Financial distress and the business cycle

In this paper we argue that firms' financial distress shouldplay a greater role in the macroeconomic analysis of the businesscycle. We provide a non-technical account of a general equilibriummodel that exhibits financially-driven equilibrium cycles. Weshow that the empirical evidence is widely supportive of thekey hypothesis and implications of our approach. We use themodel in order to evaluate the effects of several policy measures.It turns out that deepening the market for second-hand capitalgoods, subsidizing the interest payments of companies whichstart up when financial conditions are tight, and bailing outsome companies in default can indeed 'stabilize' the economy.By way of generalization, we may say that the policy reactionto a financially driven bust should be accommodating.     

What Enhances Insider Trading Profitability?

This study analyses the factors triggering insider trading profitability. Since there is not much evidence on this topic in the continental-European context, we focus on the Spanish stock market. Our findings show that the main relevant factors (the timing ability of the insider, the transparency of the transaction and the level of free cash flow of the firm) are related to insiders’ opportunities behaviour, motivated by the lack of either managerial control within the firm or enforcement of insider trading regulation. The level of ownership concentration, the spread and the interaction between the size and the transparency of the transaction are other relevant factors, some of them tested for the first time in the insider trading literature.      

Pushing on a String: How policy might encourage private doctors to compete with the public sector on the basis of quality

Results from the Philippine Quality Improvement Demonstration Study show that a policy that expands insurance coverage improves quality of care, as measured by clinical performance vignettes, among public physicians, and induces a spillover effect that improves quality among private physicians.     

An optimization approach to strategic sourcing: A case study of the United States Air Force

The DoD annually procures billions of dollars worth of systems, supplies, and services in support of the national military strategy. Faced with budget cuts and other resource constraints, the DoD must transform its procurement process to ensure cost-effective sourcing of critical supplies and services. One aspect of current transformation in the DoD is the use of a strategic sourcing approach for the procurement of services at military installations. Using the Air Force's strategic sourcing process as our context, we developed an optimization model for selecting a set of proposals from among multiple offerors for services to be performed at multiple installations. The selection achieves the most favorable objective by balancing the confidence level in an offeror's past performance with the cost of services to the Air Force. The research findings, which are based on a realistic scenario, demonstrate improvements over the current sourcing process in both overall performance and cost.     

Controlling the Urban Fabric: The Complex Game of Distance and Proximity in European Upper‐Middle‐Class Residential Strategies

This article presents an open discussion of the processes of urban secession and gentrification in contemporary European cities, arguing that intergroup social dynamics in urban spaces are generally more complex than either extreme mutual avoidance or the colonization of neighbourhoods by the wealthiest groups. We analyse the residential strategies of urban upper‐middle class managers in various European metropolitan areas through in‐depth semi‐structured interviews to argue that these groups develop complex strategies of proximity and distance in relation to other social groups. The development of these ‘partial exit’ strategies takes place through specific combinations of practices that allow groups to select the dimensions they are willing to share with other social groups, and those in which they prefer a more segregated social environment for themselves and their families. The responses of our interviewees were consistently more nuanced and complex than suggested by a simplistic theory about their drive to withdraw from society, forcing us to develop more sophisticated conceptual frameworks to account for the growing prevalence of multi‐layered identities and spheres of reference and solidarity, specific combinations of elective segregation and local involvement, and more active patterns of mobility combined with local embeddedness.     

Correlations in emerging market bonds: The role of local and global factors

This paper empirically assesses co-movements in emerging market bond returns and disentangles the roles of external and domestic factors during episodes of heightened market volatility. The conceptual framework, set in the context of asset allocation, allows us to describe the channels through which shocks originating in a particular emerging or mature market are transmitted across countries and markets. We show that a simple measure of cross-country correlations, when presented together with the more commonly used average correlation coefficient, can be more informative during episodes of heightened market volatility. Data for the period 1997–2008 are analysed for evidence of true contagion and common external shocks.     

The cost of equity of internet stocks: a downside risk approach

Beta as a measure of risk has been under fire for many years. Although practitioners still widely use the CAPM to estimate the cost of equity of companies, they are aware of its problems and are looking for alternatives. A possible alternative is to estimate the cost of equity based on the semideviation, a well-known and intuitively plausible measure of downside risk. Complementing evidence reported elsewhere about the ability of the semideviation to explain the cross-section of returns in emerging markets and that of industries in emerging markets, this article reports results showing that the semideviation also explains the cross-section of Internet stock returns.