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In this study the irrelevance school of issue price is challenged and a theoretical model of optimal allocation ratio which explicitly takes into account various costs associated with rights offerings is developed. The empirical results reveal the importance of owners' subscription cost, the issuing firm's dividend policy, as well as the cost of administering share transfers in the determination of allocation ratio. The entirety of these results points, therefore, to the rejection of the irrelevance school of issue price and lend support to the three relevance school theories: the dividend policy cost theory of Levy and Sarnat, the transfer cost hypothesis of Beranek, and the cost of owner subscription hypothesis developed in this study. / Ph. D.

This dissertation examines the performance of China's pulp and paper industry under environmental regulations, and reflects on the implementation of the regulations, and especially on market-based instruments. The dissertation includes two empirical chapters: one uses a frontier production function model to examine the impact of China's environmental policy on paper mills' environmental as well as efficiency performance; the other derives shadow prices for pollutants for the same group of mills, based on a distance function model, to examine the efficiency performance of current pollution control policy and the degree of regional variation in the policy enforcement. The basic conclusion from the first empirical chapter is that the economic instrument-pollution levy system-can be an effective tool in inducing polluting mills to abate their pollution, and there is no strong evidence that the instrument adversely affected the mills' efficiency performance. The reason that the pollution problem is not lessening over time can be largely attributed to allocative inefficiency and regional disparity in policy enforcement, as is demonstrated by the second empirical chapter. These results should point future policy in the direction of better enforcement and/or the trial of a tradable permit system. / Ph. D.

M.S.

When-issued trading, the contractual agreement for the sale and purchase of shares to be issued in the future (when-issued securities), typically occurs after stock split announcements. Curiously, when-issued trading does not always exist for a stock-splitting firm's shares even though the shares are eligible for when-issued trading. Although stock splits have been the subject of a large number of studies, intriguing questions concerning these events remain unanswered. In particular, academia has yet to explain adequately the positive average abnormal returns associated with stock split announcements. These two peculiar phenomena are examined. A major objective of this dissertation is to determine whether there are systematic differences between those stock-splitting firms whose shares are traded on a when-issued basis and those whose shares arc not. A logistic regression model was constructed, using information with respect to nine accounting variables, to determine if there are systematic differences in accounting information that are useful in classifying stock-splitting firms as being associated with when-issued trading. The classification accuracy of the logistic regression model was significantly better than a random walk model, but was not better than the maximum chance model. The results of the final model indicate that size of the stock-splitting firm is the most significant factor affecting the probability that a stock-splitting firm's shares are traded on a when-issued basis. The probability that a stock-splitting firm's shares will be traded on a when-issued basis increases with firm size. The presence/absence of when-issued trading indicates that investors do not react to stock splits in a consistent manner. Therefore, the stock price behavior around the stock split announcements was examined and the difference in the reaction to announcements of when-issued traded and non-when-issued traded firms was tested for statistical significance. The results indicate that the market responds more favorably to the stock split announcements made by non-when-issued traded firms. The variation in the stock price behavior over a two-day stock split announcement period was analyzed cross-sectionally to determine whether the market reaction displayed through stock prices is related to selected accounting variables. Again, size was the most significant factor. In this case, size was negatively related to the stock price behavior suggesting that stockholders of larger firms earn lower abnormal returns. Another interpretation would be that stock splits are viewed more favorably if authorized by smaller firms. Overall, the results of this study suggest that all stock-splitting firms are not similar and that the market does not react consistently to the announcement of stock splits of all firms. It seems that the larger the firm, the more likely its shares will be traded on a when-issued basis after the stock split is announced. Furthermore, the market does not react as positively to stock split announcements of larger firms as it does to announcements of smaller firms. My conclusion is that larger firms are more efficiently valued and, accordingly, the announcements of stock splits by larger firms are less informative than for smaller ones. / Ph. D.

