Chicago board call options as predictors of common stock price changes

The intent in this study is to determine, using response surface methodology, whether call option prices can be relied upon to predict future rises in common stock prices. If call option prices are bid up by insiders prior to the time that new information becomes available to stock traders, recognition of this price action could form the basis of a stock trading strategy yielding returns superior to buy and hold. Evidence of such an advantage would be inconsistent with the efficient market hypothesis.     

Public Choice and Urban Water Quality*

Abstract . It is the purpose of this paper to examine critically the choice of “zero discharge” as me ultimate goal of our federal water pollution policy and to demonstrate that a goal of 90 percent removal of pollutants from effluents of urban areas will be more economically efficient. Our results indicate that in reaching “Zero discharge,” there is a minimal return in water quality for urban areas which are located on large bodies of water. The final conclusion is that the substantial resources, which would be required to surpass the level of 90 percent removal of pollutants, could be employed more effectively in other social programs.     

On Perennial Re-examination of the U.S. Constitution

Abstract . The United States Constitution is still shrouded in myths, clothed in broad terms and garbed with ambiguities. These require constant reinterpretation. If a continuing constitutional convention is thus endemic to the American political system, then is it, as Jefferson said, “a mere thing of wax in the hands of the judiciary”? Justice Jackson wrote that “we are infallible only because we are final,” but it is a maxim of American politics that the Court follows the election returns. In the last analysis, there is a higher court in a republican democracy, the Court of Public Opinion (of which scholars and publicists are the officers) which achieves revision by periodic reinterpretation and re-examination.     

The accuracy of long-term earnings forecasts in the electric utility industry

This paper examines the accuracy of various methods of forecasting long-term earnings growth for firms in the electric utility industry. In addition to a number of extrapolative techniques, Value Line analyst forecasts are also evaluated. Value Line analyst forecasts for a five-year time horizon are found to be superior to many of the extrapolative models. Among the extrapolative models examined, implied growth and historical book value per share growth rate models performed best. These results provide strong support for using Value Line growth forecasts in cost of capital estimates for electric utilities in the context of utility rate cases. Value Line forecast errors could be explained by changes in dividend payout ratios, the firm's regulatory environment and bond rating changes.     

Economic design of one-sided screening procedures based on a correlated variable with all parameters unknown

Summary Economic design of one-sided screening procedures for improving outgoing product quality based on a screening variable is considered for the case with all parameters unknown. It is assumed that the performance and screening variables are jointly normally distributed and that costs are incurred by screening inspection, acceptance of an imperfect item, and disposition of a rejected one. A method for finding optimal cutoff value based on the predictive distribution is presented.     

Theϕ-divergence statistic in bivariate multinomial populations including stratification

ϕ-divergence statistics quantify the divergence between a joint probability measure and the product of its marginal probabilities on the basis of contingency tables. Asymptotic properties of these statistics are investigated either considering random sampling or stratified random sampling with proportional allocation and independence among strata. To finish same tests of hypotheses of independence are presented. The research in this paper was supported in part by DGICYT Grants No. PS91-0387 and No. PB91-0155. Their financial support is gratefully acknowledged.     

A simulation-based methodology for optimization of ambulance service policies

A simulation-based methodology for the evaluation of the emergency ambulance system in the Vancouver, Canada, metropolitan area has been created. Outputs from the simulation of the system are utilized in the creation of the objective function of a branch and bound optimization procedure. The solutions are thus obtained at a significantly lower cost than if only simulation were used. The final solutions were verified by simulation runs.     

Valuation effects of rollout publicly traded partnerships in the oil and gas industry

In trying to explain the often painful process of corporate restructuring, fingers are frequently pointed at inefficient management. This gives short shrift, however, to an important result of breaking up large, integrated corporations and selling them in smaller pieces: it makes the capital market more nearly complete, and there are strong theoretical arguments that this enhances value. We report the results of a natural experiment that occurred in the oil and gas industry, in which eleven integrated corporations formed publicly traded partnerships to hold their domestic production properties, yet (with few exceptions) retained most of the partnership units under corporate ownership. This behavior avoids any significant change in corporate governance, and is inconsistent with the tax motive popularly attributed as the reason for forming these partnerships; yet we find that significant positive abnormal returns accrued to stockholders when the formations were announced. The results we observe, therefore, support the theory that additional value can be realized by expanding the set of opportunities available to the investment community.     

In-house versus off-site sterilization

After a comprehensive review of in-house costs versus off-site sterilization costs, and considering financial and physical constraints, the decision was made to use the contracted service. Through the incorporation of the innovative concept of off-site sterilization. Flushing Hospital Medical Center was still able to provide a high standard of quality care as well as realize a significant cost savings. As hospitals face increasing demands to control costs, they may be forced to explore "uncharted waters" and give serious consideration to the use of outside services for a more efficient and effective CSS department.