This paper re-examines the case of Citizens Utilities, a firm with one class of common stock which pays stock dividends and one which pays taxable cash dividends. John Long's (1978) study of the two shares' relative prices suggests that investors may prefer cash dividends to equal-sized stock dividends. This paper finds that the cash dividend share's ex-day price decline is less than their dividend payment. Stock dividend shares fall by nearly their full dividend. The disparity between ex-day dividend valuation and the observed prices of the two shares is inconsistent with some explanations of the demand for cash dividends.

This paper asks whether market fundamentals can explain the recent run-up and decline of Japanese equity values and price-earnings ratios. Accounting differences explain about half of the long-run disparity between U.S. and Japanese P/Es. For example, if Japanese firms used U.S. accounting rules, the Japanese P/E ratio would have been 32.6, not 53.7, in 1989. Accounting differences cannot, however, explain the doubling of this ratio in 1986, nor its decline in 1990. Similarly, we are unable to isolate changes in required stock returns or growth expectations that are large enough to explain recent Japanese stock price movements.

This paper investigates transitory components in stock prices. After showing that statistical tests have little power to detect persistent deviations between market prices and fundamental values, we consider whether prices are mean-reverting, using data from the United States and 17 other countries. Our point estimates imply positive autocorrelation in returns over short horizons and negative autocorrelation over longer horizons, although random-walk price behavior cannot be rejected at conventional statistical levels. Substantial movements in required returns are needed to account for these correlation patterns. Persistent, but transitory, disparities between prices and fundamental values could also explain our findings.

This paper explores the relationship between the after-tax returns that taxable investors earn on equity mutual funds and the subsequent cash inflows to these funds. Previous studies have documented that funds with high pretax returns attract greater inflows. This paper presents evidence, based on a large sample of retail equity mutual funds over the period 1993–1999, that after-tax returns have more explanatory power than pretax returns in explaining inflows. In addition, funds with large overhangs of unrealized capital gains experience smaller inflows, all else equal, than funds without such unrealized gains. A large capital gain overhang discourages both gross fund inflows and gross outflows, but the inflow effect dominates the outflow effect.

We illustrate how equilibrium screening models can be used to evaluate the economic consequences of insurance market regulation. We calibrate and solve a model of the United Kingdom's compulsory annuity market and examine the impact of gender-based pricing restrictions. We find that the endogenous adjustment of annuity contract menus in response to such restrictions can undo up to half of the redistribution from men to women that would occur with exogenous Social Security-like annuity contracts. Our findings indicate the importance of endogenous contract responses and illustrate the feasibility of employing theoretical insurance market equilibrium models for quantitative policy analysis.