UNIVERSITY OF CALIFORNIA, LOS ANGELES Department of Economics Economics 143 Prof. Cameron EXAMPLES FROM THE LITERATURE (collected Fall, 1994) In past years, students in Economics 143 faced with the assignment of designing a research proposal have occasionally had some difficulty imagining the sorts of problems for which one might use regression analysis. To help you recognize the vast array of issues that other researchers have attempted to address using regression analysis, I have gathered together a sample of citations from the recent Economics literature (downloaded from the EconLit CD-ROM database). Some of these studies are of very high quality and others might reveal some problems under expert scrutiny, but all represent efforts to use regression analysis to answer interesting questions. If you are inclined to pursue the original articles corresponding to the citations and abstracts given below, the best strategy is probably to go to the Orion terminals at the University Research Library (URL). Once you have followed the posted instructions, you will type, for example, fnt journal of banking and finance /j This will give a list of items that have the words "journal", "banking", and "finance" (but will limit the search to journals due to the /j option). Continuing to follow the Orion instructions, you will be shown in which UCLA libraries these journals reside. Using the STATUS command will indicate whether the numbers you are interested in are checked out or not. If it looks like your item is available, proceed to the indicated library and call number and find your copy of the bound back issue of this academic journal. ============================================================================ Amoako-Adu, Ben; Rashid, M.; Stebbins, M., "Capital Gains Tax and Equity Values: Empirical Test of Stock Price Reaction to the Introduction and Reduction of Capital Gains Tax Exemption," Journal of Banking and Finance; 16(2), April 1992, pages 275-87. This paper evaluates the differential effect on stock prices of the introduction in Canada of &0,000 capital gains tax exemption and the reduction of this limit to $100,000 two years later. Using the seemingly unrelated regression methodology and controlling for thin trading and heteroscedasticity, the empirical evidence indicates that the changes in capital gains tax laws had a differential effect on low dividend yield and high dividend yield stocks on both occasions. While the evidence indicates that the stock market anticipated the 1985 capital gains tax law changes, the significant market reaction to the 1987 reduction of the exemption occurred a day before and after the reading of the tax reform proposals in Parliament. Thus, it can be inferred from the results that, despite the presence of tax sheltering opportunities in Canada, changes in capital gains tax laws affect equity values. Baade, Robert A.; Dye, Richard F., "The Impact of Stadiums and Professional Sports on Metropolitan Area Development," Growth and Change; 21(2), Spring 1990, pages 1-14. More and more cities are being encouraged to subsidize sports stadiums as an economic development tool. In this paper regression analysis using census data on nine different metropolitan areas is employed to evaluate the impact of stadiums and professional sports teams on area development. Previous attempts to estimate the effectiveness of sports based development have used assumption driven trade multiplier models. The evidence presented here is that the presence of a new or renovated stadium has an uncertain impact on the levels of personal income and possibly a negative impact on local development relative to the region. These results should serve as a caution to those who assume or assert a large positive stadium impact. Baradwaj, Babu G.; Fraser, Donald R.; Furtado, Eugene P. H., "Hostile Bank Takeover Offers: Analysis and Implications," Journal of Banking and Finance; 14(6), December 1990, pages 1229-42. A comparison of the financial characteristics of banks involved in hostile takeover bids with a control group of nonhostile bank mergers indicates that: (1) hostile targets experience abnormal returns that are significantly greater than for the targets of nonhostile bank mergers; (2) hostile bidders experience negative abnormal returns that are insignificantly different than for bidders involved in nonhostile bank mergers; (3) hostile bank acquisition announcements produce positive net wealth effects that are larger than the wealth effects of nonhostile acquisitions; and (4) a logit regression model using financial ratios, stock price data, and ownership data is able to distinguish between hostile and nonhostile targets. Bartov, Eli, "Open Market Stock Repurchases as Signals for Earnings and Risk Changes," Journal of Accounting and Economics; 14(3), September 1991, pages 275-94. This paper is an empirical examination of the nature of information conveyed by open market stock repurchase announcements. The findings weakly indicate that: (1) there are positive unexpected annual earnings in the repurchase announcement year and positive revisions of earnings forecasts by analysts around announcement dates, and that (2) repurchase announcements are followed by declines in the repurchasing firms' common stock risk. In addition, a regression analysis shows that repurchase announcement returns are positively (negatively) correlated with the earnings (risk) changes conveyed by repurchase announcements. Benjamin, John D.; Boyle, Glenn W.; Sirmans, C. F., "Retail Leasing: The Determinants of Shopping Center Rents," American Real Estate and Urban Economics Association Journal; 18(3), Fall 1990, pages 302-12. The determinants of lease rentals are of fundamental importance to real estate researchers and practitioners. Retail leases are unique in that they typically have two rental components: a base rent and an "overage" rent equal to a percentage of the tenant's gross sales above some threshold level. In this paper, we develop and test a simple cash flow model of retail lease valuation that predicts that base rents are lower with higher percentage rent rates and are higher with greater threshold levels of sales. Using a sample of shopping center leases, regression analysis indicates that these trade offs are observed in the market. Bergstrand, Jeffrey H., "The Heckscher-Ohlin-Samuelson Model, the Linder Hypothesis and the Determinants of Bilateral Intra-industry Trade," Economic Journal; 100(403), December 1990, pages 1216-29. Theoretical rationales for the robust empirical relationships between the share of intraindustry trade between two countries and the average levels of, and inequalities between, their GDPs, per capita GDPs, and tariffs have either varied or not been demonstrated formally within a unified analytical framework. This study motivates theoretically the relationships between these six determinants, as well as the average level of, and inequality between, two countries' capital labor endowment ratios and their share of intraindustry trade. Regression analysis supports, among other results, the presence of both demand and supply roles for per capita income influencing intraindustry trade. Borjas, George J., "The Intergenerational Mobility of Immigrants," Journal of Labor Economics; 11(1), Part 1 January 1993, pages 113-35. This article analyzes the intergenerational mobility of immigrants. Using the 1940 70 censuses, the study reveals an important link between the earnings of immigrants and the earnings of their American born children. Although there is some regression toward the mean, the earnings of second generation Americans are strongly affected by variables describing economic conditions in the source countries of their parents. Current