Regression‐based Tests for a Change in Persistence*

We show that the minimal forward (reverse) recursive unit tests of Banerjee, Lumsdaine and Stock [Journal of Business and Economics Statistics (1992) Vol. 10, pp. 271–288] are consistent against the alternative of a change in persistence from I(0) to I(1) [I(1) to I(0)]. However, these statistics are also shown to diverge for series which are I(0) throughout. Consequently, a rejection by these tests does not necessarily imply a change in persistence. We propose a further test, based on the ratio of these statistics, which is consistent against changes either from I(0) to I(1), or vice versa, yet does not over‐reject against constant I(0) series. Consistent breakpoint estimators are proposed.     

The Effects of Regulation and Regulatory Risk in the UK Electricity Distribution Industry

This paper examines the impact of regulation of the UK electricity industry on expectations of investors in the shares of regional electricity companies (RECs). This is done using event-study methodology where the movements of RECs' returns are compared to movements in the stock market as a whole. We then test for the presence of regulatory risk by modelling the conditional volatility of equity returns before and after 30 significant regulatory events using an ARCH process. Our results show no evidence of regulatory capture in this sector but suggest that regulatory risk does exist.     

Time-on-the-Market as a Sign of Quality

The inferences a prospective home buyer can make about the quality of a house from the amount of time it spends on the market and the seller"s optimal strategy in light of these inferences are investigated. Depending upon the information structure, the seller may have an incentive to post an inordinately high initial price (in order to "dampen" the signal transmitted to future prospective buyers) or an inordinately low initial price (in order to make an early sale and avoid consumer "herding"). It is shown that the sellers of high-quality homes do best when inspection outcomes are publicly recorded and do worst when inspection outcomes are not public and the price history is not observable. Costly inspections create more adverse selection but deter consumer herding.     

Missed opportunities? Reaching the ethnic consumer market

Changing population demographics within the UK have become a source of increased interest to marketers as companies have realized the importance of targeting their products and advertising efforts towards minority and ethnic groups. In addition, as the UK’s ethnic minorities grow in both numbers and in terms of prosperity, so does the commercial significance of this market. A clearer understanding of both the nature of changing markets and the relative importance of different minority ethnic groups as consumers is imperative to facilitate both consumer understanding and business development; marketers need to understand better how to target these people, what they have in common with the mainstream and where the differences lie. This paper seeks to describe current understanding of ethnic consumers and their impact on the marketplace while highlighting an area where future research is potentially of considerable benefit.     

Decision Making in Employment and Labor Arbitration

This experimental study examined the labor and employment arbitration decisions of four groups of arbitrators: (1) employment arbitrators who resolve disputes involving nonunion employees, (2) labor arbitrators who arbitrate cases in which an employee is represented by a union, (3) arbitrators in the National Academy of Arbitrators (NAA), and (4) students as a comparison of nonarbitrator decision makers with experienced arbitrators. A 2 ×2 ×4 factorial design was used, crossing arbitrator group with discipline standard and sex of the grievant. Results indicate that employment artibrators reinstate the grievant significantly less frequently than other arbitrators; however, the findings also reveal that all arbitrators make more favorable decisions under a just‐cause standard than under the newer META standard of discipline.     

On the Power of GLS-Type Unit Root Tests

Elliott, Rothenberg and Stock (1996), (ERS), present a 'GLS' variant of the Dickey-Fuller (DF) unit root test. Their statistic is approximately point-optimal invariant at a chosen local alternative, and usually displays better finite sample power than the DF test. Following the usual efficiency motive for GLS estimation, the higher finite sample power of the ERS test has often been attributed to the greater accuracy of the estimate of the series' non-stochastic component under stationary alternatives close to the null. This paper shows that the GLS estimates of the non-stochastic component are not, in general, more accurate. The power gain arises from the fact that the GLS statistic's null distribution has a greater positive shift relative to the DF test, than its distribution under relevant alternatives, and this persists even when the GLS estimates of the non stochastics have higher variance than the OLS estimates.     

Pamela Walker Laird. Pull: Networking and Success since Benjamin Franklin. Cambridge, Mass.: Harvard University Press, 2006. xiv + 439 pp. ISBN 0-674-01907-5, $29.95 (paper).

Success is as much about whom you know as it is about what youknow and how you perform. Networks, mentors, and role modelsplay pivotal roles in corporate climbing and entrepreneurship.Although the business lexicon only recently incorporated theseterms into its vocabulary, Pamela Laird convincingly arguesthat these forms of social capital, which she calls pull, havealways helped determine success. Moreover, because they existprimarily among individuals who see each other as belongingto the same cohort, success