The integration of international financial markets: an attempt to quantify contagion in an input–output-type analysis

ABSTRACT

The increasing integration of international financial markets means that credit defaults in one country have to be covered by creditors in other countries. If the principle of creditor liability were applied systematically, the financial losses incurred by the financial institution that provided the credit and is thus directly affected by the default would be ‘passed on’ through its domestic and foreign shareholders and debt holders, as well as their creditors, to the original savers. In this paper, this contagion effect will be estimated by taking international capital linkages into account. Analogously to an input–output analysis of inter-industry linkages, savings used for investments in one country are traced back to the countries from which the funds originated. This also reveals the important role of international financial centers, which essentially serve as distributors of investment risks, while the financial losses are ultimately borne by larger countries with higher levels of savings.     

Modelling financial transaction price movements: a dynamic integer count data model

In this paper we develop a dynamic model for integer counts to capture fundamental properties of financial prices at the transaction level. Our model relies on an autoregressive multinomial component for the direction of the price change and a dynamic count data component for the size of the price changes. Since the model is capable of capturing a wide range of discrete price movements it is particularly suited for financial markets where the trading intensity is moderate or low. We present the model at work by applying it to transaction data of two shares traded at the NYSE traded over a period of one trading month. We show that the model is well suited to test some theoretical implications of the market microstructure theory on the relationship between price movements and other marks of the trading process. Based on density forecast methods modified for the case of discrete random variables we show that our model is capable to explain large parts of the observed distribution of price changes at the transaction level.

What Determines Employee Perceptions of HRM Process Features? The Case of Performance Appraisal in MNC Subsidiaries

Against the background of Bowen and Ostroff's ( 2004 ) human resource management (HRM) process theorization, this study explores influences on individual employee perceptions of the visibility, validity, and procedural and distributive justice of performance appraisal in subsidiaries of multinational corporations, and at what levels these influences reside. The study adopts an embedded, multiple‐case design with interview data from 33 managers and professionals in six subsidiaries of three corporations. The findings show that perceptions of the performance appraisal process are driven by a number of influences pertaining to the unit, relationship, and individual levels. Further, the study highlights differences and similarities of influences across four performance appraisal process features, and identifies overlaps and inter‐linkages between the process features suggested by Bowen and Ostroff ( 2004 ). For practitioners, the value of our study lies in the identification of steps that can be taken to increase the likelihood that HRM practices are perceived positively and as intended by the organization. © 2014 Wiley Periodicals, Inc.     

Stock market speculation and managerial myopia

This paper extends the analysis of managerial share price concerns by allowing informed trading in the stock market. It is shown that because they decrease the manager's information advantage vis-à-vis the stock market, individual investors who trade on private information improve the efficiency of corporate investment. This improvement does, however, fall short of first-best efficiency. Moreover, a stronger managerial share-price concern increases the expected profit from informed trading. Hence, by encouraging individual investors to collect information about corporate decisions and trade on it, managerial myopia tends to automatically bring forth a partial solution to the problems that it causes.     

The Persistence of Profitability among Firms in the Food Economy

The persistence of industry, firm-specific, and corporate-parent effects on firm profitability in the food economy are calculated and further analyzed within its four major sectors: food processing, wholesale grocery, retail supermarket, and restaurant. Profits are more persistent within an industry than within a corporation. The retail supermarket sector has had stable profits as has individual retail supermarket firms relative to the other three sectors.     

How do individual investors trade?

This paper examines how high-frequency trading decisions of individual investors are influenced by past price changes. Specifically, we address the question as to whether decisions to open or close a position are different when investors already hold a position compared with when they do not. Based on a unique data set from an electronic foreign exchange trading platform, OANDA FXTrade, we find that investors’ future order flow is (significantly) driven by past price movements and that these predictive patterns last up to several hours. This observation clearly shows that for high-frequency trading, investors rely on previous price movements in making future investment decisions. We provide clear evidence that market and limit orders flows are much more predictable if those orders are submitted to close an existing position than if they are used to open one. We interpret this finding as evidence for the existence of a monitoring effect, which has implications for theoretical market microstructure models and behavioral finance phenomena, such as the endowment effect.     

The dynamics of environmentalism and the environment

We study the relationship between environmental preferences and the environment. Preferences are transmitted intergenerationally and through social interactions, where we assume that agents are more likely to adopt environmental preferences the larger the amount of pollution. In the basic setting we find that both converge non-monotonically towards an interior steady state. When including technical change we notice that there will be no change in the steady state level of the environment unless technical change is sufficiently strong, which stands in stark contrast to the literature. Upon introducing environmental laws we find that these may lead to a virtually pollution-free environment. This happens if environmental laws are implemented when public support is strong enough.     

Home-Market and Factor-Endowment Effects in a Gravity Approach

This paper shows how the home-market effect can be estimated in the generalized gravity equation of Bergstrand, taking into account traditional comparative advantage effects arising from differences in factor endowment. The empirical results suggest the presence of significant home-market effects for differentiated goods in many manufacturing industries which may be capital intensive or labour intensive. At the same time, our results suggest that home-market effects can only be detected for data disaggregated at the industry level and not for aggregated data. JEL no. F 12