This comment describes the U.S. federal income tax treatment of corporate bonds that are indexed for inflation and argues that these bonds do not have a tax-tax clientele in the United States.
A simple overlapping generations model is used to characterize the effects of initial margin requirements on the volatility of risky asset prices. Investors are assumed to exhibit heterogeneous preferences for risk-bearing, the distribution of which evolves stochastically across generations. This framework is used to show that imposing a binding initial margin requirement may either increase or decrease stock price volatility, depending upon the microeconomic structure behind fluctuations in economy-wide average risk-bearing propensity. The ambiguous effect on volatility similarly arises when the source of heterogeneity is noise trader beliefs. BEYOND THEIR PRUDENTIAL FUNCTIONS, the effects of initial margin requirements on securities markets are not well understood. Many have argued, based upon empirical findings, that the level of margin requirements has no discernable impact on stock price behavior.' Nevertheless, the view that high margin requirements dampen speculative excesses and reduce excess price volatility remains popular. The simultaneous existence of such views highlights the uncertainty surrounding this issue. In fact, there exists no rigorously articulated theory of the interaction between initial margin requirements and stock prices and their returns' characteristics. In this paper we construct a simple dynamic model useful for characterizing the effects of initial margin requirements on security prices and returns. To analyze the impact of margins, we introduce investor heterogeneity into an otherwise simplified overlapping generations (OLG) economy.2 The OLG models are constructed so that each generation displays heterogeneous preferences or beliefs, the distribution of which evolves stochastically across generations. In each of two heterogeneous taste models we consider there are two types of agents, one of which is more risk tolerant than the other. In one model, the
This study examines the unit (stock) price and volume behavior of master limited partnerships (MLP) around the ex-dividend day. Since the dividends of MLPs are not taxable to the unitholder, tax based hypotheses predict no abnormal unit movements around the ex-day. Significant positive excess returns and volume are found before the ex-dividend day, and significant negative excess returns are found on the ex-dividend day. The findings which are not significantly impacted by the Tax Reform Act of 1986 suggest ex-day stock movements are not solely a function of investor marginal tax rates or corporate trading behavior.
Prologue: How to Start a Depression. THE FIX IS IN. The Biggest Scam in History. ''Proper and Consistent Conduct.'' The Edge of the Meltdown. THE STRANGE CAREER OF WILLIAM ISAAC. The Road to Washington. The Butcher Revels. ''I Think We Had Them.'' Darkness at Sunshine State. INTERLUDE: THE OHIO BANK CRISIS. The Friends of Marvin Warner. The Time Bomb Explodes. The Seamless Web (1). THE EDUCATION OF EDWIN GRAY. The Making of an Outcast. Two, Three, Many Empires. Nemesis. THE BIG FIX. The Seamless Web (2). The Greatest Crime. Epilogue: Paying the Price. Notes. Index.
1. The Options Market. 2. Option Payoffs and Option Strategies. 3. Bounds on Option Prices. 4. European Option Pricing. 5. Option Sensitivities and Option Hedging. 6. American Option Pricing. 7. Options on Stock Indexes, Foreign Currency, and Futures. 8. The Options Approach to Corporate Securities. OPTION! Installation and Quick Start Exercises for OPTION!. Index. Appendix.
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