Is it Necessary to Ration Health Care?

Although there have been restrictions on access to health care since the inception of the National Health Service (NHS), there has been increasing debate on rationing and priority-setting following the changes introduced from 1991. Much of this debate has been fuelled by the fact that local Health Authorities (HAs), working with limited budgets to purchase health care services for their local population, must set priorities in order to remain within their budget. Some commentators go further and argue that health care rationing is both necessary and inevitable. Others suggest that acceptance of the necessity of rationing may be self-defeating, and question the underlying assumptions. This article reviews some of the arguments and asks whether health care rationing is really necessary.     

Is integration I(d) applicable to observed economics and finance time series?

The method of cointegration in regression analysis is based on an assumption of stationary increments. Stationary increments with fixed time lag are called ‘integration I(d)’. A class of regression models where cointegration works was identified by Granger and yields the ergodic behavior required for equilibrium expectations in standard economics. Detrended finance market returns are martingales, and martingales do not satisfy regression equations. We ask if there exist detrended processes beyond standard regression models that satisfy integration I(d). We show that stationary increment martingales are confined to the Wiener process, and observe that martingales describing finance data admit neither the integration I(d) nor the ergodicity required for long time equilibrium relationships. In particular, the martingales derived from finance data do not admit the time (or ‘space’) translational invariance required for increment stationarity. Our analysis explains the lack of equilibrium observed earlier between FX rates and relative price levels.     

Is this the right time to come out? Case study

In this fictional case study, Adam Lawson is a promising young associate at Kirkham McDowell Securities, a St. Louis underwriting and financial advisory firm. Recently, Adam helped to bring in an extremely lucrative deal, and soon he and a few other associates will be honored for their efforts at the firm's silver anniversary dinner. George Campbell, vice president in mergers and acquisitions, is caught unprepared when Adam tells him that, after serious reflection, he has decided to bring his partner, Robert Collins, to the banquet. George is one of Adam's biggest supporters at the firm, and he personally has no problem with Adam being gay. But it is one thing for Adam to come out of the closet at the office. It is quite another to do so at a public company-client event. After all, Kirkham McDowell's client roster includes some very conservative companies--one of the country's largest defense contractors, for example. George is concerned with how Adam's openness about his sexual orientation will play with their clients and, as a result, how senior management will react. Adam has not come to George for permission to bring Robert to the dinner. But clearly Adam wants some sort of response. George has never faced sexual diversity issues in the workplace before, and there is no company policy to guide him. Just how negative an effect could Robert have on Adam's career with the firm and the firm's relationship with its clients? Isn't it possible that even the firm's most conservative clients will simply decide that Adam's choice of guest is a personal matter--not a business one?(ABSTRACT TRUNCATED AT 250 WORDS)     

Is it the weather?

We show that results in the recent strand of the literature, which tries to explain stock returns by weather induced mood shifts of investors, might be data-driven inference. More specifically, we consider two recent studies [Kamstra, Mark J., Kramer, Lisa A., Levi, Maurice D., 2003a. Winter blues: A SAD stock market cycle. American Economic Review 93(1), 324–343; Cao, Melanie, Wei, Jason, 2005. Stock market returns: A note on temperature anomaly. Journal of Banking and Finance 29(6), 1559–1573] that claim that a seasonal anomaly in stock returns is caused by mood changes of investors due to lack of daylight and temperature variations, respectively. While we confirm earlier results in the literature that there is indeed a strong seasonal effect in stock returns in many countries: stock market returns tend to be significantly lower during summer and fall months than during winter and spring months as documented by Bouman and Jacobsen [Bouman, Sven, Jacobsen, Ben, 2002. The Halloween indicator, Sell in May and go away: Another puzzle. American Economic Review, 92(5), 1618–1635], there is little evidence in favor of a SAD or temperature explanation. In fact, we find that a simple winter/summer dummy best describes this seasonality. Our results suggest that without any further evidence the correlation between weather-related variables and stock returns might be spurious and the conclusion that weather affects stock returns through mood changes of investors is premature.     

