‘The rules of the game’: London finance,Australia, and Canada,c.1900–14

It is often asserted that, between 1865 and 1914, economic dependence on British capital subjected settler societies to an unofficial imperialism wielded by the City of London. This article argues that both advocates and critics of such models, particularly in the recent controversy over ‘gentlemanly capitalism’, pay insufficient attention to the City itself. Using the Edwardian City's connections with Australia and Canada, it illustrates the range of financial intermediaries involved and explores their perceptions of political economy in these countries. It concludes that the City's influence (or ‘structural power’) was limited by its internal divisions and hazy conceptions of political economy.     

An Analysis of Divestiture Effects Resulting from Deregulation

Capital market data were used to examine the divestiture effects pertaining to deregulation, the dropping of antitrust charges, and the reversing of the co-insurance effect associated with the recent breakup of AT&T. The empirical results of the study indicate that significant economic events took place during the breakup process, which led to transfers of wealth from various parties to the securityholders of AT&T. The results also indicate that the buffering effect of regulation was reduced as AT&T went through the total deregulation process. This is in accordance with Peltzman's prediction.     

Model Comparison with Transaction Costs

Failing to account for transaction costs materially impacts inferences drawn when evaluating asset pricing models, biasing tests in favor of those employing high-cost factors. Ignoring transaction costs, Hou, Xue, and Zhang (2015, Review of Financial Studies, 28, 650–705) q-factor model and Barillas and Shanken (2018, The Journal of Finance, 73, 715–754) six-factor models have high maximum squared Sharpe ratios and small alphas across 205 anomalies. They do not, however, come close to spanning the achievable mean-variance efficient frontier. Accounting for transaction costs, the Fama and French (2015, Journal of Financial Economics, 116, 1–22; 2018, Journal of Financial Economics, 128, 234–252) five-factor model has a significantly higher squared Sharpe ratio than either of these alternative models, while variations employing cash profitability perform better still.