An analysis of commercial bank common stock returns: 1802–97

This study creates analyses for the first time a continous index of returns on commercial bank common stocks listed in a specific market. The index is constructed from a unique set of historical data and is calculated on both a weighted and unweighted basis, first including and then excluding dividends. A measure of volatility is calculated annually.

The results indicate that the dividend component of holding period returns is very important. Including dividends, average returns were 6.0% for the century; excluding dividends, average returns were 0.1%. Excess returns were calculated using two different measures of a riskless rate of return. Cumulative excess returns for the first half of the nineteenth century were negative. Real returns were calculated, and found to be generally positive over the century. The volatility of returns was quite high during certain periods.

Examining the effects of significant economic and political events on bank common stock returns, we find that the War of 1812, the Civil War, and the National Banking System had a significant impact on bank stock returns. Several economic panics, several depressions, the First and Second Banks of the United States, the Embargo of 1807, and the Suffolk Bank had no measureable impact.     

Compensating variation consumer's surplus via succesive approximations

Many economists agree that the best measure of consumer's surplus is the compensating Variation Consumer's surplus (CVCS). Howerver, Because the compensated demand function is not observable, there are problems in using this measure in emperical applications. There are ways around this limitations that work well under certain circumstances, However, until now there has been no solution that always works well. We introduce a sucessive approximations method of calculating compensating variation consumer’s surplus using data from the ordinary demand curve. In doing so we numerically identify the compensated demand fuction over the price interval involved. This procedure can be made extremely ‘small’. We also use our method to calculate CVCS for three applications in the literature where Marshallian surplus was reported.     

Reviews

”THE GEOGRAPHY OF ECONOMIC CHANGE“ Martin and Rowthorn (eds), 1986: The Geography of De-industrialisation. London: Macmillan, £30 cloth, £8.95 paper.

Champion, A. G. et al, 1987: Changing Places. London: Edward Arnold, £7.95 paper.

“WHAT FUTURE FOR THE LOCAL STATE?” Simon Duncan and Mark Goodwin, 1988: The Local State and Uneven Development. Cambridge: Polity Press, £8.95 paperback.

“THE 'SEEDS' APPROACH”

(1) All Change: A study of Bus Transportation Planning, Deregulation and Privatisation in seven towns; Consultant Dr P. A. Stanley; March 1987.

(2) After Chernobyl: A safe energy policy for the South East; Consultant Adrian Atkinson; May 1987.

(3) Troubled Waters: Water services in the South East Region; Consultants Dr J. Rees and Dr M. Synott; May 1987.

(4) Jobs Plan Workshop [W.P.2]; Oxford City Council; May 1987.

(5) Opportunities for energy conservation in Brighton and Harlow council housing stock: G. Matthews, S. Hodgkinson and M. Fergusson.

(6) Defence Electronics Conference [W.P.1]; Stevenage DC; November 1987.

(7) British Rail Services in the Southampton Area (W.P.3]; Consultant Helen Dawson; February 1988.

(8) Right Lines?: A study of British Rail Services in the South East; Consultant Helen Dawson; September 1988.

(9) South-South Divide; SEEDS 1987.

All published by SEEDS, The South East Economic Development Strategy.

“INDUSTRIAL RESTRUCTURING — PROCESSES AND POLITICS” Irene Hardill, 1987: The regional implications of the restructuring in the wool textile industry. Aldershot: Gower, £25.

Bo Strath, 1987: The politics of deindustrialisation. The contraction of the West European shipbuilding industry. London: Croom Helm.     

Legal Remedies for Breach of the Regulatory “Contract”

We present a model of the regulatory contract that focuses on the mutual investment of buyer and seller and recognizes the cost of contractual renegotiation and the importance of breach remedies when contracts are incomplete. We model renegotiation as a litigation game played before a quasi-judicial administrative court. We find that the standard contractual remedy of expectations damages cannot implement first-best levels of investment for both buyer and seller. If the seller fully recovers its sunk investment upon buyer breach, however, then first-best levels of investment by both buyer and seller can be supported provided litigation costs are small enough.     