Is it the weather? Response

Kamstra, Kramer and Levi (KKL) in their comment seem to miss the main point of our paper. Many things are correlated with the seasons so it is difficult to distinguish between them when we try to explain the well-known summer winter pattern in stock returns. Finding an isolated seasonal affective disorder (SAD) effect without proper control variables does not disprove our point but strengthens it. To sidestep all of the issues they raise and take our point to the extreme, we show using plain vanilla regressions that the seasonal stock market pattern they attribute to SAD can also be “explained” by variables like ice cream consumption or airline travel. The new variations of SAD variables (“onset” and “incidence”) KKL propose in their recent work for North America are even more problematic than the original SAD variables. We find that these new SAD proxies are not significant in countries where according to KKL they should be: Canada and the United States.     

Is it the weather? Comment

This comment discusses some errors in a recent paper by Jacobsen and Marquering [Jacobsen, B., Marquering, W., 2008. Is it the weather? Journal of Banking and Finance 32 (4), 526–540], in which the authors challenge our previous finding that stock market returns exhibit seasonal patterns consistent with the influence of seasonal affective disorder on investor risk aversion. We find that we cannot replicate the authors’ findings, even after corresponding with them. Furthermore, we document several problems with their methodology, including misspecification of their economic model, misspecification of their econometric model, and use of inappropriate data. While we agree that seasonal affective disorder is not an explanation for all variation in equity markets, we do maintain that careful analysis leads to economically and statistically significant evidence of the effect we originally documented.     

Is it costly to be both shariah compliant and socially responsible?

Positive ethics associated with socially responsible investments (SRI) is challenging the limits of Islamic investments' conservative approach to promote corporate social responsibility. In this study, we test the integration of social performance measures (companies the most virtuous or high-rated in terms of environmental, social, and governance (ESG) issues) in Islamic portfolios using KLD social ratings. We seek to determine the financial price of complying both to Islamic investment and SRI principles. To do so, we measure the financial performance of self-composed Islamic portfolios with varying ESG scores. The results indicate no adverse effects on returns due to the application of ESG screens on shariah-compliant stocks during the 2007–2011 periods while reporting substantially higher performance for the portfolios with good records in governance, products, diversity, and environment issues. On the opposite, a negative performance is associated with an SRI strategy of disengagement from shariah-compliant stocks with community and human rights controversies. Our performance measures are controlled for market sensitivity, investment style, momentum factor, and sector exposure.     

The economics of the welfare state in today’s world

This article is concerned both with the substantive policy issue of the implications of the European welfare state in a global setting and with the way in which economists analyse the welfare state. Economics has made a major contribution to our understanding of the welfare state through the provision of formal models. These have allowed us to see the implications of social protection for countries increasingly open to international competition. These models, however, leave out essential elements, and the standard Heckscher–Ohlin 2-good, 2-factor, 2-country assumptions impose too tight a straitjacket. We do not observe full factor price equalisation. The paper considers how we might relax this straitjacket to incorporate elements that are important in the public debate, while preserving tractability. The resulting 3×3×3 model is used to investigate the impact of globalisation on the welfare state, contrasting Europe and the US. The first version of this paper was written while I was visiting the Economic Research Department of the Bank of Italy. I am most grateful to the Research Department for their hospitality, but make clear that the contents of the paper are solely my responsibility. The paper was presented at the April 2006 Netspar Conference in the Hague. I thank the discussants, André de Jong and Cees Oudshoorn, and the conference participants, for their helpful comments. The revision has benefited from the valuable suggestions of the referees and editors, and the final version has been greatly improved as a result of a conversation with Peter Neary. None of the above are to be held responsible for the remaining shortcomings of the paper.     

