RISK PREMIUM EFFECTS ON IMPLIED VOLATILITY REGRESSIONS

This article provides new insights into the sources of bias of option implied volatility to forecast its physical counterpart. We argue that this bias can be attributed to volatility risk premium effects. The latter are found to depend on high‐order cumulants of the risk‐neutral density. These cumulants capture the risk‐averse behavior of investors in the stock and option markets for bearing the investment risk that is reflected in the deviations of the implied risk‐neutral distribution from the normal distribution. We show that the bias of implied volatility to forecast its corresponding physical measure can be eliminated when the implied volatility regressions are adjusted for risk premium effects. The latter are captured mainly by the third‐order risk‐neutral cumulant. We also show that a substantial reduction of higher order risk‐neutral cumulants biases to predict their corresponding physical cumulants is supported when adjustments for risk premium effects are made.     

Firm-level export performance assessment: Review, evaluation, and development

Export performance is one of the most widely researched but least understood and most contentious areas of international marketing. To some extent, this problem can be ascribed to difficulties in conceptualizing, operationalizing, and measuring the export performance construct, often leading to inconsistent and conflicting results. This study reviews and evaluates more than 100 articles of pertinent empirical studies to assess and critique export performance measurements. Based on gaps identified in this evluation, guidelines for export performance measure development are advanced, suggesting, however, a contingency approach in their application. Several conclusions and implications for export strategy and future research are derived from this analysis. Constantine S. Katsikeas holds the Sir Julian Hodge Chair in Marketing and International Business at Cardiff Business School, Cardiff University. His main research interests lie in the areas of international marketing and purchasing, global strategic alliances, and competitive strategy. He has published widely in these fields and his articles have appeared inJournal of International Business Studies, Journal of International Marketing, (formerly Columbia)Journal of World Business, Journal of Business Research, Industrial Marketing Management, andManagement International Review, among others. Leonidas C. Leonidou is associate professor of marketing at the University of Cyprus. He obtained his Ph.D. in marketing from the University of Bath, and has research interests in international marketing, relationship marketing, strategic marketing, and marketing in emerging economies. He has published extensively in these fields and his articles have appeared in various journals includingJournal of International Business Studies, Journal of Business Research, Journal of International Marketing, andManagement International Review. Neil A. Morgan is assistant professor of marketing in the Kenan-Flagler Business School at the University of North Carolina, Chapel Hill. His research interests focus on strategic issues concerning marketing resources and capabilities, and marketing planning and implementation processes and their links with business performance. His work has appeared inJournal of the Academy of Marketing Science, Journal of Business Research, Industrial Marketing Management, British Journal of Management, European Journal of Marketing, and other journals.     

Exporter-importer relationship quality: The inhibiting role of uncertainty, distance, and conflict

The article examines the impact of uncertainty, distance, and conflict on key elements comprising the quality of the relationship between U.S. industrial exporters and their overseas customers. Information received from 151 manufacturers revealed that these three parameters play a significant negative role in building sound relationship quality, in terms of adaptation, commitment, communication, cooperation, satisfaction, trust, and understanding — which, in turn, may inhibit the firm's progression along the internationalization path. Specifically, an inverse association was found between uncertainty, distance, and conflict, on one hand, and commitment, cooperation, and satisfaction, on the other. In addition, in relationships characterized by high uncertainty, adaptation, communication, trust, and understanding were low. In high distance relationships, communication was insufficient, and in high conflict situations, trust and understanding were low. Several managerial implications are extracted from the study, as well as directions for future research.     

The moderating role of anticipated affective ambivalence in the formation of entrepreneurial intentions

Students’ predictions of the affective consequences of starting their own business encompass, simultaneously, positive and negative thoughts and feelings (anticipated affective ambivalence). We theorize that anticipated affective ambivalence constitutes a significant element in the entrepreneurial process holding a central role in the realization of entrepreneurial intentions. In the herein presented research, we propose and test a model within which anticipated affective ambivalence is expected to moderate the impact of attitudes towards entrepreneurship (ATT), subjective norms (SN), and perceived behavioral control (PBC) on entrepreneurial intention. Results from a large sample of university student participants found that anticipated affective ambivalence moderated the effects of ATT and SN on entrepreneurial intention (INT) but not the effect of PBC on INT. Theoretically the findings introduce affective ambivalence in the area of nascent entrepreneurship and within the Theory of Planned Behavior model. Practically, the study highlights affective ambivalence in the context of universities’ increasing interest to promote entrepreneurship and to develop suitable educational programs.     

