Impact of Divergent Consumer Confidence on Option Prices

This paper investigates the impact of divergent consumer confidence on option prices. To model this, we assume that consumers disagree on the expected growth rate of aggregate consumption. With other conditions unchanged in the discrete-time Black–Scholes option-pricing model, we show that the representative consumer will have declining relative risk aversion instead of the assumed constant relative risk aversion. In this case all options will be underpriced by the Black–Scholes model under the assumption of bivariate lognormality. This revised version was published online in June 2006 with corrections to the Cover Date.     

The measurement of corporate portfolio strategy: analysis of the content validity of related diversification indexes

Measures developed for the analysis of corporate diversification have become fundamental to a broad range of strategy research. This paper examines the content validity of the two most widely used continuous measures of related diversification—the related component of the entropy index and the concentric index—and raises fundamental questions about their validity as indicators of portfolio relatedness. These questions are not driven by the use of SIC data for estimation of the indexes; they involve validity problems intrinsic to the construction of the measures. The related component of entropy and the concentric index are sensitive to features of corporate portfolio composition that may not be directly linked to portfolio relatedness. These sensitivities can create important ambiguities in strategy research. Copyright © 2002 John Wiley & Sons, Ltd.     

Risk taking and failure in de novo savings and loans in the 1980s

This article examines failure rates in de novo S&Ls that initiated operations during the 1980–1986 period. Overall failure rates are similar to those for existing institutions but are found to vary significantly by location, time of charter, and organizational form. Both univariate tests and results from a probability-of-failure model indicate that inadequate capital, economic stress, poor management of higher risk lending allowed by broader powers, and operating inefficiencies contributed significantly to the likelihood of failure. Use of brokered funds and rapid asset growth are also significantly related to failure likelihood. Interestingly, for those S&Ls which eventually failed, rapid asset growth and high proportions of nonperforming assets actually delayed the timing of their failure. We interpret this to be the result of regulatory forbearance. We also find significant differences between the financial characteristics of de novo and non-de novo S&Ls.     

Time diversification and security preferences: A stochastic dominance analysis

We use stochastic dominance to test whether investor should prefer riskier securities as the investment horizon lengthens. Return distributions for stocks, bonds, and U.S. Treasury bills are generated for holding periods of one to 25 years by simulation. For each holding period, stochastic dominance tests are run to establish preferences between the alternative security classes. Contrary to previous mean-variance based studies, we find no evidence that high-risk securities (stocks) dominate low-risk securities (bonds, Treasury bills) as the investment horizon lengthens. However, we do find that corporate bonds systematically dominate government bonds.     

印度不是中国的翻版

电子工业在中国和印度的发展显然将追寻两条不同的道路,原因在于这两个国家正在采取非常不同的经济发展模式。     

Rationality,foolishness, and adaptive intelligence

Technologies of model‐based rationality are the core technologies of strategic management, having largely replaced earlier technologies that placed greater reliance on traditional practice or on communication either with the stars or with the gods. The technologies used by organizations in their pursuit of intelligence can be imagined to change over time as a result of responding to the successes and failures associated with the technologies. Although technologies of rationality seem clearly to be effective instruments of exploitation in relatively simple situations and to derive their adaptive advantage from those capabilities, their ventures in more complex explorations seem often to lead to huge mistakes and thus unlikely to be sustained by adaptive processes. Whether their survival as instruments of exploratory novelty in complex situations is desirable is a difficult question to answer, but it seems likely that any such survival may require hitchhiking on their successes in simpler worlds. Survival may also be served by the heroism of fools and the blindness of true believers. Their imperviousness to feedback is both the despair of adaptive intelligence and, conceivably, its salvation. Copyright © 2006 John Wiley & Sons, Ltd.     

Private Pension Arrangements and Retirement in Britain*

This paper looks at the policy debate surrounding private pensions and retirement patterns in the UK. Recent increases in longevity have led not only to increased pressures in public pensions but also to corresponding increases in the importance of private pensions in the UK and changes in the way in which they are structured. We consider the economic implications of these changes, and in particular the increased importance of defined contribution plans. In addition, we discuss the prospects for future trends in retirement ages.     

Trust‐Preferred Securities and Insurer Financing Decisions

We analyze insurance holding company (IHC) issuance of trust‐preferred securities (TPS) from 1994 to 2013. We find that larger and more financially levered IHCs issued TPS in 1996 and 1997, as well as those that obtained financial strength ratings from A.M. Best. Abnormal stock price returns are positively related to financial distress costs, growth opportunities, and tax burden, but negatively related to size. Consistent with the pecking order theory, intent to use TPS proceeds to retire debt is positively related to abnormal stock returns, whereas intent to use proceeds to retire preferred equity is negatively related to abnormal stock returns.     

Pairs trading under transaction costs using model predictive control

Model predictive control with proportional transactions costs provides a good approximation to the optimal trading strategy     

The EC‐LQO five‐factor framework: An alternative lens for business model innovation in highly knowledge‐intensive industries

Growing technological complexity continues to drive firms to interact with the external innovation environment to achieve firm success. However, industries' complexities and the business model concept's underlying ontology have limited research on modeling the key factors that enable this interface. In this study, results of an empirical analysis of a unique dataset of 102 biopharmaceutical companies broadly support the EC‐LQO five‐factor framework as a useful tool to guide business model innovation for highly knowledge‐intensive environments.