A theorem on interest rate differentials,risk and anticipated inflation

This paper develops a theorem to the effect that the difference in nominal interest rates between two securities of the same maturity but different risk is an increasing linear function of the anticipated rate of inflation. Even when society's inflationary. A preliminary attempt is made to estimate the real risk premiums that finance paper, bankers's, acceptances, commercial paper, certificates of deposit, and Eurodollar deposits command over treasury bills. It is found, for example, that the real risk premium commanded by bankers’ acceptances over treasury bills is five basis points. This means that in a non-inflationary environment, bankers' acceptances would yeild five basis points more than treasury bills. This estimate and the other estimates obtained are not implausiable, but they are probably minimum estimates because of bias in the estimate of inflationary expectations.     

Estimating the size of the Chinese outbound travel market: A demand-side approach

The Chinese outbound travel market has been one of the fastest-growing international markets over the past decade. However, estimating the size and identifying key tourist-generating areas for the Chinese travel market remain a significant challenge for international marketers. This empirical study employs an incidental target-market approach and presents updated research findings concerning this burgeoning market. Primary and secondary tourist-generating cities of Mainland China were identified based on population size and level of socioeconomic development, and their market potential for outbound travel was assessed through a large-scale telephone survey. This study estimated that the current Chinese outbound travel market comprises approximately 22 million city residents, among whom 11.5 million have traveled or plan to travel to destinations outside Asia. In addition to estimating market size and making recommendations on target cities, the study also introduces an effective research design for identifying target markets and customers.     

Development of the Voluntary Simplicity Engagement Scale: Measuring Low-Consumption Lifestyles

Journal of Consumer Policy - Those who choose to reduce their material consumption to seek satisfaction in non-material ways are said to be living a life of voluntary simplicity. This lifestyle has...     

Consumer expectations and short-horizon return predictability

Lettau and Ludvigson [Lettau, M., Ludvigson, S, 2001. Consumption, aggregate wealth and expected stock returns. Journal of Finance 56, 815–849] argue that fluctuations from the equilibrium ratio of consumption to wealth (cây) reflect changing expectations of asset returns and document significant short-horizon predictability based on cây. This paper further explores the role of consumer expectations in modeling time variation of expected equity returns by considering two measures of consumer expectations: (i) consumer behavior as reflected in cây, and (ii) a more-direct measure of expectations captured by the Index of Consumer Sentiment (ICS). We report strong regression-based evidence of return predictability based on cây, which remains evident even after accounting for various sources of estimation risk. However, the regression-based evidence of predictability does not necessarily imply that shifts in aggregate consumption and the components of aggregate wealth give rise to economically significant investment signals. The survey-based measure of expectations (ICS) is shown to complement the behavioral measure (cây) but has no apparent stand-alone predictive value in forecasting equity returns.     

STOCK PRICE DYNAMICS IN OVERLAPPED MARKET SEGMENTS: INTRA AND INTER-INDUSTRY CONTAGION EFFECTS

This study examines stock price dynamics of contagion effects in overlapping markets using an exponential ARCH (Autoregressive Conditional Hetero-scedastic) model. Specifically, the stock price dynamics among the oil and oil-related industries of the US are examined to see how stock price movements in one industry affect those of the related industries. The results suggest that when the amount of price innovations is larger than the expected amount, volatility of stock returns will be affected. The results further show that this influence comes from the oil-service industry and spreads to the oil industry and the gas industry. That is, inter-industry contagion effects do exist. In addition, when the firms of the oil industry are grouped into three size categories - large, medium and small - the results indicate that the source of contagion is from the large and the small oil firms. The influence of their price innovations spread to medium-sized oil firms, the oil-service industry and the gas industry. That is, the inter-industry and intra-industry contagion effects exist simultaneously.     

IPO research symposium review

The primary areas of IPO research are briefly reviewed. The five articles of this research symposium are placed within this body of research. The JEF editors indicate issues of particular interest for future IPO research submissions.     

International air transportation and economic development

Legislation in 1977 and 1978 effectively deregulated the US domestic air cargo and air passenger transportation industries. International air transportation, largely as the result of the ‘Open Skies’ initiative from 1979 has also gradually been liberalized but progress has been geographically and temporally uneven. This study is concerned with extending the Open Skies concept and in accessing the benefits to the US economy of removing the remaining impediments to the provision of free market services involving, in particular, the full transatlantic market. It initially reviews some of the previous work that has looked at links between industrial location and the quality of international air transportation. It develops a modeling framework to examine the implications of further liberalization on the economies of US regions that currently have limited international services. The work involves a macro-analysis of the impact of European international services for 41 Metropolitan Standard Areas.     

The Use of Foreign Accounting Data in UK Financial Institutions

Globalisation of securities markets has caused many members of the investment community to use foreign accounting data. This paper examines how this foreign data is used by some London-based participants in the market. Areas for examination are established after looking at the extensive published research on the use of domestic accounting data and the small amount of published research in an international context. Twenty-one market participants were interviewed, although four of these were treated as a pilot, so that most findings were based on 17 interviewees working for six institutions. If this sample is representative, our findings suggest that market participants are inexpert in accounting; sector experts see international accounting differences as a hindrance but country experts do not; participants use foreign accounting data for analysis but very few adjust it (although fund managers think that analysts do); there is some avoidance of countries or sectors for accounting reasons; and there is very little knowledge of international accounting differences.