NETWORK EFFECTS ON CASH-CARD SUBSTITUTION IN TRANSACTIONS AND LOW INTEREST RATE REGIMES

Abstract

We develop a Nash game on the adoption of a new EFTPOS (Electronic Fund Transfer at Point
of Sale) card payment media given cash is dispensed by a competitive ATM (Automated Teller
Machine) network. Equilibrium conditions when cash and card use coexist entail a specific
relationship between the card network coverage parameter (pk) and the proportion (x) of cash
financed expenditures. We derive a payments innovation technology constrained transactions
demand for money which is highly interest rate sensitive in low interest rate regimes. Data on
cash-card use in the UK (1990–97) is used to calibrate the model.

OVERCOMING THE ZERO BOUND ON NOMINAL INTEREST RATES WITH NEGATIVE INTEREST ON CURRENCY: GESELL’S SOLUTION

Abstract

The paper considers two small analytical models, one Old-Keynesian, the other New-Keynesian,
possessing equilibria where nominal interest rates at all maturities can be stuck at their zero
lower bound. When the authorities remove the zero nominal interest rate floor by adopting an
augmented monetary rule that systematically keeps the nominal interest rate on base money at
or below the nominal interest rate on non-monetary instruments, the lower bound equilibria
are eliminated, thus allowing an economic system to avoid or escape from the trap. This
involves paying negative interest on currency, ie, imposing a ‘carry tax’ on currency, an idea
first promoted by Gesell.

The long-horizon returns behaviour of the Por tuguese s tock market

Abstract

In the last few years several research studies have challenged the traditional weak-form
efficiency tests of the stock market. These studies suggested an alternative to the random walk model, containing temporary and permanent components . If stocks follow such a model then the traditional tests , using returns computed for short intervals would be unable to detect them. To investigate the evidence for such models in the Portuguese stock market ten stock indexes were created. This is a pioneer study of the Portuguese stock market, and uses nominal, real and excess returns , computed for longer horizons . Three methodologies were used: variance ratios , ordinary least squares regressions and weighted least squares regressions . The statistical significance of the results was studied using traditional parametric tests as well as non-parametric tests. The evidence is mixed, as the presence of tendencies towards mean aversion and mean reversion were detected. Results also show that the evidence is very sensitive to the
methodology used and the significance tests performed. These results , however, do not
necessarily reject the weak-form market efficiency hypothesis .

Price uncertainty and corporate value

Abstract

This study examines the sensitivity of equity values of oil producers to changes in the uncertainty of future oil prices. We document that this sensitivity is negatively correlated with a firm’s debt ratio and its production costs. These results indicate that companies that are more likely to experience financial distress or underinvestment from low cash flows are adversely affected by increases in the uncertainty of future cash flows. We conclude that corporate risk management can increase shareholder value by reducing the expected costs of financial distress and underinvestment.

Women entrepreneurs who break through to equity financing: the influence of human, social and financial capital

Abstract

This is one of the first efforts to systematically study attributes of women business owners and
their equity financing strategies. The study explored the factors associated with the use of equity capital in women led firms. Hypotheses examined the influence of human and social capital on the likelihood of seeking equity funding, access to funding sources, bootstrapping techniques and development of financial strategies. Data for this study came from a survey of 235 US women business owners conducted by the National Foundation for Women Business Owners from a sample identified by Dun and Bradstreet. Results showed only graduate education significantly influenced the odds of using outside equity financing. Social capital had no direct effect on increasing likelihood of using equity but influenced the use of bootstrapping
techniques. Network diversity was positively related to the use of personal sources of funding,
while professional advisor relationships were negatively related to personal sources of financing. Our research suggests women obtaining higher levels of educationmay increase their likelihood of obtaining funding. Further, during the bootstrap phase, utilizing social capital is an asset.

Risk Factors in Developing Capital Markets

Abstract

This paper addresses the question as to whether the Capital Asset Pricing Model offers an appropriateexplanation of company returns in less developed capital markets. The question is whether the CAPM isappropriate, given the potential relevance of unsystematic risk, of market distortions, and of thin tradingand its related effects on market prices. The relative unavailability of hedging opportunities may alsoimpact on relationships between risk and return. Arguments for considering some additional factors inpricing models to better deal with such situations are presented. Using company returns data from arange of Asian capital markets, a series of empirical tests examine whether these factors, in a crosssectional regression model, offer a statistically significant explanation of company returns.