Heterogeneous Expectations,Short Sales Regulation,and the Risk-Return Relationship

This paper examines, in a Canadian context, the effect of short sales regulation on the risk-return relationship. It shows that, theoretically, the opportunity cost induced by short sales regulation is positively related to the dispersion of agents' beliefs and negatively related to the security's liquidity level. The model is tested over the sixty-month period from January 1985 through December 1989. All the 13,079 observations are pooled into a time series cross-sectional model. The results corroborate that a negative linear relationship links expected risky asset returns and the divergence of agents' beliefs. This negative relationship is consistent with the presence of opportunity costs resulting from short sales regulation when return beliefs are heterogeneous. However, the negative relationship between security returns and dispersion of beliefs is essentially confined to illiquid securities, that is, those monitored by a small number of analysts.     

A particular class of continuous-time stochastic growth models

This paper generalizes to uncertaintly the neoclassical one-sector model by transforming the basic differential equation on the capital labor ratio into a “stochastic” differential equation. The capital-labor ratio and related economic variables become random variables whose probability distributions vary with time, and the paper is focused on the existence of a steady state denfined by the (probabilistic) stationarity of these variables. An application of the results is given for a specific example with a Cobb-Douglas production function and uncertainty on the saving coefficient, the labor-force rate of growth, and the capital depreciation rate.     

Stability analysis of an effluent charge and the ‘polluters pay’ principle

In a pure exchange economy with two private commodities and one collective externality, a non-tâtonnement process is formulated, which yields a rule for adjusting an effluent charge of the Pigovian type from the level zero (at a laissez-faire equilibrium) up to a level that sustains an optimum. Besides convergence (Theorem 3) and monotonous decrease of the externality (Theorem 2) along a continuous path of price equilibria (Theorem 1), the paper analyses the distributional implications of alternative redistribution schemes for the proceeds of the charge. Various interpretations of the ‘polluters pay’ principle are discussed in conjunction with property rights.     

Does securities regulation constrain small business finance? An empirical analysis

In November 2001, the Canadian province of Ontario amended the private placement regulations considerably to facilitate access to equity financing by small and medium sized enterprises (SMEs). To determine the extent to which securities regulation is an effective constraint on financing of growth corporations, we analyze issue activity before and after this change took effect. We note an increase in the number of issues, but only a slight increase in the total amounts raised on the private market following the reform. The average size of the issues has thus decreased. Some of the observed changes can be traced to concurrent events, namely the burst of the technology bubble and the strong increase in the prices of natural resources, which represent a major sector in Canada. When we control for various factors that influence issue activity, we observe a statistically significant effect only on the number of issues by closed corporations, which seems to originate from the non-resource companies. These results do not rule out the conclusion that the reform eased the issue of small amounts of money by private companies. However, our results do not confirm the argument that securities regulation is a major constraint to small business finance.

Social orderings for the assignment of indivisible objects

In the assignment problem of indivisible objects with money, we study social ordering functions which satisfy the requirement that social orderings should be independent of changes in preferences over infeasible bundles. We combine this axiom with efficiency, consistency and equity axioms. Our result is that the only social ordering function satisfying those axioms is the leximin function in money utility.     

Freedom of choice between unitary and two-tier boards: An empirical analysis

We examine board structure in France, which since 1966 has allowed firms the freedom to choose between unitary and two-tier boards. We analyze how this choice relates to characteristics of the firm and its environment. Firms with severe asymmetric information tend to opt for unitary boards; firms with a potential for private benefits extraction tend to adopt two-tier boards. Chief executive officer turnover is more sensitive to performance at firms with two-tier boards, indicating greater monitoring. Our results are broadly consistent with the Adams and Ferreira (2007) model and suggest that gains result from allowing freedom of contract about board structure.     

An econometric analysis of U.S. vital wheat gluten imports

In light of the wheat wet milling industry's development in the E.C. and of the prominent role U.S imports play in the international market for wheat gluten, this paper discusses the international market for wheat gluten, an important component of processed grain products. An econometric analysis of the U.S. import demand for wheat gluten is undertaken. The price of flour, income, and the U.S. value of wheat protein are found to be important determinants of wheat gluten imports.