TESTING THE NET BUYING PRESSURE HYPOTHESIS DURING THE ASIAN FINANCIAL CRISIS: EVIDENCE FROM HANG SENG INDEX OPTIONS

We investigate net buying pressure in the Hong Kong Hang Seng Index options market during the Asian financial crisis from July 1997 to August 1998. Our findings suggest that during this period, the dramatic changes in volatility overwhelmed the dynamics of supply and demand in the options market. The extremely high realized volatility drove market participants' expectations about future market volatility in the early months of the crisis. Findings during the late‐crisis, pre‐crisis, and post‐crisis periods are consistent with the net buying pressure hypothesis.     

Deferred Taxes and Bond Ratings: A Canadian Case

This paper explores the usefulness of the current Canadian Institute of Chartered Accountants standard on accounting for income taxes in bond rating decisions by credit analysts. Bond rating prediction models using accounting variables generated with alternate treatment of income taxes, have been developed. The analysis indicates that additional information presented by the above standard has not contributed significantly to the bond raters' decision making process.     

Pricing Barrier Options with Time–Dependent Coefficients

We consider the problem of pricing derivative securities which involve a barrier clause. We give general techniques to calculate, or estimate accurately, barrier option prices, using methods for estimating diffusion process boundary hitting times. The solution gives a simple, easy–to–use, method for calculating barrier option prices.     

INTERNATIONAL TRADE AND GLOBAL STABILITY1

Trade liberalisation has played a critical role in advancing peace and prosperity. Differences on agriculture have been the major impediment to a future multilateral trade round. The recent agreement on agriculture at the WTO meetings in Geneva may signal a breakthrough in that sector. This article analyses the benefits of recent trade agreements and examines the prospects for future ones. It also presents an alternative framework for advancing trade, the Global Free Trade Association.     

JIT Adoption: The Effects of LIFO Reserves and Financial Reporting and Tax Incentives*

Using matched samples of JIT adopters and nonadopters, we examine the association of JIT adoption with firms' financial reporting and tax incentives, earnings‐management histories, and LIFO reserve levels. We find evidence that adoption decisions are influenced by the interaction of firms' LIFO reserves with their income smoothing, debt covenant, and tax incentives. We also find that adoption is less likely for firms historically engaging in high degrees of earnings management, particularly when such firms have no substantial LIFO reserves. Our study extends earlier research demonstrating a relation between inventory valuation method and year‐end inventory transactions, and documents a relation between earnings‐management incentives and a fundamental supply‐chain design choice.     

Correspondence

The Impact of Managers' Short-term Perceptions on Technology Management and R&D in UK Companies: A Comment.

Management's Short-term Perceptions: Response.     

Arbitrage pricing with information

The Arbitrage Pricing Theory is extended to a setting where investors possess information about future asset returns. A no-arbitrage pricing restriction is obtained with arbitrage conditioned on an investor's information. The pricing restriction contains unconditional factor loadings and either conditional or unconditional expected returns. Thus, tests of the theory can be based solely on time-series estimates of unconditional moments. Additional tests based on conditional expected returns are also appropriate.