Equity market linkage and multinational trade accords: The case of NAFTA

This paper examines the impact of multinational trade accords on the degree of stock market linkage using NAFTA as a case study. Besides liberalizing trade among the U.S., Canada and Mexico, NAFTA has also sought to strengthen linkage among stock markets of these countries. If successful, this could lessen the appeal of asset diversification across the North American region and promote a higher degree of market efficiency. We assess the possible impact of NAFTA on market linkage using cross-correlations, multivariate price cointegrating systems, speed of convergence, and generalized variance decompositions of unexpected stock returns. The evidence proves robust and consistently indicates intensified equity market linkage since the NAFTA accord. The results also suggest that interdependent goods markets in the region are a primary reason behind the stronger equity market linkage observed in the post-NAFTA period. (c) 2005 Elsevier Ltd. All rights reserved.

Recent trends in pay equity: Beyond the aggregate statistics

The earnings gap between men and women has remained comparatively stable at an aggregate level over the 1990s in Australia. From one perspective, this is a reminder of the considerable difficulty of addressing wage differentials once the most overt forms of wage discrimination have been removed, and of the limited impact of most policy initiatives. From another, it may be seen as evidence that dire predictions about the effects of decentralisation on the earnings gap have failed to materialise. In this paper, I use Australian Bureau of Statistics data to show that a number of different trends are evident underneath the relatively static picture shown by the aggregate statistics, particularly as wage dispersion has increased. The data suggest not only that the prospects for pay equity are far from benign, but also that in the current labour market the issue of gender pay inequality cannot be effectively addressed separately from wage inequality more generally.

Conditional performance evaluation and the relevance of money flows for Australian international equity funds

This paper assesses the importance of fund flows in the performance evaluation of Australian international equity funds. Two concepts of fund flows are considered in the context of a conditional asset pricing model. The first measure is net fund flow relative to fund size and the second is net fund flow relative to sector flows. We find that incorporating a fund flow measure relative to the sector flow results in a reduction of measured perverse market timing. The results indicate that, at the individual fund level, cash flows are relevant in assessing management outcomes.

Relationship between franking credits and the market risk premium

In a dividend imputation tax system, equity investors have three potential sources of return: dividends, capital gains and franking (tax) credits. However, the standard procedures for estimating the market risk premium (MRP) for use in the capital asset pricing model, ignore the value of franking credits. Officer (1994) notes that if franking credits do affect the corporate cost of capital, their value must be added to the standard estimates of MRP. In the present paper, we explicitly derive the relationship between the value of franking credits (gamma) and the MRP. We show that the standard parameter estimates that have been adopted in practice (especially by Australian regulators) violate this deterministic mathematical relationship. We also show how information on dividend yields and effective tax rates bounds the values that can be reasonably used for gamma and the MRP. We make recommendations for how estimates of the MRP should be adjusted to reflect the value of franking credits in an internally consistent manner.

Does customer satisfaction lead to improved brand equity? An empirical examination of two categories of retail brands

Purpose – The objective of the present research is to examine the relationship between consumers' satisfaction with a retailer and the equity they associate with the retail brand. Design/methodology/approach – Retail brand equity is conceptualized as a four-dimensional construct comprising: retailer awareness, retailer associations, retailer perceived quality, and retailer loyalty. Then the associative network memory model is applied from cognitive psychology to the specific context of the relationships between customer satisfaction and consumer-based retailer equity. A survey was undertaken using a convenience sample of shopping mall consumers in an Australian state capital city. The questionnaire used to collect data included an experimental design such that two categories of retailers were included in the study: department stores and specialty stores, with three retailers representing each category. The relationship between consumer-based retailer equity and customer satisfaction was examined using multivariate analysis of variance. Findings – Results indicate that retail brand equity varies with customer satisfaction. For department stores, each consumer-based retailer equity dimension varied according to customer satisfaction with the retailer. However, for specialty stores, only three of the consumer-based retailer equity dimensions, namely retailer awareness, retailer associations and retailer perceived quality, varied according to customer satisfaction level with the retailer. Originality/value – The principal contribution of the present research is that it demonstrates empirically a positive relationship between customer satisfaction and an intangible asset such as retailer equity.

A consumer-based method for retailer equity measurement: Results of an empirical study

This research extends the consumer-based brand equity measurement approach to the measurement of the equity associated with retailers. This paper also addresses some of the limitations associated with current retailer equity measurement such as a lack of clarity regarding its nature and dimensionality. We conceptualise retailer equity as a four-dimensional construct comprising retailer awareness, retailer associations, perceived retailer quality, and retailer loyalty. The paper reports the result of an empirical study of a convenience sample of 601 shopping mall consumers at an Australian state capital city. Following a confirmatory factor analysis using structural equation modelling to examine the dimensionality of the retailer equity construct, the proposed model is tested for two retailer categories: department stores and speciality stores. Results confirm the hypothesised four-dimensional structure.