Coupon and tax effects on new and seasoned bond yields and the measurement of the cost of debt capital

A model of the tax structure of interest rates is developed and simple approximate expressions relating yield to coupon are derived. The effect on these simple expressions of alternative assumptions about holding period length, expectations of future interest rates, and other factors, is evaluated. It is shown that with recent U.S. yield averages the new-seasoned yield spread varies with the new-seasoned coupon spread as the theory prescribes. It is concluded that new issue yield averages should provide a more reliable measure of the cost of debt capital than is provided by seasoned yield averages.     

Sulla dominaza stocastical multivariata

Summary In this paper a sufficient condition for multivariate stochastic dominance is proposed. Such a condition is particularly intersesting in the bivariate case because of its simplicity. A numerical example is presented and worked out in detail.

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Lavoro eseguito nell'ambito del Contributo C.N.R. n. 84.00593.10     

Towards an understanding of the real effects and costs of inflation

Zusammenfassung Zum Verst?ndnis der realen Wirkungen und Kosten der Inflation. — Die traditionelle Ansicht, da\ eine Inflation, weil Geld neutral ist, keine nennenswerten realen Wirkungen hervorbringt, erweist sich nur für eine Volkswirtschaft als ann?hernd richtig, deren Regelungen vollst?ndig inflationssicher sind, d. h. für eine vollindexierte Wirtschaft. Die Realwirkungen erweisen sich aber als um so verbreiteter und schwererwiegend, je mehr bei wirtschaftlichen Regelungen Nominalwerte verwendet werden. Der Aufsatz untersucht nacheinander die Folgen von amtlichen Regelungen auf Nominalbasis (Steuersystem, Definition des steuerpflichtigen Einkommens, Buchführungsmethoden), von privaten Einrichtungen und übereinkünften auf Nominalbasis (Hypotheken, Rentenvertr?ge, Einkommensberechnungen), selbst für den Fall, da\ die Inflation vollst?ndig antizipiert wird bzw. wurde. Anschlie\end werden die Wirkungen einer nicht antizipierten Inflation geprüft, die in den bestehenden nominalen langfristigen Vertr?gen nicht berücksichtigt worden ist, und die Wirkungen einer Ungewissen zukünftigen Inflation. Soweit es m?glich ist, wird versucht, die sozialen Kosten von verschiedenen Realwirkungen abzusch?tzen, obwohl es zur Zeit nicht m?glich ist, die allgemeinen sozialen Kosten der Inflation zu ermitteln.

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Résumé Vers une compréhension des effets réels et des co?t d’inflation. — Nous démontrons que la vue traditionelle d’après laquelle l’inflation ne produit pas des effets réels appréciables à cause de la neutralité d’argent est valide pour une économie seulement dont les institutions sont complètement étanche à l’inflation, c’est-à-dire il s’agit d’une économie indexée. Mais nous démontrons que les effets réels deviennent plus et plus diffusés et sérieux comme les institutions de l’économie deviennent presque plus nominales. L’article examine succédamment les conséquences des institutions nominales de gouvernement (le système fiscal, la définition de revenu taxable, la procédure comptable); des institutions privées nominales et des conventions comptables (les contrats de hypothèque et d’annuité, le mesurage de revenu), même si l’inflation est, et a été complètement anticipée. En plus l’article examine les effets de l’inflation pas anticipée et pas incorporée dans les contrats nominaux existants à long terme, et de l’inflation future incertaine. S’il est possible, nous entreprenons l’effort de fixer les co?t sociaux des effets réels différents même bien qu’il ne soit pas possible au moment présent de fixer tous les co?t sociaux de l’inflation.

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Resumen Hacia el entendimiento de los verdaderos efectos y costos de la inflatión. — La visión tradicional que la inflatión no produce efectos reales apreciables debido a que el dinero es neutral, es solamente válida en forma aproximada para una economía cuyas instituciones están completamente a prueba de inflatión, p.ej. una economía completamente indexada. Pero se muestra que los verdaderos efectos se generalizarán más y más y serán más serios en la medida que las instituciones de la economía sean más cercanamente nominales. El artículo examina en forma sucesiva las consecuencias de instituciones gubernamentales nominales (sistema de impuestos, definitión del ingreso imponible, procedimientos contables); de instituciones privadas nominales y convenciones contables (hipotecas y contratos de renta anuales, medición del ingreso), incluso cuando la inflatión es y ha sido totalmente anticipada. Examina en seguida los efectos de inflatión no anticipados, que no han sido incoirporados dentro de los contratos de largo plazo existentes, y de inflatión futura incierta. En los casos que fue posible, se hizo un esfuerzo por determinar el costo social de varios efectos reales, aunque en este momento no es posible apreciar los costos sociales totales de la inflatión.

     

Technological regimes and demand structure in the evolution of the pharmaceutical industry

This paper examines how the nature of the technological regime governing innovative activities and the structure of demand interact in determining market structure, with specific reference to the pharmaceutical industry. The key question concerns the observation that—despite high degrees of R&D and marketing-intensity—concentration has been consistently low during the whole evolution of the industry. Standard explanations of this phenomenon refer to the random nature of the innovative process, the patterns of imitation, and the fragmented nature of the market into multiple, independent submarkets. We delve deeper into this issue by using an improved version of our previous “history-friendly” model of the evolution of pharmaceuticals. Thus, we explore the way in which changes in the technological regime and/or in the structure of demand may generate or not substantially higher degrees of concentration. The main results are that, while technological regimes remain fundamental determinants of the patterns of innovation, the demand structure plays a crucial role in preventing the emergence of concentration through a partially endogenous process of discovery of new submarkets. However, it is not simply market fragmentation as such that produces this result, but rather the entity of the “prize” that innovators can gain relative to the overall size of the market. Further, the model shows that emerging industry leaders are innovative early entrants in large submarkets.     

Machine learning,artificial neural networks and social research

Quality & Quantity - Machine learning (ML), and particularly algorithms based on artificial neural networks (ANNs), constitute a field of research lying at the intersection of different...     

The future of pensions in Europe

Unfunded state pension schemes are projected to become financially unsustainable. This is usually attributed to demographic trends. Yet trends in unemployment and in female labour force participation are quantitatively as important. Improvements in either or both might be sufficient to rescue existing state schemes, especially if combined with an end to the practice of allowing, even after retirement, the value of a pension to rise with national earnings rather than prices.
Attempts at piecemeal reform are important because nothing in economic theory suggests a switch to the alternative, fully funded pensions is desirable. Not only would such a transition be costly, and therefore politically difficult; it also neglects the fact that it makes sense to diversify the retirement portfolio, holding claims both on labour productivity and on capital assets. One can even view pensions as part of a more sophisticated system of intergenerational transfers through which workers finance their earlier education and subsequent retirement.     

Executive Gender Pay Gaps: The Roles of Female Risk Aversion and Board Representation

Using a large sample of executives in S&P 1500 firms over 1996–2010, we document significant salary and total compensation gaps between female and male executives and explore two possible explanations for the gaps. We find support for greater female risk aversion as one contributing factor. Female executives hold significantly lower equity incentives and demand larger salary premiums for bearing a given level of compensation risk. These results suggest that females’ risk aversion contributes to the observed lower pay levels through its effect on ex ante compensation structures. We also find evidence that the lack of gender diversity on corporate boards affects the size of the gaps. In firms with a higher proportion of female directors on the board, the gaps in salary and total pay levels are lower. Together, these findings suggest that female higher risk aversion may act as a barrier to full pay convergence, despite the mitigating effect from greater gender diversity on the board.