Tim R. L. Fry

Testing for Independence of Irrelevant Alternatives Some Empirical Results

In a recent article, Zhang and Hoffman discuss the use of discrete choice logit models in sociological research. In the present article, the authors estimate a multinomial logit model of U.K. Magistrates Courts sentencing using a data set collected by the National Association for the Care and Resettlement of Offenders (NACRO) and test the independence of irrelevant alternatives (IIA) property using six tests. Conducting the tests with the appropriate large sample critical values, the authors find that the acceptance or rejection of IIA depends both on which test and which variant of a given test is used. The authors then use simulation techniques to assess the size and power performance of the tests. The empirical example is revisited with the inferences performed using empirical critical values obtained by simulation, and the resultant inferences are compared. The results show that empirical workers should exercise caution when testing for IIA.

Smokers of illicit tobacco report significantly worse health than other smokers

INTRODUCTION The aim of this study was to ascertain whether the health of past and current smokers of illicit tobacco (chop-chop) differs from that of smokers of licit tobacco. METHODS The design was a telephone survey, stratified by state, using computer aided telephone interviewing, with households selected by random digit dialing from the telephone white pages. Setting was all Australian states and territories, 1,621 regular tobacco smokers aged 18+ years. Measures were social and personal characteristics of tobacco smokers, smoking histories and patterns, and health status (SF-8 and disability weights). Binary logistic regression was used to identify variables associated with current and lifetime chop-chop use. RESULTS Compared with licit-only tobacco smokers, current users of chop-chop had significantly greater odds of beginning smoking aged <16 years (odds ratio [OR] 1.65, 95% CI = 1.09-2.50), of reporting below-average social functioning (OR 1.61, 95% CI = 1.06-2.44), and of a measurable disability (OR 1.95, 95% CI = 1.08-3.51). Lifetime chop-chop users were relatively likely to be less than 45 years of age (OR 1.82, 95% CI = 1.38-2.39), report below-average mental health (OR 1.61, 95% CI = 1.22-2.13) and above-average bodily pain (OR 1.40, 95% CI = 1.06-1.85), smoke more than 120 cigarettes/week (OR 1.39, 95% CI = 1.06-1.83), and to have begun smoking aged <16 years (OR 1.33, 95% CI = 1.01-1.75). DISCUSSION Current and lifetime users of chop-chop report significantly worse health than smokers of licit tobacco. Investigation of how to communicate this finding to current and potential chop-chop smokers is warranted.

Asymmetry and time variation in exchange rate exposure: An investigation of Australian stocks returns

Purpose – The purpose of this paper is to provide some insights into the exchange rate exposure of Australian stock returns.Design/methodology/approach – Using a dynamic econometric approach that allows for both asymmetry and time‐varying risk exposures in both the exchange rate variable and the market variable, a large sample of Australian firms were tested over the period of January 2001 and December 2005. The data were analysed using three different classification methods, forming portfolios according to industry sector, size deciles, and censoring deciles.Findings – Although the evidence of exchange rate exposure is limited across the sample of industries, the following were found: a time‐varying asymmetric effect primarily in the utilities sector, time‐varying exposure in the materials and energy sectors, and an asymmetric effect in the technology sector. Further, some time‐varying asymmetric exchange rate exposure was found across most size and censoring deciles and also substantial evidence of a po...

Alternative beta risk estimators in cases of extreme thin trading: Canadian evidence

In this paper, an alternative method of estimating the systematic risk for Canadian stocks is presented and empirically investigated. The method proposed is applied to a set of data impacted by censoring – the presence of zero returns, which occurs in extreme cases of thin trading. The approach used is the sample selectivity model, which is a two-step procedure: with a selectivity component and a regression component. In addition, this study compares the new beta estimate to the standard OLS beta and the Dimson Beta. The results indicate that the selectivity-corrected beta does correct the downward bias of the OLS estimates and possesses desirable statistical properties.

