The Conditional Relationship Between Beta and Returns: A Reassessment

Abstract:  Several recent empirical tests of the Capital Asset Pricing Model have been based on the conditional relationship between betas and market returns. This paper shows that this method needs reconsideration. An adjusted version of this test is presented. It is then demonstrated that the adjusted technique has similar, or lower, power to the more easily implemented CAPM test of Fama and MacBeth (1973) if returns are normally distributed.     

Can price regulation increase cost-efficiency?

This paper examines the possibility that price regulation increases a monopolist's cost-efficiency. When the firm's choice of cost-reducing effort depends on the output supplied, a binding price-cap, by compelling the monopolist to produce more, results in lower costs. On the basis of a two-period asymmetric information model, the paper demonstrates that price regulation increases efficiency when the elasticity of demand is sufficiently low, even assuming very conservative preferences of the regulator and asymmetric information. Moreover, contrary to previous findings and conventional wisdom, we find that a periodical rate base review may increase productive efficiency through the positive effect on future cost-reducing effort, counterbalancing its well known adverse effect on the current level of effort.     

A simple test of the effect of interest rate defense

High interest rates to defend the exchange rate signal that a government is committed to fixed exchange rates, but may also signal weak fundamentals. We test the effectiveness of the interest rate defense by disaggregating into the effects on future interest rates differentials, expectations of future exchange rates, and risk premia. While much previous empirical work has been inconclusive due to offsetting effects, tests that “disaggregate” the effects provide significant information. Raising overnight interest rates strengthens the exchange rate over the short-term, but also leads to an expected depreciation at a horizon of a year and longer and an increase in the risk premium, consistent with the argument that it also signals weak fundamentals. J. Japanese Int. Economies 20 (4) (2006) 612–636.     

Exchange rate exposure

In this paper we examine the relationship between exchange rate movements and firm value. We estimate the exchange rate exposure of publicly listed firms in a sample of eight (non-US) industrialized and emerging markets. We find that exchange rate movements do matter for a significant fraction of firms, though which firms are affected and the direction of exposure depends on the specific exchange rate and varies over time, suggesting that firms dynamically adjust their behavior in response to exchange rate risk. Exposure is correlated with firm size, multinational status, foreign sales, international assets, and competitiveness and trade at the industry level.     

Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues*

Abstract. In this paper, we present an overview of a number of issues relating to the equilibrium exchange rates of transition economies of the former soviet bloc. In particular, we present a critical overview of the various methods available for calculating equilibrium exchange rates and discuss how useful they are likely to be for the transition economies. Amongst our findings is the result that the trend appreciation usually observed for the exchange rates of these economies is affected by factors other than the usual Balassa–Samuelson effect, such as the behaviour of the real exchange rate of the open sector and regulated prices. We then consider three main sources of uncertainty relating to the implementation of an equilibrium exchange rate model, namely: differences in the theoretical underpinnings, differences in the econometric estimation techniques, and differences relating to the time‐series and cross‐sectional dimensions of the data. The ensuing three‐dimensional space of real misalignments is probably a useful tool in determining the direction of a possible misalignment rather than its precise size.     

Do Financial Market Variables Show Indicator Properties Relative to Exchange Rate Returns?

This paper assesses the contemporaneous indicator properties of financial market variables relative to movements in six major developed country currency pairs. As indicator variables changes in various relative asset prices, short-term portfolio flows and currency options data are used. We find that changes in equity index differentials, short-term speculative flows and risk reversals on currency options prices exhibit consistent indicator properties for several currency pairs. Since 1999, changes in short-term interest rate differentials have gained importance as indicators. The best indicator variables explain over 50 per cent of monthly returns of the USD/EUR and GBP/USD exchange rates and over 60 per cent of the appreciation and depreciation episodes of the USD/EUR and JPY/EUR currency pairs. JEL no. F31, F32, G15, C35     

我国电信业互联互通的接入定价研究

制定合理的接入定价是实现有效互联互通的经济基础。有效的接入定价应达到促进竞争、促进关键设施的有效利用、鼓励网络内部和不同网络之间互联互通的目标。中国目前应选择以长期增量成本为基础的接入定价模式。     

节约型经济流程的基础与条件

本文基于虚拟交换前置，探索资源节约型经济流程实现的基础与可能。通过信息资源对自然资源的替代，减少生产环节之前和生产过程中对资源的无谓消耗，避免大规模生产条件下盲目竞争导致的产品过剩问题，实现微观领域的产销平衡和宏观领域的总供需平衡。要达到这一点，必须转变经济流程，即通过信息资源替代物质资源，使交换在生产之前发生；而经济流程转变的关系在于信任的治理和对机会主义的控制。     

对我国进一步扩大就业的思考

扩大就业是执政为民的第一要务，政府是扩大就业的第一责任人，应把促进就业作为经济发展的基本优先目标。     

Invoicing currency and the optimal basket peg for East Asia: Analysis using a new open economy macroeconomic model

An important characteristic of trade in Asia is that the US dollar is the dominant invoicing currency. This fact might have a consequence on the region's choice of the currency regime. To investigate this possibility, I develop a three country “new open economy macroeconomics” model that consists of East Asia, Japan, and the US. Assuming that East Asia pegs its currency to a basket of the other two's currencies, the optimal basket weights are derived numerically. It is shown that the weights under a realistic invoicing pattern are drastically different from those in the textbook case of “producer currency pricing.” J. Japanese Int. Economies 20 (4) (2006) 569–589.