This paper investigates the effect of changes in health status on household financial wealth and financial portfolio choice. It is shown that the impact of health events on household financial and non-financial wealth is asymmetric. A diagnosis of a new disease leads to a larger decrease in financial wealth than in non-financial wealth. Moreover, we find that the puzzle pertaining to the relationship between health status and portfolio choice discussed in the extant literature generally disappears after controlling for differences in the amount of financial assets held by healthy and sick people. The results suggest that the effect of changes in health status on household financial portfolios is indirect. A health shock significantly reduces household total financial wealth, in turn leading households to restructure the composition of their financial assets.

This paper compares the performance of mutual funds managed by publicly-traded management companies with those managed by private management companies. We find that publicly-traded management companies invest in riskier assets and charge higher management fees relative to the funds managed by private management companies. At the same time, however, the risk-adjusted returns of the mutual funds managed by publicly-traded management companies do not appear to outperform those of the mutual funds managed by private management companies. This finding is consistent with both the risk reduction and agency cost arguments that have been made in the literature.

This paper examines the relationship between the fees charged by mutual funds and their performance. The work distinguishes between high- and low-quality funds and sheds some additional light on the growing controversy concerning the role of independent directors as monitors of the fee setting practices within funds. We find that for high-quality managers, there is a positive relationship between fees and performance. In contrast, for lower-quality managers, there is a negative relationship between fees and performance. We believe this reflects the incentive for poor managers to extract short-term benefits from investors, as the likelihood of survival is lower for poor performing managers. These results are consistent with the notion that the independent directors whose responsibility is to safeguard the interests of shareholders may not be effective in doing so.

This paper adopts the Fama and French (1993) methodology for determining the common risk factors in the returns of Canadian stocks. Our results suggest that the three stock market factors, the excess stock market returns, a size factor, and a book-to-market equity factor, explain most of the variation in Canadian equity returns over time. Unlike in the U.S. equity market, the addition of bond market variables provide little explanatory power for the average Canadian equity, suggesting that the underlying factors influencing stocks and bonds are more distinct in Canada.

This paper examines the way in which investors evaluate risk in deciding which mutual funds to invest. New fund investment is found to be positively related to a distributed lag of past fund performance with a strong degree of inertia. The relationship is mostly linear with significant nonlinearities at the upper (and possibly the lower) end of the performance spectrum. Investors appear to use publicly available data in a way that is consistent with the theory, giving equal weight in their decisions to the return and market risk components of the performance measure, while ignoring diversifiable risk. Finally, it is shown that improved performance in any year has a significant impact on the earnings of the management company. Because managers are rewarded on the basis of risk adjusted returns, risk neutral managers have no incentive to manipulate risk, except at very high performance levels.

The Capital Asset Pricing Model is now generally accepted by the investment community as a valuable input for determining a firm's fair return on equity. Estimation of the firm's beta has proved increasingly difficult, however, as companies are taken over or are reorganized and re-emerging as subsidiaries of complex holding companies. This paper provides a model relating accounting variables to market betas so that a nontraded firm's market beta can be estimated from its accounting information when the firm is no longer traded or when the firm's operating environment has changed so dramatically that historic returns are no longer useful in predicting the future risk of the firm.

This paper examines the interaction between the firm's production and financing decisions, focusing on the specificity of its assets and on the flexibility of its production technology. The paper shows that production flexibility increases potential tax shields from debt and lowers expected bankruptcy costs and that, when asset specificity is low, operating and financial leverage tend to be complements, with the complementarity becoming stronger as ex post capacity adjustment costs increase. It also shows that an increase in the corporate tax rate induces the firm to increase capacity investment and financial leverage when asset specificity is low and that this effect becomes stronger as ex post capacity adjustment costs increase. The results suggest that in industries where assets are easily redeployable, the impact of taxes on both investment and financial leverage will be positive and increasing with the size of capacity adjustment costs.

This paper develops a model which explains the determinants of the management expenses charged by U.S. equity funds. The study shows that for high quality managers, an increase in quality is associated with higher fees. In contrast, as the quality of the lower quality managers deteriorates, their fees increase. A non-linear negative relationship is found between the size of a fund and its management expenses. Economies of scope are also shown to exist between the number of funds within a mutual fund complex and the management expenses charged investors. Finally, while 12b-1 fees have been thought of as a substitute for load charges, this paper suggests that they are complements.

This paper examines the incentives offered managers of Canadian equity mutual funds when their compensation is based upon the market value of the assets they manage. Although this method of compensation supplies a very weak direct link between performance and the remuneration of managers, we show that competition among funds supplies a stronger indirect link. Empirical evidence is provided in the paper indicating that, owing to investor expectations of positive serial correlation in the performance of mutual funds, the indirect compensation offered by asset-based schemes provides a strong incentive to managers to maximize risk-adjusted fund returns.

Why do professional partnerships like law firms, accounting practices, and management consulting groups to name a few, rely almost exclusively on promotions for incentives and do not typically use incentive pay to motivate their associates? We compare three schemes (relative‐input‐based piece rates, tournaments with monetary prizes, and tournaments with promotions as prizes) within an environment characterized by group production and double moral hazard induced by possible wealth constraints on the supervisors. We find that the difficulty in implementing promotion tournaments is possibly an important reason for the existence of firms.