Is it real? Can we win? Is it worth doing? Managing risk and reward in an innovation portfolio

Minor innovations make up most of a company's development portfolio, on average, but they never generate the growth companies seek. The solution, says Day--the Geoffrey T. Boisi Professor of Marketing and a codirector of the Mack Center for Technological Innovation at Wharton--is for companies to undertake a systematic, disciplined review of their innovation portfolios and increase the number of major innovations at an acceptable level of risk. Two tools can help them do this. The first, called the risk matrix, graphically reveals the distribution of risk across a company's entire innovation portfolio. The matrix allows companies to estimate each project's probability of success or failure, based on how big a stretch it is for the firm to undertake. The less familiar the product or technology and the intended market, the higher the risk. The second tool, dubbed the R-W-W (real-win-worth it) screen, allows companies to evaluate the risks and potential of individual projects by answering six fundamental questions about each one: Is the market real? Explores customers' needs, their willingness to buy, and the size of the potential market. Is the product real? Looks at the feasibility of producing the innovation. Can the product be competitive? and Can our company be competitive? Investigate how well suited the company's resources and management are to compete in the marketplace with the product. Will the product be profitable at an acceptable risk? Explores the financial analysis needed to assess an innovation's commercial viability. Last, Does launching the product make strategic sense? examines the project's fit with company strategy and whether management supports it.     

Time series momentum: Is it there?

Time series momentum (TSM) refers to the predictability of the past 12-month return on the next one-month return and is the focus of several recent influential studies. This paper shows that asset-by-asset time series regressions reveal little evidence of TSM, both in- and out-of-sample. While the t-statistic in a pooled regression appears large, it is not statistically reliable as it is less than the critical values of parametric and nonparametric bootstraps. From an investment perspective, the TSM strategy is profitable, but its performance is virtually the same as that of a similar strategy that is based on historical sample mean and does not require predictability. Overall, the evidence on TSM is weak, particularly for the large cross section of assets.     

Does it cost to be sustainable?

We investigate whether firms’ corporate social performance (CSP) ratings impact their performance (cost of capital) and risk. Using a proprietary CSP ratings database, we find no difference in the risk-adjusted performance of UK firms with high and low CSP ratings. Additionally, the firms do not differ in their amount of idiosyncratic risk. We find some evidence of high-ranked firms being larger. The empirical evidence therefore indicates that investors and managers are able to implement a CSP investment or business strategy without incurring any significant financial cost (or benefit) in terms of risk or return.     

FASB's conceptual framework: Is it being taught?

FASB conceptual framework supporters suggest that the future acceptance of the framework by the accounting profession is dependent in part upon student classroom exposure to the framework. This study surveyed intermediate accounting professors to determine if this exposure is occurring. Survey results suggest that the framework is frequently discussed-but normally at a superficial level. The study also attempted to develop a profile of teachers who emphasize the framework. No associations were found when testing for individual characteristics. However, an association was found between those identified as substantive framework professors and respondents from programs which allot more than six semester credit hours for the intermediate accounting sequence as well as these programs which offer undergraduate theory courses.     

Is international trust performance predictable over time? A note

We examine whether past return measures have any significant predictive ability for future returns of UK unit trusts with international equity objectives. We find significant positive persistence between the past return performance of the trust relative to its investment sector and future trust returns relative to its sector. This result holds at short‐run and long‐run return horizons. The persistence is stronger in trusts that perform well relative to their sector. Our findings suggest that the past return performance of the trust relative to their sector provides a useful guide to future return performance relative to their sector.     

Is it Shameful to be an Accountant? GenMe Perception(s) of Accountants' Ethics

The function that accountants fulfil in the economic system is dependent on their ability to maintain the perception of high ethical standards. Building on the idea that birth cohorts, otherwise known as generations, are a useful proxy for the socio‐cultural environment of different time periods, we focus on the so‐called ‘GenMe’, that is, students and young workers born in the 1980s and 1990s. In particular, combining the accounting and business ethics literature, the purpose of our paper is to contribute to an increased awareness of the GenMe perceptions of accountants, with special attention given to ethical aspects. We believe that the perceptions of this age group are particularly crucial for the future of the accounting profession as it is these young people who will either become professional accountants or the accountants' future clients. Using an extensive database of 1,794 questionnaires, results show that the impression of the accountant as a corrupt professional is not dominant among GenMe and seem to suggest the existence of a multifaceted perception of accountants' ethics. Specifically, the factors that contribute to influencing GenMe perceptions of accountants' ethics are level of education, having attended an accounting course at high school level, gender, and belonging to the accounting profession. Finally, our study indicates that there is room for improving public perceptions of accountants' ethics through university courses in ethics, continuing education programs, and focused communication strategies by accounting firms and professional bodies.     

