EARLY EXERCISE OF AMERICAN INDEX OPTIONS

We show that exercise of American call options on stock indexes frequently occurs before expiration and attribute this early exercise to the “wild card” option that results from the cash settlement exercise process. The wild card represents an “implied option” to sell the index option at the fixed settlement price; it is therefore a put option on the index call option. We derive a simple one-period valuation model using compound option pricing. Analysis of observed early exercise demonstrates that the wild card feature is a factor influencing early exercise of index options.     

Tax and Liquidity Effects in Pricing Government Bonds

Daily data from interdealer government bond brokers are examined for tax and liquidity effects. We use two approaches to create cash flow matching portfolios of similar securities and look for pricing discrepancies associated with liquidity or tax effects. We also look for the presence of tax and liquidity effects by including a liquidity term when fitting a cubic spline to the after-tax yield curve. We find evidence of tax timing options and liquidity effects. However, the effects are much smaller than previously reported and the effects of liquidity are primarily due to high volume bonds with long maturities.     

An analysis of the role of international capital markets in providing funds to developing countries

Zusammenfassung Eine Analyse der Bedeutung der internationalen Kapitalm?rkte für die Versorgung der Entwicklungsl?nder mit Kapital. — Es besteht ein dauernder und wachsender Bedarf der Entwicklungsl?nder an ausl?ndischem Kapital. Bemühungen, die Wirtschaftshilfe zu erh?hen, waren in einer Reihe von Geberl?ndern erfolgreich, aber einzelne gr?\ere L?nder haben die Hilfe vor kurzem eingeschr?nkt und sind mit einer sehr eingehenden und nicht sehr vielversprechenden überprüfung ihrer Hilfsprogramme besch?ftigt. Daher verringern sich die Aussichten auf eine Deckung des Bedarfs durch ausl?ndische Regierungshilfe, w?hrend der Mangel zunimmt. Die sechziger Jahre brachten eine Neubelebung der internationalen Kapital-m?rkte. Deshalb haben einige Beobachter die M?glichkeit diskutiert, da\ Entwicklungsl?nder in Zukunft in der Lage sein k?nnten, sich ausl?ndisches Kapital durch die Ausgabe internationaler Anleihen zu beschaffen. In der vorliegenden Abhandlung wird versucht, diese neue Kapitalbeschaffungsm?glichkeit für Entwicklungsl?nder zu beschreiben und in ihrer Gr?\enordnung abzusch?tzen. Der erste Abschnitt gibt einen historischen überblick. Die Gr?\e, die Struktur und der Verfall der internationalen Kapitalm?rkte in den zwanziger und drei\iger Jahren wird er?rtert, wobei besonderer Nachdruck auf die Erfahrungen der Entwicklungsl?nder gelegt wird. Der zweite Abschnitt beschreibt die Wiederbelebung und den Aufschwung der internationalen Kapitalm?rkte in den sechziger Jahren und die fortdauernden Hindernisse gegen diese Art der Kapitalbeschaffung für Entwicklungsl?nder. Das Schlu\kapitel analysiert die Ma\nahmen zur Verbesserung der Struktur und Leistungsf?higkeit der internationalen Kapitalm?rkte und gibt einen überblick über die M?glichkeiten, den Zugang von Entwicklungsl?ndern zur Kapitaleinfuhr zu erleichtern.

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Résumé Une analyse du r?le que jouent les marchés internationaux du capital dans l’approvisionnement des pays à développer. — Les pays à développer ont un besoin continu et croissant de capitaux étrangers. Un certain nombre de pays ont su mener à bien leurs efforts pour augmenter l’aide aux pays à développer, mais plusieurs grands pays ont, récemment, réduit leur aide et sont en train de réévaluer leurs programmes considérablement et d’une manière qui ne promet pas beaucoup. Ainsi, pendant que les besoins augmentent, les chances d’y pourvoir au moyen d’aides gouvernementales extérieures diminuent. Pendant les 1960, on a vu une reprise des marchés internationaux du capital. Certains observateurs de ce développement prétendent que les pays à développer pourraient désormais profiter des émissions internationales d’obligations pour se procurer du capital étranger. L’article que voici se propose de décrire et d’évaluer cette nouvelle source potentielle de capitaux pour le développement économique. La première section de l’article donne un aper?u historique. L’étendue, la nature et le déclin des marchés internationaux du capital de 1920 à 1940 sont examinés, tout en soulignant les expériences des pays à développer. La seconde section est consacrée à la reprise et l’accroissement des marchés internationaux du capital pendant les 1960, ainsi qu’àl’impossibilité de se servir de cette source de capital où se trouvaient les pays à développer pendant tout ce temps. La dernière section analyse les moyens d’améliorer la structure et le fonctionnement des marchés internationaux du capital afin d’y faciliter l’accès aux pays à développer.

