Elderly Female-Headed Households and the Decision to Trade Down

Results from the Panel Survey of Income Dynamics show that elderly women appear to be much more circumspect than men about making housing changes. Some of this apparent difference occurs because elderly women have low levels of financial assets. Elderly women also appear to be much more likely than men, when they do move, to dissave out of home equity. Yet what appears on the surface to be a gender difference in the decision to dissave in later life turns out upon closer examination to occur because of divorce and the event of widowhood.     

Information Gathering Externalities for a Multi‐Attribute Good

Most goods and services vary in numerous dimensions. Customers choose to acquire information to assess some characteristics and not others. Their choices affect firms' incentives to invest in quality and so lead to indirect externalities in consumers' choices. We characterize a model in which a monopolist invests in the quality of a product with two characteristics, and consumers are heterogeneous ex‐ante. Consumers do not internalize their influence on the firm's investment incentives when choosing which information to acquire. Cheaper information affects consumers' information gathering and thereby firm investment. This can paradoxically reduce consumer surplus, profits, and welfare.     

Appraisals,Transaction Incentives,and Smoothing

This article is structured around three principal objectives. The first is to determine whether any incentives for appraisals support an underlying purchase offer, which may be termed a transaction bias. Appraisals that are lower than purchase prices could involve additional cost for justification and thus undermine the transaction. The second objective is to test whether appraisal data are smoothed or exhibit less volatility than purchase data. The article compares the volatility of separate appraisal and purchase data. Given separate appraisal and purchase time series, the third objective is to derive the implied optimal appraisal updating rule.The model is applied to appraisal and purchase price indices for 3.7 million repeat transactions on mortgages bought by Fannie Mae and Freddie Mac by using monthly data from January 1975 to December 1993. The estimation procedure uses generalized autoregressive conditioned heteroskedastic (GARCH) analysis to take account of persistence in means and volatility in the house price time series. The article draws three principal conclusions. First, appraisals are systematically higher than purchase data, a first-moment differential. Second, appraisal smoothing does not occur generally. Third, the appraisal updating rule for the United States appears to involve error correction whereby underappraisals from pervious periods are eventually adjusted.     

SMEs’ Financing and Banks’ Profitability: A “Good Date” for Banks in Ghana?

Small and medium enterprises (SMEs) are the core of most economies and are a major source of economic growth. In recent times, banks have been actively involved in the financing of SMEs through the provision of loans to this sector. This paper investigates the impact of SMEs financing on banks’ profitability in Ghana. The study employed the fixed effect model as the main regression tool. The study result reveals that SMEs significantly contribute to banks’ profitability in Ghana. Interestingly, transaction cost in administering SME loans was insignificant in all the models. Higher inflation reduces the real value of the loan and erodes the interest returns on the total credit to the SMEs. Conversely, growth of GDP enhances the growth of the bank profit.     

The announcement impact of seasoned equity offerings on bondholder wealth

Previous studies document a negative return to equity on the announcement of an SEO. However, the effects of SEO announcements on bonds have received little attention. We find that bondholders experience a significant positive return on the announcement of an SEO and this effect is more pronounced for bonds with lower ratings. We examine alternate explanations for bond market reactions to SEO announcements including the leverage risk reduction, wealth transfer, and information signaling hypotheses. Overall, our results are most consistent with the leverage risk reduction hypothesis.     

On the Measurement of Changes in Product Quality in Marginal Intra-Industry Trade

There is a long established thread of the international trade literature concerned with the measurement of intra-industry trade (IIT). Two distinct strands of the literature have developed: First, measures of marginal IIT that are concerned with the adjustment implications of volume-based changes in IIT; second, measures of vertical and horizontal IIT that are concerned with quality-based differences in IIT. This paper marries the two literatures to provide a new perspective on the smooth adjustment hypothesis debate and suggests the use of the marginal product quality index, a new measure of changes in quality in matched trade changes that complements dynamic measures of volume-based IIT. JEL no.  F19     

Antitrust Policy: The Impact of Revenue Penalties on Price

The paper examines the impact on a firm’s price when it faces the possibility of an antitrust investigation and associated potential revenue penalty. As well as presenting a general model of antitrust intervention, an illustrative example reflecting the provisions of the 1998 UK Competition Act is offered, the example being developed to explore the implications of the probability of antitrust intervention and punishment increasing non-linearly as a firm’s profit rises.