Hot Hands in Mutual Funds: Short-Run Persistence of Relative Performance, 1974–1988

The relative performance of no-load, growth-oriented mutual funds persists in the near term, with the strongest evidence for a one-year evaluation horizon. Portfolios of recent poor performers do significantly worse than standard benchmarks; those of recent top performers do better, though not significantly so. The difference in risk-adjusted performance between the top and bottom octile portfolios is six to eight percent per year. These results are not attributable to known anomalies or survivorship bias. Investigations with a different (previously used) data set and with some post-1988 data confirm the finding of persistence.     

Fabric speciality stores: travel behaviour of female customers

This consumer travel behaviour study examined (i) the distance female customers travel from their home to the fabric speciality store they most often shop in, and (ii) the effects of selected factors on the travel behaviour of these customers. The procedure was to select 10 fabric speciality stores at random in the Phoenix (Arizona) metropolitan area and have 25 female customers complete the questionnaire at each store. The 250 questionnaires were analysed by examining the distances the respondents travelled in various situations and by chi-square tests to determine the relationships among the variables. The results indicated that the majority of respondents travelled 3 miles or less (oneway) from their home to the fabric speciality store they most often shopped in; however, the actual number of miles travelled in this situation was found to be dependent on the respondents' level of education. It was also found that many respondents were willing to travel farther than the distance from their home to the fabric speciality store they most often shopped in to (i) purchase a specific fabric; or (ii) seek a greater variety of fabrics and related items, lower fabric prices and helpful/knowledgeable salespeople.     

Are There Tax Effects in the Relative Pricing of U.S. Government Bonds?

We investigate the impact of the Tax Reform Act of 1986 on the relative pricing of U.S. Treasury bonds. We obtain positive statistically and economically significant estimates for the implicit tax rates of a “representative” investor in the late 1970s and early 1980s. After the 1986 Tax Reform, the point estimates for the tax rate are close to zero. Tests for a regime shift associated with the 1986 Tax Reform support the hypothesis that this event largely eliminated tax effects from the term structure. We discuss both institutional and statutory explanations for this change.     

A STATISTICAL THEORY OF EQUILIBRIUM IN GAMES*

This paper describes a statistical model of equiliobrium behaviour in games, which we call Quantal Response Equilibrium (QRE). The key feature of the equilibrium is that individuals do not always play responses to the strategies of their opponents, but play better strategies with higher probability than worse strategies. we illustrate several different applications of this approach, and establish a number of theoretical properties of this equilibrium concept. We also demonstrate an equililance between this equilibrium notion and Bayesian games derived from games of complete information with perturbed payoffs     

Positively Weighted Portfolios on the Minimum-Variance Frontier

Duality theory is employed to provide necessary and sufficient conditions for portfolios on the minimum-variance frontier to have positive investment proportions in all assets. These conditions involve the feasibility of portfolios that have non-negative correlation with all assets and positive correlation with at least one. Using these results, several “qualitative” results concerning the signs of investment proportions in efficient portfolios are proved. It is argued that the conditions that ensure all-positive weights in efficient portfolios are intuitively compelling and are not unique to the CAPM. With large numbers of assets, however, the signs of weights in minimum-variance portfolios can be very sensitive to slight departures from these conditions due to, for example, sampling error.     

REGULATORY STRUCTURE, REGULATORY FAILURE, AND THE S& L DEBACLE

Widespread S & L failures during the 1980s required the federal government to spend over 100 billion dollars bailing out the deposit insurance fund. This paper interprets the S & L debacle as a regulatory failure. Review of the S & L debacle suggests that regulators failed to manage the deposit insurance system efficiently. But the regulatory agencies' structure appears to have played a secondary role in contributing to regulatory failure. Faced with the same incentives, objectives, and resources, regulators probably would have behaved similarly regardless of the regulatory structure.