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Resumen Un análisis sobre la importancia de los mercados internacionales de capital para la aportación de recursos internacionales a los países en desarrollo. — Los países en vía de desarrollo necesitan permanentemente y en cuantía creciente recursos internacionales para financiar sus planes de desarrollo. El empe?o por aumentar el volumen de los recursos aportados por los países desarrollados ha tenido éxito en una serie de casos; pero sucede que varios de los países donantes clave o bien han reducido recientemente sus aportaciones, o bien están pasando revista a sus programas de ayuda. De ahí que las perspectivas de poder cubrir las necesidades de divisas por medio de recursos públicos externos no sean muy halagüe?as. Como en los a?os sesenta los mercados internacionales de capital experimentaron una reactivación, algunos observadores han discutido la posibilidad de que en el futuro los países en via de desarrollo movilicen recursos externos directamente, mediante la negociación de empréstitos internacionales. En el presente trabajo los autores intentan analizar este método de obtención de recursos externos y estimar su importancia cuantitativa. El primer párrafo consiste en un repaso histórico. Se estudia en él la amplitud, la estructura y el deterioro de los mercados internacionales de capital en los a?os veinte y treinta, prestando especial atención a las experiencias hechas por los países en vías de desarrollo. En la segunda parte los autores describen la reactivación y el auge que experimentaron los mercados internacionales de capital y los obstáculos contínuos con que se encontraron los países en vía de desarrollo al querer hacer uso de esta fuente de financiación interna. En la sección final, se analizan las medidas necesarias para mejorar la estructura y capacidad de los mercados internacionales de capital y se esbozan las posibilidades de facilitar a los países en vía de desarrollo el acceso a los mercados internacionales de capital.

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Riassunto Un’analisi del signincato dei mercati internazionali dei capitali per l’approvigionamento di capitali dei Paesi in sviluppo. — Da parte dei Paesi in sviluppo esiste un continuo e crescente bisogno di capitale straniero. Sforzi per aumentare gli aiuti economici furono coronati da successo in una serie di Paesi fornitori, ma singoli più grandi Paesi hanno di recente ridotto gli aiuti e sono impegnati in un riesame minuzioso ma non molto promettente dei loro programmi di aiuto. Perciò si riducono le speranze per una copertura del bisogno per mezzo di aiuti di governi stranieri, mentre la penuria aumenta. Gli anni sessanta portarono ad una rianimazione dei mercati internazionali dei capitali. Per questo alcuni osservatori hanno discusso la possibilità che, in futuro, Paesi in sviluppo potrebbero essere in grado di procurarsi capitale straniero mediante l’emissione di prestiti internazionali. Nel presente studio si tenta di descrivere questa nuova possibilità di approvigionamento di capitali per i Paesi in sviluppo e di valutarla nella sua portata. Il primo capitolo offre un quadro storico. Sono esaminate la grandezza, la struttura e la decadenza dei mercati internazionali dei capitali negli anni venti e trenta, laddove spéciale risalto è posto alle esperienze dei Paesi in sviluppo. Il secondo capitolo descrive la rianimazione e l’impulso dei mercati internazionali dei capitali negli anni sessanta e i continui ostacoli a questa forma dell’approvigionamento di capitali per i Paesi in sviluppo. Il capitolo finale analizza le misure per il miglioramento della struttura ed efficienza di rendimento dei mercati internazionali dei capitali e dà uno sguardo sintetico sulle possibilità di facilitare l’accesso di Paesi in sviluppo all’importazione di capitali.

     

Editorial

This paper reports the results of 16 market experiments designed to produce measures of the effects of nonresidential land uses on the prices of nearby dwellings. Each experiment consists of a sample of home sales in a homogeneous neighborhood located near a single nonresidential land use, e.g., industry, commercial, high-density dwellings, and highways. The data consist of price, physical characteristics of the dwelling, distance from the nonresidential use, and the date of sale for each transaction. Hedonic price indices are estimated and the significance of the distance effects assessed. No systematic relationship between nonresidential land use per se and housing prices is found.     

EDUCATION VOUCHERS IN PRINCIPLE AND PRACTICE: A SURVEY

An education voucher system exists when governments make paymentsto families that enable their children to enter public or privateschools of their choice. The tax-funded payments can be madedirectly to parents or indirectly to the selected schools; theirpurpose is to increase parental choice, to promote school competition,and to allow low-income families access to private schools.Some opponents predict that vouchers will destroy the publicsystem, aggravate poverty, and foster segregation. Others fearthat voucher-receiving independent schools will be regulatedout of recognition. The main purpose of this article is to examine the recent emergenceof voucher systems as an interesting phenomenon in its own right.The evidence summarized relates to voucher systems operatingin twenty countries, provinces, and states. The typical "funds-follow-the-child"voucher system, in which governments subsidize "schools of choice"in strict proportion to enrollment, appears to be the favoriteform. This type of voucher has been adopted by developing countries—notablyBangladesh, Belize, Chile, Colombia, Guatemala, and Lesotho—aswell as by industrial countries such as Poland, Sweden, theUnited Kingdom, and the United States. Much of the recordedexperience with such programs is pertinent to the longstandingtheoretical debates on the desirability of voucher systems.      

The influence of business strategy on annual report readability

Concerns about the complexity of firm disclosures have prompted regulators to initiate projects to improve the readability of annual reports. We investigate business strategy as a determinant of annual report readability. As business strategy fundamentally determines a firm’s product and market domain, technology, and organizational structure, it influences a firm’s operating complexity, environmental uncertainty and information asymmetry. Consequently, business strategy frames the level, wording, and complexity of disclosures. We capture a firm’s business strategy based on the Miles and Snow (1978) strategic typology and measure 10-K readability with Li’s (2008) Fog index. We find that firms pursuing an innovation-oriented prospector strategy have less readable 10-Ks relative to firms pursuing an efficiency-oriented defender strategy. We also find that prospectors display more negative and uncertainty tones while defenders exhibit more litigious tone in their 10-Ks. Our study provides useful insights to policy makers as it suggests that efforts to improve annual report readability may be limited for some firms given that business strategy is a fundamental determinant of readability and pronouncements accommodating different strategic orientations are not feasible.