Tax management strategies with multiple risky assets

We study the consumption-portfolio problem in a setting with capital gain taxes and multiple risky stocks to understand how short selling influences portfolio choice with a shorting-the-box restriction. Our analysis uncovers a novel trading flexibility strategy whereby, to minimize future tax-induced trading costs, the investor optimally shorts one of the stocks (or equivalently, buys put options) even when no stock has an embedded gain. Alternatively, an imperfect form of shorting the box can reduce aggregate equity exposure ex post. Given these two short selling strategies, it is common for an unconstrained investor to short some equity while a constrained investor holds a positive investment in all stocks. With no shorting, the benefit of trading separately in multiple stocks is not economically significant.     

THE VALUE ADDED BY BANK ACQUISITIONS: LESSONS FROM WELLS FARGO'S ACQUISITION OF FIRST INTERSTATE

Wells Fargo's recent acquisition of First Interstate Bancorp represents one of the relatively uncommon cases in which the economic values of both the acquiring and acquired banks increased sharply upon announcement of the deal. The transaction is also one of the few cases where the bidder in a major bank acquisition chose purchase instead of pooling accounting–despite the fact that the deal was openly hostile and that Wells Fargo had to fight off a competing bid from First Bank Systems.
Based on the stock market's reaction to this merger battle, as well as the results of their study of 153 bank mergers over the period 1985–1991, the authors argue that the most promising mergers are those presenting large opportunities to reduce costs by eliminating redundant operations. The stock market is much less responsive to other merger rationales such as diversification or entry into new markets in pursuit of growth.
The Wells case also suggests that a preoccupation with the accounting treatment of a merger is a mistake if it becomes the primary reason for turning down a deal that creates economic value, or if it prevents the bidder from choosing the lowest-cost method of financing the deal. Throughout the bidding contest for First Interstate, the stock market responded positively to the success of Wells Fargo's efforts, even though purchase accounting would have a large adverse impact on reported earnings.
But if the stock market does not appear to care about the accounting treatment of a merger, the method of financing does appear to matter to investors. In general, acquisitions financed with cash are viewed more favorably by the market than stockfunded transactions. The evidence also suggests, however, that acquiring firms can reduce the negative impact of stock deals by making conditional offers (those in which the number of shares depends on the stock price performance of the acquirer) and by combining such offers with stock repurchase programs.     

Competition Policy Convergence: Where Next?

As the 20th Century dawned, there were radical divergences in the policies individual nations pursued toward restraints of competition by cartels and monopolies. Since World War II there has been considerable convergence; many nations have adopted explicit pro-competition policies. This paper traces the reasons for the divergence and then convergence and asks what important steps remain to be taken, especially where the concerns of international trade policy and competition policy intersect. A proposed augmentation of the World Trade Organization's functions to deal with competition policy issues is examined.     

Binomial option pricing with stochastic parameters: A beta distribution approach

This research extends the binomial option-pricing model of Cox, Ross, and Rubinstein (1979) and Rendleman and Barter (1979) to the case where the up and down percentage changes of stock prices are stochastic. Assuming stochastic parameters in the discrete-time binomial option pricing is analogous to assuming stochastic volatility in the continuous-time option pricing. By assuming that the up and down parameters are independent random variables following beta distributions, we are able to derive a closed-form solution to this stochastic discrete-time option pricing. We also derive an upper and a lower bounds of the option price.     

A Multi-Agent View of Strategic Planning Using Group Support Systems and Artificial Intelligence

The strategic planning process is dynamic and complex. Including a Group Support System (GSS) in the problem-solving process can improve the content quality of the strategic plan by allowing increased participation by more members of the organization. However, it can also add to the complexity of the problem by increasing the quantity of textual information that can result from group activity. Added complexity increases cognitive overload and frustrations of those participants negotiating the contents of the strategic plan. This article takes a multi-agent view of the strategic planning process. It considers group participants as multiple agents concerned with the content quality of the strategic plan. The facilitator agent is responsible for guiding groups in the strategic plan construction process as well as for solving process problems such as cognitive overload. We introduce an AI Concept Categorizer agent, a software tool that supports the facilitator in addressing the process problem of cognitive overload associated with convergent group activities by synthesizing group textual output into conceptual clusters. The implementation of this tool reduces frustrations which groups encounter in the process of classifying textual output and provides more time for discussion of the concepts themselves. Because of the large amount of convergent activity necessary for strategic planning, the addition of the AI Concept Categorizer to the strategic planning process should increase the quality of the strategic plan and the buy-in of the participants in the strategic planning process.     

American dreams,American imperatives

In this article I.F. Clarke continues his theme that the special nature of life in the American colonies inevitably led to an extra-European view of society. That can in general be called a composite idea—individuality, liberty, freedom, and great opportunities—and it appealed to many Europeans who saw in the USA a hope for the future and a model for imitation. It is reported that when some of Robert Owen's contingent crossed the Atlantic to New Harmony, they celebrated their approach to New York with a song composed by one of the party. ‘Land of the West! we come to thee,’ they sang. ‘ Sick of the old world's sophistry’, they went on. Today, only the well-off can sail into New York, usually on the QE2, and they do not usually sing as they sail.     

Pricing practices in two industries

Although a critical part of marketing decision making, very little has been written about industrial pricing policy and strategy. This article has three objectives: First, to report the pricing practices of the chemical and construction industries; Second, to compare their pricing policies; and third, to develop a simple pricing framework for industrial marketers. The results of this study are interesting and somewhat unexpected. The buyer and his behavior only play a small part in pricing policy. A pricing framework or model is presented in a logical and systematic way.