The effect of movements in the real exchange rate on agricultural prices and agricultural export sales is assessed based on the principle of Granger causality. An out-of-sample forecasting procedure is used to conduct tests for Granger causality from the exchange rate to agricultural prices and export sales. Technical time series issues such as stationarity, the method of lag-length selection, in sample versus out-of-sample tests for Granger causality, and long-range versus short-range forecasting are considered in relation to the outcome of Granger causality tests. Theoretical and empirical studies are reviewed which indicate the importance of working with stationary data series when testing for Granger causality. Differing methods of lag-length selection are found to affect the outcome of both in-sample and out-or-sample tests for Granger causality. The usual in-sample tests for Granger causality are compared to out-of-sample tests; the results of the comparison reveal that the in-sample tests do not in-general agree among themselves, nor do they agree with the out-of-sample tests' results. This indicates the importance of searching the model space for the best specification before conducting Granger causality tests. Long-range forecasts are compared to the I-step ahead forecasts used to test for Granger causality; these forecasts corroborate the out-of- sample tests for Granger causality in finding significant impacts from the exchange rate to agricultural export sales and agricultural prices. / Master of Science

Stocks and similar securities are normally traded in prices which are integral multiples of one-eiqhth of a dollar (a few are traded in one-sixteenths of a dollar). This price constraint may introduce a bias in the estimates of beta for low-priced securities, and the purpose of this dissertation is to examine the bias introduced from this source. The research methodology briefly consists of constructing a price series for a hypothetical stock by computing"true" prices from an assumed"true" beta and alpha, the series of returns generated from a market index, and a random disturbance term. The constructed price series is rounded to the nearest one-eighth of a dollar and an"observed" beta for this rounded price series is calculated. The"observed” beta is compared to the"true" beta to observe the degree of bias. Replications are made which differ in their randomly chosen starting point in the market index series; and the experiment is repeated for various"true" betas and alphas within the range of interest, for different intervals between price observations, and for different initial prices. Chapter I provides an introduction to the study. In Chapter II the relevant literature for this study is reviewed. The first part includes previous studies of the one-eighth effect and the intervalling effect, while the second part of the chapter focuses on the composition and characteristics of common market indexes. The analytical considerations are discussed in Chapter III. The price generating mechanism and the constraint placed upon it by one eighth price rounding are explicitly stated. Alternative rounding procedures are presented and their implications discussed. In the next section the characteristics of the rounding functions are discussed. Finally, expressions for the amount of bias in beta estimates introduced by the one eighth price rounding are derived for both logarithmic returns and holding period (arithmetic) returns. In Chapter IV the methodology used to secure the results presented in Chapter V is reviewed. The simulation itself is discussed as well as the statistical and ad hoc procedures used to evaluate the results. The results presented in the next chapter also include the results pertinent to two ancillary issues discussed in Chapter IV, namely, how many replications are needed and how reproducible are the results. Chapter VI summarizes the findings, draws a conclusion, and suggests extensions of the study. / Ph. D.

The effects of anticipated versus unanticipated money growth on total, nonfarm, and farm real gross domestic product, real net farm income, real prices received by farmers for crops and livestock, and the real value of agricultural exports are evaluated. The distinction between anticipated and unanticipated components of money growth is motivated by the new classical rational expectations assertion that. anticipated money growth is discounted by agents and has no real effects, while unanticipated money may have real impacts. The differentiation of money growth into anticipated and unanticipated components follows a rational expectations scheme using Granger causality tests. The money growth equation and the output, real price, and agricultural export equations are estimated by a two-step estimation procedure. The regression results for total and nonfarm real gross domestic product and real net farm income indicate an influence from both anticipated and unanticipated components of money. On the other hand, real farm gross domestic product appears to be affected by only unanticipated components of money. The regression results for prices received by farmers for crops and livestock, and the real value of agricultural exports indicate little influence from either anticipated or unanticipated components of money. In sum, the results suggest that neither anticipated nor unanticipated money is always neutral, but only limited evidence is found of monetary impacts specifically on agriculture. / M.S.

Master of Science