Geographical focus in emerging markets and hedge fund performance

Emerging market hedge funds are an asset class which does not seem to outperform the market benchmarks. We hypothesize that the poor aggregate performance may be due to lack of focus of these funds. Our results suggest that a portfolio of emerging market hedge funds, which have geographical focuses, outperform their underlying stock markets. Hedge funds which focus on Eastern Europe appear to have the best outperformance. However, we also find that the performance of all emerging market hedge funds has reduced after the start of the 2008 Crisis.     

Forecasting the macroeconomy with contemporaneous financial market information: Europe and the United States

Using Economic Tracking Portfolios (ETP), I find that it is possible to forecast future values of inflation and changes in industrial production in the United States and three core euro countries - Italy, France and Germany - utilizing only current and past financial market information. The longer the forecasting horizon, the better the forecasts based solely on financial market information compared to results from other methods. Of the countries I analyze, the overall forecasting performance of the tracking portfolios is the best for the U.S., and my method outperforms the forecasting performance of a VAR approach.     

Economic policy uncertainty effects for forecasting future real economic activity

Recently introduced measures for economic policy uncertainty (EPU), included in the data from 1997 to 2016, have a role in forecasting out-of-sample values for future real economic activity for both the euro area and UK economies. The inclusion of EPU measures, either for the US, the UK or for overall European economies, improves the forecasting ability of models based on standard financial market information, especially for the period before the 2008 global crisis. However, during and after the crisis period, the slope of the yield curve and excess stock market returns improves the out-of-sample forecast performance the most compared to an AR-benchmark model. Hence, the EPU information is important in times of normal business cycles, but might contain similar information components to financial market return variables during turbulent crisis periods in the financial markets and in the real economy.     

Re-treatment with varenicline is a cost-effective aid for smoking cessation

Objective: One quit attempt with varenicline has been found to be a cost-effective smoking cessation intervention. The purpose of this study was to analyze varenicline’s cost-effectiveness in patients who relapse during or after the first treatment. A comparison was made between re-treatment schema with varenicline and re-treatment schema with bupropion, NRT and unaided cessation, and treatment once with varenicline in a Finnish context.

Methods: The two-quit version of BENESCO Markov model was used to follow a cohort of smokers making up to two quit attempts over a lifetime. The abstinence rates of the interventions were derived from a Cochrane review. Gender- and age-specific data on the incidence and prevalence of five smoking-related diseases were included in the model. Quality-adjusted life-years, total expected costs, and the lifetime cumulative incidence of smoking-related morbidities and mortality were the primary outcomes evaluated.

Results: The study cohort comprised 116,533 smokers who were willing to make a quit attempt. In the lifetime simulation, re-treatment with varenicline yielded 6,150–20,250 extra quitters, depending on the comparator. Among these quitters it was possible to prevent 899–2,972 additional cases of smoking-related diseases, and 395–1,307 deaths attributable to smoking. Re-treatment with varenicline resulted in cost savings of up to 54.9 million Euros. Re-treatment with varenicline dominated all the other smoking cessation interventions used in the analysis. Sensitivity analysis supported the robustness of the base case results.

Limitations: The analysis did not consider adverse events, and included only five major smoking-related diseases, which is a conservative approach, and probably leads to under-estimation of cost-effectiveness of cessation interventions. Furthermore, assumptions of constant relative risks for smoking-related diseases for each smoking status and the proxy values used as efficacy estimates of second quit attempts for other interventions than varenicline are limitations.

Conclusions: A second quitting effort with varenicline is economically justifiable.     

