Regulatory Information, Market Expectations, and the Determination of the Allowed Rate of Return

Dennis K Fan and Thomas G Cowing

Journal of Regulatory Economics, 1994, vol. 6, issue 4, 433-44

Abstract: The purpose of this paper is to explore the implicit structure of expectations involving allowed rate-of-return (ARR) determination and the role of regulatory information in related financial markets. Our approach utilizes two models, allowed rate-of-return determination and excess returns from announcement effects, to study the structure of expectations involved in public utility rate cases. Our results indicate that financial markets do not have complete information prior to the announcement of allowed rates of return and that the source of this informational imperfection may be incorrect expectations regarding the allowed rate of return. Copyright 1994 by Kluwer Academic Publishers

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:kap:regeco:v:6:y:1994:i:4:p:433-44

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