Verdoorn's law and increasing returns to scale in the UK regions, 1968-91: some new estimates based on the cointegration approach

The Johansen approach to estimating long-run cointegration vectorsis used with 1968–91 UK region by industry data to estimatereturns to scale. Thus, this approach has the advantages ofincluding a measure of capital, it overcomes the simultaneityproblems associated with the single-equation Verdoom law, andit involves estimating a correctly specified dynamic model inwhich is embedded the long-run solution(s). The results indicatethat there is substantial evidence that increasing returns arethe norm for the majority of manufacturing industries in Britishregions.     

Ethics and entrepreneurship

As the study of entrepreneurship and the study of business ethics become increasingly established, the intersection of entrepreneurship and ethics is receiving increasing scholarly attention. In this paper, we review the research connecting ethics and entrepreneurship, classifying the literature into three broad themes; we also identify and integrate the key themes that emerge, and we offer suggestions for future research. We conclude by introducing the articles in this special issue.     

A cost-benefit analysis of landmine clearance in Mozambique

After reviewing the nature and extent of the landmine problem in Mozambique, this article applies cost-benefit analysis to landmine clearance in that country. The main benefits of clearance are saved lives, injuries and medical costs and the agricultural output that is not lost if landmines are cleared. A very large negative net present value was estimated, a result explicable by the high costs of clearance, the relatively small number of people killed or injured by landmines and the low value of agricultural productivity per hectare. The article concludes with a discussion of the role of the economist in analysing such issues and suggests some alternative areas in which financial resources would provide a greater positive impact on the welfare of Mozambicans.     

RISK-ADJUSTED DISCOUNT RATES-EXTENSIONS FROM THE AVERAGE-RISK CASE

This paper provides an approach for developing risk-adjusted discount rates that follows naturally from the standard presentation of the weighted average cost of capital. In addition to examining the implied assumptions about the valuation of corporate debt, the paper shows the pedagogic advantages of the proposed approach.     

A COMPARISON OF SOME INTRODUCTORY AND UNDERGRADUATE ECONOMETRIC TEXTBOOKS

Books reviewed in this article:
William H. Greene (1993) Econometric Analysis (Second Edition)
William E. Griffiths, R. Carter Hill and George G. Judge (1993) Learning and Practicing Econometrics
George G. Judge, R. Carter Hill, William E. Griffiths, Helmut Lütkepohl and Tsoung-Chao Lee (1988) Introduction to the Theory and Practice of Econometrics (Second Edition)
G. S. Maddala (1992) Introduction to the Theory and Practice of Econometrics (Second Edition)     

Memory for implied versus directly stated advertising claims

An experiment tested young adults' memory for advertising slogans that either stated a strong claim directly or only implied the same claim by stating it in a much weaker form. Several advertising slogans were inserted into a story. There were two versions of each slogan, asserted and implied. The asserted version made a claim very directly and strongly (e.g.Alka-Seltzer stops common aches). The implied version only suggested the stronger claim (e.g. Alka-Seltzer helps lessen common aches ). Subjects read the story, which contained one of the two versions of each ad. After subjects finished reading the story, they were asked to recall all the brands and products. Then they performed a multiple choice task testing memory for the content of the advertising claims. While results showed no difference on the recall task, subjects on the multiple choice task frequently falsely recognized implied claims as asserted but seldom the reverse. Although they correctly recognized more asserted than implied claims, they were more confident in their correct memory for the implied claims. Results were applied to the problem of deceptive advertising.     

An Analysis of Contrarian Investment Strategies in the UK

The performance of contrarian, or value strategies – those that invest in stocks that have low market value relative to a measure of their fundamentals – continues to attract attention from researchers and practitioners alike. While there is much extant evidence on the profitability of value strategies, however, most of this evidence pertains to the US. In this paper, we provide a detailed characterisation of value strategies using data on UK stocks for the period 1975 to 1998. We first undertake simple one-way and two-way classifications of stocks in which value is defined using both past performance and expected future performance. Using sales growth as a proxy for past performance and book-to-market, earnings yield and cash flow yield as measures of expected future performance, we find that that stocks that have both poor past performance and low expected future performance have significantly higher returns than those that have either good past performance or good expected future performance. Allowing for size effects in returns reduces the value premium but it nevertheless remains significant. We go on to explore whether the profitability of value strategies in the UK can be explained using the three factor model of Fama and French (1996). Broadly consistent with the results for the US, we find that using the one-way classification the excess returns to almost all value strategies can be explained by their loading on the market, book-to-market and size factors. However, in contrast with the US, using the two-way classification there are excess returns to value strategies based on book-to-market and sales growth, even after controlling for their loading on the market, book-to-market and size factors.