Empirical applications of economic principles in producer price index analysis

The research analyses economic linkages of producer price indices of the construction industry in Australia and relationships between construction and house prices. A range of econometric techniques are applied to analyse construction and house prices. The economic equilibrium and dynamic relationships among regional markets are investigated based on producer price index analysis.

Portfolio diversification and share price behavior : some evidence from the Taiwan Stock Exchange

This dissertation consists of four separate but closely related studies which investigate different aspects of share price behavior on the Taiwan Stock Exchange over the period 1980-89: 1.The benefits of diversification available to investors using the Markowitz model and the Single Model Index. 2. The applicability of the CAPM to the TSE over the decade. 3. Regularities in proce sequences. 4. Market reaction to the announcements of stock dividends, right issues and combinations of both.

The TOC-ABC choice debate for product mix decisions : introducing asset specificity as an alternate explanation

Though constructed with different purposes, the theory of constraints and activity based costing systems pose a choice problem in respect of product mix decisions. We believe that the existing explanation of short versus long run criterion to explain firms' choice between these two systems is incomplete and offer an alternate explanation based on asset specificity. We argue that the extent to which specialized resources are deployed to make products in a mix determines the choice. We present a 2*2 matrix stating that when asset specificity is high, a firm is likely to choose ABC instead of TOC since ABC makes a large portion of costs visible to enable control. However, the choice is likely to be a TOC-ABC combination when the manufacture of asset specific products is also constrained by bottlenecks.

Asset-selling problem with an uncertain deadline, quitting offer, and search skipping option

This paper presents a discrete-time sequential stochastic asset-selling problem with an infinite planning horizon, where the process of selling the asset may reach a deadline at any point in time with a probability. It is assumed that a quitting offer is available at every point in time and search skipping is permitted. Thus, decisions must be made as to whether or not to accept the quitting offer, to accept an appearing buyer’s offer, and to conduct a search for a buyer. The main purpose of this paper is to clarify the properties of the optimal decision rules in relation to the model’s parameters.

Evaluating the distributional implications of price movements : methodology, application and Australian evidence

This article investigates the distributional implication of relative price movements in Australia. It proposes and applies a method of evaluating the nature and size of the inequality bias of price movements. In the process, the study introduces a new demographic demand model that yields sensible and statistically significant estimates of the general equivalence scale and the size economies of scale. The study finds that relative price movements in Australia during the 1990s had an inequality increasing bias and that this bias increased in the late 1990s and the first part of the new millennium. The disaggregated analysis of the inequality movements shows that the regressive nature of relative price changes affected the renters much more than non-renters. The study also provides evidence on the decomposition of overall inequality between demographic groups and compares the decomposition between the nominal and real expenditure inequalities.

A-Reit price responses to cash rate changes

With the rapid increasing number and assets of A-REITs, there has been an urgent need to study the relationship between the changes of cash rates and the A-REITs returns. This study investigates whether there were relationships between Australian-Real Estate Investment Trusts stock returns and policy interest rate changes in the past decade by using event study with a multivariate regression model. The findings indicate that cash rate changes have no significantly positive or negative influence on the equity A-REIT stock prices. A series of successive cash rate changes do not take a continuous and dramatic effect on the equity A-REIT stock prices in each economic cycle. Moreover, the A-REITs with relatively smaller assets show more significant fluctuation to the changes of cash rates, and the A-REITs owning more than $ 10 billion in capital assets have relatively steady stock prices. Overall, the findings from this research lead to a call for comprehensive research into various areas in order to ascertain the determinants of A-REIT price changes.

Can investors hedge residential price dynamics of Australia's capital cities?

The study described in this paper focuses on testing the short-run and
long-run relationships between house price and consumer price indices in Australia’s capital cities from 1998 to 2008. The autoregressive distributed lag model is adopted to obtain the estimates of the short-run relationships, while the error correction model is used to investigate the long-run relationships. The t-statistic is used to compute the significance of these relationships. The research results give no evidence that house price indices are correlated with consumer price indices in the short run. However, the long-run relationships between house and consumer price indices exist in most of the cities.

Resolving conflicts in fire management using decision theory: asset-protection versus biodiversity conservation

Agencies charged with nature conservation and protecting built-assets from fire face a policy dilemma because management that protects assets can have adverse impacts on biodiversity. Although conservation is often a policy goal, protecting built-assets usually takes precedence in fire management implementation. To make decisions that can better achieve both objectives, existing trade-offs must first be recognized, and then policies implemented to manage multiple objectives explicitly. We briefly review fire management actions that can conflict with biodiversity conservation. Through this review, we find that common management practices might not appreciably reduce the threat to built-assets but could have a large negative impact on biodiversity. We develop a framework based on decision theory that could be applied to minimize these conflicts. Critical to this approach is (1) the identification of the full range of management options and (2) obtaining data for evaluating the effectiveness of those options for achieving asset protection and conservation goals. This information can be used to compare explicitly the effectiveness of different management choices for conserving species and for protecting assets, given budget constraints. The challenge now is to gather data to quantify these trade-offs so that fire policy and practices can be better aligned with multiple objectives

An examination of conditional asset pricing models in the Australian equities market

This article examines the link between macroeconomic variables and equity returns in Australia by testing conditional asset pricing models. We find that conditioning the Fama-French model with a series of macroeconomic variables does not considerably improve its performance. However, we do find that the Fama-French factors, SMB and HML, retain their ability to explain equity returns even after the model is conditioned on macroeconomic variables. Our findings suggest that investors do not adjust their risk premiums according to the changes in the macroeconomic variables we employ.