The purchase of insurance provides a potentially finer informational partition over the distribution of post-loss resolution wealth that may allow favorable adaptation of intermediate consumption, investment, or other decisions. Such a positive informational value does not require consumer risk aversion. Lines of insurance with longer resolution periods should impact relatively more decisions and have higher informational value. Under standard assumptions on preferences, in the absence of informational value, risk premiums paid for insurance by risk averse consumers should not increase as the loss resolution period increases. Empirical tests using data from the property-liability insurance market suggest that the willingness to pay per dollar of coverage (as measured by relative market demand across lines of insurance) is greater for lines of insurance with longer resolution periods consistent with a positive informational value of insurance. The results suggest that other financial assets may also have differential informational value.

Forty-nine states and the District of Columbia enacted legislation reducing interstate banking restrictions between July 1982 and April 1993. For these 50 banking bills, deregulation increased the average price of bank stocks. Returns vary cross-sectionally by firm characteristics, regulatory features, and economic conditions. Returns are positively related to the characteristics of acquisition targets. Furthermore, returns are positively related to legislative features that increase the bargaining power of potential targets and economic conditions that are likely to encourage bank acquisition. These findings are consistent with the relaxation of geographic restrictions increasing activity in the corporate control market.

We test both the unconditional and conditional Mean Variance Efficiency of the UK stockmarket, paying particular attention to choosing a suitable set of instruments for the conditional version of the model. By considering more carefully than previous authors the pricing of economic risk within the mean-variance framework we show that certain instruments can enhance the basic model structure. Given the tendency for financial market data to display non-constancy in variance and non-normality we employ the GMM procedure described in Hansen (1982), which requires much weaker distributional assumptions than the more traditional OLS techniques. We discuss forming portfolios of stocks using both size and dividend yield as a criterion to achieve a suitable spread of risk and return, and find that our conclusions are sensitive both to the method of portfolio formation and to the choice of estimator. This is an important finding given the problem of thin trading associated with the size ordering of UK stocks. We find some support for both the unconditional and conditional version of the CAPM, though we are cautious about our conclusions given the instability of the parameter estimates.