Optimal Multiperiod Asset Allocation: Matching Assets to Liabilities in a Discrete Model

Investment and risk control are becoming increasingly important for financial institutions. Asset allocation provides a fundamental investing principle to manage the risk and return trade‐off in financial markets. This article proposes a general formulation of a first approximation of multiperiod asset allocation modeling for institutions that invest to meet the target payment structures of a long‐term liability. By addressing the shortcomings of both single‐period models and the single‐point forecast of the mean variance approach, this article derives explicit formulae for optimal asset allocations, taking into account possible future realizations in a multiperiod discrete time model.     

Asset allocation and age effects in retirement savings choices

We examine the asset allocation decisions of members of three large Australian retirement savings funds. Superannuation Guarantee legislation in 1992 made Australian employees compulsory investors by requiring employers to contribute a fixed proportion of earnings to a superannuation fund on behalf of employees. A majority of these employees can choose an investment strategy for these contributions. We examine how actual investment strategy and asset allocation choices of members change with age in view of the conventional wisdom that individuals allocate less to risky assets as they age and investments theory which provides conflicting advice on the issue.     

Underwriter reputation,earnings management and the long‐run performance of initial public offerings

This study contributes to the extant literature on the nature of earnings management surrounding initial public offerings (IPOs) by investigating the role of underwriter reputation. We argue that prestigious underwriters will protect their reputation by carefully monitoring and certifying financial information on IPO firms, thereby limiting any potential earnings manipulation. As a result, those IPO firms that are associated with more prestigious underwriters are likely to exhibit substantially less‐aggressive earnings management. Conversely, we find the existence of a negative relationship between earnings management and the post‐offer performance of an IPO firm’s stocks only for those firms associated with less‐prestigious underwriters.     

The Effects of Multiple Health and Nutrition Labels on Consumer Food Choices

Consumers face an increasing availability of information on health and nutritional aspects of foods, especially on food package labels. Previous research has identified that this information is positively valued, but the effect of presenting several items of information simultaneously is not well understood. We conduct a choice experiment to identify the effects of multiple health and nutrition information labels for two products representing a healthy and less healthy food choice. Although our consumers attach positive utility to most of the individual labels evaluated here, the simultaneous presence of more than one label only has positive impact on utility in one of nine possible cases. Therefore, promotion of multiple labels should not be considered beneficial a priori either from a regulatory or business perspective. In addition, results show that consumers show a higher willingness to pay for nutrition and health labels for less healthy products.     

Productivity and international competitiveness of agriculture in the European Union and the United States

This study looks at international competitiveness of agriculture in the European Union and the United States. The most intuitive concept is that of price competitiveness. We calculate relative prices for 11 member states of the European Union and the United States for the period 1973–2002. We assume that markets are perfectly competitive and in long‐run equilibrium, so that the observed price always equals average total cost, as measured by the cost dual to the production function. This assumption is used in our calculation of relative competitiveness and productivity gaps between the European Union and the United States and in our decomposition of relative price movements between changes in relative input prices and changes in relative productivity levels.     

Factors influencing participation in the Nova Scotia Environmental Farm Plan Program

There is growing interest in Nova Scotia's Environmental Farm Plan (NS EFP) program among farmers and policy makers because of several reasons. First, effectiveness of standardized or uniform beneficial management practices in mitigating the negative environmental impacts from agriculture is limited by inherent heterogeneities in agricultural production systems. In addition, there is heightened interest in farmers generating ecological goods and services to society. This study investigates the determinants of participation in the NS EFP program. A discrete choice model of NS EFP participation was applied to a sample of 83 farmers (representing a 31% response rate). To increase relevance of the study to program administrators, the study also examined farmers’ use of various channels and sources of information on farm conservation practices. The most used sources of information on farm conservation practices include a mix of interpersonal sources and government agencies. Although online information (especially those available for free) appears to be gaining popularity in usage, overall, electronic and computer channels of information (especially radio and television) were used less compared with traditional channels of communicating farm conservation information (such as newsletters and agricultural magazines). Regression analysis suggests that farm characteristics (i.e., farm type, farm size, farm income) and farmer capacity variables (i.e., specialized training and knowledge from EFP program information sessions and workshops, and on-farm stewardship demonstrations) were significant determinants of environmental farm planning.     

New R&D management paradigms: rethinking research and technology organizations strategies in regions

The R&D management paradigms of research and technology organizations (RTOs) have been discussed in the past. Academics have analysed their strategic challenges in view of the new demands posed by new competitive environments for their SME clients. New innovation models proposed recently have captured the attention of policy makers. The objectives of this paper are to analyse these models in the case of a particular model of RTO: the R&D units in the Basque Country in Spain, launched with the aim of improving R&D and technology transfer efficiency. This paper is based on an empirical study of a group of specialized RTOs (R&D units) and its objective is to analyse a new paradigm of RTO and propose a model to identify the critical elements that influence performance and strategic alignment between R&D performers (RTOs) and their partners (in most cases SMEs).     

Network patterns and competitive advantage before the emergence of a dominant design

This study examines the performance implications of the alliance networks of 49 firms that competed for two technology standards in the U.S. local area network industry from 1989 to 1996. During the race to define a dominant design, individual firms attract the suppliers of complements by building alliance networks to favor the firms' preferred technology standard. Controlling for the number of suppliers in each technology standard community and the extent of technical progress achieved by individual firms, the panel data analysis shows that central firms with high ego network density, coupled with a strategic intent to acquire and share knowledge broadly within the technological community, achieve better innovation performance. The size of the technological community and some random events in the early formation of the industry do not provide a sufficient explanation of how these firms gain the diverse support of suppliers or enhance their competitive advantage. By demonstrating the independent and contingent effects of alliance network properties, this study explains how network patterns might enhance or limit the benefits of alliance networks when focal firms embrace different innovation strategies. Copyright © 2009 John Wiley & Sons, Ltd.     

The Relation between Price and Performance in the Mutual Fund Industry

Gruber (1996) drew attention to the puzzle that investors buy actively managed equity mutual funds, even though on average such funds underperform index funds. We uncover another puzzling fact about the market for equity mutual funds: Funds with worse before-fee performance charge higher fees. This negative relation between fees and performance is robust and can be explained as the outcome of strategic fee-setting by mutual funds in the presence of investors with different degrees of sensitivity to performance. We also find some evidence that better fund governance may bring fees more in line with performance.     

Financial Globalization,Governance, and the Evolution of the Home Bias

We merge portfolio theories of home bias with corporate finance theories of insider ownership to create the optimal corporate ownership theory of the home bias. The theory has two components: (1) foreign portfolio investors exhibit a large home bias against countries with poor governance because their investment is limited by high optimal ownership by insiders (the “direct effect” of poor governance) and domestic monitoring shareholders (the “indirect effect”) in response to the governance and (2) foreign direct investors from “good governance” countries have a comparative advantage as insider monitors in “poor governance” countries, so that the relative importance of foreign direct investment is negatively related to the quality of governance. Using both country‐level data on U.S. investors' foreign investment allocations and Korean firm‐level data, we find empirical evidence supporting our optimal corporate ownership theory of the home bias.