Canada's Dual Class Shares: Further Evidence on the Market Value of Cash Dividends

The Canada Income Tax Act of 1971 permitted Canadian corporations to create two classes of equity, one paying ordinary cash income and the other paying capital gains income. Cash-paying shares have often sold at a premium. Empirical results indicate that the premium is largely explained by the relative value of the dividends paid and by costs imposed on investors by stock dividend payment and share conversion procedures. Premiums for a few firms also reflect the relative liquidity of the two classes of shares. No evidence exists that investors prefer cash income to equal amounts of capital gains.     

An Empirical Investigation of the Market for Comex Gold Futures Options

Option-pricing models that assume a constant interest rate may misprice futures options if the interest rate fluctuates significantly or if the price of the underlying asset is correlated with the interest rate. The futures option-pricing model of Ramaswamy and Sundaresan allows for a stochastic interest rate and correlation of the underlying asset's price with the interest rate. Using a data set of daily closing prices for Comex gold futures options, this paper tests the Ramaswamy and Sundaresan model against a constant interest rate model. Results indicate that the stochastic interest rate model is a superior predictor of market prices.     

A Simple Model of Recent Changes in the Residential Property Market*

A simple model of the Australian residential property market incorporating two form of tenure, owner occupation and renting, is developed. While the supply of housing services is common to both tenures, the demands of tenants and owner occupiers are independent and separate. The equilibrium values of rental and house prices are determined simultaneously in the two sectors. The model is then used to qualitatively assess the likely effects on rents and house prices of some important elements of the September 1985 tax package.     

Market Value Accounting in the Financial Services Sector

The past decade witnessed a deregulatory programme in Australia's financial sector. Market valuation of assets and liabilities has been required as a complement to historical costs in some cases, in others market values substitute for them. Interest in issues arising with market values has been heightened by the exposure draft on financial investments issued by the Australian Accounting Research Foundation in 1993. This article argues that the market valuation proposals offered in Exposure Draft 59 have not been argued effectively and explained sufficiently to secure their implementation.     

Insider Trading: Implications and Responses

An understanding of the implications of insider trading can only be achieved by analysing conflicting perceptions of what is meant by inside or privileged information. Empirical evidence on insider trading, mainly reflecting United States experiences, challenges assumptions not only about the impact of insider trading but also the efficiency of financial markets. There are hierarchies of market participants and rules on insider trading capable of practical implementation will only change the rankings. Companies have a property interest in their inside information and should bear the responsibility for its use.     

The Weekend Eurodollar Game

A growing number of large U.S. banks have used artificial Eurodollar transactions in connection with the heavier weighting of Fridays in the calculation of required reserves to significantly reduce the impact on them of that requirement. This reserve avoidance behavior bestows an unintended and inequitable benefit on those banks engaging in it, unnecessarily increases risks from credit exposures and potentially distorts money stock measures. The incentive for this activity and hence its practice can best be removed by paying interest on required reserves or weighting Fridays equally with all other business days in the reserve requirement calculations.