Scaling models for the severity and frequency of external operational loss data

According to Basel II criteria, the use of external data is indispensable to the implementation of an advanced method for calculating operational risk capital. This article investigates how the severity and frequencies of external losses are scaled for integration with internal data. We set up an initial model designed to explain the loss severity by taking into account potential selection bias in the external data. Estimation results show that many variables have significant power in explaining the loss amount. We use them to develop a normalization formula. We develop a zero-inflated count-data model to scale the loss frequency. We compute an operational VaR and we conduct out-of-sample backtesting.     

Risk aversion and framing effects

We present a new experimental evidence of how framing affects decisions in the context of a lottery choice experiment for measuring risk aversion. We investigate framing effects by replicating the Holt and Laury’s (Am. Econ. Rev. 92:1644–1655, 2002) procedure for measuring risk aversion under various frames. We first examine treatments where participants are confronted with the 10 decisions to be made either simultaneously or sequentially. The second treatment variable is the order of appearance of the ten lottery pairs. Probabilities of winning are ranked either in increasing, decreasing, or in random order. Lastly, payoffs were increased by a factor of ten in additional treatments. The rate of inconsistencies was significantly higher in sequential than in simultaneous treatment, in increasing and random than in decreasing treatment. Both experience and salient incentives induce a dramatic decrease in inconsistent behaviors. On the other hand, risk aversion was significantly higher in sequential than in simultaneous treatment, in decreasing and random than in increasing treatment, in high than in low payoff condition. These findings suggest that subjects use available information which has no value for normative theories, like throwing a glance at the whole connected set of pairwise choices before making each decision in a connected set of lottery pairs.     

Beyond the Game: Perceptions and Practices of Corporate Social Responsibility in the Professional Sport Industry

Corporate social responsibility (CSR) is an area of great interest, yet little is known about how CSR is perceived and practiced in the professional sport industry. This study employs a mixed-methods approach, including a survey, and a qualitative content analysis of responses to open-ended questions, to explore how professional sport executives define CSR, and what priorities teams have regarding their CSR activities. Findings from this study indicate that sport executives placed different emphases on elements of CSR including a focus on philanthropic activities and ethical behaviors. The data suggest that professional sport executives view CSR as a strategic imperative for their business. Sport executives indicated that a number of factors influenced the practice of their CSR including: philanthropy (altruistic giving), an emphasis on the local community, partnerships, and ethical concerns. We also examine important organizational variables for sport (winning, revenues, and team value) and highlight their relationship with reported CSR involvement. We discuss the implications of the findings and propose recommendations for both theory and practice.     

The Impact of Ambidextrous Leadership on the Internationalization of Emerging‐Market Firms: The Case of India

Ambidextrous leadership is a key factor in the success of emerging market firms’ venturing into advanced economies. Although the definition of ambidextrous leadership is universal, its operationalization is culturally contingent. This conceptual paper examines Indian companies, increasingly recognized for their ambidexterity, and aims to explain this phenomenon by using Indian cultural dimensions. Five propositions relating to charisma, inspirational motivation, intellectual stimulation, individualized consideration, and Indian ambidextrous leadership are developed. We show that the seven cultural variables characterizing Indian ambidextrous leadership (nurturant, personal touch, expertise, simple living and high thinking, loyalty, self‐sacrifice, and the giving model of motivation) reinforce the recent successful internationalization by Indian companies. © 2016 Wiley Periodicals, Inc.     

Threshold effect in the relationship between investor sentiment and stock market returns: a PSTR specification

This article verifies whether the hypothesis of heterogeneous agent modelling and the behavioural heterogeneity framework can reproduce recent stylized facts regarding stock markets (e.g. the 1987 crash, internet bubble, and subprime crisis). To this end, we investigate the relationship between investor sentiment and stock market returns for the G7 countries from June 1987 to February 2014. We propose an empirical non-linear panel data specification based on the panel switching transition model to capture the investor sentiment-stock return relationship, while enabling investor sentiment to act asymmetrically, non-linearly, and time varyingly according to the market state and investor attitude towards risk. Our findings are twofold. First, we show that the hypotheses of efficiency, rationality, and representative agent do not hold in reproducing stock market dynamics. Second, investor sentiment affects stock returns significantly and non-linearly, but its effects vary with the market conditions. Indeed, the market appears predominated by fundamental investors in the first regime. In the second regime, investor sentiment effect is positively activated, increasing stock returns; however, when their overconfidence sentiment exceeds some threshold, this effect becomes inverse in the third regime for a high threshold level of market confidence and investor over-optimism.