Functional form in regression models of Tobin's q
Article Abstract:
Industry and company characteristics are shown to have a multiplicative impact on company asset market valuations, as opposed to an additive impact. Different functional forms of market value equations are evaluated using the Box-Cox transformation. The commonly estimated linear form of Tobin's q equation is not favoured, with the semilog form of the equation preferred. Inferences which can be impacted by the type of functional form selected are illustrated. Instrumental variables added by a simultaneous equation model would not be expected to significantly affect the conclusions.
Publication Name: Review of Economics and Statistics
Subject: Mathematics
ISSN: 0034-6535
Year: 1993
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Bilateral trade flows, the gravity equation, and functional form
Article Abstract:
Box-Cox transformations allow the potential use of a general functional form in place of the gravity equation to study commercial policy measures by determining bilateral trade flows through countries. The loglinear form varies marginally from the optimal functional form in all years of sample data 1964-87 for the 16 OECD most developed countries, and a single novel functional form is suggested that is statistically acceptable. A general functional form specification is needed to use the gravity equation for every year.
Publication Name: Review of Economics and Statistics
Subject: Mathematics
ISSN: 0034-6535
Year: 1993
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Conditional exchange-rate volatility and the volume of international trade: evidence from the early 1900s
Article Abstract:
The effect of exchange-rate uncertainty on the volume of international trade is determined through an analysis of UK-US trade relation from 1900-1940. The rolling standard deviation and conditional variance of the exchange-rate series are used as measures of uncertainty. It is revealed that an increased exchange-rate volatility depressed the volume of trade in the early 1900s.
Publication Name: Review of Economics and Statistics
Subject: Mathematics
ISSN: 0034-6535
Year: 1992
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