This paper explores tests of the hypothesis that the tail thickness of a distribution is constant over time. Using Hill's conditional maximum likelihood estimator for the tail index of a distribution, tests of tail shape constancy are constructed that allow for an unknown breakpoint. The recursive test is shown to be inconsistent in one direction, and only a one-sided test is recommended. Specifically, the test can be used when the alternative hypothesis is that the tail index decreases over time. A rolling and sequential version of the test is consistent in both directions. The methods are illustrated on recent stock price data for Thailand, Malaysia and Indonesia. The period covers the recent Asian financial crisis and enables us to assess whether breakpoints in domestic asset return distributions are related to known changes in institutional arrangements in the foreign currency markets of these countries.

In this study, we propose an alternative technique for estimating the cost of equity capital. Specifically, we use a discounted residual income model to generate a market implied cost‐of‐capital. We then examine firm characteristics that are systematically related to this estimate of cost‐of‐capital. We show that a firm's implied cost‐of‐capital is a function of its industry membership, B/M ratio, forecasted long‐term growth rate, and the dispersion in analyst earnings forecasts. Together, these variables explain around 60% of the cross‐sectional variation in future (two‐year‐ahead) implied costs‐of‐capital. The stability of these long‐term relations suggests they can be exploited to estimate future costs‐of‐capital. We discuss the implications of these findings for capital budgeting, investment decisions, and valuation research.

This paper examines how capital tax competition affects jurisdiction formation. We describe a non-cooperative locational model of public goods provision choices, where the levels of taxation and the local public good varieties provided within jurisdictions are selected by majority voting, and where equilibrium jurisdictions consist of consumers with similar tastes. We show that interjurisdictional tax competition results in an enlargement of jurisdictional boundaries, and, even in the absence of intrajurisdictional transfers, can raise welfare for all members of a jurisdiction.

School finance equalization has probably affected American schools more than any other reform of the last 30 years. Understanding it is a prerequisite for making optimal social investments in human capital. Yet, it is poorly understood. In this paper I explain why: it differs from conventional redistribution because it is based on property values, which are endogenous to schools' productivity, taste for education, and the school finance system itself. I characterize equalization schemes and show why some "level down" and others "level up." Schemes that strongly level down have unintended consequences: even poor districts can end up worse off. I also show how school finance equalization affects property prices, private school attendance, and student achievement.

The publicly traded Boston Celtics Limited Partnership shares provide a unique means of studying the impact of information on equity prices. The results of the Celtics’ basketball games significantly affect partnership share returns, trading volume, and volatility. Controlling for the expectedvalue of the signal using betting-market point spreads has little effect on these relations. Investors respond asymmetrically to wins and losses, and playoff games have a larger impact on returns than regular-season games. Opening prices do not fully reflect game results, consistent with previous findings that significant volatility is caused by traders acting on private information.

This paper examines whether firms emerging from conglomerate stock breakups are able to affect the types of financial analysts that cover their firms as well as the quality of information generated about their performance. Our sample comprises 103 focus‐increasing spin‐offs, equity carve‐outs, and targeted stock offerings between 1990 and 1995. We find that, after these transactions, sample firms experience a significant increase in coverage by analysts that specialize in subsidiary firms’ industries, and a 30–50% increase in analyst forecast accuracy for parent and subsidiary firms. The improvement in forecast accuracy is partially attributable to expanded disclosure. However, forecast improvements for specialists exceed those for non‐specialists, leading us to conclude that corporate focus can facilitate improved capital market intermediation by financial analysts with industry expertise.

We show analytically that mean analyst forecasts inefficiently aggregate information by assigning too much weight to analysts’ common information relative to their private information when used as a summary forecast measure of forthcoming earnings. A more precise summary forecast of earnings than the current mean forecast is the current mean forecast plus a positive multiple of the change in the mean forecast.

This paper proposes an experimental approach to studying different aspects of discrimination. We let participants play various games with opponents of distinct ethnic affiliation. Strategies based upon such ethnic affiliation provide direct evidence of ethnic discrimination. This approach was utilized to study ethnic discrimination in Israeli Jewish society. Using the “trust game,” we detected a systematic mistrust toward men of Eastern origin. A “dictator game” experiment indicated that this discrimination was due to (mistaken) ethnic stereotypes and not to a “taste for discrimination.” The “ultimatum game” enabled us to trace another ethnic stereotype that reversed the discrimination's direction. One of the surprising results is that this ethnic discrimination is an entirely male phenomenon.

In this article, we measure the impact of on‐site safety inspections on the frequency of work‐related injury and death in the Alberta construction sector, 1987–92. The data are disaggregated by subindustry allowing different risk levels to be associated with different work activities. In our sample, there is a dramatic decrease in inspection activity which alows us to assess the necessity for continuing with current levels of inspection effort. We find that on‐site safety inspections have no effect on the risk of accident and injury but do have a positive effect in reducing the number of work‐related fatalities.