TESTS OF THE BLACK-SCHOLES AND CONSTANT ELASTICITY OF VARIANCE CURRENCY CALL OPTION VALUATION MODELS

An adaptation of the Cox-Ross/Emanuel-MacBeth call option valuation model for constant elasticity of variance diffusion processes is tested here against an adaptation of the Black-Scholes call option valuation model for the pricing of call currency options. Synchronized transactions data supplied by the Philadelphia Exchange are used. A maximum likelihood estimation procedure indicates a significant association between currency return variances and exchange rate levels. The constant elasticity of variance model exhibits significantly superior pricing accuracy for predictive intervals of three or fewer trading days.     

Clintonomics: The first year

This paper reviews the Clinton economic program's first year. It begins by identifying three distinguishing features of the Clinton approach: 1) The belief that government should be more involved in the economy; 2) A concern about the distribution of resources in society; and, 3) A belief that the recent large budget deficits do represent an important economic problem. It then considers the three main economic issues of the Clinton administration's first year—the 1993 budget package, the North American Free Trade Agreement (NAFTA), and health care reform—in terms of these three features. The paper's overall conclusion is that the Clinton administration has made a considerable effort at achieving economic progress during its initial year, but that, particularly as health care reform progresses, more attention needs to be paid to economic principles.     

CAPITAL INVESTMENT APPRAISAL TECHNIQUES: A SURVEY OF CURRENT USAGE

This paper seeks to show that organisational change, fuelled by the expansion of information technology, may have contributed to the erosion of the previously established relationship between company size and the quantitative investment appraisal criteria selected. It finds that companies are using more methods together, that usage of the more sophisticated discounted cash flow techniques is higher, and that usage of the less theoretically sound accounting rate of return technique is lower, than previous studies would have suggested for companies of the size involved. It suggests that the size/method selection relationship may only be identifiable when the companies involved are all part of one study, or the studies compared are contemporaneous.     

Hedging Foreign Project Risk

We study the firm's hedging problem when there is uncertainty about whether its bid on a foreign project will be accepted. Most treatments of this problem suggest that foreign currency options are the preferred hedging instrument. However, we show that when the uncertainty pertaining to the realization of the foreign cash flow is unrelated to the exchange rate, which typically will be the case, futures dominate options as hedge vehicles.
Conversely, options hedging will be appropriate when the viability of the foreign project depends also on an exchange-rate contingency, as would be the case when the bidding firm can withdraw its bid if the foreign currency depreciates sufficiently.
In many cases, both futures and options will form part of the best hedge position. The general principle in forming the hedge is that futures will best offset exchange-rate exposure the existence of which is not exchange-rate contingent. Options will best hedge any costs or revenues that might occur in a foreign currency depending on the outcome of an exchange-rate contingency.     

Changes in National Technological Competitiveness: 1990, 1993, 1996 and 1999

Georgia Tech's Technology Policy and Assessment Center, with support from the US National Science Foundation, has been generating High-Tech Indicators (HTI) — measures of national technology-based export competitiveness since 1987. This paper reports the HTI results for 33 nations in 1999 in comparison with those of 1990, 1993 and 1996. HTI includes four 'input indicators' and a key 'output indicator' — technological standing. We construct a new composite input indicator here and examine its predictive capability. Input indicators for 1990 and 1993 show intriguing relationships to 1999 technological standing. We compare the indicators for various groups — leading and emerging Western economies, rapidly developing Asian economies, former Eastern Bloc nations and lagging Latin American countries. The USA presently exhibits a dominant position, but signs strongly point toward increasingly broad-based competition in technology-based products.     

The new matrix of political action

The increasing diversity of political involvement from the 1960s onwards led to an international study designed to explain the style of political action, and the protest potential in five countries: Britain, the USA, West Germany, Austria, and the Netherlands. The study identified five types of political involvement (inactives, conformists, reformists, activists, and protesters) together with their corresponding characteristics (including age, sex, education, and values). The number of reformists and activists is likely to increase, while the protesters pose a random threat to society. They appear to have a commitment to action but to little else. Their future impact depends on who mobilises them first.     

Financial factors in R&D budget setting: the impact of interfunctional market coordination, strategic alliances, and the nature of competition

Increasingly demanding markets, changes in technology and greater international competition have made the effective management of product R&D together with its associated costs essential. The magnitude of R&D costs are of concern to many companies, potentially inhibiting organizations from investing in new product development. Although rising costs of R&D and the growing dependence of companies on R&D for product leadership increase the need to plan and evaluate R&D activities more effectively, difficulties have been experienced in applying budgetary control systems to R&D. Despite such concerns, the published literature indicates that an emphasis on financial factors in setting the size of R&D budgets is becoming a competitive necessity. A review of the published literature suggests that interfunctional market coordination, the relative use of strategic alliances and the nature of competition in terms of product cost versus product innovation are potentially instrumental in influencing the degree of emphasis on financial factors in R&D budget setting. The results of the present study indicate that these three organizational and environmental variables result in an emphasis on financial factors in setting the size of R&D budgets. Implications drawn from the findings are discussed.     

THE EFFECTS OF MANAGERIAL ROLES ON THE RELATION BETWEEN BUDGETARY PARTICIPATION AND JOB SATISFACTION

This study examines the extent to which managerial roles moderate the relation between budgetary participation and job satisfaction. Managerial roles, defined in terms of line versus staff, may serve as a situational variable that assists in explaining the equivocal results found in studies for the association between budgetary participation and job satisfaction. The findings of this study suggest that the link between budgetary participation and job satisfaction is dependent on the role a manager undertakes in an organization. The relation between budgetary participation and job satisfaction was found to be significantly more effective for line managers than for staff managers.