immigration policy, therefore, not only determines how immigrants perform in the labor market but also determines tomorrow's differences in the labor market experiences of American born ethnic groups. Boyer, Marcel; Dionne, Georges; Vanasse, Charles, "Infractions au code de la securite routiere, infractions au code criminel et gestion optimale de la securite routiere." (With English summary.), L'Actualite Economique; 67(3), September 1991, pages 279-305. In this article, the authors study the statistical relationships between individual probabilities of accidents and both different infractions to the Quebec Code of Road Safety and some infractions to the Criminal Code which carry a suspension of the driving permit. They propose new tables of demerit points based on marginal variations in the individual probabilities of accidents obtained from regression analysis and they compare their results to the Quebec official table (1987). They show among other results that infractions for excessive speed should be less penalized, that infractions associated to impaired (alcohol) driving and to illegal passing of school buses imply high probabilities of accident, and that drivers with no infractions represent relatively low accident risks. Their results can be used to improve the management of road safety. They propose three different methods in this article. Each can be viewed either as a substitute or a complement to risk based pricing of car insurance. Browne, Lynn E., "Banks' Venture into Real Estate: High Rollers, or Lemmings?," New England Economic Review; 0(0), Sept. Oct. 1993, pages 13-32. During the 1980s, commercial banks expanded their mortgage lending more rapidly than other financial institutions. This article examines the factors responsible for the variations in commercial banks' real estate lending, in an attempt to determine whether banks pursued real estate loans in a high risk, high return strategy, or simply were caught up in the general enthusiasm for real estate lending. The author's regression analysis provides some support for the argument that banks looked to real estate loans to bolster their financial performance. She also finds that in New England, where banks were particularly aggressive in increasing their real estate lending and suffered a much higher failure rate than banks nationwide, pursuit of real estate loans was also pursuit of growth. And in New England, where most banks grew rapidly, those that grew fastest proved most vulnerable to failure. Burt, Martha R., "Causes of the Growth of Homelessness during the 1980s," Housing Policy Debate; 2(3), 1991, pages 903-36. This article presents an analysis of the factors that predicted 1989 homelessness rates in large U.S. cities. Data were collected to describe homelessness rates in the 182 cities with populations over 100,000. In addition, variables were assembled to represent many factors that have been hypothesized to cause homelessness, including each city's housing and income conditions, household resources, employment conditions, employment structure, available public benefits, and cost of living. The researcher used regression analysis to assess the impact of each hypothesized causal factor on between city differences in 1989 homelessness rates for the 147 primary cities in the data set (excluding suburbs) and for subgroup breakouts based on level of manufacturing employment and population growth from 1980 to 1986. The article ends with a discussion of policy implications of the patterns discovered. Cameron, Samuel, "Race and Prosecution Expenditures," Review of Black Political Economy; 19(1), Summer 1990, pages 79-90. There has been a steady accumulation of literature on racial differentials in crime and the response of the criminal justice system. A neglected component of societal response to crime has been the volume of prosecution expenditures. This article seeks to repair this neglect by examining state level difference in per capita prosecution expenditures in 1980 using a multiple regression equation. The results show that, holding other factors constant, lower prosecution expenditures are associated with higher percentages of blacks in a state's population. The relationship of this to discrimination is discussed in terms of England. Cameron, Trudy Ann, "Combining Contingent Valuation and Travel Cost Data for the Valuation of Nonmarket Goods," Land Economics; 68(3), August 1992, pages 302-17. The travel cost method has long been used to infer the economic value of nonmarket resources and public goods. More recently, contingent valuation survey methods have gained popularity for eliciting these values. Here, contingent valuation survey responses are combined with travel cost method data on actual market behavior to estimate jointly both the parameters of the underlying utility function and its corresponding ordinary demand function. This is a prototypical empirical example of a new modeling strategy, variants of which should prove useful in many applications, especially where reliance on a single valuation method is undesirable. Cameron, Trudy Ann, "A New Paradigm for Valuing Non-market Goods Using Referendum Data: Maximum Likelihood Estimation by Censored Logistic Regression," Journal of Environmental Economics and Management; 15(3), September 1988, pages 355-79. This paper challenges the W.M. Hanemann [Amer. J. Agr. Econom. 66, 332-341(1984)] and C. Sellar, J.P. Chavas, and J.R. Stoll [J. Environ. Econom. Management. 13, 382-390 (1986)] utilizations of logit regression models to estimate the value of non-market resources from 'referendum' survey data. These data are more informative than conventional choice data. The 'random utility' interpretation of logit models is therefore too restrictive. Bypassing the utility function entirely, it will be shown that parameters and standard errors for utility-theoretic inverse Hicksian demand functions can be extracted directly and much more simply. Estimated demand functions need not be limited to those corresponding to the linear-in- parameters utility difference specifications which can be handled by packaged logit regression programs. Cameron, Trudy Ann; Englin, Jeffrey, "Cost Benefit Analysis for Non-Market Resources: A Utility Theoretic Empirical Model Incorporating Demand Uncertainty," University of California at Los Angeles Department of Economics , Working Paper: 627 , pages: 46. There exists a well-developed theoretical literature concerning the nonmarket value of public goods under uncertainty, but little research effort has been devoted to utility theoretic empirical specifications. This paper develops a regression-based empirical model that employs the state preference model of consumer decision making. We use this model to assess willingness to pay for prevention of acid rain damage to lakes in the Northeast U.S. Our sample includes both resource users and non-users and we specifically model individual participation decisions as a function of individual attributes, thereby allowing for individual risk (demand uncertainty) in the form of endogenous recreational participation probabilities. Controlling for user/non-user sample selection we use responses to a referendum contingent valuation survey question to calibrate an indirect utility difference function. We then derive the corresponding cost benefit quantities (individual expected consumer surplus, option price, option value, and individual willingness to pay loci) relevant to this application. Cameron, Trudy Ann; James, Michelle D., "Efficient Estimation Methods for "Closed ended' Contingent Valuation Surveys," Review of Economics and Statistics; 69(2), May 1987, pages 269-76. "Closed ended contingent valuation" surveys can be very useful in