Interest rate,size and book-to-market effects in Australian financial firms

The Fama–French three-factor model (1993) has been extensively used to study the pricing of nonfinancial stocks. This study provides the first examination of the pricing of Australian financial stocks using the Fama–French framework. The four-factor model (market, size, book-to-market and momentum) augmented with the level, slope and curvature of the interest rate term structure is used to examine the pricing of Australian financial stocks. The interest rate factors have not been previously considered for pricing Australian stocks within the Fama–French framework. Consistent with US evidence, we use a system-based estimation to show that the size and book-to-market factors are not priced in the cross section of the equity returns of Australian financial stocks. Momentum and term spread are priced in the equity returns of both financial and nonfinancial stocks. These findings are robust to the inclusion of control variables such as default spread, the inflation rate and a dummy variable for the global financial crisis.     

Does bank efficiency matter? Market value relevance of bank efficiency in Australia

The stochastic frontier analysis is employed to investigate efficiency of publicly listed Australian banks over the period 1985 to 2008. The results suggest that technical, cost and profit efficiency of Australian banks have improved over time. Large banks have attained a higher level of cost efficiency but a lower level of technical efficiency compared to small banks. No substantial difference between the two groups is found in terms of profit efficiency. A panel regression of bank stock return on bank efficiency suggests that an improvement in technical, cost or profit efficiency contributes to the market value of a bank. Thus, the shareholder wealth maximization goal is aligned with the goal of maximizing bank efficiency in the Australian context.     

Bread and Social Justice: Measurement of Social Welfare and Inequality Using Anthropometrics

We address the question of the measurement of health achievement and inequality in the context of variables exhibiting an inverted-U relation with health and well-being. The chosen approach is to measure separately achievement and inequality in the health increasing range of the variable, from a lower survival bound a to an optimum value m, and in the health decreasing range from m to an upper survival bound b. Because in the health decreasing range, the equally distributed equivalent value associated with a distribution is decreasing in progressive transfers, the paper introduces appropriate relative and absolute achievement and inequality indices to be used for variables exhibiting a negative association with well-being. We then discuss questions pertaining to consistent measurement across health attainments and shortfalls, as well as the ordering of distributions exhibiting an inverted-U relation with well-being. An illustration of the methodology is provided using a group of five Arab countries.     

Decomposition of bivariate inequality indices by attributes

We provide, for the class of relative bidimensional inequality indices, a decomposition of inequality into two univariate Atkinson–Kolm–Sen indices and a third statistic which depends on the joint distribution of resources.     

Price Discovery Between Informationally Linked Markets During Different Trading Phases

The dynamic nature of the price information transfer when stock and futures markets switch between different price trading phases is examined. This is undertaken by decomposing Australian stock indexes and share price index futures contract data into bear- and bull-market phases and analyzing the change in the power of the bidirectional information feedback between the futures market and small, medium, and large stocks. Results support the hypothesis that the nature of the price-discovery process varies with the trading phase. In particular, during the bull phase small stocks show a marked increase in price exogeneity and futures prices contain relatively less price-sensitive fundamental information. We argue that in bull phases, futures trading becomes increasingly associated with noninformation trading such as realizing paper profits, portfolio rebalancing, and increased noise trading.     

Channels of risk-sharing among Canadian provinces: 1961–2006

This article incorporates recent developments in the literature to quantify the amount of interprovincial risk-sharing in Canada. We find that 29% of shocks to gross provincial product are smoothed by capital markets, 27% are smoothed by the federal tax-transfer systems, and about 24% are smoothed by credit markets. The remaining 20% are not smoothed. Our results bring to light the critical role that Alberta plays in trading-off credit market smoothing for more capital market risk-sharing with the rest of Canada. Our pairwise risk-sharing analysis has brought up some interesting questions and arguments that are often neglected in discussions of regional risk-sharing. For example, one aspect of the pairwise analysis sheds light on the assessment of the economic effects of Quebec separation.     

The dynamics of fertility,family planning and female education in a developing economy

Unlike most empirical works on fertility analysis, this study is the first attempt to analyse the dynamics of fertility and its determinants with a particular focus on the role played by female education and family planning programmes in the context of a traditional society. The analysis is based on the application of the following dynamic time-series techniques in a multivariate context: cointegration, vector error-correction modelling and variance decompositions. These ‘dynamic’ tools are recently developed and hitherto untried in fertility analysis in the context of a poor developing economy, such as India. The results based on the above most recently developed methodology, broadly indicate that in the complex dynamic interactions, the importance of conventional ‘structural’ hypothesis as a ‘Granger-causal’ factor in bringing fertility down in the longer term cannot be denied. However, overall, in the short to long term, the findings appear to be more consistent with the recent ‘ideational’ hypothesis (emphasizing the critical role played by the two policy variables in the analysis- i.e. changes in the female secondary enrolment ratios, and family planning programmes- to ensure ‘initial’ fertility decline) than with the conventional ‘structural’ hypothesis (emphasizing a significant socio-economic structural change as a pre-condition for ‘initial’ fertility decline).     

Income insurance and the determinants of income insurance via foreign asset revenues and foreign liability payments

We document that the net factor income smoothing channel in OECD countries is primarily driven by net financial asset income, while the other two sub‐components (net compensation of employees and net taxes on imports) turn out to be ineffective. Once factor income inflows are distinguished from outflows, empirical evidence suggests a non-significant effect of inflows in terms of income smoothing as opposed to a positive and significant role of factor income outflows. Factor income outflows also appear to be robust with respect to positive output shocks, while neither factor inflows nor factor outflows provide insurance against negative output shocks. In terms of the determinants of income smoothing, results indicate that an increase in foreign equity and debt liabilities positively affect the extent of smoothing via factor income outflows. Whereas, contrary to the current literature, an increase in foreign asset holding does not have a positive impact on smoothing via factor income inflows. European investors' tendency of allocating a sizeable portion of their assets within the Euro zone is shown to undermine income smoothing.     

Measuring persistence of U.S. city prices: new evidence from robust tests

This article revisits the empirical analysis in Cecchetti et al. (Int Econ Rev 43:1081–1099, 2002) involving long-span U.S. city prices, who estimated the persistence of U.S. price differentials to be around 9 years. After controlling for the structural breaks in the data, we find that U.S. city price level differentials are I(0) stationary processes with the median half-life of convergence ranged between 1.5 and 2.6 years, estimates that are in accordance with what should be expected from a highly integrated economy as the United States. Our results are also robust to a pairwise test of price level convergence.