Productivity, returns to scale and product differentiation in the retail trade industry: an empirical analysis using Japanese firm-level data

This paper examines productivity and returns to scale under the assumption of monopolistic competition using Japanese firm-level data. Although differentiating products (services) is considered important in firms?? strategies and productivity growth, it has not been sufficiently investigated in previous studies. In this paper, we study this issue in two retail trade industries, department stores and supermarkets, applying the model of Melitz (2000). Our results indicate that the standard production function is not relevant to estimate productivity in imperfectly competitive markets. It also suggests that the market structure should be carefully considered in productivity analysis. In addition, product differentiation has a positive effect on firms?? revenue for the supermarkets. Furthermore, the retail trade industries possibly follow increasing returns to scale. Thus, policy measures that promote economies of scale and product differentiation should contribute to further growth in these industries. In addition, the results indicate that the regulatory reform of the retail trade industry in 2000 increased the gap between winners and losers in terms of productivity.     

Economic policy uncertainty,oil price volatility and stock market returns: Evidence from a nonlinear model

This paper investigates the nonlinear relationship between economic policy uncertainty, oil price volatility and stock market returns for 25 countries by applying the panel smooth transition regression model. We find that oil price volatility has a negative effect on stock returns, and this effect increases with economic policy uncertainty. Furthermore, there is pronounced heterogeneity in responses. First, oil-exporting countries whose economies depend more on oil prices respond more strongly to oil price volatility than oil-importing countries. Second, stock returns of developing countries are more susceptible to oil price volatility than that of developed countries. Third, crisis plays a crucial role in the relation between oil price volatility and stock returns.     

Ageing and employability. Evidence from Belgian firm-level data

The Belgian population is ageing due to demographic changes, so does the workforce of firms active in the country. Such a trend is likely to remain for the foreseeable future. And it will be reinforced by the willingness of public authorities to expand employment among individuals aged 50 or more. But are older workers employable? The answer depends to a large extent on the gap between older workers’ productivity and their cost to employers. To address this question we use a production function that is modified to reflect the heterogeneity of labour with workers of different age potentially diverging in terms of marginal products. Using unique firm-level panel data we produce robust evidence on the causal effect of ageing on productivity (value added) and labour costs. We take advantage of the panel structure of data and resort to first-differences to deal with a potential time-invariant heterogeneity bias. Moreover, inspired by recent developments in the production function estimation literature, we also address the risk of simultaneity bias (endogeneity of firm’s age-mix choices in the short run) using (1) the structural approach suggested by Ackerberg et al. Structural identification of production functions. Department of Economics, UCLA, (2006), (2) alongside more traditional system-GMM methods (Blundell and Bond in J Econom 87:115–143, 1998) where lagged values of labour inputs are used as instruments. Our results indicate a negative impact of larger shares of older workers on productivity that is not compensated by lower labour costs, resulting in a lower productivity-labour costs gap. An increment of 10 %-points of their share causes a 1.3–2.8 % contraction of this gap. We conduct several robustness checks that largely confirm this result. This is not good news for older individuals’ employability and calls for interventions in the Belgian private economy aimed at combating the decline of productivity with age and/or better adapting labour costs to age-productivity profiles.     

Seasonality in asset returns: Evidence from the gold market

In this paper we test monthly mean daily returns to gold over the period January 1975 to December 1984 against three definitions of seasonality. Weak evidence exists for seasonality under the second of the three definitions. However, this is not prima facie evidence of market inefficiency, as the pattern is consistent with seasonality in Eurodollar interest rates reported by other authors. Differences in the time pattern of returns between on- and off-shore rates raises further questions.     

Stock returns and volatility: Evidence from the Athens Stock market index

This paper investigates the volatility of the Athens Stock excess stock returns over the period 1990–1999 through the comparison of various conditional hetero-skedasticity models. The empirical results indicate that there is significant evidence for asymmetry in stock returns, which is captured by a quadratic GARCH specification model, while there is strong persistence of shocks into volatility.     

Misvaluation comovement,market efficiency and the cross-section of stock returns: Evidence from China

In this study, we examine the relation between stock misvaluation and expected returns in China's A-share market. We measure individual stocks’ misvaluation based on their pricing deviation from fundamental values, following Rhodes-Kropf et al. (2005. J. Finan. Econ. 77 (3), 561) and Chang et al. (2013. J. Bank. Finance, forthcoming), and find that the measure has strong and robust return predictive power in the Chinese market. We further form a misvaluation factor and find that misvaluation comovement and systematic misvaluation exist in the Chinese market. A comparison of our results with those of Chang et al. (2013. J. Bank. Finance, forthcoming) reveals that the misvaluation effect is much stronger in the Chinese market than in the U.S market. This evidence is consistent with the notion that the Chinese market is much less efficient than the U.S. market. Finally, we show that the return predictive power of misvaluation has weakened since China launched its split-share structure reform in 2005, which could result from the fact that the reform helps to promote market efficiency.     

