Exchange rate pass-through in the Asian countries: does inflation volatility matter?

This paper presents a nonlinear relationship between exchange rate pass-through (ERPT) and inflation volatility. Through the lens of a threshold framework, we uncover a clear evidence of near to one ERPT to consumer prices once inflation volatility crosses a threshold level of 4.17. Clearly, there are significant differences in the degree of ERPT between the high and low inflation volatility in the inflation targeting (IT) and non-IT Asian countries.     

The relationship between trading activity and stock market volatility: Does the volume threshold matter?

This paper examines whether trading activity conveys valuable information about changes in market volatility dynamics. We use a modelling framework, in which the market smoothly switches from one state to another, according to the volume level. Results show that large volume drives the high volatility regime for most of the markets, quite consistently with the disagreement-in-beliefs hypothesis. The volume decomposition into normal trading activity and surprising information arrival reveals a reverse threshold linkage for emerging markets. Results support the sequential information arrival hypothesis and highlight the key role of asymmetric information and thin trading in modelling the volume-volatility relationship. The proposed volume-based models provide significant forecast improvements over competing models and offer scope for investors to earn substantial profits.     

Stock market interdependence between Australia and its trading partners: does trade intensity matter?

We investigate the extent and manner of stock market interdependence between Australia and its trading partners and examine whether this is affected by trade intensity. Based on trade intensity, we classify Australia’s trading partners into major, medium and minor partners. We hypothesize that markets with greater (lower) trade intensity will be more (less) interdependent with Australia. We perform correlation (unconditional and conditional) analyses between Australia and its trading partners. Our results indicate that most of the markets that are highly correlated with Australia are its major trading partners. We conduct panel regression analysis to investigate whether trade intensity has any impact on the stock market correlations between Australia and its trading partners. The results show that trade intensity significantly and positively affect the correlations of Australia with its major trading partners. Thus, the results confirm our hypothesis that trade intensity drives stock market interdependence between Australia and its trading partners.     

Intraday bidirectional volatility spillover across international stock markets: does the global financial crisis matter?

This article studies volatility spillover between the US and the three largest European stock markets (Frankfurt, London and Paris) around the time of the recent Subprime crisis. In order to investigate the impact of the latter, we break our sample down into two sub-periods: a pre-crisis period and a post-crisis period, using a structural break test that has the advantage of endogenously testing for further breaks in the data. Unlike previous studies that have frequently investigated this issue using low frequency data, our article makes use of intraday data. Accordingly, using Threshold generalized autoregressive conditional heteroscedasticity (GARCH) model estimations, we find weak evidence of volatility transmission between the two regions before the Subprime crisis. However, during the post-crisis period, we record returns and volatility spillover from US to European markets and vice versa at different times of the trading day, indicating that the two regions became more dependent during the recent Subprime crisis, a finding that supports the contagion hypothesis between the US and European stock markets.     

Analysts herding: when does sentiment matter?

Herding among analysts emerges when analysts give priority to their peers’ opinions instead of their own beliefs or information. Some circumstances may enhance or restrain this type of behaviour. We postulate that market sentiment is one of them. This article analyses the effect that investor sentiment may have on analysts’ herding behaviour in the U.K. Our results suggest that ‘easy situations’ such as analysing easy-to-value securities and releasing optimistic information at times of high market sentiment clearly reduce herding practices, whereas herding clearly increases in difficult situations when analysts have to release negative information at moments of high investor sentiment.     

Forecasting US consumer price index: does nonlinearity matter?

The objective of this article is to predict, both in sample and out of sample, the consumer price index (CPI) of the US economy based on monthly data covering the period of 1980:1–2013:12, using a variety of linear (random walk (RW), autoregressive (AR) and seasonal autoregressive integrated moving average (SARIMA)) and nonlinear (artificial neural network (ANN) and genetic programming (GP)) univariate models. Our results show that, while the SARIMA model is superior relative to other linear and nonlinear models, as it tends to produce smaller forecast errors; statistically, these forecasting gains are not significant relative to higher-order AR and nonlinear models, though simple benchmarks like the RW and AR(1) models are statistically outperformed. Overall, we show that in terms of forecasting the US CPI, accounting for nonlinearity does not necessarily provide us with any statistical gains.     

The assimilation of Australian immigrants: does occupation matter?

