Using industry momentum to improve portfolio performance

Minimum-variance portfolios, which ignore the mean and focus on the (co)variances of asset returns, outperform mean–variance approaches in out-of-sample tests. Despite these promising results, minimum-variance policies fail to deliver a superior performance compared with the simple 1/N rule. In this paper, we propose a parametric portfolio policy that uses industry return momentum to improve portfolio performance. Our portfolio policies outperform a broad selection of established portfolio strategies in terms of Sharpe ratio and certainty equivalent returns. The proposed policies are particularly suitable for investors because portfolio turnover is only moderately increased compared to standard minimum-variance portfolios.     

Shared producer and consumer responsibility — Theory and practice

Over the past decade, an increasing number of authors have been examining the nexus of producer versus consumer responsibility, often dealing with the question of how to assign responsibility for internationally traded greenhouse gas emissions. Recently, a similar problem has appeared in drafting the standards for the Ecological Footprint: While the method traditionally assumes a full life-cycle perspective with full consumer responsibility, a large number of producers (businesses and industry sectors) have started to calculate their own footprints (see www.isa.org.usyd.edu.au). Adding any producer's footprint to other producers' footprints, or to population footprints, which all already cover the full upstream supply chain of their operating inputs, leads to double-counting: The sum of footprints of producers and consumers is larger than the total national footprint. The committee in charge of the Footprint standardisation process was hence faced with the decades-old non-additivity problem, posing the following dilemma for the accounting of footprints, or any other production factor: if one disallows double-counting, but wishes to be able to account for producers and consumers, then one cannot impose the requirement of full life-cycle coverage; the supply chains of actors have to be curtailed somehow in order to avoid double-counting. This work demonstrates and discusses a non-arbitrary method of consistently delineating these supply chains, into mutually exclusive and collectively exhaustive portions of responsibility to be shared by all actors in an economy.     

Legal Framework of Decentralized Energy Business Models in Germany: Challenges and Opportunities for Municipal Utilities

Feasible and profitable business models to better integrate and harness decentrally generated renewable energy are expected to constitute a key element for the energy transition in Germany. Until now, generated electricity of decentralized systems is to the largest extent only used by the property owner directly or fed into the public grid. To make better use of the generated electricity, it is necessary to find business models that provide an opportunity for different market actors, such as municipal utilities and residential prosumers. Due to the importance, yet low-anticipated monetary potential of such solutions, the legislator encourages their implementation by exemption of statutory fees, levies and taxes as well as by offering public remunerations, premiums and compensations in some cases. Capitalizing on these benefits, however, is only feasible under compliance with the legal requirements. In the light of the considerations above, this work states and analyzes the legal and regulatory framework of different business models within the German energy landscape. The major aim is to identify opportunities and challenges for the implementation of the business models self consumption, direct consumption, direct marketing, demand response, community electricity storage and net metering at the municipal level. The findings show that the profitability of various decentralized on-site business models depends primarily on the current statutory cost exemptions and compensations. At the same time, the regulation is characterized by unsystematic specific exemptions which leads to uncertainty regarding long-term planning. Additionally, although not directly privileged by the existing legal framework, municipal utilities are better suited to handle the legal burdens due to their experience and their administrative infrastructure.     

Die Kommunalen Schadenausgleiche als Unternehmen i. S. d. § 99 Abs. 1 GWB

The German communities cover their need for a general liability insurance mainly by using Municipal Loss Compensation (Kommunale Schadenausgleiche — KSA). Being an association without legal capacity as it is understood in § 54 Abs. 1 BGB (nicht rechtsfähiger Verein), the KSA can have rights and duties just like a partnership under the German Civil Code (Gesellschaft bürgerlichen Rechts). As a third-party supplier the KSA is a company in terms of § 99 Abs. 1 GWB (Law Against Restraints on Competition). Thus, the communities are to observe European Public Procurement Law when founding a KSA or when joining one. The ?in-house“-jurisprudence of the European Court of Justice is not applicable and therefore does not constitute an exemption of the European Public Procurement Law.     

