This study tests hypotheses about the valuation of leasing contracts. We examine the determinants of the yields of a relatively large, reasonably heterogeneous, and nationally representative sample of financial leases. We find lease yields to be significantly related to treasury bond yields and our proxies for the systematic risk of the leased asset's residual value and the transaction and information costs associated with the lease. There is also some evidence of a relationship between lease yields and the default-risk of the lessee.

In models where both investors and securities are subject to differential taxation, there may be no set of prices that rule out infinite gains to trade, or "tax arbitrage."This paper characterizes the joint restrictions on financial-asset returns and investors' tax schedules that preclude tax arbitrage in the absence of short-sale constraints.The authors show that, if there exists any configuration of marginal tax rates on investors' tax schedules that rule out infinite gains to trade, then "no-tax-arbitrage" prices will exist.They also show that the existence of "no-tax-arbitrage" prices ensures the existence of equilibrium prices. THE EFFECTS OF DIFFERENTIAL taxation on the equilibrium prices of financial assets have attracted much attention from financial economists in recent years.Otherwise identical securities that contribute to taxable income to different degrees will, in general, be valued differently by taxable investors.As a result, tax considerations have been useful in helping explain the effect of dividend yield on stock returns,' the effect of coupon levels and term to maturity on bond prices,2 the timing of investors' portfolio transactions,3 and the observed capital structures of firms.4While a rich set of observed behaviors can be better understood by reference to differential taxation, there are well-known difflculties in dealing with taxes in a general-equilibrium setting.To clear markets, relative prices must reflect the marginal rates of substitution of all agents simultaneously.When tax rates differ across investors, however, this condition can be impossible to achieve.To illustrate, consider a world of perfect certainty with two assets: a tax-exempt municipal bond and a taxable government bond.To equate marginal rates of substitution, the rate of return on the government bond, rg, must equal that on the municipal, rm, "grossed up" by one minus the investor's marginal tax rate, ti; that is, rg = rm/( 1 -ti).If there are investors in more than one tax bracket, this condition will obviously be impossible to satisfy for all of them simultaneously.

ABSTRACT In models where both investors and securities are subject to differential taxation, there may be no set of prices that rule out infinite gains to trade, or “tax arbitrage.” This paper characterizes the joint restrictions on financial‐asset returns and investors' tax schedules that preclude tax arbitrage in the absence of short‐sale constraints. The authors show that, if there exists any configuration of marginal tax rates on investors' tax schedules that rule out infinite gains to trade, then “no‐tax‐arbitrage” prices will exist. They also show that the existence of “no‐tax‐arbitrage” prices ensures the existence of equilibrium prices.

Reviews the book 'TREAT,' by Miklos A. Vasarhelyi and W. Thomas Lin.

An examination of analysis of variance, Anova design, which includes a blocking factor, must start with an understanding of the effect of the blocking factor on the dependent variable the cumulative abnormal return or CAR. The design includes a separate mean for each block. The effective value of each observation's CAR is thus transformed into the deviation of the original CAR from the mean CAR of the two firms control and switch in the pair of firms. The ANOVA then estimates the main effect of switch vs. control, factor A as the difference between the CAR deviations from the pair means. The other main effects and their interact modify these estimations to allow for the possible effect of signs of the forecasted change in earnings. A test of this main effect then constitutes a test of the market effect of the decision to switch to lifo. An ANOVA, of course, has only one ESS. ESS is defined to be the error term in an ANOVA. An examination of a standard statistics book would have revealed this statement to be inaccurate. Any ANOVA design that has a blocking factor combined with one more crossed factors will necessarily have more than one error term. Error term is actually ambiguous in an ANOVA. Specifically one error term excluding the between-block sum of squares will be used for analysis of any effect that includes the blocking factor while a second error term including the between-block sum of squares will be needed for analyzing effects that do not include the blocking factor. When a blocking factor is used, the observations from a given block must be placed in cells whose factor levels differ only for the blocking factor.

Bilateral trade flows are used to examine the Linder hypothesis and the effect of exchange-rate variability in a gra vity-type trade model derived from an underlying demand and supply mo del. A behavioral model is used to justify examining these issues joi ntly. The model performs well empirically using a sample of seventeen countries for the period 1974-82. The authors find overwhelming supp ort for the Linder hypothesis and this version of the gravity model. Moreover, they find strong support for the hypothesis that increased exchange-rate variability affects bilateral trade flows. Copyright 1987 by MIT Press.

ABSTRACT: The purpose of this study is to test the feasibility of using a model derived from the judgments of a group of tax experts in controlled experimental conditions to predict actual compliance behavior. A judgment model, using amount of income, source of income, penalty for cheating, and rate structure as independent variables, was derived from CPA tax professionals. The model then was used successfully to predict actual taxpayer compliance using IRS Taxpayer Compliance Measurement Program data. The model also was used to infer the relative importance of the determinants of taxpayer compliance used in the study. Source of income was found to be about three times more important than the next most heavily weighted variable. These results demonstrate the potential for employing a derived judgment model as an efficient means of predicting the effect of proposed changes in tax policy on taxpayer compliance.

[The purpose of this study is to test the feasibility of using a model derived from the judgments of a group of tax experts in controlled experimental conditions to predict actual compliance behavior. A judgment model, using amount of income, source of income, penalty for cheating, and rate structure as independent variables, was derived from CPA tax professionals. The model then was used successfully to predict actual taxpayer compliance using IRS Taxpayer Compliance Measurement Program data. The model also was used to infer the relative importance of the determinants of taxpayer compliance used in the study. Source of income was found to be about three times more important than the next most heavily weighted variable. These results demonstrate the potential for employing a derived judgment model as an efficient means of predicting the effect of proposed changes in tax policy on taxpayer compliance.]