Sentiment-scaled CAPM and market mispricing

This study explores the conditional version of the capital asset pricing model on sentiment to provide a behavioural intuition behind the value premium and market mispricing. We find betas (β) and the market risk premium to vary over time across different sentiment indices and portfolios. More importantly, the state β derived from this sentiment-scaled model provides a behavioural explanation of the value premium and a set of anomalies driven by mispricing. Different from the static β–return relation that gives a flat security market line, we document upward security market lines when plotting portfolio returns against their state βs and portfolios with higher state βs earn higher returns.     

Dismantling the south-west coalition: further evidence of distributive politics in preemption legislation

Economics of Governance - The factors influencing legislative voting behavior have often been studied. This is especially true regarding antebellum federal preemption legislation. Several...     

Impact of international entry choices on the nature and type of innovation: Evidence from emerging economy firms from the Indian bio-pharmaceutical industry

As emerging economy multinational enterprises (EMNEs) enter foreign countries in search of new markets, seeking to expand their knowledge bases, research on the type and nature of innovation activity is needed to address the impact of EMNEs’ choices related to international expansion. Building on prior literature on entry mode and location choices, as well as on organizational learning, we argue that how and where an EMNE expands internationally will impact the nature of its innovation. We carry out empirical analysis on a sample of 167 Indian bio-pharmaceutical firms for the period from 1997–2017. Our findings suggest that greenfield ventures foster innovation in core technologies, while cross-border mergers and acquisitions (M&As) foster innovation in non-core technologies. In addition, locating subsidiaries in high income countries encourages product innovations, while locating in low income countries encourages process innovations. Our findings contribute to the growing literature on differences in learning outcomes of EMNE internationalization.     

Speed under sail during the early industrial revolution (c. 1750–1830)

This article measures technological progress in oceanic shipping directly by using a large database of daily log entries from British, Dutch, and Spanish ships to estimate daily sailing speed in different wind conditions from 1750 to 1850. Against the consensus among economic (but not maritime) historians that the technology of sailing ships was fairly static during this time, we find that average sailing speeds of British East India Company and Navy ships in moderate to strong winds rose considerably after the 1770s. Driving this progress was the introduction of coppering in the 1780s, but subsequent rises are probably due to a continuous evolution of sails and rigging, and improved hulls that allowed a greater area of sail to be set safely in a given wind. By contrast, the speeds of Dutch and Spanish vessels were stagnant. Using separate data on the crossing times of Atlantic mail packets, we find gradual progress from the 1750s, followed by marked improvements when American packets appeared in the 1820s.     

Myopia and saliency in renewable resource management

An important challenge in managing renewable resources is to understand why owners and managers sometimes make decisions that deplete resources and future earnings, such as when graziers allow pastures and land condition to be degraded. In this paper, we test two potential reasons for unsustainable management practices, myopia and salience, with each explaining why resource managers may exhibit impatience in harvest decisions. Myopia is associated with decision makers placing lower weight on future outcomes than would be implied by their pure time preference. Salience is associated with overweighting of consumption ‘now’, implying inconsistency in time preferences. To test for these effects on renewable resource management, an incentivised, dynamic field experiment was carried out with rangeland grazing enterprise owners in north‐eastern Australia that related management choices with uncertain rainfall events to both profits and land condition over time. Results demonstrate that respondents exhibiting myopia/salience in their choices tended to achieve lower cumulative scores in the experiment, as well as lower land conditions on their properties as measured with remote sensing data. Our results explain why there may be persistent optimisation failures by resource owners that reduce both profits and environmental outcomes.     

Brexit: How Will UK Agriculture Fare?

There is little doubt that Brexit would have significant implications for UK agriculture, a sector with strong trade links to the EU and strong reliance on CAP income support. This article reports preliminary results from employing a Computable General Equilibrium Model, a Partial Equilibrium Model and Farm Level Models to explore selected trade and domestic policy scenarios post‐Brexit. These allow for the estimation of changes in producer prices, production and farm incomes against a baseline scenario of continued EU membership. Under a Free Trade Agreement with the EU, agricultural impacts are relatively modest. By contrast, unilateral removal of import tariffs has significant negative impacts on prices, production and incomes. Adoption of the EU's WTO tariff schedule for all imports favours net importers (e.g. dairy) and harms net exporters (e.g. sheep). Given the strong dependence of most UK farms on direct payments, their removal worsens negative impacts of new trade arrangements and offsets positive impacts. Impacts vary across different types and sizes of farm, but also regionally. However, the period of adjustment to new trade and domestic policy conditions may prove very challenging for a large number of farm businesses.     