Do Economists Have a Fatherland? How Global and National Efficiency Considerations Influence Economists’ Policy Judgements

This study evaluates whether economists support economic policies such as free trade because they deem them to be good for their home country or because they increase global welfare. In a telephone survey, 100 German economists were asked to judge different policy proposals dealing with immigration, military exports and climate policy. Our results show that the acceptance of the policy proposals is strongly influenced by national efficiency judgements. In contrast, global efficiency judgements exert no significant positive effect on policy proposal acceptance. These effects even hold for economists who self‐reported a global perspective in the assessment of the policy proposals. These judgements might be based on the potentially erroneous assumption that their policy judgements, taken from a national perspective, are consistent with global interests.     

IS THERE A CURSE OF RELOCATION? ANALYSING THE CAUSAL LINK BETWEEN OFFSHORING AND THE INNOVATION PERFORMANCE OF (SMALL) FIRMS

We analyse the empirical link between offshoring activities and different dimensions of innovation performance at the firm‐level. In order to identify causal effects running from offshoring to innovation, we use a quasi‐experimental comparison group approach by means of (conditional) difference‐in‐difference estimations applied to German establishment‐level data for firms that conducted offshoring activities in the period 2007–13. We find that the international relocation of business functions has a negative impact on the firms’ propensity to be innovative in terms of product and process innovations as well as product improvements. While for larger firms the reduction in process innovations is most striking, potentially due to a lack of resources, stagnation in expertise and a reduction in intra‐organizational learning‐by‐doing associated with the relocation of some business activities, for small and medium‐sized enterprises we particularly observe a reduction in product innovations after the offshoring activity has taken place. When interpreting this ‘pessimistic’ picture on the link between offshoring and the innovation performance of firms, the reader should note that our findings for German establishments have to be assessed through the lens of a global economy in economic recession after 2008, which may have intensified the negative impact of offshoring on the firms’ innovation performance.     

Relational effects of relative performance information: The role of professional identity

Prior accounting studies on relative performance information (RPI) have mainly considered the effects of RPI on employees’ performance. This study extends this stream of research by investigating relational effects of RPI that capture RPI recipients’ attitudes towards RPI provision. Specifically, we examine the conditions under which RPI has a positive influence on perceived organizational support (POS). This is important because research on organizational behaviour has demonstrated that POS is an antecedent of desirable job-related attitudes such as organizational commitment, job involvement, and extra-role performance. The results of a dyadic survey in a hospital setting suggest that the effect of RPI on POS is conditional not only on the perceived usefulness of information and relative performance but also on the professional identification of RPI recipients. Our findings indicate that RPI provision is especially suitable for employees who possess a stronger social identification with their peer groups. Our study adds a relational perspective to the hitherto mostly informational and motivational focus in studying social comparison mechanisms linked to RPI systems.     

Investition in die Zukunft? Zur Entwicklung des deutschen Auslandsvermögens

Germany’s substantial current account surpluses are an ongoing subject of debate, both at the domestic and the European/ global level. Advocates of high surpluses emphasise the need to accumulate foreign wealth in order to finance future investment and consumption expenditures of an ageing population. This contribution gauges the profitability of Germany’s foreign wealth. It identifies large valuation losses to the tune of half a trillion euros in recent years as well as a persistently adverse trend in previous decades. This unfavourable development as well as historically low refinancing costs point to the comparatively greater benefits of a domestic investment offensive aiming to equip Germany for central long-term challenges.     

Equipping immigrants: migration flows and capital movements in small open economies

This paper explores the extent to which migration-related capital flows can explain the variation in investment rates and current and capital account imbalances in OECD countries. We begin with a general equilibrium model of a small open economy in which migration is exogenous. Migrants must be equipped with capital, and the resulting demands for capital will generate cross-border flows of capital. Next, we move to an empirical exercise in which we allow both capital and labor flows to be endogenous. We test this model using data from a panel of OECD countries. We conclude that migration flows do in fact generate substantial matching capital flows. We calculate that increased migration may have accounted for as much as one-fifth of the increase in the US current account deficit since 1960.