Do Daily Price Limits Act as Magnets? The Case of Treasury Bond Futures

This article examines price behavior in the U.S. Treasury bond futures market in the mornings after large overnight price moves, using data from 1980 to 1987. The article tests whether price behavior is affected by proximity to a price limit, and whether the effect is a magnet effect or a calming effect. In that period, the price tends to reverse direction after the morning open, and the reversal appears to reflect a calming effect of the price being close to the limit. An alternative hypothesis—that morning price behavior reflects the overnight price change rather than proximity to the price limit per se—is also tested, and does not perform as well in explaining price behavior.     

The Link Between Gasoline Prices and Vehicle Sales

This paper examines the link between fuel prices and sales of cars and trucks. U.S. automakers have long denied that such a link exists. One source of this false belief is an obsession with the crude count of units sold, equating Hummers with Minis. Another source is the conventional “wisdom” that Americans are unwilling to pay for fuel economy. The paper presents theoretical reasons and market evidence that refute Detroit’s conventional wisdom. American manufacturers’ reaction to rising fuel prices over the last few years revealed the shortcomings of the U.S. automakers’ recent product and powertrain strategies. The effect of rising fuel prices has, in effect, been offset by reducing prices of vehicles in inverse proportion to fuel economy. Thus, unit sales of large SUVs could be maintained, but their revenue (and profit) fell because vehicle prices were cut, directly or indirectly. The paper concludes with a few practical guidelines that business economists should use to prevent their companies from experiencing the recent massive losses experienced by the U.S. automobile industry. JEL Classification D120     

Alternative Lending Channels and the Crisis in U.S. Housing Markets

To what degree has the development of alternative mortgage funding channels promoted the recent boom and bust in U.S. housing markets? Past research examined whether Alt‐A and subprime market shares are correlated with the housing bubble. This article expands the analysis to include the share of specific “alternative” lending terms and finds that the shares of interest‐only and negative amortization loans are important factors in explaining the housing bubble. This result suggests that research on the housing market bubble should focus on the impacts of loan contract terms rather than loan channel.     

Organisational and professional commitment of early career accountants: do mentoring and organisational ethical climate matter?

This study assesses the effects of mentoring and organisational ethical climate (OEC) on the organisational and professional commitment (PC) of early career accountants (ECAs) (i.e. accounting graduate recruits with three or less years of working experience). The empirical data are based on a questionnaire survey from 86 ECAs in Australian public accounting firms, and hypothesis testing utilises partial least squares analysis. Our results indicate when a career development style of mentoring is adopted there is greater organisational as well as PC. By contrast, a social support mentoring style has no significant impact on organisational commitment (OC) and a negative effect on PC. Further, our data also reveal OEC to be positively associated with OC, and OC in turn having a positive impact on PC. The results imply that fostering a career‐focused mentoring environment and an OEC can increase an ECA's OC and PC. These results have various implications for human resource management at both the accounting firm and professional levels.     

Hubris and Unethical Decision Making: The Tragedy of the Uncommon

The research theorizes how hubris impacts ethical decision making and develops empirical evidence that earnings manipulation is more likely at firms led by CEOs influenced by hubris. The theory posits that hubris impairs moral awareness by causing decision makers to ignore external factors that otherwise drive such awareness. Additionally, these individuals apply a flawed subjective assessment of the decision they face which further impairs moral awareness. The predicted result is that hubris leads managers to invoke an amoral decision process which causes a higher incidence of unethical behavior among these individuals. An empirical study investigates the relationship between CEO hubris and the unethical practice of earnings manipulation. This study finds a significant correlation between CEO hubris and earnings manipulation at the firms they lead, an outcome broadly consistent with the theory developed.     

Substance Abuse Treatment and Motor Vehicle Fatalities

The danger of alcohol‐ and drug‐impaired driving implies that policies that reduce substance abuse can save lives. We study this issue in small U.S. counties where access to substance abuse treatment can be measured directly through the presence of treatment facilities. We find that placing an additional treatment clinic in a county reduces the number of alcohol‐related motor vehicle fatalities by 15%. An additional outpatient clinic, which specializes in treating the local population, reduces the overall number of alcohol‐related deaths by 26%. In the counties that we study, this reduction in alcohol‐related accidents saves 0.66 lives per county per year.     

Markov switching in disaggregate unemployment rates

We develop a dynamic factor model with Markov switching to examine secular and business cycle fluctuations in the U.S. unemployment rates. We extract the common dynamics amongst unemployment rates disaggregated for 7 age groups. The framework allows analysis of the contribution of demographic factors to secular changes in unemployment rates. In addition, it allows examination of the separate contribution of changes due to asymmetric business cycle fluctuations. We find strong evidence in favor of the common factor and of the switching between high and low unemployment rate regimes. We also find that demographic adjustments can account for a great deal of secular changes in the unemployment rates, particularly the abrupt increase in the 1970s and 1980s and the subsequent decrease in the last 18 years. First Version Received: December 2000/Final Version Received: June 2001     

The Role of Payout Ratio in the Relationship Between Stock Returns and Dividend Yield

Abstract:   This paper examines the relationship between returns and dividend yield in the UK stock market, and introduces earnings‐related data to the asset pricing model in the form of payout ratio. The latter has a considerable effect upon the inferences which would otherwise be drawn from a study of the dividend yield‐returns relationship in the absence of such earnings information. Payout ratio conveys additional signalling information and is an important adjunct to dividend yield in explaining returns.     

