This article considers the principles that underlie the claim that some contracts are unconscionable and that such contracts should not be enforceable. It argues that it is much more difficult to explain unconscionability than is often supposed, particularly in cases where the contract is mutually advantageous or Pareto superior. Among other things, the article considers whether unconscionability is a defect in process or result, whether the gains in an unconscionable contract are disproportionate, whether there is a strong link between the use of standard forms and unconscionability, and whether the principle of inequality of bargaining power can account for unconscionability. After rejecting several standard explanations of unconscionability, I consider several alternative ways in which it might be explained.

Government policies and practices can exert significant influence on ethical behavior in a society. Many governments still rely on a long-standing prerogative of sovereigns, the defense of sovereign immunity, to avoid public inquiry about acts that are clearly immoral. However, the basic theory and frequent practice of invoking sovereign immunity cannot be ethically justified. Moreover, such practices model conduct based on power rather than reason, fairness, or justice, and invite both nations and individuals to view politics and business as a power game to be played and won, rather than as a process of building communities that emphasize reciprocity and commitment to moral principles.

Common misperceptions notwithstanding, Japanese foreign direct investment (FDI) in Europe has a long history. Such investment first penetrated European markets in the 1870s, and it has since evolved through a number of important historical phases. In quality, sectoral composition, location, motivation, and several other characteristics, Japanese FDI in Europe exhibited striking continuities during its first century of development. In more recent years, however, each of these characteristics has undergone substantial change as compared to earlier times.

Although the managerial function arises out of organizational needs imposed by market competition and technological development, managers' professional status has come in large part from legal conceptions that perceive the managerially run firm as an institutional bulwark for modern democracy. This article examines how the law, through its doctrines of trust and contract, has made and unmade management as a semi-public profession. The article explores the history of tender-offer regulation as a case study of this process.

This book has two purposes: first, to state what it means to have a right; and second, to state which rights human beings have. Because Thomson believes that the first question is prior to the second, she begins by asking why it is morally significant that human beings have rights. Her answer to this question is that rights are a kind of moral constraint such that, other things being equal, one's rights ought to be accorded. As to the second question, Thomson distinguishes rights human beings have qua human beings from rights they have by participating in private transactions or living under a legal system. The former category includes the right not to be killed or harmed; the latter category includes rights related to promise keeping and private property. By explaining what in general makes the attribution of a human or social right true, Thomson seeks to provide a foundation for the notion that the interests of human beings are worthy of respect.

This paper examines the temporal relationship between interest rates on Treasury securities ranging in maturity from three months to 30 years. We find strong empirical support that the seven Treasury rates selected are cointegrated, a conclusion that is insensitive to the normalization chosen. In particular, the hypothesis of noncointegration is rejected decisively regardless of the rate selected as the dependent variable in the cointegrating equation. To determine whether this information can be used to improve forecasts of Treasury rates, the seven rates are forecasted with a corresponding errorcorrection model that is shown to outperform an augmented VAR model that ignores the cointegration of the rates. The results are consistent with the belief that arbitrage limits the extent to which rates on different maturities of a given security diverge. In addition, the results confirm the appropriateness of imposing a common stochastic process for interest rates in equilibrium models of the term structure.

This paper investigates market manipulation trading strategies by large traders in a securities market. A large trader is defined as any investor whose trades change prices. A market manipulation trading strategy is one that generates positive real wealth with no risk. Market manipulation trading strategies are shown to exist under reasonable hypotheses on the equilibrium price process. Sufficient conditions for their nonexistence are also provided.

The paper analyzes lead-lag relationships for six major stock market indexes: New York S&P 500, Tokyo Nikkei, London FT–30, Hong Kong Hang Seng, Singapore Straits Times, and Australia All Ordinaries, for time periods before, during, and after the October 1987 market crash. Unidirectional and bidirectional causality tests are conducted by means of the Granger methodology. Practically no lead-lag relationships are found for the pre-crash and post-crash periods. However, important feedback relationships and unidirectional causality are detected for the month of the crash. There is also an increase in contemporaneous causality during and after the month of the crash. In general, our findings suggest that the October 1987 market crash probably was an international crisis of the equity markets and that it might have begun simultaneously in all the national stock markets.

This paper tests the overreaction hypothesis using monthly data for stocks listed on the Toronto Stock Exchange over the 1950–1988 period. Unlike De Bondt and Thaler (1985), (1987), it finds statistically significant continuation behavior for the next one (and two) year(s) for winners and losers, and insignificant reversal behavior for winners and losers over longer formation/test periods of up to ten years. While the systematic risks of the winners decrease significantly over all test periods, the systematic risks of the losers increase significantly for only the 12-month formation/test periods (unlike Chan (1988)). The only significant change in variance from the formation to test periods occurs for the losers for the 12-month formation/test periods. The findings are robust for January versus non-January and size-based portfolios (unlike Zarowin (1989), (1990)). The findings are robust for various performance measures (specifically, market-adjusted CAR, and the Jensen (1968) and Sharpe (1966) portfolio performance measures).

Using data that contain bid and ask quotes for both options and stocks, the analysis investigates the constant volatility assumption of the Black-Scholes model. The analysis adjusts for bid-ask spreads and finds evidence that is inconsistent with the constant volatility assumption. Instead, the results reveal a strong negative correlation between volatility and stock price, and they suggest that using a nonconstant volatility model such as the CEV model would be more appropriate to price long-term options. Finally, transaction costs associated with the dynamic hedge tend to increase with an option's maturity, but decrease as a percentage of the option's price.

This paper critically evaluates the claim in recent papers that precisely estimated betas explain the cross-sectional differences in expected returns across size-based portfolios. In these studies, the correlations between firm size and betas across the test portfolios are close to one in magnitude, yielding potentially spurious inferences. This paper shows that when the test portfolios are constructed so that the correlations between firm size and beta are small, the betas explain virtually none of the cross-sectional differences in portfolio returns.