A real option approach to the protection of a habitat dependent endangered species

We use a real option approach to determine when a social planner has to stop or resume logging in situations where an endangered species relies on forest habitat for its survival. Logging affects the stochastic process followed by the habitat of the endangered species, which disappears irreversibly if its habitat reaches a critical extinction level. As long as the endangered species is still in existence, the social planner manages logging in such a way as to balance the risk of extinction against the benefits from commercial wood exploitation. The model incorporates economic, ecological, and social features. It is solved analytically to characterize the optimal forest management rule. Then it is applied to the case of the Rangifer tarandus caribou, an endangered species in Central Labrador (Canada). The parameters of the habitat process are estimated by Monte Carlo methods. The policy implied by the model – alternatively banning and resuming logging according to appropriate habitat threshold levels – turns out to be quite attractive; it does not require long banning periods while it drastically reduces the extinction risk and increases forest value.     

Case study—Embodied virtual agents: An analysis on reasons for failure

Despite very optimistic academic and professional literatures, embodied virtual agents (EVA) on commercial websites do not seem to keep all their promises. An update in December 2009 of a benchmark led by OrangeLab in 2007 on embodied agents displayed on French websites reveals that more than 60% of them have actually disappeared. This case study deals with understanding the disappearance of embodied virtual agents thanks to a literature review, a benchmark of 80 agents on French commercial websites and an analysis of experts' in-depth-interviews. This work identifies a series of common errors in the agents design – namely, appearance inadequacy and lack of intelligence and autonomy – that creates a gap between consumers' expectations and agents' performance explaining agents' lack of success. As a conclusion, this case study gives practitioners actionable advices to design future agents by highlighting the characteristics of the ideal virtual sales agent (VSA).     

Liquidity minimization and cross-listing choice: Evidence based on Canadian shares cross-listed on U.S. venues

This paper examines whether a Canadian-listed firm seeking to cross-list in the U.S. needs to consider liquidity differences when making a choice among the main U.S. venues (AMEX, NYSE or NASDAQ). After controlling for firm characteristics, we find that trade costs for Canadian shares cross-listed in the U.S. do not depend on the U.S. cross-listing venue. This suggests that the choice of U.S. listing venue may be better motivated by the desire to minimize listing fees or to increase investor recognition and visibility.     

Statistical analysis of financial time series under the assumption of local stationarity

The aim of this paper is to apply a nonparametric methodology developed by Donoho et al(2003 IEEE Trans. Signal Processing 53614–27) for estimating an autocovariance sequence to the statistical analysis of the return of securities and discuss the advantages offered by this approach over other existing methods such as fixed-window-length segmentation procedures. Theoretical properties of adaptivity of this estimation method have been proved for a specific class of time series, namely the class of locally stationary processes, with an autocovariance structure which varies slowly over time in most cases but might exhibit abrupt changes of regime. This method is based on an algorithm that selects empirically from the data the tiling of the time–frequency plane which exposes best in the least-squares sense the underlying second-order time-varying structure of the time series, and so may properly describe the time-inhomogeneous variations of speculative prices. The applications we consider here mainly concern the analysis of structural changes occurring in stock market returns, VaR estimation and the comparison between the variation structure of stock index returns in developed markets and in developing markets.     

Canadian Investors and the Discount on Closed-End Funds

We explore the role of the discount on closed-end funds (CEFD) in asset pricing and test its validity as a proxy for investor sentiment in the Canadian stock market. Results show that CEFD is not a priced factor. Both cross-sectional and time-series tests confirm that stocks with different exposures to CEFD do not have significantly different average returns. CEFD does not even provide incremental explanatory power after controlling for firm characteristics and risk factors. Furthermore, CEFD fails to be a proxy for investor sentiment with no correlation to either the consumer confidence index or flows to open-ended funds.     

Regulation and Coordination of International Environmental Externalities with Incomplete Information and Costly Public Funds

In this article, we study cross-border externalities in a game played by two principal-agent pairs with adverse selection. Each firm/agent is located in one country and generates pollution by producing complementary or substitute goods, sold on a common market. A fraction of pollution is transferred from one country to another. Each regulator/principal is imperfectly informed about the marginal cost of his domestic firm and accordingly uses secret incentive contracts with costly public funds. We show the necessity of cooperation between competing regulators to effectively internalize all the damages caused to the environment, while reaching the first best. If the level of uncertainty is sufficiently low, we obtain an infinity of noncooperative Bayesian differentiable equilibria, which may necessitate competing regulators to coordinate on an equilibrium. Such coordination constitutes an incentive for competing regulators to cooperate. Our major result states that under some circumstances asymmetric information relaxes the transborder externality problem. Indeed, we show that, when there is a major transfer of pollution and firms' marginal costs are sufficiently high, competing regulators are better off under uncertainty. Therefore, asymmetry of information can have the very consequence of generating regulation that is too strict from the domestic viewpoint but that improves social efficiency when the benefits to both countries are taken into account.     

Exploring factors influencing US millennial consumers’ use of tap-and-go payment technology

ABSTRACT

Although mobile payment (MP) represents a possibility for traditional brick-and-mortar US retailers to enhance the quality of customer service, mobile payment adoption in the US has lagged, with research regarding this phenomenon in the US seemingly in its embryonic stage. The current study contributes to the literature on mobile payment adoption in the US by investigating the factors on US millennial consumers’ use of mobile payment technology, operationalized in the study as tap-and-go payment systems. The study mirrors a study of the acceptance of mobile shopping technology among German consumers, with some extension. The study incorporated mobile payment risk perception, system trust, and socio-cultural influence into an extended technology acceptance model (TAM) to explore this issue. Results from a survey conducted among 357 US Millennials indicate that perceived ease of use of MP (PEOUMP); perceived usefulness (PUMP); and risk perception all influence attitude toward mobile payment (AttMP). System trust, socio-cultural influence, and AttMP all influence MP use intention. The paper discussed the limitations of the study and future research directions.     

The welfare cost of bank capital requirements

Capital requirements are the cornerstone of modern bank regulation, yet little is known about their welfare cost. This paper measures this cost and finds that it is surprisingly large. I present a simple framework, which embeds the role of liquidity creating banks in an otherwise standard general equilibrium growth model. A capital requirement limits the moral hazard on the part of banks that arises due to deposit insurance. However, this capital requirement is also costly because it reduces the ability of banks to create liquidity. The key insight is that equilibrium asset returns reveal the strength of households’ preferences for liquidity and this allows for the derivation of a simple formula for the welfare cost of capital requirements that is a function of observable variables only. Using US data, the welfare cost of current capital adequacy regulation is found to be equivalent to a permanent loss in consumption of between 0.1% and 1%.