Flexible inflation targeting and financial stability: Is it enough to stabilize inflation and output?

We investigate empirically whether a central bank can promote financial stability by stabilizing inflation and output, and whether additional stabilization of asset prices and credit growth would enhance financial stability in particular. We employ an econometric model of the Norwegian economy to investigate the performance of simple interest rate rules that allow a response to asset prices and credit growth, in addition to inflation and output. We find that output stabilization tends to improve financial stability. Additional stabilization of house prices, equity prices and/or credit growth enhances stability in both inflation and output, but has mixed effects on financial stability. In general, financial stability as measured by e.g., asset price volatility improves, while financial stability measured by indicators that depend directly on interest rates deteriorates, mainly because of higher interest rate volatility owing to a more active monetary policy.     

What does it mean to be green?

Today a company is not considered environmentalist unless it moves beyond mere compliance with government regulations to behavior its competitors, and even customers, do not expect. How should it set its agenda? Author Art Kleiner proposes that, to be green, a company must ask three questions: What products should we bring to market? How much disclosure of pollution information should we support? And how can we reduce waste at its source? These questions can't be answered, Kleiner says, unless managers insist on sustainable growth. In this sense, a big investment in environmentalism is like a big one in R&D--both presuppose patient capital and managerial maturity. What are green products? Kleiner cautions against giving in to misinformed public opinion--as McDonald's did in giving up its styrene "clamshells," which were more recyclable than the composite papers it switched to. Rather, companies should rely on literature that analyzes the product life cycle. As for public disclosure, the benefits may be unexpected. Federal legislation requiring companies to report the emission of potentially hazardous waste to a central data bank has not made environmentalists attack them. Rather, it has forced companies to learn what chemicals they inadvertently produce and how much--knowledge that helps them improve production processes. Sharing it helps ecological researchers study the combined effects of plant emissions. As for pollution prevention, Kleiner notes the analogy to quality and observes that it is better to design harmful waste products out of the system than catch them at the end of the line.(ABSTRACT TRUNCATED AT 250 WORDS)     

Can investors time their exposure to private equity?

Private equity performance, both for buyouts and venture capital, has been highly cyclical: periods of high fundraising have been followed by periods of low performance. Despite this seemingly predictable variation, we find modest gains, at best, to pursuing realistic, investable strategies that time capital commitments to private equity. This occurs, in part, because investors can only time their commitments to funds; they cannot time when commitments are called or when investments are exited. There is a high degree of time-series correlation in net cash flows even across commitment strategies that allocate capital in a very different manner over time.     

Is there a postnormal time? From the illusion of normality to the design for a new normality

Ziauddin Sardar's characterization of ‘postnormal times’ elegantly captures the mood of despair, uncertainty and insecurity in the West due to the multiple shocks of terrorism, economic recession and climate change. However, the prevailing mood in India, most of Asia and developing countries in general is confidence and optimism for the future. The label ‘postnormal times’ is inappropriate for resurgent Asia and other ‘emerging markets’. Similarly, these countries - as illustrated by examples from India - need more modernization and efficiency to save and improve the lives of their citizens. This paper argues that the seeming normality of twentieth century in the West was an illusion arising out of the ignorance and neglect of environmental and health consequences of unbridled industrial growth. The distorted assumptions of neoclassical economics are largely to blame for this. It is now time to pay back for those excesses. A new normality will emerge only by addressing these distortions and by creating democratic global institutions that can reflect the changed global balance of power of the 21st century. The intellectuals, opinion-makers and leaders of the world have to exercise their ethical responsibility and creative imagination to enable this new normality to emerge.