R2

Even with hindsight, the ability to explain stock price changes is modest. $R^2$s were calculated for the returns of large stocks as explained by systematic economic influences, by the returns on other stocks in the same industry, and by public firm-specific news events. The average adjusted $R^2$ is only about .35 with monthly data and .20 with daily data. There is little relation between explanatory power and either the firm's size or its industry. There is little improvement in $R^2$ from eliminating all dates surrounding news reports in the financial press. However, the sample kurtosis is quite different when such news events are eliminated, thereby revealing a mixture of return distributions. Non-news dates also indicate the presence of a distributional mixture, perhaps due to traders acting on private information.     

Psychological and Demographic Characteristics as Determinants of Women's Health Insurance Coverage

The study examines the role of demographic and psychological characteristics in determining women's healthcare insurance coverage. To assess the role of these characteristics, data from the National Longitudinal Survey of Labor Market Experience (NLSLME), Young Women's Cohort, were used considering both a married and not married subsample. Overall, the results indicate that in addition to the influence of previously examined demographic characteristics, the role of psychological attributes is substantial particularly for the not married subsample. Findings suggest that in addition to policy aimed at increasing health insurance coverage by way of considering demographic characteristics policy should also consider psychological attributes.     

THE SWEDISH MARKET PRICE APPROACH TO MONETARY POLICY OF THE 1930s

Recently, some analysts have prescribed the combined use of certain market prices as a useful strategy for monetary policy. In light of problems with conventional (time-series) empirical tests of the approach, one may consider an alternative "test" of this strategy: examining historical episodes when the strategy was employed. The Swedish experience during the early 1930s provides one such example. This experience, fathered by Knut Wicksell, is an example of a fiat money-flexible exchange rate regime in which (i) a short-term interest rate was used as a policy instrument, (ii) market prices were used as policy guides or intermediate indicators, and (Hi) price stability was the explicitly voiced goal of monetary policy. Monetary or reserve aggregates were neither proposed nor employed as policy guides or targets in pursuing this price stabilization objective. This Swedish experience is important since it provides a rare example of a market price approach to monetary policy. This paper demonstrates that the approach worked remarkably well.     

Taxing Purchases of Home Tape Recorders and Supplies to Compensate for Copyright Infringements: An Econometric Analysis of the Role of Economic and Demographic Factors

Faced with a sharp decline in sales in the early 1980's, the music industry looked for an explanation which could be converted into windfall gains for itself. The explanation proposed by the industry was increased home taping of prerecorded music. Through the introduction of federal legislation, the industry hoped to realize gains at the expense of the consumer of home taping equipment and media. The analysis presented here indicates that the independent effect of taping on prerecorded music sales may not have been as high as the recording industry has claimed, so that consumers may end up paying more than their fair share toward the windfall.     

Auditor evaluation of loss contingencies*

Abstract. This paper examines the probability judgments made by auditors for their financial statement footnote disclosure decisions and their audit report additional paragraph decisions in the presence of material loss contingencies. In the United States these judgments are governed by SFAS No. 5 and SAS No. 58. Two prior studies have reported inconsistent results pertaining to the degree of compliance of auditors with the judgment and decision-making process implied by SFAS No. 5. In contrast, SAS No. 58 has not previously been examined with respect to auditor compliance. Results from an experiment with 64 audit partners from six firms were consistent with the hypothesis that audit partners employ the same (compensatory) judgment process when making footnote disclosure decisions as when making additional paragraph decisions. This process led the partners to make judgments for the additional paragraph decision that were in accordance with SAS No. 58. In contrast, their judgments for the footnote disclosure decision were consistent with a decision theory model of auditor behavior rather than the noncompensatory process implied by SFAS No. 5. Additional aspects of the study pertain to the additional paragraph decision of auditors. Observed judgments for these decisions are consistent with the hypothesis that additional information is conveyed beyond that provided by only a footnote disclosure. This is contrary to some recent discussions of the standards. Résumé. Les auteurs étudient les jugements relatifs aux probabilités portés par les vérificateurs dans le cadre de leurs décisions relatives à la présentation des pertes éventuelles importantes sous forme de notes infrapaginales dans les états financiers ou de paragraphes supplémentaires dans le rapport des vérificateurs. Aux États-Unis, ces jugements sont régis par le SFAS n^o 5 et le SAS n^o 58. Deux études antérieures ont donné des résultats dissemblables en ce qui a trait à la mesure dans laquelle les vérificateurs se conforment au processus de jugement et de prise de décisions que suppose le SFAS n^o 5. Le respect par les vérificateurs des normes du SAS n^o 58 n'a fait, quant à lui, l'objet d'aucune analyse. Les résultats d'une expérience menée auprès de 64 associés reponsables de la vérification dans six cabinets ont confirmé l'hypothèse selon laquelle les associés responsables de la vérification utilisent le même processus de jugement (compensatoire) lorsqu'ils décident de présenter les pertes éventuelles sous forme de notes infrapaginales que lorsqu'ils optent pour les paragraphes supplémentaires. Ce processus a amené les associés à porter des jugements pour l'ajout de paragraphes supplémentaires conformes au SAS n^o 58. Par opposition, leurs jugements relatifs à la présentation sous forme de notes infrapaginales étaient conformes à un modèle de comportement du vérificateur inspiré de la théorie de la décision plutôt qu'au processus non compensatoire que suppose le SFAS n^o 5. D'autres aspects de l'étude portent sur la décision des vérificateurs relative à l'ajout de paragraphes supplémentaires. Les jugements observés relativement à cette décision sont conformes à l'hypothèse selon laquelle d'autres renseignements sont transmis, outre ceux qui sont fournis par voie de simples notes infrapaginales. Ces résultats viennent contredire certaines analyses récentes portant sur les normes.     

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.