the evaluation of nonmarket resources. Respondents merely state whether they would accept or reject a hypothetical threshold amount, either as payment for giving up access to the resource or as a fee for its use. The authors develop a maximum likelihood procedure which exploits the variation in the threshold values to allow direct and separate point estimates of regression like slope coefficients and error standard deviations (without truncation bias). Their illustration uses data from a survey of recreational fisherman to examine factors which influence individuals' willingness to pay. Cameron, Trudy Ann; Quiggin, John, "Estimation Using Contingent Valuation Data From a "Dichotomous Choice with Follow Up" Questionnaire," Journal of Environmental Economics and Management, (forthcoming, 1994, November) Dichotomous choice contingent valuation questions have gained popularity over the last several years due to their purported advantages for avoiding many of the biases known to be inherent in other value elicitation formats. However, this type of valuation question is highly inefficient in that a vastly larger number of observations is required to identify the distribution of values with any degree of accuracy. An alternative questioning strategy introduces a second value threshold which elicits a second discrete response. The size of the second offer depends on the answer to the first question. In analyzing data from this type of questionnaire, it is imperative to acknowledge the endogeneity of the second offered amount. This paper demonstrates when this endogeneity is ignored or when inappropriate restrictions are placed upon the stochastic structure of the model. Cameron, Trudy Ann; Huppert, Daniel D., "OLS versus ML Estimation of Non- market Resource Values with Payment Card Interval Data," Journal of Environmental Economics and Management; 17(3), November 1989, pages 230-46. Contingent valuation methods (CVM) have been shown to be potentially very useful for eliciting information about demands for non-market goods. We assess the sensitivity of "payment card" CVM results to the researcher's choice of estimation method. Empirical payment card data are used in both (1) a naive ordinary least squares (OLS) regression procedure employing interval midpoints as proxies for the true dependent variable, and (2) and efficient maximum likelihood (ML) procedure which explicitly accommodates the intervals. Depending upon the design of the payment card, OLS can yield biased parameter estimates, misleading inferences regarding the effects of different variables on resource values, and biased estimates of the overall resource value. (c) 1989 Academic Press, Inc. Chew, Rosalind, "The Measurement of Gender Earnings Differentials for Foreign Trained and Local Trained IT Professionals: The Case of Singapore," Computational Economics; 6(2), May 1993, pages 95-106. Most studies on wage differentials have been conducted in the west. Few are made of the developing countries, where data on personnel profiles are generally found to be wanting. This study employs Borjas's technique to assess the effects of differences in country source education on gender wage differentials in a first attempt to study on the wage differentials of computer personnel in a non-western country. Regression results indicate that the important determinants of earnings in the IT professions are education, total IT work experience, current IT work experience, age, gender, an engineering qualification, non-IT degrees, and overseas training. They also reveal that, male foreign trained professionals are paid higher salaries than male local trained professionals and that foreign trained female professionals in the user section in general also earn more than the males. Cloninger, Dale O., "Intercity Variations in the Police Use of Lethal Response," Journal of Economic Behavior and Organization; 17(3), May 1992, pages 413-22. This paper develops and empirically tests a model of the intercity variation in the rate of lethal response (civilians killed.by police in the line of duty). The empirically derived two stage least squares regression models generally confirm the relationship between crime seriousness and police use of force found by Robert J. Friedrich. The empirical expressions in the present study explain nearly fifty percent of the intercity variation in the rate of lethal response and enjoy a high degree of statistical significance. Specifically, the statistical tests indicate that the rate of lethal response is significantly and positively related to the seriousness of the crime, the probability of arrest and conviction and the age distribution of the city's population. Furthermore, there appears to be no systematic relationship between the rate of lethal response and the rates of police killed by civilians and police per violent offense. Colton, Timothy J., "The Politics of Democratization: The Moscow Election of 1990," Soviet Economy; 6(4), Oct. Dec. 1990, pages 285-344. An American political scientist studying the 1989 elections in Moscow applies advanced analysis techniques to data gathered in the field. The study is based on a uniquely large number of observations. The election process, the main political blocs fielding candidates, and their campaign strategies are outlined and discussed. Regression analysis is used to identify relationships between election results and the socioeconomic characteristics of candidates as well as the electorate in urban neighborhoods. The effort represents the first systematic attempt to trace the broad sociological contours of democratic elections in the U.S.S.R. on the basis of statistics compiled by a Western scholar. Connolly, Catherine, "The Use of Multiple Regression Analysis in Employment Discrimination Cases," Population Research and Policy Review; 10(2), 1991, pages 117-35. This paper explores the use of multiple regression in employment discrimination cases brought under the Equal Pay Act of 1963 or Title VII of the Civil Rights Act of 1964. Through examining the outcomes of the cases and judicial commentary about regression analyses as evidence, the paper concludes that plaintiffs are most likely to prevail in cases where both the plaintiffs and defendants utilize regression. Plaintiffs who do not present regression analyses as evidence are at a distinct disadvantage when defendants do so. However, defendants are not similarly disadvantaged when responding to a plaintiff's regression analysis without their own statistical showing. Finally, plaintiffs who support their regression analyses with witness testimony of discriminatory employer acts appear to be more likely to prevail than plaintiffs who do not present such witnesses. Culbertson, W. Patton; Bradford, David, "The Price of Beer: Some Evidence from Interstate Comparisons," International Journal of Industrial Organization; 9(2), 1991, pages 275-89. This paper is an empirical exploration into factors which are responsible for differences in the inter state price of beer. Though primarily a statistical exercise, the current work has implications for policy decisions. In particular, the role of taxes and regulator constraints on the relationships between brewer, wholesaler, and retailer are highlighted. Using an, as yet, untapped data source, regression analysis indicates that a substantial proportion of the variance in the inter state price of beer can be explained by demand pressure, transportation costs, and the price of substitutes, as well as taxes and the presence of legally mandated exclusive territories governing the wholesale distribution of beer. Davis, Lance E.; Gallman, Robert E.; Hutchins, Teresa, "Productivity in American Whaling: The New Bedford Fleet in the Nineteenth