Drivers and outcomes of importer adaptation in international buyer–seller relationships

Notwithstanding the growing literature on international buyer–seller relationships, limited attention has been given to the crucial role of adaptation in enhancing relationship performance, especially from the standpoint of the importer. This article reports the findings of a study, conducted among 167 British importers, focusing on the factors that drive their adaptation in the working relationship with Western European or U.S. export manufacturers, as well as its resulting performance outcomes. It was revealed that trust positively affects commitment and cooperation, while communication positively influences cooperation but has no effect on commitment. Both commitment and cooperation subsequently lead to importer adaptation. It was also found that adaptive importers tend to be more conducive to effective and efficient relationship outcomes. Finally, the study confirmed that both the links between adaptation and relationship effectiveness and adaptation and relationship efficiency are moderated by both the level of dependence on and distance from the exporter.     

Recovering the market risk premium from higher-order moment risks

We propose a consistent approach for the estimation of the market risk premium. As a first step, we define the broadest possible set of ex ante estimators from the viewpoint of a power utility optimiser holding the market portfolio. We then employ an evaluation framework to optimise the parametrisation of the methodology. We show that this theoretical framework can still produce reasonable market risk premium estimates, even when the representative agent is not a power utility optimiser. Our results show that the inclusion of higher-order moment risk premia improves the accuracy of the method.     

Incentive‐compatible contracts in merger negotiations: The role of acquirer idiosyncratic stock return volatility

We show that the acquiring firm's idiosyncratic stock return volatility (sigma) is an important determinant of the selection and perceived valuation effects of earnouts in Mergers and Acquisitions (M&As). Earnout‐based M&As are more often announced by high‐sigma acquirers (nearly 40% of all earnout‐based M&As), yet the documented higher risk‐adjusted returns accrued to acquirers in earnout‐based M&As, relative to M&As settled in cash, stock or mixed payments (the earnout effect), appear in deals announced by low‐sigma acquirers (nearly 20% of all earnout‐based M&As). High‐sigma acquirers employing earnouts appear to break even, or even experience losses, relative to their counterparts employing single up‐front payments. These results are confirmed based on a quasi‐experimental design through which the earnout effect is measured in isolation. We argue that in M&As announced by high‐sigma acquirers, the earnout effect is potentially elusive due to the presence of an acquirer‐specific information revelation effect, resulting from the heightened extent of information asymmetry between (small) acquirers’ managers and outside investors. On the contrary, the use of earnouts in M&As announced by low‐sigma (large) acquirers, whereby the acquirer‐specific information revelation effect is likely negligible, sends a strong signal for value creation that also prevents investors from inducing a size‐related discount.     

Density forecasts of crude‐oil prices using option‐implied and ARCH‐type models

The predictive accuracy of competing crude‐oil price forecast densities is investigated for the 1994–2006 period. Moving beyond standard ARCH type models that rely exclusively on past returns, we examine the benefits of utilizing the forward‐looking information that is embedded in the prices of derivative contracts. Risk‐neutral densities, obtained from panels of crude‐oil option prices, are adjusted to reflect real‐world risks using either a parametric or a non‐parametric calibration approach. The relative performance of the models is evaluated for the entire support of the density, as well as for regions and intervals that are of special interest for the economic agent. We find that non‐parametric adjustments of risk‐neutral density forecasts perform significantly better than their parametric counterparts. Goodness‐of‐fit tests and out‐of‐sample likelihood comparisons favor forecast densities obtained by option prices and non‐parametric calibration methods over those constructed using historical returns and simulated ARCH processes. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:727–754, 2011