Influence of livelihoods on climate change adaptation for smallholder farmers in the Mekong Delta Vietnam

Farmers in the Vietnamese Mekong Delta face a wide range of climate-related and hydrological factors which threaten rice production. Smallholder farmers must adapt to climate change to sustain rice production as their central and most important livelihood activity. A sample was stratified across agro-ecological areas in the Delta affected by flooding, alluvial soils, acid sulphate soils, and saline water intrusion and by derived farmer typologies. A rural livelihoods approach was used in focus group discussions and in-depth interviews to identify and enumerate enabling and constraining adaptation factors. Smallholders experienced diverse natural hazards such as floods, abnormal rains, high temperatures, water scarcity, and salinity intrusion specific to the agro-ecological areas. Adaptation was constrained by labour shortages, water quality, topography, access to combine harvesters, transportation infrastructure, dryers and household savings. Adaptation was enabled by farming techniques and experience, cooperative groups, water quantity, access to information, and ability to purchase agro-chemicals through credit. Small farmers (< 1?ha) were more constrained than large farmers (> 1?ha) who had an expanded livelihood asset base. A range of policy implications are discussed, but adaptation is not just about technological fixes but requires overall improvements in a range of human, social and financial components.     

A classroom experiment in monetary policy

The authors propose a classroom experiment implementing a simple version of a New Keynesian model suitable for courses in intermediate macroeconomics and money and banking. Students play as either the central bank or members of the private sector. The central banker sets interest rates to meet twin objectives for inflation and the output gap or to meet only an inflation target. In both settings, private sector agents are concerned with correctly forecasting the inflation rate. The authors show that an experiment implementing this setup is feasible and yields results that enhance understanding of the New Keynesian model of monetary policy. They propose alternative versions where the central bank is replaced by a policy rule and provide suggestions for discussing the experimental results with students.     

Perceptions of Agriculture and Food Corporate Social Responsibility

An online survey of 1,201 U.S. residents was conducted in April 2015 to better understand individuals’ perceptions of prominent areas of corporate social responsibility (CSR) in the food supply chain. Demographic and household consumption information, including supermarket patronage, was collected. Each respondent completed best–worst tasks for CSR areas designed to elicit their relative importance of CSR areas. Overall, health and safety were perceived as the most important CSR area, and environment was prioritized second. Indicating gender as female and/or reporting age over 65 was positively correlated with the relative importance placed on health and safety, but negatively correlated with the size of preference share for nearly all other CSR areas investigated. Membership in the younger age categories was positively correlated with the size of the preference shares devoted to procurement, labor, fair trade, and biotechnology.     

Assessing cost‐effectiveness when environmental benefits are bundled: agricultural water management in Great Barrier Reef catchments

Using economic analysis to prioritise improvements in environmental conditions is particularly difficult when multiple benefits are involved. This includes ‘bundling’ issues in agricultural pollution management, where a change in management action or farming systems generates multiple improvements, such as reductions in more than one pollutant. In this study, we conceptualise and compare two different approaches to analysing cost‐effectiveness when varying bundles of benefits are generated for a single project investment. Each approach requires data to be transformed in some way to allow the analysis to proceed. The index approach requires the transformation on the benefits side so that the effects of multiple pollutant changes can be combined into a measure for each project which can then be compared to costs. By comparison, the disaggregation approach requires the transformation on the costs side where costs for each project have to be apportioned across the different pollutants involved. The paper provides novel insights with an application to agricultural water quality improvements into the Great Barrier Reef in Australia, demonstrating that while both approaches are effective in prioritising projects by cost‐effectiveness, the disaggregation approach provides more insightful results and values that may be relevant for use as upper value guidelines in future project selection.