Linda M. Kahn, Discussion: Multiperiod Pension Plans and ERISA, The Journal of Financial and Quantitative Analysis, Vol. 17, No. 4, Proceedings of the 17th Annual Conference of the Western Finance Association, June 16-19, 1982, Portland, Oregon (Nov., 1982), pp. 633-635

Kenneth M. Eades, Empirical Evidence on Dividends as a Signal of Firm Value, The Journal of Financial and Quantitative Analysis, Vol. 17, No. 4, Proceedings of the 17th Annual Conference of the Western Finance Association, June 16-19, 1982, Portland, Oregon (Nov., 1982), pp. 471-500

Past work on aggregation of production functions has focused on aggregation over firms where technology is embodied in fixed capital. This paper shows that much of the stringency of the necessary conditions for aggregation resides in the nature of aggregation over firms and not in the immobility of capital. Roughly, when capital is mobile, aggregation is permitted for any group of factors under the union of the conditions which otherwise applied to aggregation of fixed or aggregation of movable factors, respectively. No truly new conditions appear. The results are also interpreted in terms of output aggregation.

This paper develops a new methods for measuring tax effects in bond markets and presents empirical results for British Government Securities. The basic idea is to construct a least cost portfolio which, for investors in a given tax bracket, dominates a given bond. A portfolio is said to dominate a bond if it provides cash flows which are at least as great in every period, and has a lower price. In effect our method calculates an upper bound on the value of a bond to investors in a given tax bracket. The results demonstrate (i) the existence of clientele effects and (ii) the absence of an ‘effective tax rate’.

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Smith and Zimmerman [1976] suggested valuing employee stock options at the difference between the market price of the stock at the grant date and the present value of the exercise price of a simple call option on the stock discounted from the expiration date.' They also discussed modifications to this value to take account of the impact of dividends, differing income tax rates, and the problem of differential underdiversification across option holders. The purpose of this note is to extend the minimum value method by incorporating (a) random exercise prices which depend on stock prices, (b) fixed exercise price changes, and (c) ceilings on the amount of stock appreciation permitted in these awards. The minimum values which incorporate the first two extensions are obtained from the option models of Fischer [1978] and Merton [1973]. We derive the minimum value for the third extension from probability theory results for first-passage times for stochastic processes.

Credit ratings, Municipal bonds, Financial reporting, Predictive ability

Bond rating, Municipal bonds, Financial reporting, Credit risk