Is Index Performance Achievable? An Analysis of Australian Equity Index Funds

This article examines the performance of index equity funds in Australia. Despite the significant growth in index funds since 1976, when the first index mutual fund was launched in the U.S., research on their performance is sparse in the U.S. and non-existent in Australia. This study documents the existence of significant tracking error for Australian index funds. For example, the magnitude of the difference between index fund returns and index returns averages between 7.4 and 22.3 basis points per month across index funds operating for more than five years. However, there is little evidence of bias in tracking error implying that these funds neither systematically outperform nor underperform their benchmark on a before cost basis. Further analysis provides evidence that the magnitude of tracking error is related to fund cash flows, market volatility, transaction costs and index replication strategies used by the manager.     

The Training of Economics Teachers in England and Wales

Whitehead describes in some detail differences between British and U.S. economic education with respect to both the rigor of the precollege curriculum and the training of teachers. Perhaps his article will serve as a challege to American educators as well as provoke a definitive study of the relative effectiveness of the two educational systems.     

Assessing Cumulative Evidence within ‘Macro’ Research: Why Meta‐Analysis Should be Preferred Over Vote Counting

Understanding the conclusions a body of evidence offers involves accumulating findings. Two recent articles used vote counting to assess the evidence related to important macro theories: transaction cost theory and resource‐based theory. Each concluded that its focal theory is not well supported. In contrast, recent meta‐analyses of the same theories concluded that both are strongly supported. We explain why macro researchers should trust the findings of meta‐analyses but not those of vote counts. A direct implication is that researchers interested in advancing transaction cost and resource‐based theories need to build upon the meta‐analytic evidence. A broader implication is that, as the preferred method for accumulating evidence, meta‐analysis can be a catalyst for the re‐evaluation of established theories and the development of new theory.     

Taxation and the stock market valuation of capital gains and dividends: Theory and emphirical results

Dividends seem to be more heavily taxed than capital gains. Why then do corporations pay dividends rather than repurchasing shares or retaining earnings? Either corporations are not acting in the interests of shareholders, or else shareholders desire dividends sufficiently for nontax reasons to offset the tax effect.In this paper, we measure the relative valuation of dividends and capital gains in the stock market, using a variant of the capital asset pricing model. We find that dividends are not valued differently systematically from capital gains. This finding is consistent with share price maximization by firms but inconsistent with the fact that most shareholderspay a heavier tax on dividends.We also show that the relative value of dividends provides an indirect measure of a marginal Tobin's q. The measured value of dividends relative to capital gains tends to be higher during prosperous periods, as is consistent with this interpretation. We hope that this time series on a marginal Tobin's q will prove to be useful in forecasting the rate of investment.     

Regulatory incentive policies and abuse

We examine the incentives for abuse under rate-of-return (ROR) and incremental surplus subsidy (ISS) regulation. Abuse consists of expenditures by the regulated firm that provide private benefits, but do not reduce production costs. We show that ISS regulation provides efficient incentives for owners of the regulated firm to limit abuse by subordinates. We also prove that abuse by owners of the firm will generally be greater (smaller) under ROR regulation than under ISS regulation when consumer demand for the regulated product is inelastic (elastic). Furthermore, we show that to limit abuse and improve welfare under ROR regulation, it can be advantageous to ignore available information about consumer demand.     

Systemic justice and burnout: A multilevel model

With the aim of extending organisational justice research to embrace significant and enduring aspects of the workplace context, this study examines organisational culture and human resource management (HRM) as constitutive dimensions of systemic justice and relates them to employee health. Bridging organisational justice, HRM, organisational culture, and occupational health research, we advance and test a multilevel model relating systemic justice to burnout. Data collected from 60 organisations; 89 employee groups; and 1,976 employees provide support for the hypothesised relationships between justice‐oriented culture, in terms of organisational values and group culture, and justice‐oriented HRM. In turn, justice‐oriented HRM related directly to employee burnout and indirectly through employee perceived job control and supervisor social support.