Spot and forward volatility in foreign exchange

This paper investigates the empirical relation between spot and forward implied volatility in foreign exchange. We formulate and test the forward volatility unbiasedness hypothesis, which may be viewed as the volatility analogue to the extensively researched hypothesis of unbiasedness in forward exchange rates. Using a new dataset of spot implied volatility quoted on over-the-counter currency options, we compute the forward implied volatility that corresponds to the delivery price of a forward contract on future spot implied volatility. This contract is known as a forward volatility agreement. We find strong evidence that forward implied volatility is a systematically biased predictor that overestimates movements in future spot implied volatility. This bias in forward volatility generates high economic value to an investor exploiting predictability in the returns to volatility speculation and indicates the presence of predictable volatility term premiums in foreign exchange.     

Common risk factors in the U.S. and UK interest rate swap markets: Evidence from a nonlinear vector autoregression approach

This paper produces evidence in support of the existence of common risk factors in the U.S. and UK interest rate swap markets. Using a multivariate smooth transition autoregression (STVAR) framework, we show that the dynamics of the U.S. and UK swap spreads are best described by a regime‐switching model. We identify the existence of two distinct regimes in U.S. and UK swap spreads; one is characterized by a “flat” term structure of U.S. interest rates and the other is characterized by an “upward” sloping U.S. term structure. In addition, we show that there exist significant asymmetries on the impact of the common risk factors on the U.S. and UK swap spreads. Shocks to UK oriented risk factors have a strong effect on the U.S. swap markets during the “flat” slope regime but a very limited effect otherwise. On the other hand, U.S. risk factors have a significant impact on the UK swap markets in both regimes. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:221–250, 2004     

The Lead‐Lag Relationship Between Cash and Stock Index Futures in a New Market

This paper investigates the lead‐lag relationship in daily returns and volatilities between price movements of the FTSE/ATHEX‐20 and FTSE/ATHEX Mid‐40 stock index futures and the underlying cash indices in the relatively new futures market of Greece. Empirical results show that there is a bi‐directional relationship between cash and futures prices. However, futures lead the cash index returns, by responding more rapidly to economic events than stock prices. This speed is much higher in the more liquid FTSE/ATHEX‐20 market. Moreover, results indicate that futures volatilities spill information over to the corresponding cash market volatilities in both investigated futures markets, but volatilities in the cash markets have no effect on the volatilities of futures markets. Overall, it seems that new market information is disseminated faster in the futures market compared to the stock market. This implies that the futures markets can be used as price discovery vehicles, providing further evidence that derivatives markets contribute to completing and stabilising capital markets in Greece. A further finding of this study is that futures volume and disequilibrium effects between cash and futures prices are important variables in the explanation of volatilities in cash and futures markets.     

Hard,soft or ambidextrous? Which influence style promotes managers’ task performance and the role of political skill

Abstract

Ambidexterity at the manager level focuses on the crucial, but underexplored, role of managers’ knowledge, skills, and behaviors to address competing demands and promote organizational ambidexterity. As such, to successfully complete their assigned duties, managers need to employ the appropriate interpersonal style and calibrate their behavior to different contextual demands. This study highlights the role of the individual in the ambidexterity process by introducing the concept of influence tactic ambidexterity, to denote the frequent use of both hard and soft influence and investigating its role on task performance. Drawing on the literature on ambidexterity and HRM, we analyze data from a sample of 172 middle managers and their corresponding 68 supervisors working for multinational organizations, and provide evidence that influence tactic ambidexterity relates to higher levels and less variation in managers’ task performance compared to the sole use of either hard or soft tactics. Our findings also show that political skill positively moderates the relationship between influence tactic ambidexterity and a manager’s task performance. Therefore, this study suggests that influence tactic ambidexterity and political skill can be considered valuable HR assets for managers.     

The effect of human resource practices on organizational performance: evidence from Greece

The present study addresses a central research question: how do human resource management practices contribute to organizational performance? We examined the following HR practices: (1) job security; (2) selective hiring; (3) self-managed teams and decentralization of decision making; (4) compensation policy; (5) extensive training; and (6) information sharing. We surveyed food managers in Greece and recorded their perceptions on HR practices and their relation to firm performance.

