Allocation,externalities, and building value

Externalities generally are viewed as impacting land values rather than building values. Yet when locational obsolescence is attributed to externalities, the implication is that externalities impact primarily on building values. The presence of negative externalities generally does not determine whether a building suffers from locational obsolescence; the more general cause is a misallocation of land. At the market allocation, there is no locational obsolescence even in the presence of an externality, while at the optimal allocation only an externality can produce locational obsolescence. Because locational obsolescence can exist without externalities, an externality is not a necessary condition for locational obsolescence. Because an externality can be present without accompanying locational obsolescence, an externality also is not a sufficient condition for the existence of locational obsolescence.     

The hysteresis of currency substitution: Currency risk vs. network externalities

It is widely documented that currency substitution (using foreign money in transactions) increases in periods of high inflation but does not decline once inflation is reduced. The paper uses survey data from Bulgaria, which experienced this phenomenon, to investigate the origins of this ratchet effect. We find that expected devaluation of the domestic currency, while relatively high, does not play a major role in sustaining the dollarization of transactions. Conversely, preferences for the use of foreign money are strongly influenced by people's perception that foreign money is already widely used in the economy.     

Tourism, globalization, social externalities, and domestic welfare

One of the impacts of globalisation has been the growth in tourism and mobility of capital. This paper examines the welfare effect of tourism on the host economy with imperfect competition. Three channels that affects domestic welfare by tourism are: social externalities accompanied with tourists, the terms of trade effect via rises in the non-tradable prices, and the resource movement effect to the manufacturing sector. Owing to the positive terms-of-trade effect and/or the beneficial resource movement effect, the optimal levels of tourism occur at the situations that tourists bring negative social externalities to the economy.     

Convertible bond arbitrage,liquidity externalities,and stock prices

In the context of convertible bond issuance, we examine the impact of arbitrage activity on underlying equity markets. In particular, we use changes in equity short interest following convertible bond issuance to identify convertible bond arbitrage activity and analyze its impact on stock market liquidity and prices for the period 1993 to 2006. There is considerable evidence of arbitrage-induced short selling resulting from issuance. Moreover, we find strong evidence that this activity is systematically related to liquidity improvements in the stock. These results are robust to controlling for the potential endogeneity of arbitrage activity.     

Taxpayer resistance,guarantee uncertainty,and housing finance subsidies

In the absence of external guarantees, a private firm's debt trades in the market at rates reflective of its private default risk. Not all firms go it alone, however. There are entities, government-sponsored enterprises (GSEs), whose debt obligations enjoy federal guarantees. Federal guarantees affect housing finance indirectly in that they tend to enhance the creditworthiness of the debt obligations of the housing intermediary which lessens the debtholder's exposure to default. The market investor then becomes a willing buyer of GSE debt at a lower (subsidized) rate as a result of the government guarantee.Due to the fact that the subsidy rests on the presumption that the GSE debt will be bailed out by the government it can be seen that the subsidy in turn rests upon the presumption by the GSE debtholder that the taxpayers will honor the guarantee in the event of a GSE default. Hence, government subsidies to the housing intermediaries rest not on ongoing government outlays but rather on the confidence that the taxpayers will be willing, if called upon, to cover GSE losses, i.e., the confidence of a bailout.This article analyzes the effects on the GSE subsidy and on the taxpayer, if the debt markets charge for bailout risk. Bailout risk pricing is an economic event. When debtholders seek to protect themselves by pricing for bailout risk, this increases GSE borrowing costs and cuts into both GSE borrowers' subsidies and stockholder earnings. Higher borrowing costs leave the GSE in a weakened condition and increase the ex ante bailout cost to the taxpayer. When bailout risk premiums become priced by the market, it substantially lessens the government's ability to subsidize housing finance or other GSE activities.     

Market transparency,liquidity externalities,and institutional trading costs in corporate bonds

We develop a simple model of the effect of public transaction reporting on trade execution costs and test it using a sample of institutional trades in corporate bonds, before and after initiation of the TRACE reporting system. Trade execution costs fell approximately 50% for bonds eligible for TRACE transaction reporting, and 20% for bonds not eligible for TRACE reporting, suggesting the presence of a “liquidity externality.” The key results are robust to changes in variables, such as interest rate volatility and trading activity that might also affect execution costs. Market shares and the cost advantage to large dealers decreased post-TRACE. These results indicate that market design can have first-order effects, even for sophisticated institutional customers.     

The avenue effect,landmark externalities,and cubic transformation: Manhattan office valuation

A functional form for the valuation of office buildings is a third-order function that replicates the constrained cost function in which one of the inputs, land, is fixed. The third-order transformation improves a hedonic regression pricing model and reduces the autocorrelation. The presence of neighborhood landmarks, selected avenue address, and building size influence the office building value. The data set includes 103 midtown Manhattan office building sales transactions from 1980 to first quarter 1990.     

论农业补贴与农业政策性金融

文章通过农业补贴政策比较探讨了农业补贴调整方向,并认为要用政策性金融杠杆支持和保护农业势在必行。     

Internal capital market subsidies and industry downturns

We examine whether multisegment firms tend to subsidize operations doing business in industries that experience a major downturn in investment opportunities. The results provide little evidence of subsidization. The likelihood of discontinuation of multisegment operations in these industries does not statistically differ from that of single-segment operations. Similarly, patterns of capital expenditures after the shock do not materially deviate between multisegment and single-segment operations. These results indicate that the internal capital markets of multisegment firms are no less (and no more) efficient than that of single-segment firms in their reaction to a shock to investment opportunities.     

