Provision Point Mechanisms and Field Validity Tests of Contingent Valuation

Past field validity tests of contingent valuation have relied on voluntary contribution mechanisms to elicit actual willingness to pay, and may overestimate hypothetical bias because of free riding in the actual contributions. This paper argues that provision point mechanisms are a preferred alternative for field validity tests of contingent valuation because they increase the proportion of demand revealed in cases in which public goods can be provided in a step function. The results of a contingent valuation validity study of participation in a green electricity pricing program that uses a provision point mechanism are reported, and hypothetical open-ended and dichotomous choice responses are compared to actual participation. Calibration of hypothetical responses is also explored.     

Finance and growth in Africa: The broken link

While bank liabilities in Sub-Saharan Africa are found to follow (but not lead) economic growth, the link between bank credit and growth is altogether absent.     

Local martingales, arbitrage, and viability Free snacks and cheap thrills

Summary. We revisit a standard model of security prices as Ito processes, and provide some new economic insights about the role of arbitrage and credit limits within such a model. We show that the standard assumptions of a positive state prices and existence of an equivalent martingale measure exclude prices that are viable models of competitive equilibrium and that are potentially useful for modeling actual financial markets. These models have been dismissed in the past as allowing arbitrage, but in fact an agent who prefers more to less and who has limited access to credit may have an optimum. Received: June 9, 1999; revised version: October 4, 1999     

Re‐assessing the long‐term underperformance of UK Initial Public Offerings

Previous work has identified that IPOs underperform a market index, and the purpose of this paper is to examine the robustness of this finding. We re‐examine the evidence on the long‐term returns of IPOs in the UK using a new data set of firms over the period 1985–92, in which we compare abnormal performance based on a number of alternative methods including a calendar‐time approach. We find that, using an event‐time framework, there are substantial negative abnormal returns to an IPO after the first 3 years irrespective of the benchmark used. However, over the 5 years after an IPO, abnormal returns exhibit less dramatic underperformance, and the conclusion on negative abnormal returns depends on the benchmark applied. Further if these returns are measured in calendar time, we find that the (statistical) significance of underperformance is even less marked.     

Transition = Improved Revenue Performance Plus Elektrificatsiya? A Look at Irkutsk Region During the Early Transition Era

MOCT-MOST: Economic Policy in Transitional Economies -     

An Analysis of Contrarian Investment Strategies in the UK

The performance of contrarian, or value strategies – those that invest in stocks that have low market value relative to a measure of their fundamentals – continues to attract attention from researchers and practitioners alike. While there is much extant evidence on the profitability of value strategies, however, most of this evidence pertains to the US. In this paper, we provide a detailed characterisation of value strategies using data on UK stocks for the period 1975 to 1998. We first undertake simple one-way and two-way classifications of stocks in which value is defined using both past performance and expected future performance. Using sales growth as a proxy for past performance and book-to-market, earnings yield and cash flow yield as measures of expected future performance, we find that that stocks that have both poor past performance and low expected future performance have significantly higher returns than those that have either good past performance or good expected future performance. Allowing for size effects in returns reduces the value premium but it nevertheless remains significant. We go on to explore whether the profitability of value strategies in the UK can be explained using the three factor model of Fama and French (1996). Broadly consistent with the results for the US, we find that using the one-way classification the excess returns to almost all value strategies can be explained by their loading on the market, book-to-market and size factors. However, in contrast with the US, using the two-way classification there are excess returns to value strategies based on book-to-market and sales growth, even after controlling for their loading on the market, book-to-market and size factors.     

Employee Relations and the Likelihood of Occurrence of Corporate Financial Distress

Abstract:   In this paper, we investigate the association of employee relations with the occurrence of onset of financial distress. We argue that if adverse economic conditions arise, firms that have maintained good employee relations will be more effective in obtaining temporary labor concessions. As a result, firms with good employee relations, to the extent they are dependent on labor in the conduct of business operations, should be more likely to avoid the onset of future financial distress. The empirical findings we document support this prior.