THE INTERACTION OF MONETARY POLICY AND STOCK RETURNS

The “irrational exuberance” of the stock market in the late 1990s led to a discussion of the appropriate policy response by monetary authorities. Any response would be contingent on the stock market reaction to policy shocks. In this study, I employ a structural vector autoregression to estimate the response of the stock market returns to innovations in the federal funds rate. The role of the stock market in the Federal Reserve policy rule can also be examined empirically.     

Forward exchange rates in general equilibrium

This paper develops a two-country, overlapping-generations model of an economy with a forward market in foreign exchange. The equilibrium forward rate exhibits the conventional decomposition into the expected future spot rate, a convexity term and a risk premium. Unlike partial equilibrium models, however, the model expresses these terms as functions of the primitive structural parameters of the economy. It thus provides insights into the structure of the premium which may facilitate interpretation of empirical studies of the forward markets. In particular, it suggests that time-varying risk premia may arise from changes in the distribution of wealth between countries over time.     

Results on the bias and inconsistency of ordinary least squares for the linear probability model

This note formalizes bias and inconsistency results for ordinary least squares (OLS) on the linear probability model and provides sufficient conditions for unbiasedness and consistency to hold. The conditions suggest that a “trimming estimator” may reduce OLS bias.     

The economics term paper as an effective teaching tool: Another approach

Summary and conclusion Combining the term paper with the format of a professional conference session provided a learning experience with a lasting positive impact. Students' role playing as chairperson, presenters, and discussants helped to enhance the learning process. Students were motivated go the extra mile not only for peer approval but also because of the impact on their final grade. This approach also helped to develop their oral and written communications skills. These skills are equally relevant for students planning academic and business careers.The presenter-discussant format encouraged critical thinking and provided students with immediate feedback on the success of their efforts. Students who have experienced the process are more knowledgeable about their topic. Most importantly, they are better prepared to succeed at future research projects on other topics.     

Manufacturers need to show greater commitment to customer service

In order to improve their competitiveness, firms are being advised to be more responsive to customer needs, and there is evidence that customer service is becoming one of the key management issues of the 1990s. This article examines what manufacturing companies in the U. K. are doing in terms of customer service compared with managerial guidelines in the literature. The key concepts that have been advocated to make organizations more responsive and customer-driven are identified, and the extent to which this advice is followed is evaluated by conducting an empirical study of manufacturing companies. This comparison between what is preached in the literature and what is practiced by managers suggests that although managers may pay lip service to customers, their actions fall a long way short of what is required to be a customer-driven firm. The managerial implications are discussed.     

Tariff protection and workforce gender: Evidence from U.S. manufacturing industries

A data set of 266 four-digit SIC U.S. manufacturing industries is used to examine the relationship between tariff protection and workforce gender. The paper shows that industries with a relatively large proportion of women are more likely to be protected by U.S. tariff policy, even when factors such as wages and human capital are controlled. Furthermore, this result is robust in that it is not driven by any particular industry or industries.     

Consumer information cues in television advertising: A cross country analysis

This paper compares the number of consumer information cues found in television advertisements in three countries: Australia, Ecuador, and the United States. Earlier studies conducted by Resnick and Stern in the United States and Dowling in Australia were replicated in Ecuador. Content analysis of 108 Ecuadorian television advertisements evaluated the number and types of information cues in each commercial. Results indicate that a much greater proportion of Ecuadorian television commercials contain consumer information cues than those broadcast in the other two countries. The explanation suggested for this observation is that Ecuador, due to its level of economic development, has many more products in the introductory stages of the product life cycle. This situation, in turn, requires more extensive communication of consumer information to market the products effectively. This finding implies an additional dimension, information content level, which must be considered when adapting international campaigns to conditions in developing countries.     

GAINS TO BIDDER FIRMS IN CASH AND SECURITIES TRANSACTIONS

This paper presents empirical test results of alternative hypotheses regarding differences in returns to shareholders of bidding firms that choose different payment methods (cash or securities). The evidence is consistent with the payment method signaling hypothesis, which asserts that when management of the bidding firm believes its own stock to be overvalued (undervalued), securities (cash) will be the preferred payment method. The results are not consistent with either the overpayment hypothesis or the present value/hubris hypothesis. The findings also explain the conflicting results reported in prior work on gains to bidding firms.     

THE RELATIONSHIP BETWEEN FINANCIAL PERFORMANCE AND STOCK MARKET BASED MEASURES OF CORPORATE DIVERSIFICATION

This study examines the relationship between corporate diversification and financial performance. The use of a stock market based measure of diversification allowed a much larger database than in previous studies and overcame the subjective nature of measuring internal diversification. Because previous researchers found that firm size affected performance, size was controlled in this analysis. The authors conclude that there is no statistically significant relationship between the degree of internal diversification and financial performance.