This paper utilises the occupational attainment approach to investigate immigrant labour market assimilation, complementing other assimilation approaches such as employability, earnings, skills-match and job satisfaction. Our results show that all immigrant groups suffer from initial occupational attainment disadvantage. Worryingly, no ‘catch-up’ over time is evident – even when disaggregated to reflect different cultures and backgrounds. Nor is there much evidence that the occupational status of younger arrivals matches those of Australian born residents, despite being immersed in local mores and institutions while undertaking schooling in Australia. Newer cohorts of immigrants (those who arrived between 2000 and 2014) are also more prone to suffering an occupational penalty. We recommend policymakers subsidise bridging courses to aid recognition of overseas-obtained qualifications and encourage immigrants to obtain local qualifications that can complement their overseas-obtained work experience. This will increase their ‘Australian-ready’ skill-set and occupational attainment in their new host country.     

How much does schooling disutility matter?

Studies on structural education choice models are often inconsistent in choosing whether and how to include a disutility of education, especially in an environment with risk and wealth inequality. We show that adding a disutility term to the education decision, a human capital investment option, is equivalent to assuming a relationship between wealth, risk, and education. Utility gain from education is increasing in the riskiness of future consumption. A riskier environment further propels an agent to choose the human capital investment option that maximizes future income. If the degree of risk increases heterogeneously across multiple human capital investment options, risk aversion and the precautionary savings motive can compound or negate each other depending on which option has a greater increase in risk.     

What are returns outside trading hours capturing for volatility of individual stocks?

This study is the first to harness the negative returns and squared returns outside trading hours, trading volume and leverage effects in an augmented heterogeneous autoregressive model for forecasting volatility of individual stocks. Besides significant leverage effects and trading volume impact, we find that an increase in the negative returns is associated with a decline in volatility, but an increase in the squared returns is associated with a rise in volatility. This new finding suggests that the negative returns and squared returns outside trading hours are capturing additional leverage effects and additional volatilities, respectively. Moreover, the relations display differences amongst various firm categories which arise from firm heterogeneity.     

Stochastic optimization applied to self-financing portfolio: does bequest matter?

The article studies stochastic optimization of an intertemporal consumption model to allocate financial assets between risky and risk-free assets. We use a stochastic optimization technique, in which utility is maximized subject to a self-financing portfolio constraint. The papers in literature have estimated the errors of Euler equations using data from financial markets. It has been shown that it is sufficient to test the first order Euler equation implied by the model. However, they all assume a constant consumption–wealth ratio that constrains the boundary conditions, hence influencing the coefficient of the risk premium. The main contribution of our article is that we drop the assumption of a constant consumption–wealth ratio. We have an analytical solution using a utility maximization model with a stochastic self-financing portfolio. We introduce a terminal condition of wealth with and without bequests. We also simulate the stochastic optimization with a self-financing portfolio, distinguishing risk neutral investors (γ-low) from high risk averse investors (γ-high). We show that the model with bequest has a higher level of wealth and a smoother decline of consumption over time than the model with no bequest at the end of the period. The model with no bequest has the same level of consumption and a sharp fall at the end of the period. Risk averse agents with high return assets have a higher amount of wealth than risk-neutral agents with lower return assets.     

Why does bad news increase volatility and decrease leverage?

A recent literature shows how an increase in volatility reduces leverage. However, in order to explain pro-cyclical leverage it assumes that bad news increases volatility, that is, it assumes an inverse relationship between first and second moments of asset returns. This paper suggests a reason why bad news is more often than not associated with higher future volatility. We show that, in a model with endogenous leverage and heterogeneous beliefs, agents have the incentive to invest mostly in technologies that become more volatile in bad times. Agents choose these technologies because they can be leveraged more during normal times. Together with the existing literature this explains pro-cyclical leverage. The result also gives a rationale to the pattern of volatility smiles observed in stock options since 1987. Finally, the paper presents for the first time a dynamic model in which an asset is endogenously traded simultaneously at different margin requirements in equilibrium.     

The cost of registering property: does legal origin matter?

There is a large literature that finds that common law countries perform better than civil law countries in various aspects of the institutional environment. This article extends these findings to another dimension of institutional quality??the cost of registering property. In a sample of 121 countries, we find that the cost of registering property is lower by 26 percent of the world average in common law compared with civil law countries, a result largely driven by differences in non-notary costs of registering property. We provide plausible explanations for these findings.     

Cost efficiency in Bangladesh banking: does financial reform matter?

