Richard R. West

Risk, Return, and Equilibrium: A Revisit

This paper reports the results of tests of the major implications of the two-parameter capital asset pricing model. The findings indicate that the relationship between stock returns and systematic risk contains important nonlinearities during 1935-82. These nonlinearities cannot be ascribed to previously documented anomalies related to firm size or January seasonality. Moreover, the test results appear to be sensitive to the choice of the proxy for the market portfolio.

Competition and the Pricing of Dealer Service in the Over-the-Counter Stock Market

The stock market is in the midst of an era of change unparalleled since the Great Depression, long-standing institutions — including the major stock exchanges — are being radically challenged by contemporary developments, and novel approaches to making markets for common stocks are appearing with increasing frequency. In addition, the Martin Report and the recent hearings of the Securities and Exchange Commission on the future structure of the equities market indicate that the regulatory climate surrounding the stock market can be expected to undergo serious change in the near future.

Seasonality in Canadian Stock Prices: A Test of the “Tax-Loss-Selling” Hypothesis

A popular hypothesis to explain the anomalous January returns of common stocks is based on the argument that there is considerable tax-loss selling by investors toward the end of the year. The purpose of this study is to test the tax-loss-selling hypothesis with data on Canadian stocks. Although the introduction of capital gains tax in Canada seems to have affected the behavior of stock returns, the findings do not support the proposition that taxinduced trading is the sole cause of the seasonality in stock returns in Canada.

Margin Changes and Stock Price Behavior

The relationship between Federal Reserve margin requirements and the behavior of stock prices has long been of interest to academicians and investors. This paper reports the results of a study of price movements around times when margins were changed. Using data from the 1933-69 period, the study concludes that increases in margin appear, at most, to have a trivial depressing influence on stock prices, which takes place over a number of days following the announcement of increases. Margin decreases, on the other hand, do not seem to have any significant impact on price behavior.

The Securities Industry under Negotiated Brokerage Commissions: Changes in the Structure and Performance of New York Stock Exchange Member Firms

This paper examines the effects of competitive brokerage commission rates on the structure and performance of the NYSE brokerage industry. Although the demise of fixed minimum commission rates has caused economic hardship for a number of brokerage firms, the results to date do not support the negative public policy effects that were alleged to be the inexorable consequences of permitting brokerage rates to be set by competitive pressures.

Negotiated versus Competitive Underwritings of Public Utility Bonds: Just One More Time

Over the past decade, a number of papers [1, 2, 3, 6, 7, 9] have explored the relative merits of negotiation versus competitive bidding in the underwriting of corporate bonds, particularly bonds issued by public utilities. Interest in this subject has been stimulated principally by an important public policy issue—namely, the SECs posture vis a vis its Rule U–50. Originally promulgated in 1940, this rule required competitive bidding on certain classes of utility bonds. In 1974, however, it was “temporarily†suspended on the grounds that chaotic conditions in the market for these securities called for more flexibility in the way issues could be underwritten. While this suspension continues in effect, Rule U–50 could be reinstated at any time by the SEC.

Corporate Finance and the Changing Stock Market

Dr. West is Dean and Professor of Finance in the College of Business, University of Oregon. He is the author of numerous papers in financial and economics journals. Dr. Tinic is Professor of Managerial Economics and Quantitative Methods at the University of Alberta. He is coauthor of The Economics of the Stock Market, and has published papers in several journals including the Journal of Finance, Quarterly Journal of Economics, Journal of Financial and Quantitative Analysis, the Bell Journal of Economics, and Management Science.