The Economic Value of Volatility Timing

Numerous studies report that standard volatility models have low explanatory power, leading some researchers to question whether these models have economic value. We examine this question by using conditional mean-variance analysis to assess the value of volatility timing to short-horizon investors. We find that the volatility timing strategies outperform the unconditionally efficient static portfolios that have the same target expected return and volatility. This finding is robust to estimation risk and transaction costs.     

Foreign Direct Investment in China: An Examination of the Literature

Since 1978, when China announced its ‘open-door’ policy to pursue the country's long-term national goal, the Four Modernisations, more than 220,000 foreign funded ventures have been approved. By the end of 1994 some US$300 billion of contracted investment had been agreed and US$95 billion of utilized investment, making the country the most important recipient of foreign direct investment (FDI) in the developing world. This paper analyses the phenomenon of FDI in China. It examines the different forms and composition of FDI, reviewing its development since the early days of the ‘open-door’ policy and analysing its importance for Chinese domestic and export industries, as well as Western investor companies. Furthermore, the paper focuses on the world-wide sources of FDI in China and its distribution by both region and industry. Additionally, it reviews the existing research on FDI in China, emphasizing the investment mode of equity joint venture.     

The impact of international information disclosure requirements on market discipline

Financial regulators are challenged with finding the most efficient and effective ways to monitor banks given an expanding and complex international financial system. Market discipline has grown in importance as a way to discourage banks from taking on unnecessary risk. One of the main drivers of market discipline is information disclosure. While the literature on market discipline is expansive, there are no known studies on the impact of individual information disclosure requirements on market discipline. Our study investigates which specific disclosure requirements influence financial investors to discipline banks and which do not. We find that information disclosure requirements primarily reduce or have no impact on market discipline practices.     

It's Not a Laughing Matter: Critical Geopolitics,Humour and Unlaughter

This paper explores the possibilities of considering humour and laughter as a serious matter of concern for critical geopolitics and political geography more generally. While there has been some interest in this topic, there is scope to devise a more expansive research agenda. Using both laughter and Michael Billig's notion of unlaughter, the paper considers how these visceral expressions contribute, often in subtle ways, to the making of geopolitical subjectivities. The final part of the paper considers some possibilities for future research.     

Capital expenditures and firm performance: evidence from a cross‐sectional analysis of stock returns

Using a simple two‐period model of investment, we show that there should be a nonlinear relation between a firm's investment‐to‐capital ratio and its subsequent stock returns. This prediction finds substantial empirical support. The evidence indicates that the slope of the investment function is negative at low investment levels, close to zero at intermediate investment levels and negative at high investment levels. Our results, which are robust to the use of narrowly‐ and broadly‐defined measures of capital investment, pose a challenge to the hypothesis that the negative cross‐sectional correlation between investment and stock returns is attributable to some sort of overinvestment phenomenon.     

The restrictions on predictability implied by rational asset pricing models

This article shows how rational asset pricing models restrictthe regression-based criteria commonly used to measure returnpredictability. Specifically it invokes no-arbitrage argumentsto show that the intercept, slope coefficients, and R² in predictiveregressions must take specific values. These restrictions providea way to directly assess whether the predictability uncoveredusing regression analysis is consistent with rational pricing.Empirical tests reveal that the returns on the CRSP size decilesare too predictable to be compatible with a number of well-knownpricing models. However, the overall pattern of predictabilityacross these portfolios is reasonably consistent with what wewould expect under circumstances where predictability is rational.     

The future of deforestation in the Brazilian Amazon

Concern about the future of Amazonian forests is growing as both the extent and rate of primary forest destruction increase. We combine spatial information on various biophysical, demographic and infrastructural factors in the Brazilian Amazon with satellite data on deforestation to evaluate the relative importance of each factor to deforestation in the region. We assess the sensitivity of results to alternative sampling methodologies, and compare our results to those of previous empirical studies of Amazonian deforestation. Our findings, in concert with those of previous studies, send a clear message to planners: both paved and unpaved roads are key drivers of the deforestation process. Proximity to previous clearings, high population densities, low annual rainfall, and long dry seasons also increase the likelihood that a site will be deforested; however, roads are consistently important and are the factors most amenable to policymaking. We argue that there is ample evidence to justify a fundamental change in current Amazonian development priorities if additional large-scale losses of forests and environmental services are to be avoided.     

The impact of water scarcity on food,bioenergy and deforestation

We evaluate the impact of explicitly representing irrigated land and water scarcity in an economy‐wide model with and without a global carbon policy. The analysis develops supply functions of irrigable land from a water resource model for 282 river basins and applies them within a global economy‐wide model. The analysis reveals two key findings. First, explicitly representing irrigated land has a small impact on global food, bioenergy and deforestation outcomes. This is because this modification allows irrigated and rainfed land to expand in different proportions, which counters the effect of rising marginal costs for the expansion of irrigated land. Second, changes in water availability have small impacts on global food prices, bioenergy production, land use change and the overall economy, even with large‐scale (c. 150 exajoules) bioenergy production, due in part to endogenous irrigation and storage responses. However, representing water scarcity and changes in water availability can be important regionally, with relatively arid areas and/or areas with rapidly growing populations fully exhausting our estimated maximum irrigation capacity that allows for improved irrigation efficiency, lining of canals to limit water loss, and expanding storage to fully capture average annual water flows.