Century," National Bureau of Economic Research Working Paper: 2477 , pages: 81. From the end of the War of 1812 until the Civil War the New Bedford whaling fleet grew spectacularly; thereafter it declined, equally spectacularly. By the end of the century New Bedford's day was over. During the 88 years of this period, the technical configuration of the fleet, the hunting grounds visited, and the types of whales pursued all changed dramatically, and more than once. The literature on whaling suggests that the collapse of the industry was due, in part, to declining productivity, occasioned by the disappearance of the whales (because of over hunting) and the deterioration of the quality of labor. The shifts in the composition of the fleet are viewed, chiefly, as the result of efforts by whalemen to overcome their problems. In this paper, productivity data (superlative indexes), by voyage, are employed in multiple regression analysis to trace the relationships between the changes in the composition of the fleet and productivity. The propositions that declining labor quality and whale stocks had important consequences for productivity are subjected to test, while the impacts of technical changes on productivity are measured. Dayhoff, Debra A., "High School and College Freshmen Enrollments: The Role of Job Displacement," Quarterly Review of Economics and Business; 31(1), Spring 1991, pages 91-103. The problems facing workers displaced from their jobs have received growing attention during the past decade. Although economists have discussed the possibility that this increased risk should lead to greater education, no one has attempted to estimate the relationship between displacement threats and education enrollments. This article presents empirical estimates of the determinants of high school and college freshmen enrollments, using the displacement rate within the state of residence as a regressor. The regression results indicate that higher displacement rates have a positive, significant effect on enrollments for all groups studied. DeBoer, Larry, "Lotto Sales Stagnation: Product Maturity or Small Jackpots?," Growth and Change; 21(1), Winter 1990, pages 73-77. New York State lotto data are examined to determine whether the sales slowdown experienced by many state lotteries between 1985 and 1987 was due to a decline in interest by bettors or to a scarcity of large jackpots. Regression analysis shows that lotto sales accelerate as jackpots grow. Rising bettor participation causes fewer rollovers and smaller jackpots; this was the primary cause of the sales slowdown in New York. Increasing the odds against winning generates larger prizes and sales growth. Devaney, Barbara; Moffitt, Robert, "Dietary Effects of the Food Stamp Program," American Journal of Agricultural Economics; 73(1), February 1991, pages 202-11. Based on data from the 1979 80 Survey of Food Consumption in Low Income Households, this paper estimates the effects of changes in cash income and the food stamp benefit on household nutrient availability, while controlling for two potential sources of selection bias. The major finding of the empirical analysis is that the estimated dietary effects of changes in food stamp benefits are considerably larger than those resulting from changes in cash income, with estimates of the rations of the MPC for the food stamp benefit to the cash income MPC ranging from three to seven across nutrients. No significant evidence of selection bias was found, and the estimated dietary effects of food stamp benefits from the selection bias models are similar to those from the basic model estimated by ordinary least squares regression. Duffy-Deno, Kevin T., "Pollution Abatement Expenditures and Regional Manufacturing Activity," Journal of Regional Science; 32(4), November 1992, pages 419-36. Using a sample of sixty three SMSAs for the years 1974, 1978, and 1982, the author finds weak support for the argument that environmental regulations retard economic activity. Regression analysis of the relationship between per unit total and air pollution abatement expenditures in the manufacturing sector of these SMSAs and manufacturing employment and earnings levels reveals that these associations are negative but that the magnitudes are relatively small. For example, 10 percent higher per unit total pollution abatement costs are associated with, on average, 1064 fewer manufacturing workers (0.17 percent of total regional employment) in Sun Belt SMSAs during 1982. Dunlevy, James A., "On the Settlement Patterns of Recent Caribbean and Latin Immigrants to the United States," Growth and Change; 22(1), Winter 1991, pages 54-67. Between 1981 and 1987 the United States experienced a rate of immigration that had not been seen since before the First World War. Some 25 percent of these people came from the Americas south of the United States. While the great majority of these Latin and Caribbean immigrants tended to settle in a few select states, there are interesting nationality related differences in settlement preferences. In this paper the settlement patterns of persons from each of eleven different Latin and Caribbean nations who received immigrant status in 1987 are considered. Regression analysis suggests that social and economic forces were important, but that specific factors influenced different nationalities differently. Evidence is also found for a lagged adjustment in the settlement process. Furthermore, the attractive effect of a previously settled migrant stock is estimated to be strong for every nationality. Easton, Peter D.; Zmijewski, Mark E., "Cross sectional Variation in the Stock Market Response to Accounting Earnings Announcements," Journal of Accounting and Economics; 11(2 3), July 1989, pages 117-41. Studies of the information content of accounting earnings typically assume earnings response coefficients do not vary across firms. Valuation models relating earnings to security prices however, predict that earnings response coefficients are positively associated with revision coefficients (coefficients relating current earnings to future earnings) and negatively associated with expected rates of return. A random coefficient regression model provides evidence consistent with these predictions. The evidence has implications for interpreting multiple regression models and that relate abnormal returns to unexpected earnings and other information variables. Eckard, E. Woodrow, Jr., "Advertising, Competition, and Market Share Instability," Journal of Business; 60(4), October 1987, pages 539-52. This paper tests the hypothesis that advertising reduces leading firm market share instability (a proxy for interfirm rivalry) by creating market power. If advertising increases product differentiation and brand loyalty, then it also reduces demand cross elasticities and stabilizes shares. Changes over time in the combined market shares of the top four firms are examined for a large sample of four digit Standard Industrial Classification manufacturing industries for 1963 82. Multiple regression equations are used to explain s hare instability, measured as deviations both about the simple mean a nd about a linear time trend. The results indicate that advertising does not reduce market share instability. Edwards, Steven F., "Evidence of Structural Change in Preferences for Seafood," Marine Resource Economics; 7(3), Fall 1992, pages 141-51. The results from graphical and regression analyses of time series data on seafood consumption and prices suggest that preferences for seafood have strengthened in response to medical evidence that seafood promotes nutrition and health. The graphical analysis reveals a trend of increased per capita consumption of seafood since the late 1960s