Persistent Doubt: An Examination of Hedge Fund Performance

We examine whether performance persistence is suspicious. Top quintile portfolios formed on the Sharpe ratio, alpha, and information ratio persistently outperform similarly constructed mediocre third quintile portfolios throughout our sample period, but performance is more modest and less persistent when portfolios are formed on the excess manipulation‐proof performance measure (EMPPM). By selecting funds formed on ranking by Sharpe and information ratios, investors also select funds that have persistently doubtful performance according to the doubt ratio. In contrast, portfolios formed on alphas and especially the EMPPM have much less excess and persistent doubt.     

Abolishing the Tax‐Free Threshold in Australia: Simulating Alternative Reforms*

This paper examines the role of the tax‐free income tax threshold in a complex tax and transfer system consisting of a range of taxes and benefits, each with its own taper rates and thresholds. Considering a tax and benefit system with benefit taper rates whereby some benefits are received by income groups other than those at the bottom of the distribution, it is suggested that a tax‐free threshold is not a necessary requirement to achieve redistribution. Four alternative policy changes, each involving the elimination of the tax‐free threshold in Australia and designed to achieve approximate revenue neutrality, were examined using the Melbourne Institute Tax and Transfer Simulator. A range of implications were examined, including labour supply responses to tax changes and the effects of policy changes on inequality and social welfare. The results demonstrate that it is possible to eliminate the tax‐free threshold under approximate overall revenue and distribution neutrality, but that it is impossible to improve labour supply incentives at the same time. In order to achieve improved incentives, either revenue or distribution neutrality has to be sacrificed.     

Media richness and internet exploration

Previous research found that media richness is associated with positive evaluation of a web site. An experiment was carried out where participants were instructed to explore a web site presenting a popular town: Venice. According to a random distribution, participants were exposed (or not) to street‐sounds when exploring the web site and had the possibility to control (or not) the photography (using a 360° navigation with their mouse) displayed on the web site. Results shown that higher evaluation were associated with sounds and mouse‐control. Theory of media richness was used to explain our results and the managerial application for tourism was discussed. Copyright © 2010 John Wiley & Sons, Ltd.     

Managers’ Citizenship Behaviors for the Environment: A Developmental Perspective

The objective of this longitudinal study is to analyze the intrinsic drivers and values underlying managers’ organizational citizenship behaviors for the environment (OCBEs) from a developmental psychology perspective based on measuring the stages of consciousness that shape the meaning-making systems of individuals. At time 1, the stages of consciousness of 138 managers were qualitatively assessed using the Leader Development Profile test. At time 2, a quantitative survey measured the environmental beliefs and OCBEs of these managers. The links between stages of consciousness, environmental beliefs, and OCBEs were analyzed using hierarchical regressions. The main findings show that managers’ stages of consciousness positively influence two types of OCBEs, namely eco-initiatives and eco-helping, while environmental beliefs influence eco-helping and eco-civic engagement but do not appear to be connected with the stage of consciousness development. This paper first contributes to the literature on corporate greening by shedding more light on the aspects of behavioral and developmental psychology that underlie environmental leadership. Second, it bridges the gap between theories that have developed separately by showing the interconnectedness between the managers’ stage of consciousness and the more concrete environmental behaviors in the workplace that could have emulative effects throughout the organization.     

Stakeholders’ relationships and product market competition

In this article, we study the relationships between main stakeholders (shareholders, consumers and employees) when firms are consumer oriented (CO) in the sense of caring about consumers’ interests in the objective function. We let these firms first bargain with labour union over their employees’ wages and then compete either in the quantity space (Cournot competition) or in the price space (Bertrand competition). Our model shows that taking care of the consumers’ interests when determining product market strategies may reverse the traditional ranking between Cournot and Bertrand equilibria. This implies that if shareholders in a CO firm can choose either a quantity or a price strategy, they will surprisingly choose the latter. Moreover, we show that the conflicting interests between main stakeholders are attenuated under Bertrand competition compared to Cournot competition.     

International portfolios, capital accumulation and foreign assets dynamics

Despite the liberalization of capital flows among OECD countries, equity home bias remains sizable. We depart from the two familiar explanations of equity home bias: transaction costs that impede international diversification, and terms of trade responses to supply shocks that provide risk sharing, so that there is little incentive to hold diversified portfolios. We show that the interaction of the following ingredients generates a realistic equity home bias: capital accumulation and international trade in stocks and bonds. In our model, domestic stocks are used to hedge fluctuations in local wage income. Terms of trade risk is hedged using bonds denominated in local goods and in foreign goods. In contrast to related models, the low level of international diversification does not depend on strongly countercyclical terms of trade. The model also reproduces the cyclical dynamics of foreign asset positions and of international capital flows.     

Corporate diversification and firm value: a survey of recent literature

We survey the recent literature on corporate diversification. How does corporate diversification influence firm value? Does it create or destroy value? Until the beginning of this century, the predominant thinking among researchers and practitioners was that corporate diversification leads to an average discount on firm value; however, several studies cast doubt on the diversification discount. In the last decade, there has been no clear consensus as to whether there is a discount or even a premium on firm value. Recent literature concludes that the effect on value differs from firm to firm and that corporate diversification alone does not drive the discount or premium; rather, the effect is heterogeneous across certain industry settings, economic conditions, and governance structures.     

Long memory and fractional integration in the housing price series of London and Paris

This article deals with the analysis of house price indexes from a long-range dependence viewpoint. In particular, it estimates the fractional differencing parameter in the London and Paris house price series recognizing in some cases the potential seasonality and allowing for breaks in the data. Moreover, it analyses the stability of the parameters across the sample period examined. It is concluded that the series are nonstationary but mean reverting in some cases and very persistent in others. Policy implications are derived.