The Mortgage Acquisition Process: A Comparison of VRM and FRM Borrowers*

In recent years a number of alternative types of residential mortgage plans (i.e., alternative to the fixed-rate level-payment mortgage) have been proposed, and some of these have been available in various parts of the country. The most often proposed innovation has been the variable rate mortgage (VRM). The most widespread use of the VRM has been in the State of California, starting in early 1975. This paper discusses some of the results of a survey of over 1,700 homeowners in California that examined consumer reaction to the VRM. Specifically, this paper looks at the impact of the VRM on the mortgage acquisition process and the features of mortgages demanded by consumers. The data seem to indicate that the process of acquiring a mortgage has not been affected significantly by the availability of the VRM. However, the existence of alternative mortgage plans means that consumer choice can be broadened to include type of mortgage as well as lending institution.     

Discipline by objectives

Modern discipline is not punishment, but a shaper of behavior; it requires rules to be reviewed periodically against objectives to see if they are still productive in changing conditions and it allows the exceptional performer who is achieving exceptional results to be treated with far greater tolerance when it comes to violations.     

Relationship Marketing: Theory and Implementation

The field of relationship marketing can be viewed as a sub-area of market focused management. In this issue, we present some cutting edge work on relationship marketing (RM). At the most simple level, RM strategy prescribes that it is more effective to invest in long-term customer interactions than to rely on a series of potentially unrelated, one-time exchanges. In practice, however, RM is not that simple to implement. There are multiple stakeholders to consider, and organizations must make certain that value is provided for all members of a potential partnership. Here, we consider several strands of relationship marketing, including the concepts of: customer relationship management, stakeholder theory, affinity marketing, promotional incentives, strategy, and leadership.     

Imbalance of power

Too many companies have run into trouble because their boards won't stand up to management. Good governance requires a balance of power between the board and the CEO, and a healthy tension between them, says former Medtronic CEO William George.     

An empirical comparison of continuous-time models of implied volatility indices

We explore the ability of alternative popular continuous-time diffusion and jump-diffusion processes to capture the dynamics of implied volatility indices over time. The performance of the various models is assessed under both econometric and financial metrics. To this end, data are employed from major European and American implied volatility indices and the rapidly growing CBOE volatility futures market. We find that the addition of jumps is necessary to capture the evolution of implied volatility indices under both metrics. Mean reversion is of second-order importance though. The results are consistent across the various metrics, markets, and construction methodologies.     

The relation between national cultural dimensions and tax evasion

Although penalties and audits exist, tax evasion is a widespread phenomenon and continues to be a problem for many countries. National culture may contribute to a further understanding of intentional noncompliance across countries. In this study, we investigate the influence of national culture on tax compliance levels across 50 countries. Using Hofstede's (1980) cultural framework as a basis for our hypotheses, we find that a noncompliant country's profile is characterized by high uncertainty avoidance, low individualism, low masculinity, and high power distance. Our results have implications for both research and practice. This is the first study to employ Hofstede's cultural framework as an explanator of international tax compliance diversity and serves as the starting point for the development of an international tax compliance framework. Tax policy implications also are addressed.     

Share restrictions and asset pricing: Evidence from the hedge fund industry

This paper presents evidence on the relation between hedge fund returns and restrictions imposed by funds that limit the liquidity of fund investors. The excess returns of funds with lockup restrictions are approximately 4–7% per year higher than those of nonlockup funds. The average alpha of all funds is negative or insignificant after controlling for lockups and other share restrictions. Also, a negative relation is found between share restrictions and the liquidity of the fund's portfolio. This suggests that share restrictions allow funds to efficiently manage illiquid assets, and these benefits are captured by investors as a share illiquidity premium.