Consumer brand confusion: A conceptual framework

A definition and theoretical framework for consumer brand confusion are developed. Brand confusion is distinguished from related terms, such as uncertainty, miscomprehension, infringement, and deception. The factors affecting the likelihood of brand confusion are extended beyond stimulus similarity to include individual and situational factors, and propositions regarding the effects of individual and situational factors are developed. The value of a better understanding of consumer brand confusion to managers and policy makers is discussed.     

Does foreign aid really raise per capita income? A time series perspective

Abstract. We analyze the relationship between per capita income and foreign aid. We employ annual data and five‐year averages and carefully examine the time‐series properties of the data. Panel estimations with dynamic feasible generalized least‐squares (DFGLS) show that aid generally has an insignificant or minute negative significant impact on per capita income (particularly in highly aid‐dependent countries). This holds true for countries with different levels of human development and income, as well as for different regions. We also find that aid has a small positive impact on investment, but a significant negative impact on domestic savings (crowding out) and the real exchange rate (appreciation). JEL classification: F35, O11, C23, C51     

Balancing Power Markets in Germany: Timing Matters

This paper analyzes timing issues on the German balancing power market. We focus the analysis on the length of the bidding period, i.e. the length of the time period a supplier has to provide balancing power capacities, and the question of how far before the beginning of a bidding period the auction should be carried out. We show that different load levels require different plants for the optimal provision of balancing power. In a longer bidding period, the power plants that have the lowest average cost in the bidding period are unlikely to be efficient in all hours of the bidding period. Hence, shortening bidding periods can increase efficiency. Furthermore, we show that an early commitment on a power plant’s mode of operation (when uncertainty about resulting spot prices is still relatively high) also reduces efficiency. This suggests that the auction should be held relatively close to the beginning of the bidding period. Furthermore, we discuss some advantages of a liquid real time market.     

Market fragility and international market crashes

We extend the Pukthuanthong and Roll (2009) measure of integration to provide an estimate of systemic risk within international equity markets. Our measure indicates an increasing likelihood of market crashes. The conditional probability of market crashes increases substantially following increases of our risk measure. High levels of our risk measure indicate the probability of a global crash is greater than the probability of a local crash. That is, conditional on high levels of systemic risk, the probability of a severe crash across multiple markets is larger than the probability of a crash within a smaller number of markets.     

Forecasting the Yen/U.S. Dollar exchange rate: Empirical evidence from a capital enhanced relative PPP-based model

This study uses a relative purchasing power parity (PPP) model based on price indexes (consumer, CPI or traded-goods price indexes, TPI), interest rate differentials, and a linear forecasting technique to determine the horizon over which such a model outperforms a random walk in forecasting the Yen/U.S. Dollar exchange rates out-of-sample. The results improve if one adjusts a simple CPI-based PPP-model by interest rate differentials, while the best results are obtained using a TPI-based PPP-model. For example, the TPI-based model, adjusted by interest rate differentials, is able to statistically significantly outperform the pure random walk starting at forecast horizons of 1 month.     

Gold price dynamics and the role of uncertainty

This study focuses on the dynamics of the gold price against bonds, stocks and exchange rates based on a disaggregation of the underlying relationships across different frequencies applying a wavelet decomposition. To analyze joint extreme movements (i.e. tail dependence), we adopt a copula approach, which helps us to assess the dependence between the returns of gold and other assets in calm and turmoil market times and therefore the hedge and safe haven functions of gold. We also examine whether gold prices are directly affected by changes in macroeconomic uncertainty, economic policy uncertainty and/or CPI forecasters disagreement. Analyzing data for nine economies for a sample period starting in 1985, we find that the role of gold changes significantly after the collapse of Lehman Brothers in 2008. Gold is unable to serve as a hedge or safe haven in the classical sense while the findings for the period prior to 2008 mostly suggest that gold is able to shield investors. Uncertainty measures display a surprising and time-varying relationship with the path of the gold price. While economic policy uncertainty is positively correlated with gold price changes, macroeconomic uncertainty and inflation uncertainty among forecasters are both negatively related to gold price changes.     

Are Social Costs the Outcome of Struggles over Truth?

Abstract:

This article critically examines the institutional economics theory of social costs by way of reviewing The Dark Places of Business Enterprise: Reinstating Social Costs in Institutional-Economics (2019). In particular, the article assesses the proposal to re-root institutional economics in the theoretical synthesis of “Veblen-Kapp-Mirowski” to better understand the social costs of neoliberalism. One of the findings is that while such a synthesis seems justified on the grounds of significant commonalities and the merits of deeper insights, it nevertheless runs into difficulties due to divergent philosophical foundations. One of the conclusions is that further philosophic clarification is needed on how an alternative economy would understand the relationship between “social costs” and Truth.     

Tail dependence between gold and sectorial stocks in China: perspectives for portfolio diversification

This article analyzes the relationship between gold quoted on the Shanghai Gold Exchange and Chinese sectorial stocks from 2009 to 2015. Using different copulas, our results show that there is weak but significant tail dependence between gold and Chinese sectorial stock returns. This means that the dependence between extreme movements of the two assets is not pronounced and confirms the role of gold as a safe haven asset. Based on analyzing the efficient frontier, CCC-GARCH optimal weights, hedge ratios and hedging effectiveness, we further show that adding gold into Chinese stock portfolios can help to reduce their risk. Gold appears to be the most efficient diversifier for stocks of the materials sector and the less efficient for the utilities sector. As a robustness check, we also compare gold to oil and indicate that gold is more efficient than oil in the diversification of Chinese stock portfolios.

     

Simulation-based pricing of convertible bonds

We propose and empirically investigate a pricing model for convertible bonds based on Monte Carlo simulation. The method uses parametric representations of the early exercise decisions and consists of two stages. Pricing convertible bonds with the proposed Monte Carlo approach allows us to better capture both the dynamics of the underlying state variables and the rich set of real-world convertible bond specifications. Furthermore, using the simulation model proposed, we present an empirical pricing study of the US market, using 32 convertible bonds and 69 months of daily market prices. Our results do not confirm the evidence of previous studies that market prices of convertible bonds are on average lower than prices generated by a theoretical model. Similarly, our study is not supportive of a strong positive relationship between moneyness and mean pricing error, as argued in the literature.