despite concurrent increases in the relative price of seafood. The two phase regression analyses of per capita consumption and of the relative price of seafood identified the mid-1960s and the mid-1970s as possible times of accelerated change in preferences. These results, which match those reported for consumption of poultry and red meats, have important implications for modeling derived demand in landings markets, for estimating welfare, and for managing fishing effort and multiple uses of fish stocks. [This journal was not available at UCLA at last check.] Evans, Mark O., "An Estimate of Race and Gender Role Model Effects in Teaching High School," Journal of Economic Education; 23(3), Summer 1992, pages 209-17. This article reports an attempt to estimate race and gender role model effects in high school economics courses from data included in the National Assessment of Economic Education Survey. No evidence of a gender role model effect was found, but classroom role models increased the achievement of African American students by nearly 19 percent when their mothers did not have a college education. Despite the greater underrepresentation of black males in higher education, the black role model effect appears to be just as strong when the student or teacher is female. The study employed single equation regression models that included student teacher race and gender interaction variables to estimate the role model effects. Figlewski, Stephen; Freund, Steven, "The Pricing of Convexity Risk and Time Decay in Options Markets," New York University Salomon Brothers Center Working Paper: , S 91-21 , pages: 24. The Black Scholes model and other related option valuation formula assume an environment in which all risk can be eliminated by a continuously rebalanced hedge. In this paper we identify two sources of risk in real world options that arise because hedged positions can only be adjusted discretely: convexity of the option pricing function and time decay. We develop measures for the option risk associated with these characteristics and examine transactions data drawn from the Berkeley options data base for evidence that the market prices these risks. We find a significant price effect associated with convexity, which becomes larger immediately following a period of increased stock price movements. The results regarding the pricing of time decay were not as strong as for convexity, but were statistically significant, with the hypothesized sign, in a multiple regression that included the convexity measure. Ganderton, Philip T., "The Effect of Subsidies in Kind on the Choice of a College," Journal of Public Economics; 48(3), August 1992, pages 269-92. It is possible that government subsidies to higher education, disbursed in kind, can produce the anomalous result of reducing the consumption of the good being subsidized. In this paper, the author employs individual and college data to estimate the effect of such subsidies on students' choices of college quality. Empirical estimates from a switching regression model with correction for the joint decisions to apply to college and choose the public or private sector are presented. Predictions from the model suggest that students choose a substantially lower quality public college than they would have chosen in the private sector. Horvath, Jane; Beaudin, Barbara Q.; Wright, Sheila P., "Persisting in the Introductory Economics Course: An Exploration of Gender Differences," Journal of Economic Education; 23(2), Spring 1992, pages 101-08. In a logistic regression model, males are more likely than females to enroll in a second economics course. The grade in the first course, however, is shown to be a more important predictor of persistence for females. Jegadeesh, Narasimhan, "Seasonality in Stock Price Mean Reversion: Evidence from the U.S. and the U.K.," Journal of Finance; 46(4), September 1991, pages 1427-44. The evidence of slowly mean reverting components in stock prices has been controversial. The hypothesis of stock price mean reversion is tested using a regression model that yields the highest asymptotic power among a class of regression tests. Although the evidence that the equally weighted index of stocks exhibits mean reversion is significant in the period 1926 88, this phenomenon is entirely concentrated in January. In the postwar period, both the equally weighted and the value weighted indices exhibit seasonal mean reversion in January. A similar phenomenon is also observed for the equally weighted index of stocks traded on the London Stock Exchange. Jensen, Eric R., "An Econometric Analysis of the Old Age Security Motive for Childbearing," International Economic Review; 31(4), November 1990, pages 953-68. A switching regression for birth interval lengths with endogenous switching is developed to test Mead Cain's contention that parents' fertility decisions arise from lexicographic preferences for old age security. The model is estimated as a survival model using Malaysian data. Assuming that contraceptors constitute the group of parents who have attained the minimal number of children with which they feel their old age support is secure, strong support for Cain's concept of old age security as the principal interest of those parents who have not yet attained a sufficient number of children appears in these data. Johannesson, Magnus et al., "Willingness to Pay for Antihypertensive Therapy Further Results," Journal of Health Economics; 12(1), April 1993, pages 95-108. A measurement experiment regarding willingness to pay for antihypertensive therapy is reported. A new type of binary willingness to pay question is used that allows for different degrees of certainty with respect to the responses. Mean willingness to pay is derived from a simple expected utility model and estimated.using maximum likelihood methods. The estimated parameters are highly significant, with predicted signs, and imply a mean willingness to pay of about SEK 800 ($130) per month. The explanatory power of the equation that only includes 'certain' yes/no responses is, as expected, much higher than that of the equation where only 'uncertain' responses are included. Coauthors are Per Olov Johansson, Bengt Kristrom, and Ulf G. Gerdtham. Jones, J. C. H.; Walsh, William D., "Product Market Imperfections, Job Content Differences and Gender Employment Discrimination at the Management Level: Some Evidence from the Canadian Manufacturing Sector in 1971 and 1981," Canadian Journal of Economics; 24(4), November 1991, pages 844-58. This paper presents a regression model of the relative employment level of female managers using data for 1971 and 1981 on a forty one industry sample drawn from the Canadian manufacturing sector. The object of the analysis is to test the neoclassical proposition that employment discrimination, here, against females, is fostered by imperfect product market conditions. In addition, the model allows for the open nature of the Canadian economy and for interindustry differences in the job and skill content of managerial occupations. The results support the neoclassical view and as well emphasize the importance of post secondary education to the employment of females at the management level. Kahn, Lawrence M., "Managerial Quality, Team Success, and Individual Player Performance in Major League Baseball," Industrial and Labor Relations Review; 46(3), April 1993, pages 531-47. This paper uses 1969 87 major league baseball data to investigate the impact of managerial quality on team winning and individual player performance. Managerial quality and player performance are measured as predicted pay based on salary regression s; these market based measures permit conclusions about costs and benefits of managerial