AUGUST 1996, VOL. 2, NO. 3 351

Applicability of American Stock Market Anomalies to International Investing

DARROL J. STANLEY Pepperdine University

Comment GARY E. CLAYTON, Northern Kentucky University

This paper examines five factors--four fundamental and one technical--to provide evidence of growing similarities in four international equity markets: Europe, Japan, Europe/Japan, and the U.S. This reviewer is in general agreement with the findings, although several matters should be addressed to strengthen the paper.

First, excessive market aggregation ignores the issue of capital market segmentation. All European bourses are combined to form a single market, and the Europe/Japan category is a redundant combination that could be dropped without affecting the conclusions. Additionally, the U.S. market (regardless of the factor) overwhelmingly outperforms all other markets, tending to highlight dissimilar components of the comparison. Finally, the 1991-94 period is long enough to provide comparison, but not long enough to establish a trend.

A Discussion on the Development of Theory of Employment and Wages

MING FAN Northern Illinois University

A fully developed theory of employment and wages should emphasize the interaction of demand and supply. The idea is simple, but ignored. The dominant theories are one-sided. The neoclassical theory of employment and wages is demand-sided. The utility theory of labor supply and the life- cycle model of labor supply are supply-sided. The theory of human capital only focuses on human capital to explain individual wage differentials. Besides, there are certain theoretic problems and limitations. Marginal product of labor may not be well-defined given the integral technology (as termed by the author, all workers integrally operate a production system and it will shut down if anyone is missing). The actual labor supply is not the only result of utility maximization but is also under the influence of demand. The utility function is not meaningfully defined when either consumption or leisure is negative. Demand and supply functions cannot be estimated separately, so one can only identify factors affecting demand or supply or both and estimate effects of these factors empirically. This paper advances a wage equation. The justification of including each independent variable is based on demand-supply analysis. Some independent variables are unique, which is supported by the empirical work.

A Discussion on the Development of Theory of Employment and Wages

MING FAN Northern Illinois University

Comment SHIMSHON KINORY, Jersey City State College

Following a critical review of various labor market theories which could benefit from a careful revision, the paper presents a new wage determination model. The model consists of the traditional variables included in human capital models plus the unemployment rate and a variable which is supposed to reflect the relative growth of a certain industry in the GDP. Left unclear is whether the data are cross sectional or times series, who is included in the medical tapes used as the data bank, how to interpret the regression coefficient of the industry growth variable, and how to reconcile the extremely high t-scores with the pedestrian R value of 0.37 for the model. Also questionable is attributing a 1 percent growth of a sector in GDP identical effects on wages regardless of the industry in which it occurred.