Dividend policy and capital structure of a defaultable firm

Default risk significantly affects the corporate policies of a firm. We develop a model in which a limited liability entity subject to default at an exponential random time jointly sets its dividend policy and capital structure to maximize the expected lifetime utility from consumption of risk‐averse equity investors. We give a complete characterization of the solution to the singular stochastic control problem. The optimal policy involves paying dividends to keep the ratio of firm's equity value to investors' wealth below a critical threshold. Dividend payout acts as a precautionary channel to transfer wealth from the firm to investors for mitigation of losses in the event of default. Higher the default risk, more aggressively the firm leverages and pays dividends.     

The Resource-Based View of Competitive Advantage in Two-Sided Markets

abstract    Using two-sided markets as a specific market context, we show that cross-group network effects can turn the participants of a two-sided network into critical resources. In two-sided markets such as payment cards and personal computer operating systems, two groups of agents interact with each other via a common network platform; the value of joining the network for agents in one group depends on the number of participants in the other group. In these markets, resource heterogeneity is represented by different sizes of existing networks; resource accumulation possesses all five characteristics of asset-stock accumulation summarized by Dierickx and Cool. The unique resource accumulation process provides an isolating mechanism for large networks to sustain their resource and competitive advantages. Using two dynamic systems models, we show that resource heterogeneity (i.e. varying initial network sizes) is a source of sustained competitive advantage for two-sided networks and has significant impact on long-term competition dynamics. The findings illustrate the importance of incorporating market context in the research of the resource-based view of competitive advantage.     

Market quality and the connectedness of steel rebar and other industrial metal futures in China

We examine the market quality of China's steel rebar futures, along with three other important industrial metal futures. Steel rebar futures are the most active metal futures contracts in China. Our analyses show that while steel rebar and copper futures are comparable in terms of informational efficiency, they are more informationally efficient than iron ore and aluminum futures, with low bid–ask spread, volatility persistence, pricing error variance, and probability of informed trading. We find a bidirectional connection between iron ore and steel rebar futures. Furthermore, we show that these metal futures are weakly related to the Chinese stock market.     

An improved Huffman coding with encryption for Radio Data System (RDS) for smart transportation

As the development of Radio Data System (RDS) technology and its applications are getting more and more attention and promotion, people concern their personal privacy and communication efficiency, and therefore compression and encryption technologies are being more important for transferring RDS data. Unlike most of the current approaches which contain two stages, compression and encryption, we proposed a new algorithm called Swapped Huffman Table (SHT) based on Huffman algorithm to realise compression and encryption in a single process. In this paper, a good performance for both compression and encryption is obtained and a possible application of RDS with the proposed algorithm in smart transportation is illustrated.     

Entry and exit echoes

While aggregate data do not show the investment echoes predicted by vintage-capital models, echoes arise in rates of entry and exit of firms at the industry level. Moreover, industries where prices decline rapidly experience early ‘shakeouts’. The relation emerges naturally in a vintage-capital model in which exit of firms sometimes accompanies the replacement of their capital, and in which a shakeout is the first replacement ‘echo’ of the capital created when the industry is born.     

Cognitive age and fashion consumption

This study used two‐step structural equation modelling to explore whether cognitive age acts as a mediator between fashion attitudes and fashion behaviours. Three nested and one non‐nested competing models were compared with the base model to determine which model was the best. Data from 1344 consumers showed that cognitive age plays a mediatory role between fashion attitudes and fashion behaviours. It fully mediates between high fashion interest and fashion behaviours, and between utilitarian orientation and fashion behaviours. However, cognitive age only partially mediates between individual taste concern and fashion behaviours.     

The relationship between currency carry trades and U.S. stocks

The article examines the relationship between daily returns of currency carry trades and U.S. stocks from January 1995 through September 2010. Carry trade and stock returns are highly correlated with no Granger‐causality in either direction. An EGARCH model shows that significant volatility spillovers flow from the stock market to the carry‐trade market, but not vice versa. The markets are more correlated in periods of high volatility. Volatilities in both markets also increase more with negative innovations than positive innovations. A sectoral analysis of the index suggests that volatilities of cyclical stocks have more impact than noncyclical stocks on carry trades.