Cross-border exchanges and volatility forecasting

We test for the performance of a series of volatility forecasting models (GARCH 1,1; EGARCH 1,1; CGARCH) in the context of several indices from the two oldest cross-border exchanges (Euronext; OMX). Our findings overall indicate that the EGARCH (1,1) model outperforms the other two, both before and after the outbreak of the global financial crisis. Controlling for the presence of feedback traders, the accuracy of the EGARCH (1,1) model is not affected, something further confirmed for both the pre and post crisis periods. Overall, ARCH effects can be found in the Euronext and OMX indices, with our results further indicating the presence of significant positive feedback trading in several of our tests.     

Structural holes in social networks

We consider a setting where every pair of players that undertake a transaction (e.g. exchange goods or information) creates a unit surplus. A transaction can take place only if the players involved have a connection. If the connection is direct the two players split the surplus equally, while if it is indirect then intermediate players also get an equal share of the surplus. Thus, individuals form links with others to create surplus, to gain intermediation rents, and to circumvent others who are trying to become intermediary.Our analysis clarifies the interplay between these forces in the process of strategic network formation. First, we show that, in the absence of capacity constraints on links, it leads to the emergence of a star network where a single agent acts as an intermediary for all transactions and enjoys significantly higher payoffs. Second, we study the implications of capacity constraints in the ability of agents to form links. In this case, distances between players must be long, which induces players who are “far off” to connect in order to avoid paying large intermediation rents. A cycle network then emerges, payoffs being equal across all players.     

Learning from Neighbours

When payoffs from different actions are unknown, agents use their own past experience as well as the experience of their neighbours to guide their decision making. In this paper, we develop a general framework to study the relationship between the structure of these neighbourhoods and the process of social learning.
We show that, in a connected society, local learning ensures that all agents obtain the same payoffs in the long run. Thus, if actions have different payoffs, then all agents choose the same action, and social conformism obtains. We develop conditions on the distribution of prior beliefs, the structure of neighbourhoods and the informativeness of actions under which this action is optimal. In particular, we identify a property of neighbourhood structures—local independence—which greatly facilitates social learning. Simulations of the model generate spatial and temporal patterns of adoption that are consistent with empirical work.     

Queues with batch poisson arrivals and hyper-exponential service time distribution

Summary We consider in this paper the transient behaviour of the queuing system in which (i) the input, following a Poisson distribution, is in batches of variable numbers; (ii) queue discipline is ‘first come first served’, it being assumed that the batches are pre-ordered for service purposes; and (iii) service time distribution is hyper-exponential withn branches. The Laplace transform of the system size distribution is determined by applying the method of generating functions, introduced in queuing theory byBailey [1]. However, assuming steady state conditions to obtain, the problem is completely solved and it is shown that by suitably defining the traffic intensity factor,ϱ, the value,p ₀, of the probability of no delay, remains the same in this case of batch arrivals also as in the case of single arrivals. The Laplace transform of the waiting time distribution is also calculated in steady state case from which the mean waiting time may be calculated. Some of the known results are derived as particular cases.     

TAX REFORMS IN EAST ASIAN DEVELOPING COUNTRIES: Motivations, directions, and implications

This first presents an overview of the level and structure of taxation in Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand. It then briefly reviews the available literature on tax reform, country by country. It finally gives a comparative analysis, focusing primarily on tax mix and tax structure, and the importance attached to tax administration.     

The Global Preference for Dividends in Declining Markets

Investors globally prefer dividend‐paying stocks over nondividend‐paying stocks more in declining than in advancing markets, even accounting for firm‐level growth opportunities, size and risk effects. Dividend‐paying stocks outperform nondividend‐paying stocks, from 0.63% (China) to 3.79% (Canada) more per month in declining than in advancing markets. In declining markets, dividend‐paying firms outperform by more than any underperformance in advancing markets. The results are robust across dividend taxation regimes, legal environments, emerging and developed markets, periods prior to and after the 2008 global financial crisis, the exclusion of the dividend declaration month and in respect to segmented or integrated international capital markets.     

Influencing the influencers: a theory of strategic diffusion

The growth of the Internet and assorted technologies has made it possible to collect and process detailed information on social networks. This article investigates how firms (and governments) can harness the power of social networks to promote their goals. We show that the optimal use of social networks leads to higher sales and greater profits. However, an increase in the level and dispersion of social interaction can increase or decrease the optimal influence strategy and profits of the player, depending on the content of the interaction. Optimal influence strategies will target individuals with low or high connections, depending on the content of interaction. Finally, the returns to investing in market research on social networks are greater in more unequal networks.     

Corporate governance,life cycle,and payout precommitment: An emerging market study

We analyze the role of firm‐level corporate governance in determining the precommitment payout policy of emerging market firms and investigate whether there is a precommitment life‐cycle effect. Unlike previous studies of U.S. firms, we find evidence of precommitment only among relatively well‐governed firms, which combine good governance with large dividend payouts to shareholders and large debt‐related repayments to creditors. We also document a strong precommitment life‐cycle effect. Firms in the growth and mature stages of their life cycle tend to use both debt and dividends to precommit to investors, with an increasing proportion of dividends in total payout measures. Our results are robust to an array of control variables, alternate payout proxies, market setting, and firm‐level corporate governance, and it addresses potential endogeneity concerns in the sample.