From tools to theories: The emergence of modern financial economics

It is shown that early research in modern financial economics had substantially been driven by the application of the research strategy of economics and the use of newly developed mathematical methods. For this purpose the professionalization of business education as a consequence of changes in the U.S. economy after Word War II is presented. The emergence of professional Journals in financial economics, similar to the academic culture including the trend of applying abstract mathematical reasoning and during the war developed methods like linear programming are highlighted. Also the meaning of Milton Friedman's 1953 essay The Methodology of Positive Economics for the dominance of abstract and prediction driven research in modern financial economics gets discussed. Finally, the emergence of Harry Markowitz's paper Portfolio Selection (1952) is used to substantiate the hypothesis. --history of finance,portfolio theory,business schools,modern financial economics,modelling,theories of modern financial economics,risk management,positivism,professionalization,methodology of finance

A Comparative Analysis of the Performance of Alternative Stock Valuation Ratios Using Stochastic Dominance with a Riskless Asset

John R. Erickson is an Associate Professor of Finance in the Department of Finance, School of Business Administration and Economics, California State University, Fullerton. Albert J. Fredman is Professor of Finance in the Department of Finance, School of Business Administration and Economics, California State University, Fullerton

Seeking votes - the political economy of expenditures by the Peruvian Social Fund (FONCODES), 1991-95

President Alberto Fujimori created the Peruvian social Fund (FONCODES) in 1991 with the stated objectives of generating employment, helping to alleviate poverty, and improving access to social services. The author uses province-level data on monthly expenditures, socio-economic indicators, and electoral outcomes to analyze political influences on the timing and geographic distribution of FONCODES expenditures between 1991 and 1995. He finds that: 1) FONCODES expenditures increased significantly before elections. 2) FONCODES projects were directed at poor provinces, as well as provinces in which the marginal political impact of expenditures was likely to be greatest. The results are robust to many specifications and controls. The Peruvian data thus support predictions made in the literature on political business cycle as well the literature on political influences on the allocation of discretionary funds.Decentralization,Environmental Economics&Policies,Parliamentary Government,Health Economics&Finance,Election Systems,Health Economics&Finance,Environmental Economics&Policies,Parliamentary Government,Election Systems,Business in Development

The Pricing of Dutch Auction Rate Preferred Stock

Daniel T. Winkler is an Assistant Professor of Finance in thc Joseph M. Bryan School of Business and Economics, Department of Finance at The University of North Carolina at Greensboro and Tony R. Wingler is an Associate Professor of Finance in the Joseph M. Bryan School of Business and Economics, Department of Finance at The University of North Carolina at Greensboro

The Proliferation of Special Accounting Items: A Threat to Corporate Credibility

Betty L. Brewer, DBA, CFP, is associate professor of finance, Department of Business and Economics, North Carolina A&T State University, Greensboro, NC 27411. Robert J. Angell, DBA, is professor of finance, Department of Business Administration, School of Business and Economics, North Carolina A&T State University, Greensboro, NC 27411. R. David Mautz, Jr., Ph.D., CPA, is associate professor of accounting, Department of Accounting, School of Business and Economics, North Carolina A&T State University, Greensboro, NC 27411

The economic analysis of sector investment programs

This paper discusses the economic analysis of sector investment or expenditure programs, collectively referred to as SIPS. There are many different views as to what actually constitutes a SIP. For the purposes of this paper, the essential feature of a SIP that is focused on is that the Government, World Bank, and other donors jointly finance an agreed-upon forward sectoral expenditure program. A SIP may also have many different objectives. Again, for the purposes of this paper, a critical objective of a SIP is to improve the development impact of public expenditures in the sector. Suthiwart-Narueput focuses on how to use economic analysis to help sector investment programs improve the development impact of public spending. He uses Kenya as a case study. The paper is organized as follows. Section 2 proposes a methodology for the economic analysis of SIPS which emphasizes evaluating the sectoral expenditure program based on principles of public expenditure analysis. Particular emphasis is placed on identifying the rationale for public intervention and improving cost-recovery. Section 3 discusses alternative methodologies, e.g., cost-benefit analysis. Section 4 applies the proposed methodology to the Kenya Agricultural SIP. Section 5 concludes.Business Environment,Environmental Economics&Policies,Health Economics&Finance,Decentralization,Economic Theory&Research,Environmental Economics&Policies,Business in Development,Business Environment,Health Economics&Finance,Poverty Assessment

Does environmental regulation matter? Determinants of the location of new manufacturing plants in India in 1994

The cost of complying with environmental regulations has been cited as a major burden on businesses. Is it enough of a burden to influence where businesses locate new plants, which are not restricted to their choice of location? The authors examine a unique establishment level dataset to find out whether the stringency of environmental regulation affects where firms locate new plants. Using a conditional logit model, they estimate the importance of difference variables in plant location choice. After controlling for the impact of factor price differentials, infrastructure and agglomeration, they find that the number of new plans commissioned in different states of India in 1994 does not appear to be adversely affected by more stringent environmental enforcement at the state level. In other words, and environmental"race to the bottom"is unlikely. They find that the level of existing business activity overwhelms all other factors affecting location decision. Reliable infrastructure and factors of production are also critical.Environmental Economics&Policies,Public Sector Economics&Finance,Economic Theory&Research,Labor Policies,Decentralization,Environmental Economics&Policies,National Governance,Economic Theory&Research,Health Economics&Finance,Public Sector Economics&Finance

International Diversification of the Lower 400 Firms of the S&P 500 Index

E. Tylor Claggett, Ph.D., CFA, is professor of finance at Salisbury University in Salidsby, MD 21801-6860. He also serves as the director of the Financial Planning track within the Department of Economics and Finance of the Perdue School of Business. Danny M. Ervin, Ph.D., is associate professor of finance at Salisbury University in Salisbury, MD 21801-6820. He also serves as the director so the Shore Energy Center within the Department of Economics and Finance of the Perdue School of Business