Intra- and international risk-sharing in the short run and the long run

We investigate empirically how industrialized countries and US states share consumption risk at horizons between 1 and 30 years. US federal states share about 50% of their permanent idiosyncratic risk through cross-state capital income flows. While insurance against transitory fluctuations in output is virtually complete, OECD countries do not share any of their permanent idiosyncratic risk. Our results suggest that purely transaction cost based theories cannot explain the home bias, since the potential welfare gains from insurance against permanent shocks would by far outweigh that of insuring against transitory variation. We conclude that permanent and transitory shocks constitute two qualitatively different kinds of risk and that various forms of endogenous market incompleteness may render permanent shocks a lot harder to insure, in particular at the international level.     

Was unterscheidet die Mediatisierungsforschung von der Medienwirkungsforschung?

For three reasons, mediatization research is not a variant of traditional media effects research, but should rather be considered an approach in its own right. First, rather than on individuals, attention is focused on structures that are changed by the individuals’ orientation to the media. Individual behavior is nothing but an indicator of structural aspects. Second, besides direct media effects on the people who use them, indirect media effects are included in analyses. “Indirect” refers to effects of media-induced behavior change of media users on other persons who do not necessarily know themselves what the media have to offer. As they are often very influential, the protagonists of media coverage (that is: those on whom the media report) are of special importance in this respect. Third, causal explanations of media effects are supplemented by functional ones. Social actors are considered individuals who behave according to their intentions. They adjust their behavior to the requirements of the social environment they act in, and the media on whose resonance they depend.     

Bias-correcting the realized range-based variance in the presence of market microstructure noise

Market microstructure noise is a challenge to high-frequency based estimation of the integrated variance, because the noise accumulates with the sampling frequency. This has led to widespread use of constructing the realized variance, a sum of squared intraday returns, from sparsely sampled data, for example 5- or 15-minute returns. In this paper, we analyze the impact of microstructure noise on the realized range-based variance and propose a bias correction to the range-statistic. The new estimator is shown to be consistent for the integrated variance and asymptotically mixed Gaussian under simple forms of microstructure noise. We can select an optimal partition of the high-frequency data in order to minimize its asymptotic conditional variance. The finite sample properties of our estimator are studied with Monte Carlo simulations and we implement it using Microsoft high-frequency data from TAQ. We find that a bias-corrected range-statistic often leads to much smaller confidence intervals for the integrated variance, relative to the realized variance. We should like to thank an anonymous referee and the associate editor for insightful comments on an earlier draft. Parts of this paper were written while Kim Christensen was at the University of California, San Diego, whose hospitality is gratefully acknowledged. Mark Podolskij received financial support from CREATES funded by the Danish National Research Foundation, and Mathias Vetter was supported by the Deutsche Forschungsgemeinschaft grant SFB 475 “Reduction of Complexity in Multivariate Data Structures.” The code for this paper was written in the Ox programming language, due to Doornik (2002). All views expressed here are those of the authors and do not necessarily represent the views of Nordea.     

Fine‐Tuning a Corporate Hedging Portfolio: The Case of an Airline

Industrial companies typically face a multitude of risks that could cause significant fluctuations in their cash flow. This is a case study of the hedging strategy adopted by an international air carrier to manage its jet‐fuel price exposure. The airline's hedging approach uses “strips” of monthly collars constructed with Asian options whose payoffs are based on average of “within‐prompt‐month” oil prices. Using the carrier's own implicit objective function based on an annual granularity, the authors show how the air carrier could fine‐tune its current hedge portfolio by adding tailored exotic options. The article describes annual average‐price options, provides an explicit valuation of them, and considers how such instruments may affect corporate liquidity. Consistent with its annual objective function, the airline made this exotic derivative the central tool to hedge across all potential realized values of annual jet‐fuel spot prices. The authors believe this modified portfolio is better suited to address the firm's hedging cost and its overall exposure to jet‐fuel price fluctuations.     

Gestaltung von Tarifen für kommunikationsfähige Messsysteme im Verbund mit zeitvariablen Stromtarifen

In Germany too, communication-capable electricity metering systems (CMS) together with time-based differentiation of kWh-rates for energy consumption are increasingly proliferated among household customers. Nevertheless, empirical evidence with respect to preferences of members of this customer group for the design of CMS tariff elements and of time-variant electricity consumption rates is still scarce. The present study captures such preferences by means of conjoint analysis of data obtained in an online survey of 754 German-speaking adults. Examined CMS tariff elements are a one-off installation fee and monthly recurring use charges. The studied characteristics of time-based rates are the number of time/tariff blocks, the maximum spread between kWh-rates for different time windows and the adaptability/predictability of kWh-rates. Most respondents judged multidimensional CMS and electricity consumption tariff offerings mainly in light of the CMS tariff characteristics. The vast majority of the participants perceived kWh-rates, which may change with a minimum lead time of one day as reducing the benefit of CMS and consumption tariff bundles. Tariff preferences on the one hand were only rarely significantly related to customers’ socio-demographic and electricity procurement characteristics as well as their CMS-related expectations/assessments on the other. The willingness to accept CMS-related one-off installation and recurring service charges as well as the propensity to opt for time-dependent electricity consumption tariff variants differing clearly from non-differentiated electricity price schemes appear to be positively affected by customers’ practical application experience with CMS and time-variant electricity consumption rates. Conclusions are drawn for energy suppliers seeking to propagate CMS-based time-variant tariffs among household customers in Germany and for future scholarly research.     

Asymptotic seat bias formulas

Apportionment methods are used to round the vote proportions of parties in a proportional representation system to integer numbers of seats in the parliament. Seat biases quantify by how much on average a particular apportionment method favors larger (or smaller) parties. In this paper, we prove a previous conjecture on asymptotic seat biases of stationary divisor methods and the quota method of greatest remainders, as the size of the parliament tends to infinity.     

The basic ideas and prospects

The locomotive theory is likely to come up again for discussion at the next summit of the major industrial nations in Bonn in July. What are the basic ideas behind this theory? And what are its chances of success if adopted as an economic policy?     

Multinationals and structural changes

The effects of the activities of multinational corporations on the economy of the Federal Republic of Germany have hardly ever been examined empirically. The role of the multinational corporations (MNCs) in the process of structural change had not been studied either until an enquiry was recently undertaken for the Federal Ministry of Economic Affairs¹. The following article is based on the expert report which deals with this and other aspects for the first time and is to be published shortly.     

Strategic supply chain management: Improving performance through a culture of competitiveness and knowledge development

For many firms, using their supply chains as competitive weapons has become a central element of the strategic management process in recent years. Drawing on the resource‐based view and theory from the organizational learning and information‐processing literatures, this study uses a sample of 201 firms to examine the influence of a culture of competitiveness and knowledge development on supply chain performance in varied market turbulence conditions. We found that synergies exist between a culture of competitiveness and knowledge development: their interaction has a positive association with performance. In addition, based on behavioral and contingency theories, we found that market turbulence moderates these relationships, having a positive influence on the knowledge development–performance link and a negative influence on the culture of competitiveness–performance link. Managers who are confident about the level of market turbulence they will face can use this sense to decide whether to emphasize developing either a culture of competitiveness or knowledge development in their supply chains. For those firms whose managers are unlikely to be able to predict the degree of turbulence they will face over time, a focus on both a culture of competitiveness and knowledge development is critical to ensuring success. Copyright © 2007 John Wiley & Sons, Ltd.