A MEASUREMENT OF THE ERRORS IN INTRA-PERIOD COMPOUNDING AND BOND VALUATION

The errors in intra-period compounding and bond pricing are widespread in textbooks, and they also periodically occur in published research. This article deals with the measurement of error and the magnitude of error when, given the market price of other than annual bonds, the yield to maturity is calculated using the incorrect formula. The authors demonstrate that the errors are (1) the result of confusion, not oversight, (2) large in magnitude when the effective yearly interest rate is high, and (3) not symmetrical; that is, the characteristics of the errors when determining yields, given bond prices, differ from the characteristics of the errors when determining bond prices, given interest rates.     

Antecedents of war: the geopolitics of low oil prices and decelerating financial liquidity

We investigate the joint dynamics of oil prices, financial liquidity and geopolitical risk, within a multi-country global vector autoregressive model. We find that low oil prices are expected to trigger higher levels of geopolitical risk and that decelerating financial liquidity serves as an accelerator.     

Economic growth and government expenditure: evidence from a new test specification

A new test specification of Wagner's Law of Public Expenditure has been formulated. The aim is to disentangle the effects of accelerating and decelerating economic growth on growth in government expenditure. Two alternative proxies for the state of the economy are experimented with. The first defines the current state of the economy by relating it to its historical mean growth rate, while the second defines it relative to a pooled time-series/cross-sectional mean growth rate. This distinction is then explicitly incorporated into an error correction model that parameterizes the bivariate relation between government expenditure and economic growth for alternative OECD country groupings. The results suggest that government expenditure increases less than proportionately with accelerating economic growth and decreases more than proportionately with decelerating economic growth. There is only a limited support for Wagner's Law.     

Capital gains taxes and the market response to public announcements in an indexation-based tax regime

This paper addresses the impact of capital gains taxes on the market price and trading volume response to public announcements in an indexation-based tax regime. Our analysis indicates that indexation makes share prices more responsive to public announcements. Moreover, ‘over responsiveness’ induces negative correlation between short-term price changes around the public announcement and subsequent long-term price movements. This effect is greater when anticipated inflation is higher. Our analysis also indicates that trading volume is increasing in price changes around the public announcement.     

Manufacturing shareholder value: The role of accounting in organizational transformation

This paper explores the role of accounting calculations in constructing shareholder value within the context of organizational transformation in work organization. Using an intensive longitudinal case study (Conglom, a pseudonym), the paper relates innovation and experimentation in new forms of work organization to a drive for shareholder value creation. The priority given to shareholder value creation was articulated through a proliferation of accounting metrics and calculations that intermediated between the strategic preoccupation with securing financial profitability, as demonstrated by the share price, and the operational challenge of squeezing costs and improving margins to boost short-term performance through outsourcing, programme management and divestment. We interpret the discourse of shareholder value creation and the development of related accounting metrics as a hegemonic move which is central to the reassertion of capital – a development that, we contend, is symptomatic of a shift towards a more ‘despotic’ mode of capitalist reproduction [Burawoy, M., (1985). The politics of production. London: Verso], where the whip of the market, allied to notions of possessive individualism, free choice and self-determination, progressively replaces the velvet glove of the corporatist state.     

CAPM and Option Pricing With Elliptically Contoured Distributions

This article offers an alternative proof of the capital asset pricing model (CAPM) when asset returns follow a multivariate elliptical distribution. Empirical studies continue to demonstrate the inappropriateness of the normality assumption for modeling asset returns. The class of elliptically contoured distributions, which includes the more familiar Normal distribution, provides flexibility in modeling the thickness of tails associated with the possibility that asset returns take extreme values with nonnegligible probabilities. As summarized in this article, this class preserves several properties of the Normal distribution. Within this framework, we prove a new version of Stein's lemma for this class of distributions and use this result to derive the CAPM when returns are elliptical. Furthermore, using the probability distortion function approach based on the dual utility theory of choice under uncertainty, we also derive an explicit form solution to call option prices when the underlying is log‐elliptically distributed. The Black–Scholes call option price is a special case of this general result when the underlying is log‐normally distributed.     

The influence of the introduction of accounting disclosure regulation on mandatory disclosure compliance: Evidence from Jordan

This paper examines the influence of accounting disclosure regulation, governance reforms and ownership changes, resulting from privatisation, on mandatory disclosure compliance of a sample of 80 non-financial, listed Jordanian companies for the years 1996 and 2004. Employing two checklists based on the International Financial Reporting Standards (IFRS) extant in the years 1996 and 2004, we find that disclosure compliance with the IFRS is significantly higher in 2004 than that in 1996. Our multiple regression results indicate that disclosure regulation reforms produced the most significant influence on mandatory disclosure compliance. Further, governance reforms through the mandate of audit committees emerged as a significant determinant of compliance with mandatory disclosure requirements.