Results provide overall support for all HR practices except of job security. Selective hiring was found to be a key practice that improved organizational performance. Compensation policy, information sharing, decentralization of decision making and extensive training were significant predictors for all performance variables. Directions for further research are provided.     

The Unbiasedness Hypothesis in the Freight Forward Market: Evidence from Cointegration Tests

The current paper investigates the unbiasedness hypothesis of Forward Freight Agreement (FFA) prices in the freight over-the-counter (OTC) forward market trades. Cointegration techniques are employed to examine the hypothesis. The results indicate that: FFA prices one and two months before maturity are unbiased predictors of the realised spot freight rates for all investigated shipping routes; three months FFA prices for panamax Pacific routes are unbiased predictors of spot prices, while FFA prices for panamax Atlantic routes are found to be biased predictors of spot prices. This diverse evidence suggests that the validity of the unbiasedness hypothesis depends on the specific characteristics of the market under investigation, the selected trading route and the time to maturity of the contract. JEL classification G13, G14, C32     

Sense and sensibility in personalized e‐commerce: How emotions rebalance the purchase intentions of persuaded customers

This research develops and tests a theoretical model of customer persuasion in personalized online shopping, building on information processing theory, and addressing cognitive and affective stages of the persuasion process. Data from 582 experienced online customers were used to validate the proposed model through structural equation modeling and multigroup analysis. Results show that quality of personalization, message quality, and benefits of the personalized recommendations are important in the persuasion process. Positive emotions increase the effect of persuasion on purchase intentions, contrary to negative emotions. The study extends online personalization theory, offers an in‐depth analysis of the persuasion process in online shopping, and provides valuable recommendations for personalized online marketing.     

Holistic investment assessment: optimization,risk appraisal and decision making

On deciding for the most appropriate investment when capital restrictions exist, investors define their alternatives and analyze each one of them. Traditionally, the definition, appraisal and analysis stages are treated separately. Herein, an innovative holistic method is proposed for bridging these stages. Within this method, investment attributes definition occurs by genetic algorithm optimization, while the analysis of the investment is realized through simulation. The method also proposes the NPV Expected Shortfall and the NPV Risk Preference Index as investment evaluation criteria. An illustrative case study of two mutually exclusive renewable energy investment scenarios is also used for demonstration purposes. Copyright © 2008 John Wiley & Sons, Ltd.     

Bank crisis management and resolution after SVB and Credit Suisse: Perspectives from India and the European Union

The March 2023 bank failures of Silicon Valley Bank, Signature, and Credit Suisse, which caused turmoil in financial markets and led to regulatory and central bank intervention, revived the debate about the effectiveness of the bank crisis management, resolution, and deposit insurance legal framework established after the Global Financial Crisis. Although the March 2023 events did not escalate into a full-blown financial crisis, they drew attention to certain areas of the current framework, where improvements may be needed. These areas include the need for financial regulation and supervision to focus more on small- and medium-sized banks as potential sources of systemic market events; to review the adequacy of the current deposit insurance regime and the treatment of uninsured deposits; and to provide more clarity about the order of creditor claims in case of bank resolution/insolvency. This article reviews the events of March 2023 and the key lessons from these events and discusses how these lessons could shape the frameworks for bank crisis management and resolution in India and the European Union. The two jurisdictions are in the process of updating their laws in this area, and the March 2023 events could influence the relevant decisions.     

Overnight information and stochastic volatility: A study of European and US stock exchanges

This paper provides a comprehensive evaluation of the predictive ability of information accumulated during nontrading hours for a set of European and US stock indexes. We introduce a stochastic volatility model, which conditions on lagged overnight information, distinguishes between the nontrading periods of weeknights, weekends, holidays and long weekends, and allows for an asymmetric leverage effect on the impact of overnight news. We implement Bayesian methods for estimation and ranking of the empirical models, and find two key results: (i) there is substantial predictive ability in financial information accumulated during nontrading hours; and (ii) the performance of stochastic volatility models improves considerably by separating the asymmetric impact of positive and negative news made available over weeknights, weekends, holidays and long weekends.