Previous studies in the valuation of American options apparently undervalue the right of early exercise. This study uses actual prices from the CBOE's S&P 100 option instead of model-generated values. Deviations from the theoretical put-call parity relationship are caused by the possibility of early exercise. These deviations are used to infer the value of early exercise. The actual value of early exercise is both statistically and economically significant. As expected from theoretical considerations, the value of early exercise for put options is greater than for call options.

North-South trade is studied in a model of vertical product differentiation. The South produces a low-quality spectrum of goods and the North a high-quality spectrum. An increase in the South's population lowers its relative wage, expands the spectrum of Southern goods at the top, and shifts the Northern spectrum upward. An increase in Northern labour productivity raises its relative wage. If the increase is neutral or export-biased, then the South's terms of trade improve, the spectrum of Northern products expands, the spectrum of Southern products contracts, and the volume of trade grows. If it is biased against Northern exports, these effects are reversed. Similar results hold for neutral increases in Southern productivity.

A model of growth is developed in which finite-lived individuals invest in human capital, investments have a positive external effect on the human capital of later cohorts, and labor with more human capital produces higher-quality goods. Stationary growth paths are analyzed, paths along which human capital and the quality of goods grow at a common, constant rate. It is also shown that if a small open economy is either very advanced or very backward relative to the rest of the world, then its rate of investment in human capital is lower under free trade than under autarky.

This paper suggests tests for the heterogeneity of parameters in linear least-squares estimation. The tests are based on the properties of resampled estimates, and test the hypotheses that the parameters have a common mean, or that they are independently and identically distributed. The tests can be viewed as the analogue of those based on recursive residuals, in cross-sectional models. We analyse the properties of tests based on jack-knifed estimates in the linear regression model, and compare their performance in a small empirical application.

This paper introduces a semiparametric estimation method for Polychotomous Choice models. The method does not require a parametric structure for the systematic subutility of observable exogenous variables. The distribution of the random terms is assumed to be known up to a finite-dimensional parameter vector. In contrast, previous semiparametric methods of estimating discrete choice models have concentrated on relaxing parametric subutility parametrically specified. The systematic subutility is assumed to possess properties such as monotonicity and concavity that are typically assumed in microeconomic theory. The estimator for the systematic subutility and the parameter vector of the distribution is shown to be strongly consistent. A computational technique to calculate the estimators is developed. Copyright 1991 by The Econometric Society.

We develop a closed-form general equilibrium model of stock index futures prices in a continuous-time economy with stochastic interest rates and market volatility. We show that futures prices implied by the model have very different properties from those of the cost of carry model. Using NYSE stock index futures data, we examine the restrictions imposed on futures prices by both the equilibrium and cost of carry models. Consistent with the equilibrium model, we find that stock index futures prices are related to market volatility and that their interest-rate sensitivity is a nonlinear function of contract maturity.

Abstract. This paper considers the effects of different rules regarding research and development (R&D) costs on competition in oligopolistic industries. It is shown that the consequences of those regimes on equilibrium levels of R&D spending depend on the impact of R&D on marginal costs and the risk attitudes of firm managers. Further results speak to the self‐selection of disclosure policies and the effects of those policies on social welfare. Generally speaking, the results are useful in forming predictions concerning the economic consequences of Statement of Financial Accounting Standards No. 2 and in explaining the information exchange activities of trade associations in high‐technology R&D industries. Résumé. Les auteurs analysent les conséquences de différentes règles relatives à la présentation de renseignements relatifs aux coûts de la recherche et du développement sur la concurrence dans les secteurs d'activité oligopolistiques. Ils établissent que les conséquences de la structure oligopolistique sur les niveaux d'équilibre des dépenses de recherche et de développement dépendent de l'incidence de ces activités sur les coûts marginaux et de l'attitude des cadres à l'égard du risque. Les auteurs tirent en outre des conclusions quant à l'autosélection de politiques relatives à la présentation de renseignements et aux conséquences de ces politiques sur l'intérêt de la société. Dans l'ensemble, les résultats de l'étude peuvent servir à l'élaboration de prédictions relatives aux conséquences économiques de la norme Statement of Financial Accounting Standards No. 2 et expliquer les activités d'échange d'information des associations commerciales dans les secteurs où la recherche et le développement technologiques sont importants.

Abstract. This first study of Canadian securities' earnings forecasts published by Institutional Brokers Estimate System (IBES) focuses on changes in the mean earnings per share forecasts of 159 to 188 companies from 1985 to 1987. Cumulative average residuals are used to detect the announcement effects of large earnings forecast revisions. The main results of this study are the following. First, an investor with access to changes of earnings per share forecasts at the beginning of the month of publication could realize abnormal excess returns. Second, trading strategies based on earnings forecasts revisions can also yield abnormal returns, but the magnitude of the revision, the sector of the company, and the month in which the revision is realized must be considered. Third, when financial analysts' forecasts are published, the informational content of large revisions in forecasts has already been discounted by the market. This result is similar to findings of U.S.– and U.K.–based studies. Finally, large forecasts revisions coincide with a period of abnormal returns. However, the information content of the announcement of forecasts changes cannot be established. The gains are larger if the trade is undertaken before the diffusion of the forecast revision to the IBES subscribers. These results do not vary with the model chosen to predict company returns. This does not necessarily indicate the existence of a market inefficiency because information acquisition and analysis costs, as well as transaction costs, may diminish considerably these abnormal trading gains.