Asymmetries in bid and ask responses to innovations in the trading process

This paper proposes a new approach to jointly model the trading process and the revisions of market quotes. This method accommodates asymmetries in the dynamics of ask and bid quotes after trade-related shocks. The empirical specification is a vector error correction (VEC) model for ask and bid quotes, with the spread as the co-integrating vector, and with an endogenous trading process. This model extends the vector autoregressive (VAR) model introduced by Hasbrouck (Hasbrouck J (1991) Measuring the information content of stock trades. J Finance 46:179–207). We provide evidence against several symmetry assumptions, very familiar among microstructure models. We report asymmetric adjustments of ask and bid prices to trade-related shocks, and asymmetric impacts of buyer and seller-initiated trades. In general, buys are more informative than sells. The likelihood of symmetric quote responses increases with volatility. We show that our findings are robust across different model specifications, time frequencies, and trading periods. Moreover, we find similar asymmetries in markets with different microstructures.

Amino acid formula as a new strategy for diagnosing cow’s milk allergy in infants: is it cost-effective?

Aims: To estimate the cost-effectiveness of a new strategy that uses an amino acid formula in the elimination diet of infants with suspected cow’s milk allergy (CMA).

Materials and methods: This pharmacoeconomic study was developed from the perspective of the Brazilian Public Healthcare System. The new strategy proposes using an amino acid formula in the diagnostic elimination diet of infants (≤24 months) with suspected CMA. The rationale is that infants who do not respond to the amino acid formula do not suffer from CMA. Patients with a positive oral challenge test receive a therapeutic elimination diet based on Brazilian Food Allergy Guidelines. This approach was compared to the current recommendations of the Brazilian Food Allergy Guidelines. A decision model was constructed using TreeAge Pro 2012 software. Model inputs were based on a literature review and the opinions of a panel of experts. A univariate sensitivity analysis of incremental cost-effectiveness ratios was performed.

Results: The mean cost per patient of the new amino acid formula strategy was R$3,341.57, while the cost of the current Brazilian guidelines strategy was R$3,641.08. The mean number of symptom-free days per patient, which was used as an indicator of effectiveness, was 900.6 and 875.7 days, respectively. The new strategy is, therefore, dominant. In the sensitivity analysis, the dominance was maintained with parameter variation.

Limitations: In the absence of information in the literature, some premises were defined by a panel of specialists.

Conclusions: The new strategy, which uses an amino acid formula in the elimination diagnostic diet followed by an oral food challenge, is a dominant pharmacoeconomic approach that has a lower cost and results in an increased number of symptom-free days.     

Outliers - robust ECM cointegration tests based on the trend components

The main goal of this paper is to analyze the behavior of the ECM non-cointegration test when there are additive outliers in the time series under different co-breaking situations. We show that the critical values of the usual ECM test are not robust to the presence of transitory shocks and we suggest a procedure based on signal extraction to bypass this problem. These procedure renders ECM tests with a left tail of distribution under the null that is robust to the presence of additive outliers in the series. The small sample critical values and the empirical power of the test are analyzed by Monte Carlo simulations for several low frequency filters. The proposed empirical methodology is applied to the CPI-based US/Finland real exchange rate.JEL Classification: C22, C12, C15, C52, C51 Corresponding author: Alvaro EscribanoWe thank A. Lucas for kindly providing us with the data for the empirical example. Previous drafts of this paper have greatly improved thanks to the comments of two anonymous referees and the Associate Editor. The first author wishes to thank members of Department of Statistics and Econometrics, Universidad Carlos III de Madrid, and Department of Economics, University of Maryland at College Park. The second author acknowledeges support from the following grants: Spanish MCyT BEC2002-00279, The European TMR-ERB-40618C97-0994 and the Secretaría de Estado de Universidades PR2003-0305. This paper was finished while Alvaro Escribano was visiting the Department of Economics, Georgetwon University, Washington DC, USA.     

Business groups and their types

We clarify what business groups are and analyze their various types. We first distinguish business groups from other types of firm networks based on the strategic relationships among companies; business groups are defined as those networks that exhibit unrelated diversification under common ownership. We then separate business groups into three types based on their ownership: family-owned, widely-held, and state-owned. We argue that each type has different agency costs and diversification logics. As a result of these differences, their performance varies, with family-owned business groups outperforming widely-held ones, and these in turn outperforming state-owned business groups.

Estimation of log-GARCH models in the presence of zero returns

A critique that has been directed towards the log-GARCH model is that its log-volatility specification does not exist in the presence of zero returns. A common ‘remedy’ is to replace the zeros with a small (in the absolute sense) non-zero value. However, this renders estimation asymptotically biased if the true return is equal to zero with probability zero. Here, we propose a solution. If the zero probability is zero, then zero returns may be observed because of non-trading, measurement error (e.g. due to rounding), missing values and other data issues. The algorithm we propose treats the zeros as missing values and handles these by estimation via the ARMA representation. An extensive number of simulations verify the conjectured properties of the bias-correcting algorithm, and several empirical applications illustrate that it can make a substantial difference in practice.     

Human resource function strategic role and trade unions: exploring their impact on human resource management practices in Uruguayan firms

Organizations worldwide are confronted with different contextual constraints. Jackson and Schuler [1995, ‘Understanding Human Resource Management in the Context of Organizations and their Environments,' Annual Review of Psychology, 46, 237–264], in their classical review, highlight the importance of the impact of the internal and external organizational context on human resource management (HRM) practices. This paper uses data collected through a survey of firms located in Uruguay, in a context where HR function and trade unions have gone through significant changes, to determine their impact on the adoption of different HRM practices. The authors find that organizations with an HR function strategically involved and with higher degree of union presence have more person-centred HRM practices, while performance-centred HRM practices were positively influenced by HR function strategic role. However, the findings do not support the moderating role of trade union presence on the relationship between the HR function strategic role and HRM practices.     

Host Country Politics and Internationalization: A Meta-Analytic Review

We study how host country politics influence internationalization. Our meta-analysis clarifies which ideas receive support across the empirical literature and reveals new theoretical insights in three areas: the conceptualization of host country politics, the impact of host country politics on internationalization steps, and the moderating influence of home-country conditions on the previous relation. First, regarding the concept of host country politics, we propose analysing host country politics rather than political risk, and separating political decision-making, i.e., regulation creation, from political administration, i.e., regulation implementation. Second, on the effect of host country politics on internationalization steps, we suggest a dynamic management across the internationalization process, with managers shifting from avoiding harm through country selection to pre-empting harm through entry mode selection, to adapting to harm to ensure survival. Third, studying how home-country conditions modify the impact of host country politics on internationalization, we propose that multinationals build political and uncertainty management capabilities from their exposure to home country conditions that help them manage host country politics better.