On firm-level,industry-level,and aggregate employment fluctuations

Employment fluctuations are examined, at different levels of aggregation, in a model with firm-specific hiring decisions due to search frictions and sticky pricing. The results indicate that firm-level employment dispersion rises with higher price stickiness and higher demand elasticity, whereas it falls with more convexity of search costs and with a higher labor supply elasticity. Industry-level employment is more volatile and less procyclical than aggregate employment, and a larger industry size reduces volatility and raises co-movement with output. The calibrated model is able to match the volatility, autocorrelation and cyclical correlation of US industry-level employment when incorporating firm-specific technology shocks.     

Economic policy uncertainty and stock market returns: New evidence

This paper investigates the predictive performance of the Chinese economic policy uncertainty (EPU) index constructed by Davis, Liu, and Sheng (2019) in forecasting the returns of China’s stock market. Using the univariate and bivariate predictive regression model, we confirm that the monthly EPU index can significantly and negatively impact the next month’s stock returns, and has better out-of-sample predictability than the existing EPU index and several macroeconomic variables. By comparing the forecasting effect of the EPU index before and during special events with sharply increased uncertainty, we find that the EPU’s forecasting power decline rapidly when an event of sharply increased uncertainty occurs. Finally, our conclusions are consistent through a batch of robustness tests.     

The influence of lock-up provisions on IPO initial returns: Evidence from an emerging market

A lock-up agreement ensures that major shareholders retain significant economic interest in the companies following the IPOs. Rationally, these insiders will not adhere to the lock-up agreement unless the benefits of doing so can more than offset the costs. Therefore, in an environment characterized by high information asymmetry, a lock-up agreement can serve as an effective mechanism to signal the risk or quality of firms. This article examines whether the lock-up ratio and lock-up period affect the initial returns, using a sample of 384 IPOs listed on Bursa Malaysia between 2000 and 2012. The results of the cross-sectional multiple regression show that the lock-up period is significantly positive in explaining IPO initial returns, but the lock-up ratio is not. The findings provide new insights for testing the signaling content of lock-up provisions, particularly in a setting characterized by high information asymmetry.     

The external returns to education: Evidence from Chinese cities

Following Rauch's seminal study, there has been a growing interest among economists in estimating human capital externalities at the individual level [J. Rauch, Productivity gains from geographic concentration of human capital: Evidence from the cities, Journal of Urban Economics 34 (1993) 380–400]. In this paper, we provide a first set of estimates of the external returns to education in Chinese cities. We find that the external returns are at least as high as the private returns to education. OLS estimates of the external returns range from a low of 4.9% to a high of 6.7%. Two-stage least squares estimates indicate that a one-year increase in city average education could increase individual earnings by between 11 and 13%. We also examine the impact of economic reforms on the external returns to education and find suggestive evidence that economic reforms have raised the external returns to education in Chinese cities.     

Economies of scale and market power in policing

The objective of this paper is to use a simultaneous equations method for estimating police production and demand to determine whether or not there are economies of scale in policing. In addition, the effect of market power on productivity, using the Herfindahl–Hirschmann Index, is to be measured. The estimation yields the result that there are diseconomies of scale with respect to the amount of crime beyond about 22 000 people in the policing jurisdiction and diseconomies of scale in numbers of police beyond about 36 000 people. Efficiency is also reduced where there is greater market power. This is conjectured to be the public sector equivalent of taking market power profits. Copyright © 2005 John Wiley & Sons, Ltd.     

Order imbalance and stock returns: Evidence from China

We investigate the relation between daily order imbalance and return in the Chinese stock markets of Shenzhen and Shanghai. Prior studies have found that daily order imbalance is predictive of subsequent returns. On the two Chinese exchanges we find the autocorrelation in order imbalances is similar to that of the New York Stock Exchange as reported by Chordia and Subrahmanyam [Chordia, T., & Subrahmanyam, A. (2004). Order imbalance and individual stock returns: Theory and evidence. Journal of Financial Economics, 72, 485–518]. We also find a strong contemporaneous relation between daily order imbalances and returns. However, we do not find evidence that order imbalances predict subsequent returns. We attribute the difference in predicative power to differences in trading mechanisms on the two exchanges and to differences in the share turnover rates.     

The empirical linkages among market returns,return volatility,and trading volume: Evidence from the S&P 500 VIX Futures

The purpose of this study is to examine the relationships between return and trading volume as well as between return volatility and trading volume by analyzing the asymmetric relationships of contemporaneity and lead-lags between these factors for the S&P 500 VIX Futures Index. We apply the threshold model with the GJR-GARCH framework for empirical analysis herein. The main findings demonstrate that the threshold effects exist in both the contemporaneous and lead-lag relationships between return-volume and volatility-volume. Moreover, the delayed effects of a one-trading-day lag through to three-trading-day lags exist from trading volume to returns and return volatility. Larger trading volume is beneficial for investors to gain returns, but it also leads to higher volatility. The implication of our findings offers a suggestion as to the opportune timing for investors to buy S&P 500 VIX Futures.     