quality. There are two major findings: first, when player inputs are controlled for, higher quality managers lead to higher winning percentages; second, players tend to play better, relative t o their prior performance levels, the higher the manager's quality. Kang, Han Bin; Reichert, Alan K., "An Empirical Analysis of Hedonic Regression and Grid Adjustment Techniques in Real Estate Appraisal," American Real Estate and Urban Economics Association Journal; 19(1), Spring 1991, pages 70-91. Multiple regression analysis has become increasingly popular when appraising residential properties for tax purposes. Alternatively, most fee appraisers and real estate brokers use the traditional sales comparison approach. This study combines the two techniques and uses multiple regression to generate the adjustment coefficients used in the grid adjustment method. The study compares the combined grid regression method with ordinary regression and defines the market conditions under which each method is likely to be more effective. The grid regression method is found to be more accurate for relatively homogeneous housing markets, and the multiplicative percentage adjustment method (MPAM) the preferred approach. Karafiath, Imre; Mynatt, Ross; Smith, Kenneth L., "The Brazilian Default Announcement and the Contagion Effect Hypothesis," Journal of Banking and Finance; 15(3), June 1991, pages 699-716. In this paper the authors use stock market data to test several hypotheses regarding possible investor reaction to the February 20, 1987 Brazilian default. Both the traditional event study approach and a generalized least squares regression, using Brazilian exposure as an explanatory variable for abnormal returns, are used. A sample of 46 bank holding companies, all listed on the New York of American stock exchanges, is divided into groups of no, low and high Brazilian exposure. They find that the initial stock market reaction to the default represents a rational investor response to new bank specific information. However, the stock market reaction also reveals that not all relevant information was contained in the disclosure announcement. Further, they find some evidence of a contagion effect related to size. Kellough, J. Edward; Elliott, Euel, "Demographic and Organizational Influences on Racial/Ethnic and Gender Integration in Federal Agencies," Social Science Quarterly; 73(1), March 1992, pages 1-11. This article examines several theoretically important demographic and organizational influences on the racial/ethnic and gender integration of federal government departments and agencies. Data on 30 government organizations from 1982, 1984, 1986, and 1988 are pooled to produce 120 observations which are then analyzed with a GLS regression procedure. Findings indicate that the variables analyzed explain from 54 to 70 percent of the variation in departmental and agency work force diversity. Linneman, Peter D.; Wachter, Michael L., "The Economics of Federal Compensation," Industrial Relations; 29(1), Winter 1990, pages 58-76. The problem investigated in this paper is the economic interpretation of federal wage comparability laws. We show that estimating wage differentials to test whether federal wages comport with the law is more complex than typically treated in the literature. Although the issue is largely one of econometric interpretation, it addresses the central question of which private sector workers should be compared to federal workers. We demonstrate that determining which explanatory variables in the wage regression equation are job descriptive and which are skill descriptive defines the comparison group. Loh, Eng Seng, "The Economic Effects of Physical Appearance," Social Science Quarterly; 74(2), June 1993, pages 420-38. This paper examines the wage effects of height and weight in a sample of full time young adult workers drawn from the National Longitudinal Survey Youth Cohort. Consistent with findings in other fields on the effects of physical appearance, it finds that height and weight have statistically significant impacts on the wage level and wage growth of both male and female workers. Moreover, they are robust across regression equations. A tentative conclusion is that these wage premiums reflect employer discrimination. Lovell, Peggy A., "The Geography of Economic Development and Racial Discrimination in Brazil," Development and Change; 24(1), January 1993, pages 83-101. This study investigates the relationship between unequal resource and population distribution and racial wage inequalities in Brazil. Using sample data from the 1980 Brazilian census, monthly wages were estimated for white and Afro Brazilian men working in nine metropolitan areas. Estimates showed that racial disparities in wages existed.across all regional labor markets. Regression based decomposition analysis found that a substantial portion of the racial wage gap was due to discrimination (unequal pay) while estimates of the magnitude of labor market discrimination indicated considerable variation by geographical area. Discrimination was higher in the predominantly white and highly developed areas of the South than in the former slave and underdeveloped regions of the Northeast. Maki, Dennis; Ng, Ignace, "Effects of Trade Unions on the Earnings Differential between Males and Females: Canadian Evidence," Canadian Journal of Economics; 23(2), May 1990, pages 305-11. This paper examines whether trade unions have affected the earnings gap between male and female workers in Canada. Based on a sample of 4,093 individuals derived from the Survey of Union Membership, the results of regression analysis suggest that unions have increased the relative earnings of male workers, even after the difference in the level of unionization between males and females is accounted for. The results also indicate that the relative wage effect differs substantially between the public and private sectors. Mankiw, N. Gregory; Romer, David; Shapiro, Matthew D., "Stock Market Forecastability and Volatility: A Statistical Appraisal," Review of Economic Studies; 58(3), May 1991, pages 455-77. This paper presents and implements statistical tests of stock market forecastability and volatility that are immune from the severe statistical problems of earlier tests. It finds that although the null hypothesis of market efficiency is rejected, the rejections are only marginal. The paper also shows how volatility tests and recent regression tests are closely related, and demonstrates that when finite sample biases are taken into account, regression tests also fail to provide strong evidence of violations of the conventional valuation model. McCrohan, Kevin F.; Pearl, Robert B., "An Application of Commercial Panel Data for Public Policy Research: Estimates of Tip Earnings," Journal of Economic and Social Measurement; 17(3 4), 1991, pages 217-31. Unique panel data provided by NPD Research, Inc., were used to investigate the magnitude and interactive effects upon tipping aggregates and levels. The analysis revealed that tips by American households aggregate to $6.2, $6.3, and $6.7 billion annually in restaurants and other eating places in 1982, 1983, and 1984 respectively. The information was collected by means of diaries kept by the tippers themselves, which was regarded as a more accurate source than inquiries of either the tip recipients or their employers. The paper covers the relationship between the characteristics of the tippers and of the tipping occasions and the propensity and magnitude of tipping. One finding of the regression analysis is that there are sizable differences in tip rates across tipping type restaurant categories when the combined effects of geographic region, metropolitan size, and restaurant