This article estimates the cost efficiency of the commercial banks of Bangladesh in the context of financial reform. Employing the single-stage stochastic frontier analysis (SFA) model, the study uses a unique balanced panel data set comprising bank-level annual data from the dominant commercial banks in Bangladesh for the period 1983–2012. The results show that bank cost has fallen due to financial deregulation. Our results from the data envelopment analysis do not vary significantly that we obtained from the SFA. In addition, the presence of politically linked directors on the bank board has an adverse effect on efficiency. These findings suggest that further reforms aiming at removing all sorts of political influence should continue to ensure competitive environment in order to achieve cost efficiency in the financial sector of the country.     

The older nurse in the workplace: does age matter?

Between 2010 and 2020, over 40% of the RN workforce will be over 50 years of age, and many RNs are expected to retire and withdraw from the workforce. Given that older nurses are the fastest growing cohort of the workforce, the important findings presented in this article deserve careful consideration by policymakers, health care leaders, and managers.     

Does timing of decisions in a mixed duopoly matter?

We determine the endogenous order of moves in a mixed price-setting duopoly. In contrast to the existing literature on mixed oligopolies we establish the payoff equivalence of the games with an exogenously given order of moves if the most plausible equilibrium is realized in the market. Hence, in this case it does not matter whether one becomes a leader or a follower. We also establish that replacing a private firm by a public firm in the standard Bertrand?CEdgeworth game with capacity constraints increases social welfare and that a pure-strategy equilibrium always exists.     

Higher education enrolment in Bangladesh: does the wage premium matter?

This paper empirically examines the decisions of individuals to enrol in a course of tertiary education in Bangladesh, focussing on the period 1999 to 2009. Of particular interest is whether the wage premium―the gap in wage earnings between tertiary and secondary school graduates―is associated with decisions to enrol in tertiary education. The analytical framework used here is the human capital theory, which is tested through a discrete choice model. Using data from Bangladesh Labour Force Surveys, empirical results suggest that the wage premium is positively associated with decisions of males to enrol in tertiary education, while for females there appears to be no such association. A battery of robustness tests supports our results.     

Growth in Africa: does the source of investment financing matter?

This paper examines empirical evidence for 11 sub-Saharan African countries on the relationship between economic growth and three principal sources of investment funds: foreign aid, foreign direct investment, and domestic saving. In light of the shortcomings of traditional cross-section analyses, the time series approach is used instead. Modern time series methods are rigorously applied, beginning with unit root tests and followed by model specifications that reflect the revealed temporal behaviours of the variables in each of the 11 countries. Domestic saving seems to play a somewhat more important role in generating economic growth than foreign direct investment or foreign aid. However, the mixture of results across the 11 countries implies that, in general, it is not possible to rank one source of investment financing ahead of any other.     

Dual track or academic route for auditors: does it matter?

In the Netherlands auditors can be trained in a part-time educational track in which students combine working and studying or in a full-time educational track. The former training is relatively firm-specific whereas the latter training is relatively general. Applying human capital theory, we expect higher wage growth for full-time educated auditors than for dual-educated auditors. Furthermore, full-time educated auditors may have better outside options than part-time educated auditors. This may make it easier for them to switch employers than for the part-time educated auditors. The predictions on tenure and wages of differently educated auditors are supported by the estimation results in this paper. The part-time, dual track appears an important route for students from a lower socioeconomic background.     

An international comparison of hospital efficiency: does institutional environment matter?

The consensus among many health economists is that no meaningful performance differences exist among for-profit and non-profit hospitals in the US, but this topic has continued to be a matter of academic, judicial, and public policy interest. A similar debate has ensued internationally, regarding the potential efficiency gains from privatization of public enterprises. In this paper, we examine empirical evidence from the public, highly regulated Norwegian hospital sector and the private, highly competitive and unregulated California hospital sector to ascertain whether institutional environment and level of market competition significantly affect the degree of productive efficiency in hospitals. We compare and discuss the productive efficiency of four similar sets of hospitals operating in different institutional and competitive environments. The four samples are carefully matched in the dimensions of sample size, hospital size, and average lengths of stay. Heterogeneity in output definition is used to control for other dimensions (casemix, age distribution of patients). We use Data Envelopment Analysis (DEA) to estimate and compare average long-run as well as short-run efficiency measures across groups. We find that scale and scope regulation of Norwegian hospitals improves long-run efficiency, primarily due to better utilization of capital.