The price-earnings relation can be characterized as a system of simultaneous equations. Earnings and prices can behave as if they are both endogenously determined because they are jointly affected by information that is difficult to specify explicitly. Specification tests provide evidence that both earnings changes and price changes are endogenous. The price and earnings coefficients increase from OLS to joint estimation and, under a restrictive set of assumptions, provide increasingly similar estimates of the permanent component of earnings. The evidence is consistent with the contention that a portion of the single-equation bias can be mitigated via joint estimation.

We exploit a unique experimental setting within the life insurance industry to examine the effects of taxes, regulation, earnings, and organizational form on life insurers' investment portfolio realizations. A unique equity tax levied on mutual life insurers, as well as the statutory rate variation that occurred during our sample period, allow us to disentangle the effects of taxes from earnings or profitability. Consistent with some policymakers' claims, we find mutual insurers' capital gain realizations are affected by company-specific equity tax rate variation. In addition, we find capital regulation and earnings considerations affect both stocks' and mutuals' realizations.