How Large Are Housing and Financial Wealth Effects? A New Approach

This paper presents a simple new method for measuring “wealth effects” on aggregate consumption. The method exploits the stickiness of consumption growth (sometimes interpreted as reflecting consumption “habits”) to distinguish between immediate and eventual wealth effects. In U.S. data, we estimate that the immediate (next quarter) marginal propensity to consume from a $1 change in housing wealth is about 2 cents, with a final eventual effect around 9 cents, substantially larger than the effect of shocks to financial wealth. We argue that our method is preferable to cointegration‐based approaches, because neither theory nor evidence supports faith in the existence of a stable cointegrating vector.     

Bank Information Monopolies and the Mix of Private and Public Debt Claims

This article examines the determinants of the mix of private and public debt using detailed information on the debt structure of 250 publicly traded corporations from 1980 through 1990. We find that the relationship between bank borrowing and the importance of growth opportunities depends on the number of banks the firm uses and whether the firm has public debt outstanding. For firms with a single bank relationship, the reliance on bank debt is negatively related to the importance of growth opportunities. In contrast, among firms borrowing from multiple banks, the relationship is positive.     

Australia and the Pacific Economy*

The industrialization and growth of East Asian countries has shifted the centre of world trade and economic activity towards the Pacific. There has already been a huge redirection of Australia's trade and external economic interests towards the region, based importantly on the emergence of Japan as a major economic power. Australia's future economic prospects will be significantly determined by how it manages its trade policy interests in the context of continuing East Asian industrialization. The most promising Australian trade policy approach is one which allies Australia's trading interests to those of East Asian countries in seeking to maintain an open non-discriminatory trade regime, supportive of the transformation of trade specialization necessary to the industrialization of resource-deficient countries, and which marries that objective to the liberalization of her own and Pacific country markets.     

THE EFFECTS OF STATUTORY RAPE LAWS ON NONMARITAL TEENAGE CHILDBEARING

Many policy makers view the enforcement of statutory rape laws as a way to reduce teenage childbirths. This article considers whether unmarried teenage girls covered by a state statutory rape law are less likely to give birth than girls who are not covered by a statutory rape law. The presence of statutory rape laws is negatively correlated with nonmarital birthrates for white females but is not a significant predictor for black or Hispanic females. In contrast, the enforcement of statutory rape laws has a deterrent effect on teen childbearing for blacks and Hispanics but not for whites. (JEL J13, K14 )     

Regulation and the Determination of Bank Capital Changes: A Note

The effectiveness of bank capital adequacy requirements is examined in this paper. Using empirical tests similar to those employed by Peltzman and Mingo, no significant relationship is found between changes in bank capital and the capital standards imposed by regulators. The findings conflict with those of previous studies. The conflict in findings, it is argued, results from the failure of previous studies to account for the effect of binding deposit rate ceilings.     

Investment Management and Risk Sharing with Multiple Managers

This paper addresses the investor's decision to employ multiple managers for the management of investment funds. Under conditions such that specialization of managers and diversification among managers are not motives for the use of multiple managers, the paper shows that risk sharing considerations may be sufficient. A model is developed in which the decision to use multiple managers is explicitly treated, and conditions are studied such that an increase or decrease in the number of managers would be desirable. Under some conditions, a multiple manager solution is preferred over a single manager solution.     

The Relation Between Common Stock Returns Trading Activity and Market Value

This study examines the relation between common stock returns, trading activity and market value. Our results indicate that although firm size and trading activity are highly correlated, differences in trading activity are not the underlying reason for the firm size anomaly, the finding of systematic differences in risk adjusted returns across stocks of firms of different size.     

Can Socialist Spaniards Ride Market Forces?

Spain's Socialist government looks set to inflict the kind of damage on its economy in its first few months of office that has taken President Mitterrand two years in France. Increasing liberalism following the removal of the Franco regime has been swept away by a welter of controls and state diktats, and the economic gains of the last few years look like vanishing.     

Consumer acceptance of fatty spreads

The effect of consumer trends on the purchase of reduced fat products in general and fatty spreads in particular are discussed. A variety of fatty spreads with fat levels ranging from 20 to 80% were assessed by cone penetration measurements and sensory assessments. The results indicated that butter had poor spreadability characteristics at 5° and 10°, while mechanically worked butter (spreadeasy butter) gave a significantly different texture profile, as measured by the Instron Model 1000. This butter type was assessed as being spreadable at 10° by the sensory panelists and by cone penetrometry. Comparable values of hardness were obtained using data obtained by cone penetrometry and texture profile analysis from the Instron. Low fat spreads (fat levels 25–39%) produced desirable spreadability characteristics using both objective and subjective methods of assessment. Sunflower oil-based spreads and very low fat spreads, i.e. ≦ 25% fat, were assessed as being soft and oily. The results overall indicated that the use of a cone penetrometer and the subsequent calculation of a yield value gave, using Haighton's seven-point scale, a good indication of spreadability characteristics.     

Anomalies in Security Returns and the Specification of the Market Model

We examine the hypothesis originally advanced by Roll 12 that observed anomalies in excess returns can be explained by misspecification of the market model used to estimate systematic risk. We find substantial misspecifications in the model systematically related to size and period of listing of the securities in question. There is some evidence that these misspecifications are associated with systemic biases in measured betas used to construct excess returns.