solution. Firms should increase alternative reporting--and fully account for their accounting.     

Networks,Law, and the Paradox of Cooperation

There is a tension between libertarians' optimism about private supply of public goods and skepticism of the viability of voluntary collusion (Cowen 1992, Cowen and Sutter 1999). Playing off this asymmetry, Cowen (1992) advances the novel argument that the free market in defense services favored by anarcho-capitalists is a network industry where collusion is especially feasible. The current article dissolves Cowen's asymmetry, showing that he fails to distinguish between self-enforcing and non-self-enforcing interaction. Case study evidence on network behavior before and after antitrust supports our analysis. Furthermore, libertarians' joint beliefs on public goods and collusion are, contrary to Cowen and Sutter (1999), theoretically defensible.     

An experimental examination of the house money effect in a multi-period setting

There is evidence that risk-taking behavior is influenced by prior monetary gains and losses. When endowed with house money, people become more risk taking. This paper is the first to report a house money effect in a dynamic, financial setting. Using an experimental method, we compare market outcomes across sessions that differ in the level of cash endowment (low and high). Our experimental results provide support for a house money effect. Traders’ bids, price predictions, and market prices are influenced by the amount of money that is provided prior to trading. However, dynamic behavior is difficult to interpret due to conflicting influences. JEL Classification C91 · C92 · D80 The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System.     

Debt Schedules of Tax-Exempt Bonds Using NIC

Municipal bonds are a large proportion of the total number of securities offered every year. The volume outstanding is more than that of all federal agency debt. It is important that the issuance procedure be as cost efficient as possible. This research develops a model to minimize the net interest cost of a municipal bond issue. Net interest cost remains a highly popular award criteria. The model incorporates the level and shape of the yield curve, the schedule of revenue to be received, and the segmented nature of the municipal market.     

Beyond Redemption: The Reporting Practices Of Unlisted Property Trusts

The deterioration over recent years of the Australian real property market brought the focus of public attention on to the investment entities which manage holdings of real properties. Concerns grew particularly about the stability and liquidity of unlisted property trusts. Some of the worries related to asset valuations and whether the balance-sheet representations of trusts' real property reflected likely recoverable amounts. These concerns were realised on 23 July 1991 when the Federal Government announced a 12-month freeze on redemptions from all existing unlisted property trusts. The significance of the financial reporting policies of unlisted property trusts is amplified when their size is considered: for the quarter ending 30 June 1991, assets under management in unlisted property trusts which were members of the Investment Funds Association of Australia (IFA) totalled $6.7 billion. This article describes a survey of unlisted property trusts' general-purpose financial reports.     

Improvement reviews in new product development

This research examines how organizations can use improvement reviews to enhance learning from product development experiences. We review learning related literature and highlight learning barriers that firms should attempt to minimize when conducting reviews. We then discuss two studies aimed at better understanding the effectiveness of improvement reviews. The first study suggests that improvement reviews can facilitate learning by leading to a reduction in the recurrence of people-related problems, though reviews had no impact on reducing market or product related problems. The second study involved depth interviews with new product developers. Interview comments provide insights into improvement review best practices and shed light on why improvement reviews are sometimes ineffective. A set of managerial recommendations is provided.     

The Impact of Changes in the FTSE 100 Index

This paper investigates FTSE 100 index membership changes, which are determined quarterly by market capitalization and should have no information content. Return reversal around index additions and deletions suggests that buying (selling) pressure moves prices temporarily away from equilibrium, consistent with short‐term downward sloping demand curves. In contrast to widely reported results for the S&P 500, there is no evidence of permanent price effects. Further results suggest that investor awareness and monitoring due to index membership do not explain the price effects. There is statistically significant anticipatory trading in stocks that just fail to be promoted to the FTSE 100.     

Adjusting Choice Models to Better Predict Market Behavior

The emergence of Bayesian methodology has facilitated respondent-level conjoint models, and deriving utilities from choice experiments has become very popular among those modeling product line decisions or new product introductions. This review begins with a paradox of why experimental choices should mirror market behavior despite clear differences in content, structure and motivation. It then addresses ways to design the choice tasks so that they are more likely to reflect market choices. Finally, it examines ways to model the results of the choice experiments to better mirror both underlying decision processes and potential market choices. Co-chairs. Author order is alphabetical.