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Journal of Law and Financial Management |
- Do Returns on Synthetic Portfolios Constructed from Stock Index Futures Deliver Capital Gains, Dividends and Franking Credits? - [2004] JLFM 2; (2003) 3(1) JLFM 8
Alex Frino, Grant Wearin and Joel FabrePrevious papers documenting the relationship between returns on stock index futures and stock indices typically ignore dividends. This
appears to leave open the issue of whether the return on a synthetic position constructed using stock index futures and a risk free asset
effi ciently delivers the value of dividends. This paper proves mathematically that the returns on synthetic positions using such contracts
should deliver capital gains, cash dividends and the value of franking credits derived by arbitrageurs. Empirical evidence consistent with
this proposition is provided, using a sample of data for the SPI 200 contract trading on the Sydney Futures Exchange. Interestingly, the
evidence suggests that franking credits are priced into stock index futures contracts, despite the introduction of the 45-day rule which
seemingly would appear to prevent this- A Note on Autocorrelations in Asset Returns Due to Market Overreaction - [2004] JLFM 3; (2003) 3(1) JLFM 14
Subhrendu RathUsing the partial price adjustment model of Amihud and Mendelson (1987), it is shown that overreaction in asset returns will produce
positive and negative autocorrelations. Market overreaction research use higher order negative correlations to detect market overreaction
or trading noise. A proper procedure to detect market overreaction is to use tests for alternated correlation patterns.- Superannuation and the Ageing Myth - [2004] JLFM 4; (2003) 3(1) JLFM 18
Rami Hanegbi and Professor Mirko BagaricThe ageing population rationale, which was the central plank underpinning compulsory superannuation, is fl awed. The
increase in individual wealth in the future more than compensates for the increasing number of older people. In addition to
this, compulsory superannuation contributes to the ageing population problem because it provides less money to couples
who wish to raise children and hence provides a disincentive for people to have children. The most appropriate method for
dealing with the ageing problem is to encourage people to work longer - not because they need the money, but because it is
good for their psyche and self-worth.
- Editorial - [2004] JLFM 5; (2003) 3(2) JLFM 7
JLFM
- The Australian Competition and Consumer Commission’s Proposed Industry Codes of Conduct - A Compliance Solution? - [2004] JLFM 6; (2003) 3(2) JLFM 8
Len GainsfordRecently, the Australian Competition and Consumer Commission (ACCC) has promoted the endorsement of voluntary
industry codes of conduct. The ACCC’s 14 October 2003 draft guidelines suggest the endorsement of “industry best practice”
codes separately, but related to, individual trade practices compliance programs. In public submissions, industry groups
have identifi ed problems with the ACCC’s proposals. In this article, it is argued that endorsement of voluntary industry
codes should not be separated from a commitment to individual trade practices compliance. Codes in themselves are not a
compliance solution.
In 1994, the Australian Law Reform Commission found that codes of conduct are a form of co-regulation. It also found that
there needs to be a level of mutual commitment to a code from the regulator and its regulated entities. That commitment
may be lacking if businesses fi nd that the ACCC’s code endorsement process is less rewarding than their own compliance
processes. Recent research data suggests that Australian businesses prefer trade practices compliance programs derived from
their own compliance culture. Simple obedience by a business to an ACCC endorsed industry code is not consistent with this
trend.- What Financial Institutions are not Disclosing about Term Annuity Products - [2004] JLFM 7; (2003) 3(2) JLFM 14
Roger Gay and Paul LatimerImmediate annuities (fi xed term, life expectancy) are notionally the simplest of retirement income products and the simplest
to price. For intending purchasers, the issuing institution’s Product Disclosure Statement (PDS) is one of the fi rst ports of
call.
An examination of a selection of immediate annuity PDSs indicates that they fall far short of the Australian Securities and
Investments Commission’s requirement that a product issuer, seller, fi nancial adviser etc. provide a retail client with “clear,
concise and effective” information to make an informed choice between similar products.
For this product, a precise cost could be provided, so we ask why is the cost absent from the PDS?
Given some expertise (which most retirees won’t have), the impact of any given fee structure can be assessed, but only if a current
investment reference rate is supplied. As none of the PDSs we surveyed provided such a rate (or its equivalent - the effective after-fees
investment rate earned by the annuity purchase price over the term of the annuity), we query whether there is misleading or deceptive
conduct under Corporations Act s 1041H, Australian Securities and Investments Commission Act s 12DA, 12DB and whether the PDSs
comply with the new PDS requirements fully in force from March 2004.- Good Faith - Time to Put the Genie Back in the Bottle - [2004] JLFM 8; (2003) 3(2) JLFM 22
Tyrone M Carlin and Louise ChauIn this paper, we examine the doctrine of good faith contractual performance in the context of the Australian law of
contract. We argue that the doctrine as presently developed has taken on chimerical qualities and in particular, represents an
undesirable threat to commercial certainty. In justifying our position, we use the recent decision of the NSW Court of Appeal
in Vodafone v Mobile Innovations as a case study of the dangers associated with invoking good faith as a means of interfering
with the essence of a bargain struck between commercial parties.