Economic Guidelines for Land and Water Resource use in Agriculture*

This paper presents conceptual and some empirical information concerning natural resource use and demand for natural resources in Canada. The framework for land and water use establishes the predominance of a varying array of factors in decisions on land as compared with water use. In both cases, however, a need is seen for new efforts in studying recreational demands for natural resources and for further study and efforts devoted to preserving and improving the natural environment. LIGNES ÉCONOMIQUES DIRECTRICES SUR L'EMPLOI DES TERRES ET DE L'EAU EN AGRICULTURE–Ce mémoire présente des renseignements conceptuels et parfois empiriques sur l'utilisation et la demande des ressources naturelles au Canada. La structure pour l'emploi dés terres et de l'eau établit la prédominance d'une gamme variée de facteurs dans les décisions concernant l'utilisation des terres par rapport à l'emploi de l'eau. Dans les deux cas, toutefois, on prévoit un besoin de nouveaux efforts vers létude des demandes récréative en ressources naturelles et d'etudes et d'efforts plus approfondis consacrés à la préservation et l'amélioration de Vambiance naturelle.     

Price Clustering Asymmetries in Limit Order Flows

We explore the relation between limit order price clustering and price efficiency. We find that executed sell limit orders cluster more frequently on round increments than buy limit orders and that this asymmetry in clustering is consistent with the well‐documented asymmetry in price response to marketable orders. In addition, we find that the degree of clustering is positively related to volatility and that asymmetry in clustering depends on whether stock prices are rising or falling—sell limit orders cluster more frequently as prices are rising, although buy limit orders cluster more as prices are declining. Our results indicate that predictable patterns in limit order pricing contribute to short‐run deviations from price efficiency.     

Federal Home Loan Bank advances and bank risk

The Federal Home Loan Bank system (FHLB) has evolved into a major source of liquidity for the banking system with the demonstrated ability to borrow over a trillion dollars in world financial markets based on an implied U. S. Treasury guarantee. The FHLB loans the borrowed funds to commercial banks at reduced rates that are not adjusted for the risk of an individual bank. Moral hazard could cause member banks using FHLB loans to increase financial leverage and exposure to high risk assets. Conversely, the FHLB offers banks additional liquidity and specialized debt instruments that help them manage interest rate risk. We use dynamic panel generalized method of moments estimation to test the relation between FHLB advances and bank risk. We find that if banks have relatively normal default probabilities, advances are not associated with increased bank risk but, instead, advances are related to decreased interest rate risk. However, when bank default probabilities are high, our evidence suggests advances and higher bank risk are related.     

Reputation and investor activism: A structural approach

We measure the impact of reputation for proxy fighting on investor activism by estimating a dynamic model in which activists engage a sequence of target firms. Our estimation produces an evolving reputation measure for each activist and quantifies its impact on campaign frequency and outcomes. We find that high reputation activists initiate 3.5 times as many campaigns and extract 85% more settlements from targets, and that reputation-building incentives explain 20% of campaign initiations and 19% of proxy fights. Our estimates indicate these reputation effects combine to nearly double the value that activism adds for target shareholders.     

FORECASTING DISCONNECTED EXCHANGE RATES

The inability of empirical models to forecast exchange rates has given rise to the belief that exchange rates are disconnected from macroeconomic fundamentals. This paper addresses the potential disconnect by endogenously selecting forecast models from a broad set of fundamentals. The procedure shows that exchange rates are not disconnected from fundamentals, but fundamentals vary in their predictive content at different forecast horizons and for different currencies. Performing model selection out‐of‐sample is challenging. At short horizons, the method cannot outperform a random walk, although the performance is improved at long horizons. These findings are confirmed across currencies and forecast evaluation methods. Copyright © 2013 John Wiley & Sons, Ltd.     

Financial models with defaultable numéraires

Financial models are studied where each asset may potentially lose value relative to any other. Conditioning on nondevaluation, each asset can serve as proper numéraire and classical valuation rules can be formulated. It is shown when and how these local valuation rules can be aggregated to obtain global arbitrage‐free valuation formulas.     

Indian farmers’ valuation of yield distributions: Will poor farmers value ‘pro-poor’ seeds?

Potential poverty traps among the rural poor suggest a need to reduce poor farmers’ vulnerability by stabilizing crop yields and limiting yield losses. Advances in biotechnology will help address this need directly with crops that tolerate climate fluctuation or resist biotic stresses. Evaluating ex ante how farmers will value these ‘pro-poor’ seeds is important for delivery design, but also challenging. This paper describes an experimental economic approach to understanding farmers’ valuation of such seeds. Using data from a survey and experiment, I assess Indian farmers’ valuation of changes in the mean, variance, and skewness of payoff distributions. These farmers value increases in expected value, but seem indifferent about higher moment changes in payoff distributions. Farmer traits such as wealth and risk exposure affect their valuation of these changes only mildly. While various limitations to the experimental approach must qualify practical implications of these findings, the experiment demonstrates the viability of conducting valuation experiments with open-ended questions in developing countries.     

Off Track: The Disappearance of Tracking Stocks

During the two decades following the first announcement of a tracking stock issue by General Motors in 1984, over 50 new tracking stocks were created. The value of a tracking stock is supposed to reflect the performance of a division or operation of a firm, but does not have a direct claim on the division's assets or income. The voting rights of the tracking stock are only for the parent corporation, with no direct voting rights for the tracked division. The claimed benefits of issuing tracking stock include the use of internal capital markets, additional disclosure of the firm's operations, reduction of agency costs, the ability to directly compensate divisional management on performance, and greater analyst following and liquidity. But the last new issue of a tracking stock took place in 2001. And few, if any, tracking stocks still trade. This study examines how and why tracking stocks have largely stopped being issued, and why so many have been dissolved either through exchanges of shares, or sales or spin‐offs of the business units with tracking stock.