Signaling, investment opportunities, and dividend announcements

This article examines potential explanations for the wealtheffects surrounding dividend change announcements. We find thatnew information concerning managers' investment policies isnot revealed at the time of the dividend announcement. We alsofind that dividend increases (decreases) are associated withsubsequent significant increases (decreases) in capital expendituresover the three years following the dividend change, and thatdividend change announcements are associated with revisionsin analysts' forecasts of current earnings. These results areconsistent with the cash flow signaling hypothesis rather thanthe free cash flow hypothesis as an explanation for the observedstock price reactions to dividend change announcements.     

Dividends,Taxes, and Signaling: Evidence from Germany

The higher taxation of dividends in the United States gave rise to theories that explain why companies pay dividends. Tax-based signaling models propose that the higher tax on dividends is a necessary condition to make them informative about companies' values. In Germany, where dividends are not tax-disadvantaged and in fact are taxed lower for most investor classes, these models predict that dividends are not informative. However, we find that the stock price reaction to dividend news in Germany is similar to that found in the United States. This suggests other reasons, beyond taxation, that make dividends informative.     

Commitment problems justify subsidies for medical insurance

Consumers who believe that government will provide them with some public medical care, even if they did not purchase medical insurance, may choose to purchase no such insurance. The amount of medical care consumed will then be less than the first-best optimum. Under specified conditions government can then increase the welfare of consumers by subsidizing insurance, or by providing public health care at a more generous level than the minimum it would otherwise give.     

Signaling safety

Contrary to signaling models’ central predictions, changes in the level of cash flows do not empirically follow changes in dividends. We use the Campbell (1991) decomposition to construct cash-flow and discount-rate news from returns and find the following: (1) both dividend changes and repurchase announcements signal changes in cash-flow volatility (in opposite directions); (2) larger cash-flow volatility changes come with larger announcement returns; and (3) neither discount-rate news, nor the level of cash-flow news, nor total stock return volatility change following dividend changes. We conclude cash-flow news—and not discount-rate news—drive payout policy, and payout policy conveys information about future cash-flow volatility.     

Intangible Assets and Corporate Signaling

Research and development (R&D) and advertising expenditures often result in patents, technologies and brand names which are difficult to accurately value. Under current generally accepted accounting principles (GAAP) these intangible assets are generally not recognized in the financial statements, but instead are expensed in the period that they occur. Prior studies note that the market-to-book ratios of firms with significant levels of R&D and advertising expenditures suggest that investors, at least partially, value these assets. Researchers and practitioners argue that current GAAP, by not recognizing these intangible assets, reduces the usefulness and relevance of accounting reports.We investigate whether companies with significant levels of intangible assets are more likely to emphasize dividend increases and stock repurchases (which are generally perceived as signaling favorable investment opportunities), instead of traditional accounting disclosures, as a means of overcoming adverse selection. Because these assets are difficult to measure, cash distributions may be viewed as a more credible means of signaling firm value to investors. Using analysts' ratings of firms' accounting disclosures, we find that companies with higher levels of R&D and advertising expenditures are less likely to provide extensive accounting disclosures and instead tend to employ dividend and stock repurchase signals. We obtain these results even after controlling for other firm attributes, such as size, stock returns performance, leverage, liquidity and investors' expectations of growth opportunities. We also find that the market reaction to dividend increase and stock repurchase announcements is greater for firms with higher levels of R&D and advertising expenditures, indicating that these announcements are more informative for such firms.     

An empirical examination of the externalities of neighborhood churches on housing values

Recently, establishment of churches in residential neighborhoods has become controversial. This study is the first to address the issue of whether a neighborhood church positively or negatively affects the value of nearby single-family properties. This hypothesis is tested with a standard hedonic pricing model, using a sample of 469 sales transactions drawn from a large metropolitan area. Nonchurch effects are held constant with a standard set of housing-related variables. A distance variable is included to measure the direction and magnitude of the externality effect. Results indicate the effect of churches on sales price is negative up to approximately 850 feet. The authors suggest that empirical evidence such as this will inform both public and private parties involved in land use decisions relating to neighborhood churches.     

Mortgage credit availability in low- and moderate-income minority neighborhoods: Are information externalities critical?

This study conducts a cross-sectional analysis of U.S. metropolitan counties to inquire into the factors affecting white and minority mortgage loan approval rates during 1990–1991. In particular, evidence is sought on whether minority loan applicants are denied credit more frequently than white applicants because of information externalities. Within each county, all predominantly minority, low- or moderate-income census tracts are groupted together, and then regression equations are estimated across counties and tract groupings. Separate approval rate equations are estimated for conventional and federally insured (FHA or VA) home purchase loans. In addition, a regression equation for the percentage of applicants applying for federally insured loans is estimated.Both approval rate regressions indicate that across white tract groupings, the depth of the housing market (the number of sales of owner-occupied units during 1989) has a positive and statistically significant effect on the loan approval rate, consistent with the view that information externalities affect mortgage loan evaluations. However, this relationship appears not to hold across minority tract groupings.     

Fee Speech: Signaling, Risk-Sharing, and the Impact of Fee Structures on Investor Welfare

The fee structure used to compensate investment advisers iscentral to the study of fund design, and affects investor welfarein at least three ways: (i) by influencing the portfolio-selectionincentives of the adviser, (ii) by affecting risk-sharing betweenadviser and investor, and (iii) through its use as a signalof quality by superior investment advisers. In this paper, wedescribe a model in which all of these features are present,and use it to compare two popular and contrasting forms of feecontracts, the "fulcrum " and the "incentive " types, from thestandpoint of investor welfare. While the former has some undeniablyattractive features (that have, in particular, been used byregulators to justify its mandatory use in a mutual fund context),we find surprisingly that it is the latter that is often moreattractive from the standpoint of investor welfare. Our modelis a flexible one; our conclusions are shown to be robust tomany extensions of interest. The results are also extended toconsider unrestricted fee structures and competitive marketsfor fund managers.