A pack a day for 20 years: Smoking and cigarette pack sizes

This study focuses on the determinants of cigarette consumption. In particular, the impact of cigarette pack sizes on the typical daily consumption of smokers is investigated. Results are presented from a new multi-modal count data model which allows for ‘pack-effects’ in daily consumption levels. Our results suggest that smokers regulate their consumption in accordance with the variety of pack sizes that are available to them.

A duration analysis of the time from prospectus to listing for Australian initial public offerings

A finding of the Australian Initial Public Offerings (IPOs) literature is that the time from prospectus registration to listing is related to the level of informed demand. This makes the understanding of time to listing an important matter. This study analyses the time to listing for 834 IPOs in Australia over the period 1994 to 2004. The study finds that a shorter time to listing is associated with higher issue prices, and the use of an underwriter or Big 5 independent accountant. In contrast, IPOs offering share options take longer to list. The significant role of variables associated with the degree of certainty about a listing is consistent with informed demand hypotheses about the time to listing.

The Growth of Labour Hire Employment in Australia

This Productivity Commission Staff Working Paper ‘The Growth of Labour Hire Employment in Australia’ was released in February 2005. This paper is part of an ongoing labour market research program at the Productivity Commission to examine developments in employment relationships and the implications of these developments for the labour force and the Australian economy. The series seeks to produce analysis to inform the policy debate by characterising how different forms of employment contribute to the Australian economy. This paper examines how the rapid growth of labour hire employment can be attributed to how firms manage their workforce, rather than to changes in the economy’s structure. For example changes in operating environments contributed to firms’ altering of their employment strategy in favour of labour hire workers through the changing industrial relations context and rising competitive pressures. The views expressed in this paper are those of the staff involved and do not necessarily reflect the those of the Productivity Commission. Authors: Laplagne, P., Glover, M. and Fry, T.

Censoring and its impact on multivariate testing of the Capital Asset Pricing Model

The primary objective of this paper is to assess the affect of data ‘censoring’ on asset pricing tests. This is achieved by modifying tests to incorporate a ‘selectivity bias’ correction factor in a Gibbons (Journal of Financial Economics, 10, pp. 3–27, 1982) multivariate framework. The sample comprises daily Australian stock returns for 524 companies over the five-year period 1995 to 1999. First, it is found that the use of a ‘selectivity bias’ correction factor is generally justified in stocks with a degree of censoring at about 50% or above. This represents approximately 52% of the sample. Second, despite the first finding no evidence is found supporting the need for such a correction in asset pricing tests – the degree of support for the CAPM is not materially affected.

Understanding the motivations of contraband tobacco smokers

Aim: This study explored the motivations behind illicit tobacco use in Australia. A key focus was to investigate the hypothesis that the primary motivation for illicit tobacco use is its low cost in comparison to the price of legal tobacco. Methods: An Australian tobacco usage telephone survey was conducted in 2007. Illicit tobacco smokers completed a longer version of the questionnaire, with questions relating to illicit tobacco usage and perceptions. Findings: Of the current smokers of illicit tobacco surveyed, almost half would consider increasing illicit tobacco consumption if the cost of legal tobacco were to increase to four times the price of illicit tobacco, although others stated consumption would remain the same regardless of such a price change. Almost all former smokers of illicit tobacco claimed that price did not influence the decision to stop smoking illicit tobacco. Conclusions: Some illicit tobacco smokers appear to be sensitive to the price of tobacco products, but price is not always an underlying motivator. Personal preference and supply also influence illicit tobacco consumption. The findings suggest that reducing the availability of illicit tobacco would be a useful strategy for combating the growing illicit tobacco problem.

Is Illicit Tobacco Demand Sensitive to Relative Price

A tough fiscal stance has become the norm for discouraging tobacco consumption. Tax and excise rises serve to increase the price of licit relative to illicit tobacco. Consequently there has been a rise in black market tobacco consumption. This paper investigates the degree of substitution between licit and illicit tobacco using novel survey data. We find that illicit tobacco smokers are sensitive to the price ratio between licit and illicit tobacco. This implies that high tobacco taxes have spillover effects that need to be accounted for in policy evaluation.