options such as acceptance of credit cards and reservations and service of alcoholic beverages are considered. McDonald, John; Shlomowitz, Ralph, "Mortality on Immigrant Voyages to Australia in the 19th Century," Explorations in Economic History; 27(1), January 1990, pages 84-113. The seaboard population of European immigrants to Australia after the mid-1850s was probably the first such group whose adult mortality rate at sea was reduced to that on land. We calculate monthly death rates for various age classes and use novel regression techniques to estimate the correlates of mortality. For adults, the main characteristics associated with mortality were length of voyage and degree of crowding. For children and infants, these characteristics were even more highly associated with mortality, as was the tonnage of the vessel. The analysis highlights the special dangers faced by infants from infectious diseases aboard ship. (c) 1990 Academic Press, Inc. Mensch, Barbara; Kandel, Denise B., "Drug Use as a Risk Factor for Premarital Teen Pregnancy and Abortion in a National Sample of Young White Women," Demography; 29(3), August 1992, pages 409-29. The relationship between adolescent drug use and premarital teen pregnancy and abortion as a pregnancy outcome among sexually active women is investigated in a sample of white women from the National Longitudinal Survey of Youth. Event history analysis is used to explore whether prior drug use has a unique effect on premarital teen pregnancy. with controls for personality, lifestyle, and biological factors. Logistic regression is used to estimate whether drug use affects the decision to terminate a premarital teen pregnancy. The results show that the risk of premarital teen pregnancy is nearly four times as high for those who have used illicit drugs other than marijuana as for those with no history of any prior substance involvement. Furthermore, illicit drug use increases the likelihood of an abortion by a factor of 5. Policy implications of the findings are discussed. Miller, Warren B., "Personality Traits and Developmental Experiences as Antecedents of Childbearing Motivation," Demography; 29(2), May 1992, pages 265-85. Childbearing motivation may be conceptualized as based upon psychological traits and shaped by experiences during childhood, adolescence, and early adult life. This paper explores what those traits and developmental experiences are. Two measures of childbearing motivation, one positive and the other negative, are described. Using a sample of 362 married men and 354 married women, the paper systematically examines the factors associated with these measures. In addition to a set of basic personality traits, these factors include parental characteristics, teenage experiences, a number of variables from young adult behavior domains such as marriage, education, work, religion, and parental relationships. Stepwise multiple regression analyses lead to two final constrained, simultaneous equation regression models. These models indicate the importance of both personality traits and diverse life cycle experiences in the development of childbearing motivation, the differential gender distribution of predictors, and the different experiential antecedents of positive and negative motivation. Model, Karyn E., "The Effect of Marijuana Decriminalization on Hospital Emergency Room Drug Episodes: 1975-1978," Journal of the American Statistical Association; 88(423), September 1993, pages 737-47. Between 1973 and 1978 states with collectively over one third of the total U.S. population enacted laws that de-criminalized the possession of marijuana. This article uses standard metropolitan statistical area (SMSA) level data on hospital emergency room drug episodes collected by the Drug Abuse Warning Network to measure the effect of changes in drug penalties on substance abuse crises. The regression models demonstrate that marijuana decriminalization was accompanied by a significant reduction in episodes involving drugs other than marijuana and an increase in marijuana episodes. Although possible biases in the data preclude firm conclusions, the results suggest that some substitution occurs toward the less severely penalized drug when punishments are differentiated. Moore, Dora J., "Forecasting the Probability of Homeownership: A Cross Sectional Regression Analysis," Journal of Housing Research; 2(2), 1991, pages 125-43. In this paper, a logit model is developed using 1985 American Housing Survey (AHS) data to predict the probability of homeownership for a given household. The variables used as regressors describe demographic characteristics of householders as well as family income and the location of the housing unit. The probability of homeownership for householders with particular sets of characteristics is demonstrated. Factors such as the marital status and age of the householder and the location of the housing unit have significant explanatory power, but family income remains important. Although current demographic trends should have a favorable effect on the homeownership rate, economic policies will continue to influence household behavior. Murayama, Yuzo, "Information and Emigrants: Interprefectural Differences of Japanese Emigration to the Pacific Northwest, 1880-1915," Journal of Economic History; 51(1), March 1991, pages 125-47. This article examines the determinants of interprefectural patterns of Japanese emigration to the U.S. Pacific Northwest, using a multiple regression analysis. In estimating the regression equations, new proxies are introduced for the "familyfriends" effect that are free of the statistical problems common in previous studies on long distance migration. The result shows that the information networks that developed between pioneer immigrants and the home districts played a central role in shaping emigration patterns. The lack of an alternative means of obtaining reliable information about conditions in the United States appears to be responsible. Pastor, Manuel, Jr., "Capital Flight from Latin America," World Development; 18(1), January 1990, pages 1-18. This paper focuses on capital flight from Latin America during the 1970s and 1980s. After estimating the extent of such flight, I suggest that capital flight imposes growth costs, erodes the tax base, and worsens income distribution. I then use regression analysis to investigate the causes of capital flight as well as the role of capital controls and IMF programs in slowing flight. I conclude by criticizing the current policy approach to the capital flight problems and suggesting some new directions. Piette, Michael J.; Sauer, Douglas G., "Legal and Statistical Approaches to Analyzing Allegations of Employment Discrimination," Journal of Legal Economics; 3(1), March 1993, pages 1-14. This paper illustrates the legal and statistical approaches to the analysis of employment discrimination and details the types of issues generally investigated in the litigation of civil disputes where employment discrimination is alleged. The actual type of analysis used depends upon several considerations, including the size of the case, the particular legislation under which the case is brought, and the legal theory of the case. Statistical approaches include simple Chi square and distributions. More complex analysis include, but are not limited to, OLS and LOGIT regression analysis. The expansion of antidiscrimination legislation into new areas, such as under the Americans with Disabilities Act, promises to expand the already large role of statistical evidence in the analysis of employment discrimination. Pilotte, Eugene, "Growth Opportunities and the Stock Price Response to New Financing," Journal of Business; 65(3), July 1992, pages 