INFORMATION ASYMMETRY AND OPTIONS TRADING

This paper demonstrates that options trading does not have a uniform impact on the volatility of underlying stocks. Although uninformed traders are able to hedge the risk of underlying stocks by maintaining opposite positions in the options market, informed traders hold outright options positions to capitalize on their information. This hedging behavior tends to reduce noise in the stock market, whereas the speculating behavior tends to generate noise in the stock market. As a result, stocks that were originally volatile, i.e., traded primarily by uninformed traders, will be stabilized by the introduction of options. Conversely, stocks that were more stable become destabilized by options trading.     

Residents’ perspectives of a newly developed ecotourism project: an assessment of effectiveness through the lens of an importance–performance analysis

Understanding the perceived importance and performance of various components of ecotourism to residents living in the area it is undertaken is crucial to the overall success of an ecotourism development project. This study examines residents’ perceptions of the importance and performance of ecotourism components (i.e. environmental conservation, economic wellbeing, promotion of local arts and culture, local participation, and fair share of resources), including overall ecotourism development, at the Gaurishankar Conservation Area (GCA) – a recently implemented ecotourism development project in Nepal. This study also examines the effect of socio-demographic, economic, and psychological factors on a perceived gap between the importance and the performance of ecotourism components. Findings suggest that the ecotourism development project at the GCA should concentrate on improving the economic wellbeing of residents, and on overall ecotourism development. Findings also suggest that residents’ inclusion in benefit-sharing mechanisms was associated with a reduced perceived gap between the importance and performance of ecotourism components. A comparison among different geographical segments of residents indicated that the perceived gap between importance and performance varies across different locations.     

CEO Stock Options and Equity Risk Incentives

Abstract:   We test the hypothesis that the risk incentive effects of CEO stock option grants motivate managers to take on more risk than they would otherwise. Using a sample of mergers we document that the ratio of post‐ to pre‐merger stock return variance is positively related to the risk incentive effect of CEO stock option compensation but this relationship is conditioned on firm size, with firm size having a moderating effect on the risk incentive effect of stock options. Using a broader time‐series cross‐sectional sample of firms we find a strong positive relationship between CEO risk incentive embedded in the stock options and subsequent equity return volatility. As in the case of the merger sample, this relationship is stronger for smaller firms.     

Debt problems of developing countries

Much concern has been expressed in recent years over the mounting debt burden of developing countries. The increasing amounts of loans and their hardening terms have in many cases led to external debt servicing problems of alarming magnitudes. The following contribution addresses itself to evaluating these problems.     

Integration and underdevelopment in the Commonwealth Caribbean

While the integration process in the Caribbean Community and Common Market (Caricom) has only been in force for a few years, it is, in the author’s view, clear that the narrow free trade approach used so far will not be able to deal with the widening gap between the better-off and the less well-off member states or to provide a solution to fundamental problems facing the region as a whole.     

THE DIVIDEND PAYOUTS OF PRIVATE FIRMS: EVIDENCE FROM TAX COURT DECISIONS

To study the dividend payouts of private firms we extend the agency cost/external financing cost trade-off model of dividend payouts to include the accumulated earnings tax (AET). The firm's optimal dividend policy trades off the benefits from lower agency costs against external financing costs and the AET. Information from tax court records reveals that private firms' payouts are influenced by both agency costs and the AET.     

Estimation of catastrophic quantities of toxic chemicals by atmospheric dispersion modeling

In response to the Bhopal disaster and several repeated chemical releases (even though of less dangerous magnitude) in New Jersey, the state of New Jersey passed a bill on January 8, 1986, which is aimed at the prevention of such catastrophic releases in the state. This bill is officially referred to as the Toxic Catastrophe Prevention Act (TCPA). The TCPA identified eleven specific Extraordinarily Hazardous Substances (EHS). Table 1 lists these eleven EHS identified in the Act and their reportable quantities. The TCPA aims at the prevention of the release of these EHS into the environment. The Legislature did not provide the basis and background of the development of the reportable quantities of these eleven EHS. The TCPA mandates that the New Jersey Department of Environmental Protection (NJDEP) shall expand the list of these EHS and shall “… correlate the substances with the quantities required to produce the potentially catastrophic circumstances.”