Monotonicity of the (reversed) hazard rate of the (maximum) minimum in bivariate distributions

It is well known that in the case of independent random variables, the (reversed) hazard rate of the (maximum) minimum of two random variables is the sum of the individual (reversed) hazard rates and hence the onotonicity of the (reversed) hazard rate of the marginals is preserved by the monotonicity of the (reversed) hazard rate of the (maximum) minimum. However, for the bivariate distributions this property is not always preserved. In this paper, we study the monotonicity of the (reversed) hazard rate of the (maximum) minimum for two well known families of bivariate distributions viz the Farlie-Gumbel-Morgenstern (FGM) and Sarmanov family. In case of the FGM family, we obtain the (reversed) hazard rate of the (maximum) minimum and provide several examples in some of which the (reversed) hazard rate is monotonic and in others it is non-monotonic. In the case of Sarmanov family the (reversed) hazard rate of the (maximum) minimum may not be expressed in a compact form in general. We consider some examples to illustrate the procedureResearch of the second author is supported by a grant from Natural Sciences and Engineering Research Council and the research of the other two authors is partially supported by a travel grant from the Canadian American Center of the University of Maine     

National Culture and the Valuation of Cash Holdings

Prior studies document that national culture traits are systematically related to cash holdings and attribute this to managerial cultural predispositions. However, it is possible that these preferences reflect investors’ cultural preferences and that managers are simply catering to investors’ preferences. It is also not clear whether the cash holding effects previously documented are value maximizing. By examining the impact of national culture traits on cash valuation, we are able to provide insight into these questions. Specifically, we examine the effect of three national culture traits – individualism, uncertainty avoidance and long‐term orientation – on firm cash valuation. Our results suggest that the previously observed effects of cultural traits on cash holdings and attributed to managerial cultural biases do not reflect investors’ preferences and are not value maximizing.     

The Effects of Relative Changes in CEO Equity Incentives on the Cost of Corporate Debt

We examine how effort and risk incentives embedded in CEO equity incentives are related to the cost of debt and the role credit worthiness plays in this relationship. Our empirical approach addresses a number of unanswered questions in the literature by examining the sources and effects of co‐movements in CEO incentives, whether the proportionality of these movements is rationally priced, and whether the effects are concentrated among bonds with greater likelihood of default. Our findings confirm that effort and risk incentives are rationally priced by bond market participants. We also show that significant cross‐sectional effects are more pronounced for speculative bonds, implying that previously documented links between equity incentives and the cost of debt may not be generalizable to all debt issues.     

Tourism Taxes: Implications for Tourism Demand in the UK

Before one can understand tax implications for the tourism industry, one must understand the sensitivity of tourism demand. Using a recently developed theoretical framework, we model inbound tourism demand in the UK. The results suggest that tourism demand in the UK is very price sensitive and that measures which result in increasing tourism prices will have a significant negative impact on tourist arrivals. It is believed that a reduction in the VAT rate could boost UK's tourism sector, depending on the extent to which a decrease in taxation is passed on in the form of price reductions. The results also suggest that arrivals from neighboring countries are 98% higher than from distant origins; however, expenditure per capita of the former is 52% lower than the latter. We also found that common language between the origin and the destination increases arrivals 7% more than non‐native English‐speaking origins.     

SKEWNESS AND KURTOSIS IN JAPANESE EQUITY RETURNS: EMPIRICAL EVIDENCE

In this paper, the distribution of equity returns on the Tokyo Stock Exchange is examined from 1965 to 1984, and significant and persistent skewness and kurtosis are found. The deviation of security returns from normality declines with increasing portfolio size and appears to be greater than the non-normality evidenced in U.S. security returns. Further, these deviations from normality persist even after controlling for January and firm size effects.     