Innovation trends and industrial renewal in Finland and Sweden 1970–2013

We examine trends in innovation output for two highly ranked innovative countries: Finland and Sweden (1970–2013). Our novel dataset, collected using the LBIO (literature-based innovation output) method, suggests that the innovation trends are positive for both countries, despite an extended downturn in the 1980s. The findings cast some doubt on the proposition that the current stagnation of many developed countries is due to a lack of innovation and investment opportunities. Our data show that Finland catches up to, and passes, Sweden in innovation output in the 1990s. In per capita terms, Finland stays ahead throughout the period. We find that the strong Finnish performance is largely driven by innovation increase in just a handfull of sectors, but is not restricted to few companies. Both countries saw a rise in innovation during the dot-com era and the structural changes that followed. Since 2000 however, Sweden has outperformed Finland in terms of total innovations, especially in machinery and ICT, while the Finnish rate of innovation has stabilised. We suggest that these patterns may be explained by different paths of industrial renewal.     

Asymptotic inference in regression models with autoregressive errors having roots on the unit circle

An inference procedure is proposed for regression models with stationary regressors and non-stationary autoregressive errors. It is shown that the usual GLS or Cochrane–Orcutt procedure should be done in reverse order by starting the estimation from the error structure.     

Monetary policy in the BOF3 quarterly model of the Finnish economy

This paper describes the modelling of monetary policy in BOF3, a quarterly econometric model of Finland built at the Research Department of the Bank of Finland. BOF3 is a 198-equation, ‘amended Keynesian’ model which is used regularly in policy analysis and forecasting at the Bank. The modelling of the Finnish monetary sector has been complicated by the fact that most interest rates applied by the banks have so far been institutionally regulated. In spite of this, model builders have attempted to follow the conventional IS-LM approach as closely as possible, assuming that interest rates equilibrate financial markets outside the banking sector. The reported simulation experiments describe the effects of a change in nomical interest rates, of a change in the domestic money supply, and of a fiscal stimulus with and without monetary accomodation.     

Option to wait in a search model

We consider a standard search model with buyers and sellers. Upon meeting the buyers make a take-it-or-leave-it offer, but the sellers have an option not to trade immediately but wait for more agents to appear. If more buyers come, there is excess demand, and the buyers engage in auction to get the good. Analogously, if more sellers come, the sellers engage in a Bertrand-type pricing game to sell the object. The option to wait restricts the price offer of the buyer; in an equilibrium in which trades are consummated without delay there is a unique price offer for the buyer.JEL Classification: C78, D44, D831     

Philanthropy, Integration or Innovation? Exploring the Financial and Societal Outcomes of Different Types of Corporate Responsibility

This article argues that previous research on the outcomes of corporate responsibility should be refined in two ways. First, although there is abundant research that addresses the link between corporate responsibility (CR) and financial performance, hardly any studies scrutinize whether the type of corporate responsibility makes a difference to this link. Second, while the majority of CR research conducted within business studies concentrates on the financial outcomes for the firm, the societal outcomes of CR are left largely unexplored. To tackle these two deficiencies, this article extends the different conceptualizations of corporate responsibility and elaborates both the financial and the societal outcomes of different types of CR.     

Debt Judgments as a Reflection of Consumption-Related Debt Problems

In connection with the strengthening and enlargement of financial markets, i.e., financialization, financial services and products play a major role in the everyday lives of consumers. One drawback of this trend is the increase in the number of debt problems. The data used in this article consist of Finnish district-court judgments related to debt that in most cases was consumption-related, and register-based data on debtors. We first compare debtors to the entire population of Finland by age, gender, marital status, and education, and also in different age groups. The focus then turns to the four most common types of debt in the judgments (based on consumer credit, operator services, distance selling, and credit card debts), and how age, gender, marital status, and education related to these debt types. According to the results, consumers under 30 years of age, in particular, men, those with a basic level of education, and the divorced were over-represented in the data, compared to the overall Finnish population. Young single adults were particularly likely to have accrued smaller amounts of debt related to instant loans and operator services, whereas more extensive consumer credit as well as credit card debt tended to be a problem among retirees. Credit card debt, as well as debts to lending firms, were more common among those with tertiary education than among those with a basic education. Overall, the adverse effects of financialization focused especially on young people with a low level of education. The results also indicate that legislation could partly reduce the negative effects of financialization.