While modern industrial organization theory predicts the use of sunk costs to deter entry, this paper examines some factors that might act to moderate the commitment value of capital and, hence, the entry-barring impact of these sunk costs-to the point, perhaps, that empirical detection might be difficult. We show that the tax system and financial contracts of the incumbent firm may affect its optimal precommitment decision and, in fact, may attenuate the strategic incentives for precommitment.

In this paper, we adopt a disaggregate approach to modelling the components of gasoline demand. Gasoline demand in our model is viewed as the outcome of the fol- lowing household decisions: vehicle holdings (number and type) and vehicle usage (non- discretionary and discretionary usage). Modelling gasoline demand in this way correctly specifies gasoline as an input into the production of transportation services and allows for the interdependence between household decisions on vehicle holdings and usage. Moreover, estimation of the components of gasoline demand allows policy makers to identify the means by which individuals will respond to policy changes. This leads to more effective policies designed to reduce gasoline consumption. We use this model to estimate price and fuel efficiency elasticities of vehicle usage and gasoline demand.

AbstractA case study in which a three‐stage choice model of Canadian household vehicle holdings and usage is used to generate short‐run forecasts of changes in household vehicle usage and gasoline consumption in response to a range of energy‐related policies. The objectives of this case study are to (1) demonstrate the application of disaggregate choice modelling methods to the generation of policy‐relevant forecasts of travel behaviour; (2) draw implications from this forecasting exercise concerning the likely impacts of various energy‐related policies; and (3) assess some of the strengths and weaknesses of the current state‐of‐the‐art of forecasting with disaggregate choice models, using the presented study as a case in point.

This paper examines the characteristics that influence the household's choice of heating system. A multinomial probit model is developed and tested using disaggregate survey data from 712 respondents across Canada. The results indicate that product reliability is the characteristic having the most significant impact on choice, followed by the yearly operating costs of the system. This implies that successful research and development and marketing programmes should both be directed toward improving these product attributes and relating this information to prospective purchasers.

Journal Article The Relationship Between Relative Attributes, Relative Preferences, and Market Share: The Case of Solar Energy in Canada Get access Michael K. Berkowitz, Michael K. Berkowitz Search for other works by this author on: Oxford Academic PubMed Google Scholar George H. Haines, Jr. George H. Haines, Jr. Search for other works by this author on: Oxford Academic PubMed Google Scholar Journal of Consumer Research, Volume 11, Issue 3, December 1984, Pages 754–762, https://doi.org/10.1086/209011 Published: 01 December 1984 Article history Received: 01 June 1983 Revision received: 01 July 1984 Published: 01 December 1984

AbstractThis paper examines the sensitivity of forecasts to the level of aggregation of the data. A relative shares regression model and a multinominal logit model are tested with both aggregate and disaggregate survey data from 2109 respondents. The results indicate the appropriate model to use depends on whether the data are disaggregate or aggregate in form. Forecasts of solar heating of dwelling unit demand and market shares are also reported for Canada in terms of the solar price relative to the natural gas price and solar reliability relative to natural gas reliability.

This paper presents two models which allow long run demand for a new product to be estimated prior to any significant sales history. The specific product studied is residential solar heating in Canada. Both models are based on the concept that consumers react in their purchasing decisions to the inherent package of characteristics in a commodity. The use of survey information to enable specific numerical estimates to be made is exemplified. Directions for future research to improve the usefulness of such models are suggested.

This paper considers the open economy issues relating to the development of a single country's patent policy. Recognizing differences in the structure of the invention market, a high degree of patent protection is optimal for countries characterized by a significant concentration of imperfectly competitive inventive enterprises. In contrast, a short period of patent protection is optimal for a developing country where a competitive invention market is likely to exist. The paper includes, as well, an analysis of patent policy for a country in which multinational firms operate. While it is frequently observed that local governments insist on the performance of research in local subsidiaries of foreign countries, our results indicate that such pressures are misguided unless the government can ensure that patent rights (and appropriate royalties) reside in the local subsidiary. Politique de brevets dans une e'conomie ouverte. Ce memoire etudie les problemes souleves dans le developpement d'une politique de brevets dans une economie ouverte. Si l'on tient compte des differences dans la structure du marche de l'invention, il appert qu'un fort degre de protection par le truchement de brevets est optimal dans les pays caracterises par une forte concentration d'entreprises innovatrices imparfaitement concurrentielles. D'autre part, une protection par le truchement de brevets de courte duree est optimale pour un pays en voie de developpement oii un marche concurrentiel dans les activites d'invention est susceptible d'exister. Le memoire contient aussi une analyse de la politique de brevets pour un pays ou les entreprises plurinationales sont actives. Les gouvernements locaux insistent pour que les filiales d'entreprises etrangeres aient leur part de l'activite de recherche de l'entreprise globale. Il semble que de telles pressions ne soient pas particulierement utiles sauf pour le cas oil le gouvernement local peut s'assurer que les droits attaches aux brevets (et evidemment les royautes attenantes) demeurent le privilege de la filiale.