SOCIAL ACCOUNTS AND THE DISTRIBUTION OF INCOME: THE MALAYSIAN ECONOMY IN 1970

Although the functional and institutional distributions of income are integrally connected to individual living standards and other development policy objectives, these dimensions are rarely given prominence or even accommodated within standard national accounting frameworks. This paper summarizes research on the estimation of a social accounting matrix (SAM) for Malaysia for 1970 in which the distribution of income between different factors and socio-economic groups is identified. It is the latest of a series of case studies involving some of the authors and is, perhaps, the most detailed of its kind. The study departs from the United Nations SNA guidelines at various points. The SNA basically proposes a commodity balance approach to national income accounting. In giving equal emphasis to income/outlay accounts as to the production accounts, the present study has brought together data from two major primary sources: a household expenditure survey and a production survey. Their combination poses several problems which are discussed in the paper. It leads to an integrated picture, in matrix form, of the interrelationships between income distribution and production structure in the Malaysian economy. Both the factor and household accounts in our SAM are disaggregated according to race and the geographic distinction between Peninsular and East Malaysia, with an urban/rural split within Peninsula Malaysia. The Peninsula labor force is further disaggregated by education level, while its households are then subdivided according to the employment status of main income earners. Arguments for and against these choices are presented. Some other aspects of the study can be noted. First, the distinction drawn between East and Peninsular Malaysia is desirable not only because of the inherent interest of the regions but also because of large differences in data availability and hence in estimation methods. Secondly, to complete our SAM it was necessary to estimate inter-household transfers, being the institutional analogue of inter-industry commodity flow. And finally an attempt has been made to impute the labor component of unincorporated business income. These, then, are the major problems which had to be overcome in our attempt to quantify the generation, distribution, and redistribution of income within Malaysia in a SAM framework.     

The case for debt-forgiveness for Latin America and the Caribbean countries

Resource transfer to Latin America and the Caribbean was negative throughouthe eighties. Debt-forgiveness would benefit not only the debtor countries, however. Lending countries and institutions would also stand to gain.     

How long to eat a cake of unknown size? Optimal time horizon under uncertainty

This paper is concerned with the determination of the optimal time horizon for the cake–eating problem under uncertainty. It is shown that if the uncertain exhaustible resource stock is a discrete random variable admitting at most a finite number of values, the optimal planning horizon is infinite (finite) according as the marginal utility of extraction–cum–consumption is infinite (a finite positive value) as the latter approaches zero, thereby extending the scope of the similar result under perfect certainty. Other results show that uncertainty will generally lengthen the planning horizon, implying a more conservative extraction policy under uncertainty, and that the extraction policy aimed at extracting an amount equal to the expected value of the uncertain resource stock takes longer than the expected value of the optimal planning horizon. JEL Classification: D81 and Q31 Combien de temps pour manger un gâteau de taille inconnue? L’horizon temporel optimal en régime d’incertitude. Ce mémoire s’attaque à la détermination de l’horizon temporel optimal dans le cas du problème du gâteau–à–manger en régime d’incertitude. On montre que si le stock incertain de la ressource épuisable est une variable aléatoire discontinue qui ne peut prendre qu’un nombre fini de valeurs, l’horizon temporel est infini (fini) selon que l’utilité marginale de l’extraction–cum–consommation est infinie (prend une value finie positive) quand celle–ci approche zéro, et ce faisant élargit la portée d’un résultat similaire obtenu en régime de certitude parfaite. D’autres résultats montrent que l’incertitude accroît généralement l’horizon temporel, ce qui suggère qu’une politique d’extraction plus conservatrice va prévaloir en régime d’incertitude, et que la politique d’extraction visant à extraire une quantitéégale à la valeur anticipée d’un stock de ressource incertain prend plus de temps que la valeur anticipée de l’horizon temporel optimal.     

DEALER BID-ASK SPREADS AND OPTIONS TRADING ON OVER-THE-COUNTER STOCKS

In this study the impact of option listings on bid-ask spreads for over-the-counter stocks is examined. Option listings are hypothesized to impact spreads by affecting the inventory-holding cost and/or the informed risk component of spreads. Univariate tests reveal that the commencement of options trading is accompanied by a statistically significant decline in percentage spreads. In addition, it is found that there is a significant rise in the average daily stock trading volume in the post-option-listing period, while there is no significant change in variance of the underlying stock returns in the short term. Regression results indicate that some stocks experience a decline in spreads even after controlling for changes in inventory-holding costs. The univariate and regression results taken in conjunction indicate a favorable impact of option listings on both the inventory-holding cost and informed-trading risk components of spread determinants. The combined evidence suggests that initiation of options trading enhances the overall liquidity of the underlying stock.