ON APPLICATION OF THE RANK TRANSFORMATION DISCRIMINATION METHOD TO FINANCIAL PROBLEMS

Multiple discriminant analysis is a powerful analytic tool for the financial researcher. However, data transformations are a near necessity for improving relevant sample characteristics, since the assumption of normality plays a critical role in successfully applying the technique to financial problems. The rank transformation approach is an alternative that offers considerable advantages over traditional mathematical transformation procedures. The strength of rank transformation is illustrated in this paper using the bond-rating problem as an empirical example. The results are significant because a classic model is shown to be more robust than previously was assumed. We suspect that other multivariate financial problems could benefit from the approach as well.     

Intertemporal separability in overlapping-generations models

In a pure exchange overlapping-generations model with many goods, but a single consumer with preferences separable between two periods of life, there are (generically) finitely many equilibria in which money has no value. If money has value, then (generically) there is at most one dimension of indeterminacy. This property does not generalize to a model with many consumers and general preferences. It is shown why a separable representative consumer implies such strong conclusions. It is also shown that the absence of income effects leads to similar results.     

Utilization of minority employees in small business: A comparison of nonminority and black-owned urban enterprises

Structural changes in the urban economy are causing African-American workers in blue collar occupations to rely increasingly upon the small business sector for employment. This study finds that most of the nonminority-owned small businesses operating in large urban areas do not employ minorities. Even among the businesses physically located within minority communities, the majority of the workers in the nonminority small firms are white. Black-owned businesses, in contrast, rely largely on minority workers even when their firms are located outside of minority neighborhoods.     

INTRADAY MARKET BEHAVIOR AND THE EXTENT OF FEEDBACK BETWEEN S&P 500 FUTURES PRICES AND THE S&P 500 INDEX

In this study we empirically examine the intraday lead/lag relation between S&P 500 futures prices and the S&P 500 index, and whether daily market characteristics are associated with changes in the relation. We estimate daily Geweke measures of feedback and regress time series of these measures on daily price volatility and volume characteristics. Results indicate that the contemporaneous price relation is substantive and that measures of contemporaneous feedback are positively associated with the daily range of the futures price. The primary implication is that the relation between cash and futures prices becomes stronger as futures price volatility increases. As volatility increases, information is being impounded at a faster rate so that futures and equity markets operate more closely as one market. Large futures price moves, by themselves, are not responsible for breakdowns in the stock-futures price relation.     

Supplier strategy and customer responsiveness: Managing the links

Responsiveness to the customer is a fine ideal. Making it a reality is increasingly critical to gaining competitive advantage. In practice, it often means more variety at shorter notice. Faced with these challenges, companies must look to their suppliers for support. Instant market intelligence and flexible manufacturing are worth little if they face bottlenecks in getting the right supplies. Becoming customer responsive therefore starts with supplier strategy. Success requires better ways of managing the commercial links.     

The Relationship between Bankruptcy Model Predictions and Stock Market Perceptions of Bankruptcy

This study uses a cumulative sum technique to determine the point at which the stock market first perceives that a firm may file for bankruptcy. The study then attempts to identify information, whether from financial statements or from other sources, that may have influenced the market in its reassessment of the firm's prospects. The results indicate that the switching point of the mean and variance of stock returns appears to be related both to financial statement information (as measured by changes in bankruptcy model probability assessments) and the release of unfavorable news in the Wall Street Journal.     

Evolution of urban housing stocks: A model applied to Baltimore and Houston

Historical simulations of urban residential growth in Baltimore and Houston based on a model of the growth process which has two distinct components are presented. The vintage component utilizes the growth of income and population, and an assumption that housing is putty-clay, to predict the age distribution of the housing stock in each period. The spatial component of the model determines where this housing construction will take place according to (1) housing is built on vacant land and (2) the pattern of construction obeys the rules of the standard monocentric models. Housing is demolished when economically obsolete. The putty-clay (vintage) aspect of the model produces fairly accurate city-wide vintage distributions, but there is much more mixing of vintages and income (in Baltimore) by location than predicted, even under monocentric assumptions most favorable to mixing.