Mortgage-Backed Securities (MBS): Is It a Curse or a Blessing for the Australian Home Loan Market? A Natural Experiment

The Australian home loan market has seen a significant and persistent boom over more than two decades. Theextant literature exploring the underlying factors explaining this boom has predominantly looked at thedemand side rather than the supply side. In this paper, we look at a major supply-side issue, the introductionof mortgage-backed securities and its likely impact on the home loan market. In doing so, we have developeda mathematical model that theorises this likely relationship. Our mathematical model predicts possibleexistence of an unstable equilibrium in the home loan market in the presence of mortgage-backed securities.We have subsequently backed up our theoretical exercise with sound empirical evidence acquired andanalysed as a natural experiment in the Australian scenario using quarterly market data on home loans andmortgage-backed securities data for a 36-year period from 1976 to 2012. Using unknown structural breaktests, we have identified significant breaks around late 1992 to mid-1995, clearly indicating that there weresignificant changes in the housing market due to the introduction of mortgage-backed securities in early1993. We have also performed a stability test confirming that under certain conditions this market canbecome unstable.

Reconsidering the scope of the equitable mortgage arising from deposit of title documents

This article examines the underlying fairness of applying equitable security presumptions to the deposit of title documents belonging to third parties. It argues that within such transactions, the focus of the equitable jurisdiction must be upon the intention of the owner of the title documents rather than presumptions arising from the fact of the deposit. It suggests that there is no logic in applying equitable presumptions, founded on the principles of part performance, to infer a security intention in transactions involving third party title documents. The fact that the parties to a loan advance may have intended to create a mortgage between themselves does not mean that the third party owner of the title documents also intended to create a mortgage. In third party transactions, the objectives of the equity jurisdiction are best achieved through a comprehensive assessment of the intention of all parties and the abolition of presumptions based upon the bare fact of title deposit.

Characterising derivative-based loan arrangements

The income tax and GST laws contain an array of rules that apply to debt and gains in the nature of interest. The definitions of 'debt' or 'loan' and amounts in the nature of 'interest' vary across the provisions and tax officials, taxpayers and courts must decide whether the terms should be read as applying to debt, loans or interest in a narrow legal sense or should be read more broadly to catch multi-element arrangements that give effect to a debt or loan relationship in an economic or commercial sense but not in conventional single document form. This article reviews the UK, US and Australian approaches to interpreting multi-element transactions and considers whether four tax provisions dealing with debt should be interpreted to apply to multi-element, derivative-based loan arrangements.

Predatory pricing and the expectation of recoupment in Australia : Boral and the pathways forward

High Court decision, Boral v ACCC in which the Court overturned the decision of the Full Federal Court and held that Boral's strategy of below cost pricing did not contravene s 46 of the Trade Practices Act - suggestion that the test of recoupment be the central test with respect to predatory pricing cases.

The pricing of property trust IPOs in Australia

Following Brounen and Eichholtz (2002) this paper adds to the international literature investigating the underpricing of REIT initial public offerings (IPOs), with a study into Australian property trusts. This study finds that initial day returns can in part be explained by forecast profit distributions (or dividends) and the market sentiment towards property trusts from the date of the prospectus to the date of listing. There is some support for the “winners curse” explanation of underpricing with evidence that large investor or institutional involvement at the outset of the IPO also has some explanatory power.

Pricing segmentation and MBA course choice

The consensus from studies of the price-demand relationship for higher education is that this relationship is negative but small. This paper investigates the circumstances in which demand for an MBA is positive to price increases. A survey of currently enrolled MBA students, and prospective MBA students, found that most students displayed the expected price elasticity in a conjoint analysis of hypothetical MBA course ratings. However, 12 per cent of respondents exhibited “reversal” behaviour regarding price. Profiling these respondents using discriminant analysis suggested that “reversals” seemed prepared to pay more for a course at a high prestige university, if they could study off-campus using print-based materials.

Pricing in the museum sector : the need to balance social responsibility and organisational viability

An essential component of marketing strategy is pricing. Pricing in museums, however, is problematic as issues beyond cost recovery or surplus, such as social responsibilities, need to be considered. This area of marketing is under researched. The aim of this study is to address the research gap by synthesising the literature on pricing strategy in the museum sector. The study found that there are a number of strategies being advocated with regard to pricing in the museum sector in the literature, each representing various perspectives of museology. A research agenda was proposed to assist marketers in the museum sector to meet their organisational needs, whilst balancing their social responsibilities.

Allocative and informational pricing roles in MBA program choice

This paper reports on a study of how prospective and current MBA students (n = 699) made tradeoffs between tuition price and other variables in choosing a university program in the Australian market. Two price segments were identified: price-negative and price-positive. The price-positive segment constituted 13 per cent of the sample. The behaviour of the two price segments is interpreted in relation to the allocative and informational roles of price. Price-positive respondents were found to be more concerned with the reputational characteristics of universities and programs in making their choice. Age, enrolment mode, and residential state were found to be associated with segment membership. The results suggest that an MBA by distance education can be regarded as a prestige product for some market segments.

Jurisdictional differences in contracting out GBE audits : the impact on audit pricing

This paper examines audit costs for government business enterprises in various Australian jurisdictions, focusing on whether contracting private-sector suppliers induces competitive pricing and hence lower-priced audits. One jurisdiction (New South Wales) is shown to have low levels of contracting-out. It is argued that this lowers price competition and therefore, we predict, audit costs in NSW will be higher than elsewhere in Australia. An empirical comparison shows that, controlling for other factors, NSW is statistically significantly more expensive than other Australian jurisdictions. Alternative explanations relating to variation in audit quality, jurisdiction differences and relative cost are also discussed.

Museum pricing : challenges to theory development and practice

The museum sector has undergone considerable change in the last few decades, which has been a result of both internal and external forces. The topic of pricing in museums, however, has attracted little interest from researchers in the field despite the sector's need to understand it better. This study aimed to address this gap in knowledge. Results of a comprehensive literature review on pricing highlight that the topic of pricing in museums is problematic, as a range of issues, social, political and often value-laden, must be considered before pricing decisions can be made. The study highlights that there is diversity in the sector with regard to pricing, but that museums generally adopt a unilateral approach to pricing. Researchers in entrepreneurial marketing have noted that conventional pricing theory is being turned on its head and they argue that deciding what prices to charge represents one of the more entrepreneurial strategies for organisations. This study indicates that, within the context of museums, marketers are failing to recognise and capitalise on such pricing opportunities. Approaches to setting multiple museum pricing strategies, depending on the market context, are proposed in this paper. In this way, knowledge of museum pricing can optimise the organisational outcomes of museums while continuing to meet their social responsibilities.

Wellbeing of Australians : mortgage payments and home ownership

The Australian Unity Wellbeing Index monitors the subjective wellbeing of the Australian population. Our first survey was conducted in April 2001 and this report concerns the 16th survey, undertaken in October 2006. Our previous survey had been conducted five months earlier in May 2006. This intervening period was relatively uneventful in terms of events likely to change population wellbeing. In March 2006, the new Industrial Relations legislation came into force. Each survey involves a telephone interview with a new sample of 2,000 Australians, selected to represent the national population geographic distribution. These surveys comprise the Personal Wellbeing Index, which measures people’s satisfaction with their own lives, and the National Wellbeing Index, which measures how satisfied people are with life in Australia. Other items include a standard set of demographic questions and other survey-specific questions. The specific topics for Survey 16 are home location and travel time, and expenditure on mortgage or rent.