Selective perception,unions and organisational change

This article uses a large scale body of survey data to investigate the proposition that reported management perceptions of the extent to which unions constitute a constraint on organisational change will vary systematically according to certain personal and organisational characteristics. The resulting evidence of selective perception has a number of implications for survey work that seeks attitudinal based responses to questions, particularly from a single management respondent per employment establishment.     

Road Pricing: Solving the Technical Problems

How would road pricing work? Peter Hills and Phil Blythe, of Newcastle University, explain the technical developments which make a variety of road pricing schemes a genuine possibility.     

The shakedown

Customer Strategy Solutions, a California-based developer of order-fulfillment systems, is facing a shakedown. Six months after the firm's CEO, Pavlo Zhuk, set up a software development center in Kiev, local bureaucrats say the company hasn't filed all the tax schedules it should have. Moreover, Ukrainian tax officials claim that the company owes the government tax arrears. Zhuk is shocked; he and his colleagues have done everything by the book. This isn't the first time Zhuk has encountered trouble in Ukraine. In the process of getting the development center up and running, a state-owned telecommunications utility had made it difficult for Zhuk to get the phone lines his company needed. Senior telecom manager Vasyl Feodorovych Mylofienko had told Zhuk it would take three years to install the lines in his office-but for a certain price, Mylofienko had added, the lines could be functioning the following week. Even as the picture of rampant bribery and corruption in Ukraine becomes clear, Zhuk still doesn't want to pull out of the country. Of Ukrainian descent, he has dreams of helping to modernize the country. By paying his programmers more than they could make at any local company, he hopes to raise their standard of living so they can afford three meals a day without having to barter, stand in queues for hours, or moonlight. And yet, he isn't sure he can keep compromising his principles for the sake of the greater good. Should Customer Strategy Solutions pay off the Ukrainian tax officials? Commenting on this fictional case study are Alan L. Boeckmann, the chairman and CEO of Fluor Corporation; Rafael Di Tella, a professor at Harvard Business School; Thomas W. Dunfee, the Kolodny Professor of Social Responsibility and a professor of legal studies at Wharton; and Bozidar Djelic, the former finance and economy minister of Serbia.     

Evaluating the performance of non-Bayesian regulatory mechanisms

This paper compares the performance of two prominent non-Bayesian regulatory mechanisms: Sappington and Sibley's (1988) Incremental Surplus Subsidy (ISS) and Hagerman's (1990) refinement of the Vogelsang-Finsinger (1979) mechanism. The two mechanisms are shown to induce identical, non-zero levels of abuse—unproductive expenses that benefit the firm—though neither induces pure waste. ISS pareto-dominates the Hagerman mechanism when lump-sum transfers to the firm are non-distortionary, but the Hagerman mechanism generates greater welfare and consumer surplus when the distortionary effects of transfers are large. For a wide range of intermediate parameter values, the quantitative difference in performance between the two mechanisms is surprisingly modest.This paper has benefited from the comments of Keith Crocker, Steve Hackett, John Mayo, David Sibley, Ted Stefos, Lester Taylor, two anonymous referees, and seminar participants at the 1992 American Economic Association meetings, the Tenth Annual Eastern Conference of the Rutgers University Center for Research in Regulated Industries, the Pennsylvania State University, GTE Laboratories, and the Management Science Group, Department of Veterans Affairs, Bedford, Massachusetts.     

The Impact of Universal Stock Futures on Feedback Trading and Volatility Dynamics

Abstract:  This paper investigates the impact of the introduction of Universal Stock Futures (USFs) on underlying market dynamics (volatility and the level of feedback trading). Analysis of USFs provides a number of advantages compared to investigation of index futures, leading to reliable and wider ranging insights into the impact of derivatives. Specifically: (i) any impact of derivatives is more likely to be evident in the behaviour of individual stocks; (ii) with USFs it is possible to directly trade the underlying; (iii) USFs have multiple introduction dates within a given market; (iv) differential country/industry effects can be identified; and (v) the endogeneity issue can be addressed using control stocks. Findings suggest limited feedback trading in USF stocks, but listing has reduced this further. While news has less impact and persistence and asymmetry effects are more evident post-futures, control stock results suggest these changes are not futures induced. Differences are evident across industries. The need for analysis of an appropriate (industry based) control sample is highlighted if reliable policy conclusions are to be reached.