Economic geography in the presence of preferential trade agreements: an empirical analysis of OECD data

In the presence of preferential trade agreements (PTAs), there are two distinct levels of economic geography–global economic geography (GEG) between a PTA bloc and the world and local economic geography (LEG) between a PTA member and its PTA bloc. Using OECD data, we empirically examine whether both types of economic geography can help to explain the international production structure. Our findings provide some support for the importance of distinguishing between LEG and GEG when testing for the presence of economic geography.     

A novel measure of liquidity premium: application to the Korean stock market

This study proposes a novel measure for an asset’s liquidity premium. Applying Brownian first-passage time distribution properties, we derive an explicit form of liquidity premium embedded in the asset price. Our liquidity premium measure is intuitive because it assesses the extent to which the value of the asset should be increased from the current market price if investors were allowed to retain the asset until they achieve an investment goal. This measure is readily available for assessing an asset’s liquidity because it does not require information on the asset’s transactional characteristics. Our empirical experiment using Korean stock market data suggests that the liquidity premium in this study is inversely related to Amihud’s (2002) illiquidity ratio, which is commonly used to measure stocks’ illiquidity.     

Technological diversification and firm's techno-economic structure: An assessment of Canon's sustainable growth trajectory

Contrary to the decrease in operating income to sales (OIS) in Japan's electrical machinery firms, Canon has demonstrated its increasing trend with increase of its technological diversification. These contrasts and Canon's conspicuous functionality development suggest that a virtuous cycle between its technological diversification strategy and increase in OIS can be the source of its sustainable growth.Prompted by this hypothetical view, this paper attempts to assess Canon's sustainable growth trajectory by elucidating a mechanism of its technological diversification system through an effective utilization of potential resources in innovation. By means of an epidemic function, the new approach for assessing marginal productivity of technology as well as functionality development is developed. Utilizing this approach, comparative empirical analyses are conducted focusing on the consequence of technological diversification and development trajectory in Japan's leading electrical machinery firms over the last two decades.     

Small Hubs,Large Spokes and Overlapping Free Trade Agreements

The proliferation of overlapping free trade agreements (FTA) in recent years has led to pair‐wise hub‐and‐spokes (HAS) throughout the world. Being avid subscribers to FTAs, many countries in the Asia‐Pacific region, including the United States, Japan, Singapore, South Korea, Thailand and Australia, have become trade hubs to their partners who are in turn relegated to spoke status. In this paper, we question whether being a hub is welfare optimal for a small and open economy such as Singapore compared to membership in a single bilateral FTA or a multi‐member free trade zone. Within this context, we use a computable general equilibrium model to examine the welfare implications of the triangular trade relationship of the United States, Singapore and Japan. This is facilitated by the Japan–Singapore Economic Partnership Agreement, the USA–Singapore Free Trade Agreement, and a hypothetical USA–Japan Economic Partnership Agreement. The analysis is extended to incorporate ‘super‐hub’ effects, that is, the spoke countries could be trade hubs in other HAS systems. Our experiment reveals that hub status generates positive welfare gain and is the highest Singapore can get from the trade configurations considered. Meanwhile, Japan loses more than the USA when both are relegated to spoke status. These findings prove to be robust under different market structures and production technologies, deeper economic integration, ‘super‐hub’ effects, as well as uncertainty in the key model parameters and the extent of trade liberalisation shocks.     

Investigation of the relationship between service values and loyalty behaviors under high commitment

The aim of this study is to investigate to relationship between service values, commitment, and customer loyalty. Based on self-administrated survey from 440 mobile service users in South Korea, the proposed model was estimated by a hierarchical regression. First, the price and the quality values have a positive effect on repurchase intention under high calculative commitment. Second, price value also has a positive effect on positive word of mouth under high calculative commitment. Finally, and social value has a positive effect on positive word of mouth under high affective commitment. We discuss the implications of these findings for commitment management strategies on the relationship between service values and customer-loyalty link. Limitations and recommendations for future research are also presented.     

Trade Openness and Vertical Structure: Evidence From Korean Firm-Level Data

Recent theories and empirics suggest that trade openness increases production fragmentation across countries. In this paper, we focus on the relationship between trade openness and firms’ choice of vertical structure. We find supportive, firm-level evidence that upon trade liberalization, firms restructure their organization by downsizing their domestic production processes (i.e. domestic vertical disintegration) and relocating their input production plants to other countries (i.e. cross-border vertical integration).     

Diffusion of competing innovations in influence networks

Although an influence network is a crucial factor affecting diffusion processes, it is generally fixed or assumed to follow some typical topologies in traditional diffusion research. The purpose of this study is to examine how innovation diffusion is changed by different influence relationship structures existing among individuals. We introduce an extended version of the regular digraph that can represent various influence relationships among influentials and followers. We focus on three key features of influence relationships (i.e. monopolization, localization, and diversification of opinions) and examine how they are associated with certain macroscopic behavioral regularities by employing agent-based simulation. The simulation results show that market becomes “locked-in” to a single product when influences are monopolized by few influentials. We also find that when influence relationship becomes complex as influentials and followers increase, market cannot be categorized by a single typology, but becomes random and unpredictable. Our model demonstrates successfully an underlying principle of collective behavior that uniformity of behavior is promoted under monopolization of opinions and random, unpredictable behavioral patterns emerge from diversification of opinions.     

Eco-efficiency approach for global warming in the context of Kyoto Mechanism

This study discusses an approach to measuring and improving the economic and ecological efficiency of Kyoto Mechanism projects. The approach consists of Global Warming Eco-Efficiency (GWEE), Clean Development Mechanism (CDM) & Joint Implementation (JI) Environmental-Efficiency (EE) and CDM & JI Economic-Productivity (EP). The GWEE indicator is based on the ratio of the value added of a system to its global warming influence in order to measure the eco-efficiency of a product in terms of the global warming issue. In addition, CDM & JI EE and CDM & JI EP are proposed to measure the environmental and economic performances of CDM and JI projects, respectively. While EE is defined as the ratio of the Certified Emission Reductions (CER) obtained from a CDM project or Emission Reduction Unit (ERU) from a JI project to total global warming influence relevant to the CDM or JI implemented, EP is defined as the ratio of the total of CER profit (and ERU profit) and the sales revenue to the costs of the CDM (and JI) implemented. Then, the feasibility of these indicators is examined through a case study for the power generations in the field of alternative energy.     

High Idiosyncratic Volatility and Low Returns: A Prospect Theory Explanation

The well‐documented negative relationship between idiosyncratic volatility and stock returns is puzzling if investors are risk‐averse. However, under prospect theory, while investors are risk‐averse in the domain of gains, they exhibit risk‐seeking behavior in the domain of losses. Consistent with risk‐seeking investors’ preference for high‐volatility stocks in the loss domain, we find that the negative relationship between idiosyncratic volatility and stock returns is concentrated in stocks with unrealized capital losses, but is nonexistent in stocks with unrealized capital gains. This finding is robust to control for short‐term return reversals and maximum daily return, among other variables.     

Cross‐Section of Expected Returns and Extreme Returns: The Role of Investor Attention and Risk Preferences

Previous work finds a negative and significant relation between the maximum daily return over the past one month and expected future stock returns. We determine that this effect is more pronounced for stocks that achieve their maximum daily returns toward the end of the month and stocks that are associated with capital losses show greater reversals. These results suggest the effect is related to investor attention and risk preferences.