Capital Asset Prices With and Without Negative Holding

Prize Lecture to the memory of Alfred Nobel, December 7, 1990.Finance;

Bank Capital Adequacy, Deposit Insurance and Security Values, Part I

This paper provides a formal setting for the analysis of the capital adequacy of an institution with deposits insured by a third party. An insured depositor has a claim against the institution and a contingent claim against the insurer. This paper analyzes the effect of the riskiness of the asset mix and the relative amount of deposits and capital on the potential liability of the insurer. It shows that an increase in asset risk, holding value constant, increases the value of equity and raises the potential liability of the insurer.

Perspective on Bank Capital Adequacy: Time-Series Analysis

The first part of this paper provides a historical perspective on bank risks. Five-year moving average measures of total risk, market risk, and nonmarket risk are computed for an index of New York banks from 1929-1975 and for an index of outside New York banks from 1950-1976.We use a carefully constructed series of bank balance sheet data to compute correlations among various components of New York banks' port-folios and observe trends over time. The time series relationship between book values and market values is investigated, and classical measures of capital adequacy are calculated using surrogates for market values rather than book values. Finally, data are presented on the movement of interest rates and the term structure over time. Serial correlations and cross-correlations are computed. The second part of the paper uses the technique proposed in Sharpe ("Bank Capital Adequacy, Deposit Insurance and Security Values," June 1978) to gain information about capital adequacy. He has shown that for a bank with deposit liabilities that do not extend beyond the review period a "value preserving spread" in asset risk is likely to increase the value of capital. Moreover, the less adequate the capital, the larger this effect should be. We outline the method used to develop an econometric model to test for this effect. The model is then applied to time series data from 1938 to 1975.

Interest-Free Demand Loans Now Subject to Gift Tax - \u3cem\u3eDickman v. Commissioner\u3c/em\u3e

One day, Mr. Jones walks into your office and tells you that he wants to help junior start his own business, but he does not want to incur any gift tax. No problem, you say, and you proceed to tell him about the advantages of an interest-free demand loan to junior. You tell him that based on Johnson v. United States and Crown v. Commissioner, an interest-free demand loan will not result in a taxable gift. So junior can get the money to start his new business, Mr. Jones can transfer some of his wealth without adverse gift tax consequences, and all is right with the world - well, almost. On February 22, 1984, the United States Supreme Court handed down its decision in Dickman v. Commissioner. The Court overruled the decisions in Johnson and Crown and held that an interest-free demand loan between family members does result in a taxable gift. Sorry, Mr. Jones, but do not despair. If you make yourself comfortable, we will take a look at the High Court\u27s reasoning and the implications of the Dickman decision

Evidence Teaching Wisdom: A Survey

This Survey secures data on the methods American law school faculty use to teach the law of evidence. The Survey provides insight into the teaching of evidence and facilitates discourse among evidence faculty on how we teach the course, for the benefit of new or occasional instructors as well as veterans. Specifically, the Survey focuses on the question of which classroom instruction approach predominates among evidence professors