371-94. The author documents the effect of growth opportunities on the stock price response to security offerings. For equity offerings, the stock price decline for mature firms exceeds the decline for growth firms. For straight and convertible debt offerings, mature firms experience a significant price decline while growth firms experience no significant price change. Regression analysis indicates that the stock price response to new financing is significantly, positively related to a variety of growth opportunity measures. Holding growth opportunities fixed, the stock price response depends on the type of security offered (equity vs. debt) and, for straight debt offerings, Moody's bond ratings. Spurr, Stephen J., "Sex Discrimination in the Legal Profession: A Study of Promotion," Industrial and Labor Relations Review; 43(4), April 1990, pages 406-17. Although the proportion of lawyers who are women has grown rapidly in recent years, this study presents evidence of discrimination against women in promotion to partnership in major U.S. law firms in 1969 73 and 1980. Using regression analysis and maximum likelihood estimates of a probabilistic model of production of legal services, the author finds that women were about one half as likely as men to achieve partnership in those years, even though they did not significantly differ from men in academic distinction (selection for the law review or the Order of the Coif), the rank of the law schools, or productivity. Stano, Miron; Hotelling, Harold, "Regression Analysis in Litigation: Some Overlooked Considerations," Journal of Legal Economics; 1(3), December 1991, pages 68-78. The article shows that standard loglinear estimation of a growth trend, a method commonly used by experts in legal cases to forecast earnings and other economic magnitudes, may result in serious forecasting error. From earnings data introduced in a recent antitrust case, the results of alternative forecasting methods are compared to illustrate both the potential degree of error and under what circumstances alternatives to the standard procedure should be considered. The results are applicable to discrimination and wrongful death as well as antitrust cases. Telford, Ted A., "Covariates of Men's Age at First Marriage: The Historical Demography of Chinese Lineages," Population Studies; 46(1), March 1992, pages 19-35. Age at first marriage is studied in one historical Chinese population reconstituted from the genealogies of 39 lineage groups for the period 1520 1661. By using event history methods, descriptive measures of age at marriage for various categories of men are generated from fathers' ages at birth of first son as a proxy measure. The covariates of the likelihood of marriage at specific ages are also examined, using Cox's regression analysis. This study confirms an early average age at first marriage of 21 22 years for men, which is comparable to other historical Chinese populations. Some evidence for large proportions of celibate men and marriage in the teens for women in these lineage populations is also presented. Considerable variation in men's age at marriage is evident, primarily accounted for by differences in social status. Travlos, Nickolaos G.; Waegelein, James F., "Executive Compensation, Method of Payment and Abnormal Returns to Bidding Firms at Takeover Announcements," Managerial and Decision Economics; 13(6), Nov. Dec. 1992, pages 493-501. This study investigates the association between method of payment, long term performance plans, managerial stockholdings and abnormal returns to bidding firms at takeover announcements, using a cross sectional regression methodology. Previous studies have examined each of these factors separately. The results indicate that firms with long term performance plans and high managerial stockholdings in cash offers experience significantly higher abnormal returns at the announcement of mergers prior to 1980. The study provides additional evidence in explaining the previous conflicting results (Jensen and Ruback, 1985), examining the stock market reaction of bidding firms at merger announcements. Truett, Dale B.; Truett, Lila J., "The Demand for Life Insurance in Mexico and the United States: A Comparative Study," Journal of Risk and Insurance; 57(2), June 1990, pages 321-28. This study compares the demand for life insurance in Mexico with that in the United States. It provides a brief historical perspective on the growth of life insurance purchases in the two countries and employs regression analysis to estimate life insurance demand functions. The principal findings are that age, education, and level of income affect the demand for life insurance and that the income elasticity of demand for life insurance is much higher in Mexico than in the United States. Wagner, G. Oliver, V., "College and Professional Football Scores: A Multiple Regression Analysis," American Economist; 31(1), Spring 1987, pages 33-37. No abstract available. Whitney, James D., "Winning Games versus Winning Championships: The Economics of Fan Interest and Team Performance," Economic Inquiry; 26(4), October 1988, pages 703-24. Championship prospects, as distinct from game winning prospects, may contribute to a fan's interest in a particular sports team. If so, then both season length and the structure of championship playoffs help determine the equilibrium allocation of playing skills across the teams of a league. Evidence from a regression analysis of team attendance in baseball indicates that ticket demand depends, in part, on perceived flag winning prospects. Several patterns in the winning percentages of league leaders in the major U.S. team sports are consistent with the perspective that championship considerations influence the allocation of playing skills. Williams, Mary L.; Waldauer, Charles; Duggal, Vijaya G., "Gender Differences in Economic Knowledge: An Extension of the Analysis," Journal of Economic Education; 23(3), Summer 1992, pages 219-31. This article extends the analysis of gender differences in economic knowledge by examining college students in intermediate economic theory and economic statistics courses, as well as in principles of economics. In addition, this investigation includes mathematical problems, graphs, and essay questions, along with the standard multiple choice questions in the tests administered. Using ordinary least squares multiple regression analysis, no consistent evidence is found to support the hypothesis that significant gender differences exist in college student performances on economic exams. Also, there is no indication that males perform better on questions requiring quantitative skills, nor that females perform better on questions requiring verbal skills. Yang, Bijou, "The Economy and Suicide: A Time Series Study of the U.S.A.," American Journal of Economics and Sociology; 51(1), January 1992, pages 87-99. The suicide rate for the United States for the period of 1940 84 was posited to be the consequence of the interplay of economic and social variables. The single equation regression was applied to the suicide rates for the total population and for the four sex by race social groups. The results indicated that: (1) suicide rates did not increase during the economic booms and busts as predicted by Durkheim, and the change depended upon the social groups involved; (2) the unemployment rate had significant detrimental impact only on the white male suicide rate; (3) the female labor force participation rate had beneficial impact on both the white and non-white female suicide rates; (4) the divorce rate was the only variable that had a consistent impact for all social groups; and (5) membership in the Catholic Church had a positive association with the suicide rates.