Testing the CAPM revisited

This paper re-examines the tests of the Sharpe–Lintner Capital Asset Pricing Model (CAPM). The null that the CAPM intercepts are zero is tested for ten size-based stock portfolios and for twenty five book-to-market sorted portfolios using five-year, ten-year and longer sub-periods during 1965–2004. The paper shows that the evidence for rejecting the CAPM on statistical grounds is weaker than the consensus view suggests, and highlights the pitfalls of testing multiple hypotheses with the conventional heteroskedasticity and autocorrelation robust (HAR) test with asymptotic P-values. The conventional test rejects the null for almost all sub-periods, which is consistent with the evidence in the literature. By contrast, the null is not rejected for most of the sub-periods by the new HAR tests developed by Kiefer et al. (2000), Kiefer and Vogelsang (2005), and Sun et al. (2008).     

Costs of financial instability, household-sector balance sheets and consumption

Extant work on costs of financial instability focuses on fiscal costs and declines in aggregate GDP following banking crises. We estimate effects of banking and currency crises on consumption in 19 OECD countries, showing consumption plays an important role in the adjustment following a crisis, and effects are not captured solely by the impact of crises on standard consumption determinants, income and wealth. Additional effects, attributable to factors such as time-varying confidence, uncertainty and credit rationing, are aggravated by high and rising leverage, despite financial liberalisation easing liquidity constraints. High leverage implies that banking crises taking place now could have greater incidence than in the past.     

Non-audit services provided to audit clients,independence of mind and independence in appearance: latest evidence from large UK listed companies

This paper investigates whether the provision of non-audit services (NAS) to audit clients impairs auditor independence of mind and independence in appearance. The main contributions of this paper are in terms of its timeliness with respect to regulatory changes, the simultaneous examination of both forms of auditor independence and the methodological innovation whereby it uses a variable derived from the level of abnormal audit fees as a moderating variable in order to capture the direct impact of the NAS fee level on auditor independence as well as how its influence is moderated by the level of unexpected audit fees. Our results indicate that auditor independence of mind is compromised by the size of NAS fees, particularly for clients who pay below the level of expected audit fee. The stock market perceives that auditor independence is compromised by NAS fees but, at the same time, additional tests indicate that there are benefits that accrue from NAS and, in particular, the relation between return and non-discretionary net income is increasing in NAS fees. The balance of evidence suggests that the European Union is correct in undertaking some reform of the auditing market.     

Who Receives Farm Government Payments?

If we do not systematically attempt to collect data and assess distributional impacts, we shall always be surprised by the many unintended consequences of our public decisions. (Bonnen 1969, p. 447) Direct government payments to farmers have tripled in the last half of the 1980s. Market price support programs (for example, the Western Grain Transportation Act, among others) and supply management regulation continue to be topics of debate among policy analysts. Certainly the debate has become intensified by the discussions surrounding the Canada-U.S. Trade Agreement and the Uruguay Round of talks under the General Agreement on Tariffs and Trade. When all census farms are distributed across gross sales classes, the “selected” programs included in this study tend to be more concentrated among the mid-sized farms than are aggregate gross sales. However, if one considers Prairie grain farms distributed across farm size classes measured in terms of grain acres, gross sales, net farm income (specifically, NCFIWF) and the net “benefits” of “selected” government programs are similarly concentrated. For example, Prairie farms with 320 to 599 acres of grain report 24% to 26% of each of these four items.²⁶ The “selected” programs included in this study tend to pay about the same size of payout per farm household, regardless of the size of household income. We obtain this result because farm size in terms of gross farm sales tends to be the same, regardless of the size of household total net income. Across the spectrum of farm financial stability classes, the net “benefit” of the “selected” programs in this study tend to be distributed similarly to gross farm sales. The results depend on exactly how one implements the classification but more than two thirds of gross sales and more than two thirds of net “benefits” of “selected” programs accrue to farms with a higher level of financial stability. Across the spectrum of rates of return on equity as an indicator of farm efficiency, about one third of gross sales and one third of net “benefits” of “ selected” programs accrue to farms with a rate of return on equity of 10% or more. The potential impact of deregulation of supply management depends on one‘ s assumption. Three scenarios are presented here and, in each case, both “winners” and “losers” are identified. Between 4% and 37% of households on farms with quota would move from above to below the Statistics Canada low-income cutoff (LICO), depending on the scenario under consideration. However, in each seen-ario, there are cases of households moving from below to above LICO as a result of our calculated impact of deregulating supply management. This paper takes its lead from Bonnen's observation about “unintended consequences.” We do not offer an “evaluation” of any government program. Our sole objective is to illustrate “distributional impacts” so that all individuals in the policy debate may speak from an informed perspective. This paper represents an initial step in developing an “informed perspective.” As the first note to this paper indicates, an important ancillary objective is to illustrate the potential of Statistics Canada databases to provide tabulations to answer specific Questions posed by researchers and policy analysts.     

棉花市场近期展望

今年6月27日至29日,由中国棉花协会、农业部农村经济研究中心、全国棉花交易市场共同主办的"2007’中国国际棉花会议"在乌鲁木齐召开,与会政府官员、联合国粮农组织官员,以及专家、学者就"入世五年的中国棉业与全球未来市场"主题进行了热烈讨论。现将部分官员、专家、学者的发言摘要刊登如下:     

Introduction to development theory

This article introduces the symposium on economic development theory.     

Inflation and its impact on investment decisions in the hospitality industry

The impact of inflation is more severe in the hospitality industry than in some others because of its high level of capital investment. Proper evaluation of investment returns can only be made if inflation is considered in the evaluation process. This article presents an approach based on the net present value method of investment evaluation which incorporates the anticipated level of inflation and provides for the uncertainties of future cash flows.