Seasonality in the Risk-Return Relationship: Some International Evidence

We report evidence of seasonality in the Fama and MacBeth estimate of the CAPM-based risk premium in four stock exchanges: the NYSE and the London, Paris, and Brussels exchanges. Specifically, we found that, in Belgium and France, risk premia are positive in January and negative the rest of the year. There is no January seasonal in the U.K. risk premium. Instead, we observed in this country a positive April seasonal and a negative average risk premium over the rest of the year. In the U.S., the pattern of risk-premium seasonality coincides with the pattern of stock-return seasonality. Both are positive and significant only in January. We also found that the January risk premium in the U.S. is significantly larger than those observed in the European markets. Interestingly, the reported patterns of risk-premium seasonality in European equity markets do not fully coincide with the observed patterns of stock-return seasonality in these markets. For example, in the U.K., average stock returns are significant and positive in January and April, whereas the market risk premium is significantly positive only in April. A possible interpretation of this phenomenon is presented in the paper.     

CAPITAL MOBILITY IN SUB-SAHARAN AFRICA: A PANEL DATA APPROACH

In this paper we are primarily concerned with assessing the degree of capital mobility in sub‐Saharan Africa. Using the methodology as proposed by Feldstein and Horioka (1980)—later termed the “Feldstein‐Horioka puzzle”—we test the hypothesis of perfect capital mobility against the alternative of imperfect capital mobility. Following Vamvakidis and Wacziarg (1998) and Isaksson (2000), provision is made in our model to show the dependency of the lesserdeveloped countries on international finance and aid and how a more open economy contributes towards improving the level of capital movement in these countries. We also assess the change in the degree of capital mobility over the time period in an effort to see whether institutional and political changes have been successful. We show that, compared to the region, South Africa is, to a large extent, more developed and should therefore play a leading role in the “African Renaissance”. Stationary panel data estimation techniques are applied to a sample of 36 sub‐Saharan African countries over the time period 1980–2000. The benefits of using one‐way error component models are derived from simultaneously employing time and cross‐section dimensions of the data, resulting in a substantial increase in the degrees of freedom. The fixed and random effects models enable us to acknowledge country heterogeneity within the panel, making provision for differences across countries like capital control policies, financial and capital market structures and exchange rate regimes.     

INCOME AND CONSUMPTION DISTRIBUTION TRENDS IN THE PHILIPPINES, 1950–70*

Unlike most developing countries, the Philippines has had several (four) reasonably comparable family income and expenditure surveys, covering a reasonable period of time (15 years). This study draws on those surveys and on wage data in an attempt to judge how, if at all, the distribution of income has been changing. The household survey data shows a declining share of both income and consumption for the top income groups; for the bottom quintile the share of recorded income fell while that of recorded consumption rose. When possible biases of the data are allowed for, it is hard to argue that either a narrowing or widening of income differentials occurred over these years. Real wages of a number of important occupations appear to have fallen, however. Only a partial reconciliation of the trends indicated by these wage series and the income trends for various occupational groups implicit in the household survey data was possible, indicating either data problems or the need for more subtle interpretations of the data. Since structural change in the labour force has been rapid (an increasing share being found in the high income occupations as time passed), declining wage rates for certain lower income groups cannot be taken to imply a general worsening of distribution. Our final conclusion is that distribution has probably changed little, and is about as likely to have changed one way as the other.