Social welfare optimization with tastes as variables

Zusammenfassung Wohlfahrtsoptimierung mit variablen Pr?ferenzen. — Es wird die M?glichkeit direkter Wohlfahrtsvergleiche bei unterschiedlichen Pr?-ferenzen von Individuen und Gesellschaften erkl?rt. In diesem Rahmen ist es m?g-lich, sowohl in bezug auf individuelle Pr?ferenzen als auch in bezug auf gesellschaft-liche Situationen zu optimieren. Beispiele aus der Politik werden angeführt, und eine nützliche Systematik theoretischer F?lle wird vorgeschlagen. Geeignete Instrumente einer geometrischen Analyse für ein einfaches Standard-modell mit zwei Personen, normalen Indifferenzkurven für zwei Güter und den üblichen Beschr?nkungen der Produktion durch Ressourcen und den Stand der Technik werden entwickelt. Es wird gezeigt, daβ die Standardanalyse ein relevanter Unter-fall ist. Darauf folgen die Hauptmodifikationen, die wegen zus?tzlicher Neben-bedingungen in bezug auf Produktion und Konsum, nicht vollst?ndiger Ver?nder-barkeit oder gegenseitiger Abh?ngigkeit der Pr?ferenzen erforderlich sind. Die Wohl-fahrtseffekte exogener Geschmacks?nderungen k?nnen auch bestimmt werden.

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Résumé L’optimisation de ?welfare? social avec des go?ts comme variables. — Nous expliquons les idées des comparaisons directes de ?welfare? sur des possibles relations différentes de préférence pour chaque individu et société. En ce contexte il est possible d’optimiser sur des go?ts aussi bien que sur des états sociaux. Nous donnons des exemples politiques et proposons une taxonomie utile des cas théoriques. Nous développons des outils géométriques appropriés pour un simple modèle standard de deux personnes avec des courbes d’indifférence ordinaires pour deux produits et seulement les restrictions normales des resources et de la technologie concernant la production. Nous démontrons que l’analyse standard est inclue et apparait comme toujours importante. Nous continuons avec des modifications princi-pales étant nécessaires à cause des restrictions additionelles concernant la produc-tion et la consommation ou à cause d’une variabilité des go?ts moins que complète ou d’une dépendance des go?ts. Nous pouvons aussi déterminer les ?welfare? effets des changes exogènes des go?ts.

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Resumen Optimización del bienestar social utilizando los gustos como variables.-Se explica la idea de las comparaciones de bienestar directas a través de diferentes relaciones de preferencia posibles para cada individuo y para la sociedad. En este contexto es posible optimizar a través de gustos como también a través de gustos sociales. Se dan ejemplos de políticas y se propone una taxonomía útil de casos teóricos. Se desarrollan herramientas de análisis geométricas apropiadas para el modelo standard simple de dos personas con curvas de indiferencia ordinarias para dos bienes y solamente la limitation usual de recursos y tecnología sobre la productión. La inclusión del análisis standard se considera aún relevante. Este análisis es seguido por las modificaciones principales requeridas por limitaciones adicionales sobre la productión y el consumo, o una variabilidad menos que completa de los gustos, o una dependencia de los gustos. También se puede determinar el efecto de bienestar de cambios exógenos en los gustos.

     

Global developments in the competition for land from biofuels

The potential global demand for biofuels and the implications of this for land use and its interaction with food agriculture is reviewed. It is expected that biofuels will form an important element of global transport energy mix (in the order of 20–30% of total requirement) over the next 40 years and beyond. Over this time, there will be a transition from so called first generation biofuels, based on commodity agricultural crops with food/feed uses, to advanced biofuels, sometimes called second and third generation biofuels, based primarily upon lignocellulosic feedstocks. It remains unclear whether these advanced biofuels, based on lignocellulosic materials, will entirely replace first generation or if second generation will be supplemental to first generation. This expansion in biofuels will be coupled to a substantial increase in alternative fuels (electricity, hydrogen, biogas and natural gas) and modal shifts. Biofuel production from agricultural commodity crops that exhibit strong sustainability criteria will remain important (e.g. sugarcane) with supportive and competitive aspects for food security.Land requirement projections estimated for a range of potential biofuel development trajectories range widely and are inherently uncertain. Under the most active scenario that delivers substantive greenhouse gas reductions in transport by 2050 (relative to 2005 levels), approximately 100 Mha of additional land is projected. In the ‘business-as-usual’ scenario, in which transport energy demand rises by 80% by 2050 from present levels, a land use requirement of 650 Mha is projected.Significant potential exists for producing biofuels that possess high productivity and sustainability profiles through continued research, development and demonstration. Policy and regulation at a global level, that focuses biofuel development on these goals in ways that are synergistic with food agriculture, will simultaneously help to decarbonise transport and maintain a diverse and financially robust agricultural (and forestry) sector.