A note on odds in the cattle futures market

This paper investigates the odds of generating a 100-fold return in the cattle futures market. We employ cattle futures data for the period October 11, 1978, through July 31, 1979, to compute the probability of obtaining such a return. The tests are constructed to give the investor the benefit of the doubt whenever doubt exists. The most conservative finding is that the probability is one in approximately thirty-one trillion. Assuming that the return is made in the most efficient way possible, this probability falls to approximately 1.5×10⁻¹⁶.     

Changes in the EC licensing environment and their effect on licensing as a strategy for Europe 1992

The further integration of the European Community (EC) is intended to create one large, integrated market and a semistandardized business environment throughout the member countries. This study investigates the current status of the technology licensing environment in the EC and analyzes the returns that a licensor can achieve by locating a licensee in each of the EC countries. This analysis may be important to any firm which has chosen a licensing strategy as its approach to operating in the EC, because locational choice of licensee can affect a licensor's financial returns.     

Orange County Bankruptcy: Financial Contagion in the Municipal Bond and Bank Equity Markets

We examine the spillover wealth effects of the Orange County, California bankruptcy announcement in December 1994 on municipal bonds, municipal bond funds, and bank stocks. This bankruptcy is prominent because of unprecedented losses and because it was caused by a highly leveraged derivatives strategy rather than a shortage of tax revenues and excess spending. We find contagion in the bond market with significantly negative abnormal returns for municipal bond funds without direct exposure to Orange County and for non‐Orange County municipal bonds. In addition, our findings suggest the contagion spills over to the common stocks of investment and commercial banks that deal in or use derivatives; however, the equities of banks unexposed to derivatives are not affected.     

Capital market trading volume: an overview and some preliminary conclusions

This paper suggests an explanation for the heavy trading volumeobserved on the US capital markets, the world's largest. Heterodoxeconomic theory puts much of this volume down to speculation.Mainstream theory tends to support this thesis, either directlyor indirectly, by giving space to the idea that trading activityis for the most part exogenous to the functioning of the capitalmarkets. The central hypothesis of this paper is that the tradingvolumes observed are an endogenous feature of the capital markets,because they are to a great extent determined by the needs ofthe institutional investors who predominate on these markets.This endogeneity of trading is posited in connection with theemergence of a new ‘core–satellite’ paradigmin institutional investment, a development that essentiallymanifests the asset-management industry's transformation froma small industry serving a few wealthy clients to a mass industryserving large sections of the population.     

Performance Monitoring in the Australian Public Service: a Government-Wide Analysis

This article considers the applicability of performance monitoring in the public sector. It analyses performance information across Australian government in order to identify, if possible, the basic attributes of effective performance monitoring, and finds significant variations. The authors conclude that varying levels of complexity in defining ends, and in attributing the achievement of objectives to particular means, may account for most of the differences. However, a number of exceptions suggest there is also room for adaptation.     

Tactical Opportunities,Risk Attitude and Choice of Farming Strategy: an Application of the Distribution Method

When assessing farming strategies, it is important to account for the opportunities provided for tactically adjusting to outcomes of risk. The hypothesis that accounting for tactical adjustment is more important than accounting for risk attitude was supported in this study with regard to identifying the optimal drainage recirculation strategy for an irrigated dairy farm. Failing to account for tactical adjustment would lead to a sub-optimal choice, costing the farmer about A$3 100 in present value terms. In contrast, failing to account for risk aversion would not affect the strategy chosen. The distribution method was found to be well suited to modelling tactical adjustment.     

The Coevolution of the Real and Financial Sectors in the Growth Process

The role of debt and equity changes over time and with the levelof development. What are these changes, and why should theysystematically occur across different countries and time periods?This article characterizes financial innovation as a dynamicprocess that both influences and is influenced by the developmentof the real sector. It focuses on the emergence and developmentof equity markets, using a model that allows for growth andfor capital accumulation that is financed externally througha combination of debt and equity. As an economy develops, theaggregate ratio of debt to equity will generally fall; yet,debt and equity remain complementary sources for the financingof capital investments. The results suggest how various governmentpolicy actions might affect capital accumulation and equitymarket activity.     

Annuity Values in Defined Contribution Retirement Systems: Australia and Singapore Compared

Annuities promise to play an increasingly important role in countries with national defined contribution retirement systems. In this article we examine life annuities in two countries, Singapore and Australia, each of which has a national mandatory pension program. Exploiting data on annuity pricing and purchase behaviour, we compare the money's worth of life annuity products across these two nations. Our results indicate that, after controlling on administrative loadings, there are important differences in measured adverse selection. Part of the explanation may be due to the different structures of the two countries’retirement systems.     

OPTIMAL FORECAST COMBINATION UNDER REGIME SWITCHING*

This article proposes a new forecast combination method that lets the combination weights be driven by regime switching in a latent state variable. An empirical application that combines forecasts from survey data and time series models finds that the proposed regime switching combination scheme performs well for a variety of macroeconomic variables. Monte Carlo simulations shed light on the type of data‐generating processes for which the proposed combination method can be expected to perform better than a range of alternative combination schemes. Finally, we show how time variations in the combination weights arise when the target variable and the predictors share a common factor structure driven by a hidden Markov process.