Risk aversion and information structure: an experimental study of price variability in the securities markets

Article Abstract:

After establishing the operational parameters of two experimental markets, the differences in the trading patterns and behaviors of speculative and conservative investors are analyzed. Were each of these types of investors relegated to separate markets, the speculators' market would evidence greater price fluctuations, although its price patterns would converge more closely and more rapidly, thus allowing the speculators' market greater allocational efficiency and more limited tendency to be misdirected on pricing questions. The discussion following the presentation of the research paper details some of the reasons for the greater rationality evidenced by the speculative investors, when compared to the conservative investors.

Psychological aspects, Research, Prices and rates, Stocks, Speculation, Investments, Risk management, Securities prices, Stock prices, Stock price forecasting

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The effect of taxes on the relative valuation of dividends and capital gains: evidence from dual-class British investment trusts

Article Abstract:

We provide evidence that taxes affect equity valuation by studying British investment trusts having otherwise identical classes of cash- and stock-dividend-paying shares outstanding. We study 1969-1982, a period in which there were two dramatic changes in tax policy. We find that stock-dividend shares, which are convertible into cash-dividend shares, sell at premiums when the tax system favors capital gains and at discounts when the tax advantage of capital gains is reduced. After the 1975 elimination of the tax advantage to stock-dividend shares, we observe that investors convert virtually all stock-dividend shares into cash-dividend shares. (Reprinted by permission of the publisher.)

United Kingdom, Taxation, Dividends, Mutual funds, Tax policy, Capital gains tax, Securities taxes, Great Britain

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Agency costs and ownership structure

Article Abstract:

Analysis of ownership structure of over 1,700 corporations shows how it affects agency costs. These become higher when outsiders manage the firm, are inversely related to a manager's ownership share, increase when nonmanager shareholders increase, and lessen when bank monitoring increases.

United States, Business, Management, Corporations

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