Multidimensional skills and the returns to schooling: Evidence from an interactive fixed-effects approach and a linked survey-administrative data set

This paper presents new evidence on returns to schooling based on an interactive fixed-effects framework that allows for multiple unobserved skills with potentially time-varying prices as well as individual-level heterogeneity in returns. This constitutes a substantive generalization of most existing approaches. Our empirical analysis employs a unique linked survey-administrative panel data set on education and earnings. We find average marginal returns to schooling of about 2.8–4.4% relative to least squares/instrumental variable estimates between 7.7% and 12.7%. Omitted ability accounts for a larger fraction of the aggregate least squares bias compared to heterogeneity. We also find considerable heterogeneity in individual returns.     

Economic policy uncertainty and stock market sector time-varying spillover effect: Evidence from China

This paper investigates the volatility spillover effect among the Chinese economic policy uncertainty index, stock markets, gold and oil by employing the time-varying parameter vector autoregressive (TVP-VAR) model. Three main results are obtained. Firstly, the optional consumption, industry, public utility and financial sectors are systemically important during the sample period. Secondly, among the four policy uncertainties, the uncertainty of fiscal policy and trade policy contributes more to the spillover effect, while the uncertainty of monetary policy and exchange rate policy contributes less to the spillover effect. Thirdly, during COVID-19, oil spillovers from other sources dropped rapidly to a very low point, it also had a significant impact on the net volatility spillover of the stock market. This paper can provide policy implication for decision-makers and reasonable risk aversion methods for investors.     

Worker reciprocity and the returns to training: Evidence from a field experiment

Do reciprocal workers have higher returns to employer-sponsored training? Using a field experiment with random assignment to training combined with survey information on workers' reciprocal inclinations, the results show that reciprocal workers reciprocate employers' training investments by higher posttraining performance. This result, which is robust to controlling for observed personality traits and worker fixed effects, suggests that individuals reciprocate the firm's human capital investment with higher effort, in line with theoretical models on gift exchange in the workplace. This finding provides an alternative rationale to explain firm training investments even with the risk of poaching.     

Spillovers of currency carry trade returns,market risk sentiment,and U.S. market returns

This paper examines the link between spillovers of currency carry trade returns and U.S. market returns. Following Tse and Zhao (2012), this paper hypothesizes that the magnitude of spillovers of currency carry trade returns is positively correlated with market risk sentiment and, therefore, has an impact on market returns. Using the G10 currencies and S&P 500 index futures, the empirical results present a high magnitude of spillover effects of currency carry trade markets. The empirical findings also show a significantly positive relationship between spillovers of currency carry trade returns and subsequent market returns. Furthermore, the results indicate that this relationship is stronger in bear markets than in bull markets. Finally, our findings show that spillovers of currency carry trade returns significantly affect the subsequent transition probabilities of market returns.     

Common analyst links and predictable returns: Evidence from China

Based on shared analyst coverage, we are the first to document the common-analyst momentum (CAM) effect in China. Empirically, we show that average returns of common-analyst peer firms have strong predictive power for future focal firm returns. Moreover, the CAM effect is stronger than other cross-asset momentum (XAM) effects. Interestingly but differently, the CAM cannot unify other XAM effects as the U.S. market does. Exploiting the underlying mechanism, we find that common-analyst-connected firms are fundamentally similar. Further, the CAM effect is stronger when inter-firm linkages are stronger when the information processing task is more complex and on earnings announcement dates. We conclude that sluggish analyst forecasting and investors’ attention constraint could contribute to the stronger CAM effect, and our results support the hypothesis that slow information diffusion generates the CAM effect.     

International acquisitions in the united states: Evidence from returns to foreign bidders

This paper provides evidence on the minimally explored topic of abnormal returns earned by stockholders of foreign bidders seeking to acquire a target firm in the USA. Four sources of influence on abnormal returns are identified: changes in net wealth of the bidder associated with changes in exchange rates; possible value-destroying managerial discretionary behavior by bidders with excess cash flows, as suggested by Jensen; comparative advantages for foreign bidders domiciled in relatively favorable tax jurisdictions; ownership status of the target, i.e. whether the target is an entire firm and whether it involves divested assets. The study includes 77 firms from 10 countries. The results show that stockholders of foreign bidders earn significant, negative abnormal returns surrounding the announcement of an acquisition in the USA. These abnormal returns become increasingly negative over the 15 days after the announcement of the acquisition, indicating that more information about the acquisition is revealed to investors subsequent to the initial announcement. Cross-sectional regressions indicate that relative exchange rates and cash positions explain variation in abnormal returns. A decline in the value of the dollar increases abnormal returns for the foreign bidder, thus supporting the net wealth hypothesis. The results also show that cash-rich foreign firms tend to enjoy higher abnormal returns when making acquisitions in the USA. The result provides support for the Froot and Stein cash-constrained hypothesis rather than for Jensen's free-cash-flow theory.