Forecasting value‐at‐risk in oil prices in the presence of volatility shifts

Recent evidence suggests shifts (structural breaks) in the volatility of returns causes non‐normality by significantly increasing kurtosis. In this paper, we endogenously detect significant shifts in the volatility of oil prices and incorporate this information to estimate Value‐at‐Risk (VaR) to accurately forecast large declines in oil prices. Our out‐of‐sample performance results indicate that the model, which incorporates both time varying volatility (without making any distributional assumptions) and shifts in volatility, produces more accurate VaR forecasts than several benchmark methods. We make a timely contribution as the recent more frequent occurrences of unexpected large oil price declines has gained significant attention because of its substantial impact on the financial markets and the global economy.     

Has Adoption of IFRS Increased Non–North American Institutional Investment in the Canadian Stock Markets?

We investigate whether non–North American (non‐NA) institutional investment in firms listed on the Canadian stock markets increased between the pre‐ and post‐IFRS adoption periods relative to such investment in firms listed on the U.S. stock markets. Prior to IFRS adoption, Canada had high‐quality financial reporting standards that were similar to the U.S. standards. As consequences of IFRS adoption, Canadian financial statements became more comparable with European and other IFRS country financial statements and less comparable with neighboring U.S. financial statements. Thus, a question of interest is whether the enhanced comparability with non‐NA companies was beneficial in terms of attracting non‐NA investment to Canadian companies versus U.S. companies. We find that there was no significant change in non‐NA institutional investment in Canadian firms relative to U.S. firms for the very largest (fifth quintile) and for smaller (first, second, and third quintiles) Canadian companies. However, intermediate‐sized Canadian companies in the fourth size quintile lost non‐NA institutional investment relative to their U.S. peer companies, suggesting that non‐NA investors cared more about comparability with U.S. peer companies than non‐NA peer companies for companies in this size quintile.     

Epidemiological patterns of suicide terrorism in the civilian Pakistani population

In this study, we assessed the epidemiological patterns of suicide terrorism in the civilian population of Pakistan. Information about suicide terrorism-related events, deaths and injuries was extracted from the South-Asian Terrorism Portal (SATP) for the period from 2002 to October 2009. Of 198 events, civilians were involved in 194 events. Civilians accounted for 74.1% (N?=?2017) of those who died and 93.8% (N?=?6129) of those who were injured. In nine districts, mortality rates were more than one death per 100,000 inhabitants per year. The yearly trend showed a shift of attack targets from foreigners and sectarian targets in 2002-2005 to security forces or general public in 2006-2009. Attacks on public installations (mosques) or political gatherings resulted in a significantly greater (P?≤?0.02) number of deaths (22 vs. 8) and injuries (59 vs. 24) per event compared with security installations. These results show that prevention might focus on political negotiation with armed groups and that appropriate measures should be taken to protect mosques and political gatherings.     

An experimental analysis of tax avoidance policies

Policies to reduce aggressive tax avoidance are increasingly being implemented or discussed in many countries around the world. Tax authorities hope that such policies will generate new tax revenue by increasing overall tax compliance. We present an experimental design to investigate the effect of a stylized anti-avoidance tax policy on tax compliance behavior. We highlight that anti-avoidance tax policies that reduce tax avoidance can also induce an increase in tax evasion (“substitution effect”), which limits the additional tax revenue these policies will generate. We show that the degree of substitution depends crucially on behavioral factors such as tax morale. Policymakers therefore also need to consider behavioral features while designing such policies and estimating their potential effects.     

Particle filters for continuous likelihood evaluation and maximisation

In this paper, a method is introduced for approximating the likelihood for the unknown parameters of a state space model. The approximation converges to the true likelihood as the simulation size goes to infinity. In addition, the approximating likelihood is continuous as a function of the unknown parameters under rather general conditions. The approach advocated is fast and robust, and it avoids many of the pitfalls associated with current techniques based upon importance sampling. We assess the performance of the method by considering a linear state space model, comparing the results with the Kalman filter, which delivers the true likelihood. We also apply the method to a non-Gaussian state space model, the stochastic volatility model, finding that the approach is efficient and effective. Applications to continuous time finance models and latent panel data models are considered. Two different multivariate approaches are proposed. The neoclassical growth model is considered as an application.     

Role of quality management capabilities in developing market-based organisational learning capabilities: Case study evidence from four Indian business process outsourcing firms

Business-to-business marketing literature acknowledges the value firms, including business process outsourcing firms, realise through their supplier networks. Such value realisation is often possible through a dynamic exchange of complementary organisational capabilities between a firm and its network partners. However, little is known about how outsourcing firms develop these capabilities and thus realise value. This paper addresses an unexplored theoretical gap of developing market-based organisational learning capabilities in business process outsourcing firms. Using a capabilities lens, this study assesses the impact of quality management capabilities in developing market-based organisational learning capability. Findings from a case study of four business process outsourcing firms in India suggest that effective knowledge transfer, diffusion and the development of market-based organisational learning capabilities are contingent upon the strength of a firm's quality management capabilities. Implications for theory and practice are discussed.     

Are bygones not bygones? Modeling price-level targeting with an escape clause and lessons from the gold standard

Like the gold standard, price-level targeting (PT) involves not letting past deviations of inflation be bygones; both regimes return the price level (or price of gold) to its target. The experience of suspension of the gold standard in World War I and resumption in the 1920s (for some countries at a different parity) is reviewed. It suggests that, in practice, PT might operate with an escape clause that would allow rebasing of the price target in the face of large shocks. Using a calibrated general equilibrium model, we show that such an escape clause can produce multiple equilibria. For some parameterizations, there is a low credibility equilibrium (with high expectation of a reset) associated with high output volatility and frequent resets. These problems reduce, or reverse, the expectational advantage PT has over inflation targeting.     

Cultural distance and its implication for the duration of the international alliance in a high technology sector

This study examines the role of cultural distance in the duration of an international alliance in a high technology sector. The general view is that cultural distance between international partners can hamper the duration of the alliance. We propose the alternative argument that cultural distance can be a source of the alliance duration. We use cultural distance based on widely perceived five cultural dimensions (Hofstede et al., 2010). Overall, the result supports the proposition. The distance based on masculinity, uncertainty avoidance and long-term orientation tends to increase the duration of the alliance. The distance based on power distance and individualism tends to decrease the duration of the alliance. Nevertheless, the composite measure based on all five dimensions also shows a positive effect on the duration of the alliance. The study concludes that learning alliances prefer diversity of knowledge sources. Knowledge transfer is a context dependent phenomenon. The diversity of the context delays knowledge transfer. Therefore, learning alliances tend to be longer when there is a cultural distance between international partners. The article notes some implications and limitations for the future research.