THE MARKET REACTION TO THE 1986 TAX OVERHAUL: A STUDY OF THE CAPITAL GAIN TAX CHANGE

The Tax Reform Act of 1986 (TRA) eliminated the favorable tax treatment on long-term capital gains in the US. Using a standard event study… CONTENTS AND ABSTRACTS 111 methodology, this paper examines daily stock return reactions to the tax overhaul. The results show that high dividend yield stocks earned a significant positive abnormal return and low yield stocks a significant negative return during the legislation period. This finding is consistent with the notion that the TRA made the market valuation of stocks shift in favor of high yield stocks.     

TAX AND SAVINGS IMPLICATIONS OF THE CANADIAN REGISTERED RETIREMENT SAVINGS PLANS

This paper shows that the net effective tax rate on the Registered Retirement Savings Plans (RRSPs) in Canada has not been inflation non-neutral because of the combination of the non-neutrality of various sources of retirement income and the progressivity of the personal tax system. The paper also shows that although the RRSPs provide some tax arbitrage opportunities, these opportunities in Canada are limited due to the non-tax-deductibility of interest on mortgage and consumer credits. Finally, on theoretical grounds, the paper argues that the RRSPs may not have provided any incentives for personal savings in Canada.     

AN INVESTIGATION INTO THE ROLE OF THE MARKET PORTFOLIO IN THE ARBITRAGE PRICING THEORY

This paper investigates the role of the market portfolio in the arbitrage pricing theory (APT). We show that if the multifactor return-generating process put forth in the APT is valid, then unexpected deviations in the return on the market portfolio must be completely explained by unexpected deviations in the underlying return-generating factors. As well, market betas are developed as a combination of return-generating factor sensitivity coefficients. These results lead us to conclude that an empirically significant “market factor’ is evidence of omitted return-generating factors, rather than evidence that the market is a factor. Finally, results obtained when market betas are regressed against factor sensitivity coefficients are consistent with these insights. The results suggest that there are at least three return-generating factors. This evidence does not rely on ex post pricing of estimated factors.     

BANK LOAN SALES: A NEW LOOK AT THE MOTIVATIONS FOR SECONDARY MARKET ACTIVITY

Bank lending traditionally involves the extension of credit that is held by the originating bank until maturity. Loan sales allow banks to deviate from this pattern by transferring loans in part or in their entirety from their own books to those of another institution. I use a new methodology to test the validity of two hypotheses regarding banks' motivations for selling and buying loans: (1) the comparative advantage hypothesis, that banks with a comparative advantage in originating loans sell and those with a comparative advantage in funding loans buy; and (2) the diversification hypothesis, that banks lacking the ability to diversify internally use loan sales and purchases to achieve diversification. I also address the possibility that information asymmetries may increase the cost of participating in secondary markets. Particular attention is paid to the importance of affiliate relationships in overcoming informational barriers to participation. The empirical evidence presented here helps clarify the benefits of an active secondary loan market and generates predictions regarding the future of that market in a world of rapid consolidation and disappearing barriers to geographical expansion.     

FUNCTIONAL FORMS OF THE CAPITAL ASSET PRICING MODEL UNDER DIFFERENT MARKET RISK REGIMES

This paper demonstrates that, given the assumption that asset returns are generated by the linear market model, the same functional form for the capital asset pricing model can be derived via the simpler linear programming approach for the riskaverse, risk-neutral, and risk-loving market regimes.     

关于利率市场化进程中人民币贷款定价的探讨

自1996年人民币存贷款八次降息以来,商业银行的利差空间逐步缩小,与此同时,优质企业对贷款下浮的需求越来越强烈,商业银行从风险管理和盈利考虑,探讨贷款定价与利率市场化问题.如何根据本行实际情况进行合理的贷款定价成为营销中面临的具体问题.本文通过实证分析银行贷款利率下浮情况及其对收益变动的影响,提出了贷款定价的设想:首先进行整体贷款定价,明确利率浮动范围;然后进行单笔贷款定价,有效控制浮动利率的贷款结构,将综合贷款利率控制在整体贷款目标利率范围内.另外,作者还对如何通过定量指标和定性指标相结合的标准化利率浮动评分体系确定单笔贷款定价进行了探讨.