Testing Term Structure Estimation Methods: Evidence from the UK STRIPS Market

Prices and yields of UK government zero‐coupon bonds are used to test alternative yield curve estimation models. Zero‐coupon bonds permit a more pure comparison, as the models are providing only the interpolation service and also not making estimation feasible. It is found that better yield curves estimates are obtained by fitting to the yield curve directly rather than fitting first to the discount function. A simple procedure to set the smoothness of the fitted curves is developed, and a positive relationship between over‐smoothness and the fitting error is identified. A cubic spline function fitted directly to the yield curve provides the best overall balance of fitting error and smoothness, both along the yield curve and within local maturity regions.     

Unions and Work Attitudes in the United States and Japan

Examining whether Japanese enterprise unions have a negative effect on employee job attitudes or whether they forge a stronger bond between the worker and the firm, our results indicate that union membership has no effect on Japanese employees' job satisfaction, but that there is some negative impact on company commitment. Much of the union effect on U.S. workers' job attitudes stems from lower job complexity, work autonomy, perceived promotion chances, and quality circle membership.     

Holiday Trading in Futures Markets

In this paper, we find significantly higher preholiday returns in futures contracts compared to nonholiday returns. The findings are consistent with the inventory adjustment hypothesis, since higher preholiday returns associated with lower trading volume are most pronounced for exchange-closed holidays. There is evidence of positive postholiday returns associated with higher trading volume for exchange-open holidays. This is consistent with positive holiday sentiments. The holiday effect is uniquely independent: The magnitude of excess holiday returns is the largest among all seasonal variations.     

Job Safety and Contract Workers in the Petrochemical Industry

The legal rules for assigning liability for the costs of accidents penalize petrochemical plants that exercise direct control over contract employees. Evidence from diverse sources indicates that these liability rules lead plant management to give primary responsibility for the safety training and supervision of contract employees to contractors. However, analysis of the determinants of accidents suggests that host plants offer more effective safety training and supervision than do contractors. It follows that accident rates in the petrochemical industry would be reduced if liability rules were altered so that host plants had greater incentives to take primary responsibility for the safety training and supervision of contract workers.     

On Determination of Stochastic Dominance Optimal Sets

Applying Fishburn's [4] conditions for convex stochastic dominance, exact linear programming algorithms are proposed and implemented for assigning discrete return distributions into the first- and second-order stochastic dominance optimal sets. For third-order stochastic dominance, a superconvex stochastic dominance approach is defined which allows classification of choice elements into superdominated, mixed, and superoptimal sets. For a choice set of 896 security returns treated previously in the literature, 454, 25, and 13 distributions are in the first-, second-, and third-order convex stochastic dominance optimal sets, respectively. These optimal sets compare with admissible first-, second-, and third-order stochastic dominance sets of 682, 35, and 19 distributions, respectively. The applicability of superconvex stochastic dominance for continuous distributions defined over a bounded interval is then shown. The difficulties in identifying the elements of the superdominated set for distributions defined over the entire real line are demonstrated in the determination of the dominated choices for a set of normally distributed mutual fund returns previously examined by Meyer [9]. Specifically, we find that the dominated set determined by Meyer is too large.     

The Usefulness of the Wind-Up Measure of Pension Liabilities: A Labor Market Perspective

Financial economists have long favored the use of a wind-up measure of the firm's pension liabilities. Yet the pension liabilities of the firm also represent the pension wealth of its workers. It is reasonable to presume that workers and shareholders have a common view of the pension contract. If the wind-up measure depicts the true pension liabilities of the firm, then the wage concession granted by its workers must reflect the fact that the firm may choose to terminate the plan at any time. Data on the wage-service characteristics of the membership of a sample of final earnings plans in Canada suggest, contrary to the implications of the wind-up measure, that workers' wages do not internalize accruing pension benefits on a year-to-year basis. Instead, the data suggest that pension plans may be a vehicle through which a significant portion of the total compensation of individual employees is deferred until their later work years, and that the wind-up measure may well understate the pension liabilities of an on-going firm.     

Leadership Giving in Charitable Fund-Raising

Why do charities often begin new capital fund drives by announcing a large contribution by a single wealthy donor? This paper explores the possibility that such “leadership giving” provides a signal to all other givers that the charity is of high quality. The dilemma is that if the lead giver can deceive others to believe the charity is of higher quality than it truly is, then these followers will make larger contributions, which will benefit the leader. Hence, the leader must give an unusually large amount to convey a credible signal of the quality. This sets up a war‐of‐attrition game for who will pay the cost to signal the quality. Since the wealthy have the lowest opportunity cost of providing the signal, they, in equilibrium, move first to provide the signal of quality with exceptionally large gifts.