Dynamic jump intensities and risk premiums: Evidence from S&P500 returns and options

We build a new class of discrete-time models that are relatively easy to estimate using returns and/or options. The distribution of returns is driven by two factors: dynamic volatility and dynamic jump intensity. Each factor has its own risk premium. The models significantly outperform standard models without jumps when estimated on S&P500 returns. We find very strong support for time-varying jump intensities. Compared to the risk premium on dynamic volatility, the risk premium on the dynamic jump intensity has a much larger impact on option prices. We confirm these findings using joint estimation on returns and large option samples.     

Cause-related marketing persuasion research: an integrated framework and directions for further research

This paper presents an integrative review of the literature on cause-related marketing (CRM) persuasion research (i.e. studies of how CRM influences evaluations of the partner brand). The aim of the study was to review CRM persuasion research and to integrate the findings into a theoretical framework that could direct future research efforts in the area. Drawing on Bergkvist and Taylor's model of Leveraged Marketing Communications (LMC), a dual-path model of CRM persuasion effects was developed. According to the model, CRM affects brand evaluations along two paths: the indirect transfer path which is mediated by attribution of motives and the direct transfer path in which attitude towards the cause is transferred to the brand. The model incorporates results from extant research and provides guidance for future studies.     

The marginal cost of public funds is one at the optimal tax system

This paper develops a Mirrlees framework with skill and preference heterogeneity to analyze optimal linear and nonlinear redistributive taxes, optimal provision of public goods, and the marginal cost of public funds (MCF). It is shown that the MCF equals one at the optimal tax system, for both lump-sum and distortionary taxes, for linear and nonlinear taxes, and for both income and consumption taxes. By allowing for redistributional concerns, the marginal excess burden of distortionary taxes is shown to be equal to the marginal distributional gain at the optimal tax system. Consequently, the modified Samuelson rule should not be corrected for the marginal cost of public funds. Outside the optimum, the marginal cost of public funds for distortionary taxes can be either smaller or larger than one. The findings of this paper have potentially important implications for applied tax policy and social cost–benefit analysis.     

Financial development,financial liberalization and social capital

The relationship between financial liberalization policies and financial development is controversial. The impact of these policies differs greatly across countries. In the literature, the quality of formal institutions has been identified as an important source of this heterogeneity, as countries with a weak institutional environment generally fail to benefit from financial liberalization. Using panel data covering 82 countries for the period 1973–2008, we find evidence that social capital may substitute for formal institutions as a prerequisite for effective financial liberalization policies. In particular, we find that during the post Washington-consensus period countries with a high prevailing level of social capital can ensure that financial liberalization positively influences financial development, despite the poor quality of their formal institutions.     

Second-best income taxation and education policy with endogenous human capital and borrowing constraints

We formulate a two-period life cycle model of saving, labor supply, and human capital investment when individuals differ in their ability and initial wealth. Borrowing constraints result in sub-optimal choices for consumption and investments in human capital. We analyze optimal linear income taxes and education subsidies. The optimal income tax is shown to be positive—even in the absence of any redistributional concerns. A redistributive income tax relaxes borrowing constraints by redistributing resources from the unconstrained to the borrowing constrained stages of the life cycle. The income tax thus alleviates preexisting non-tax distortions in the capital market. Human capital is subsidized on a net basis in the absence of redistributional concerns. Education subsidies help to relax credit constraints and to reduce distortions from explicit and implicit taxes on human capital formation. When redistributional concerns are present, education is subsidized more if this helps to alleviate distortions on labor supply, but is subsidized less if education subsidies have a very regressive incidence. Simulations demonstrate that optimal income taxes are substantially higher when credit constraints are present. Education is generally subsidized on a net basis, and the more so if credit constraints are more severe.     

Celebrity endorsements: a literature review and research agenda

This paper presents a narrative review of celebrity endorsement research. The review identifies six areas of research on celebrity endorsements (celebrity prevalence, campaign management, financial effects, celebrity persuasion, non-evaluative meaning transfer, and brand-to-celebrity transfer). A review of the research in each area identifies key findings, conflicting results, and research gaps. In addition, this paper reviews the celebrity endorsement literature with a focus on the psychological processes underlying celebrity endorsement effects that has been put forward in the literature. Based on the review an agenda for future research is offered.     

Predicting bankruptcy in the Texas nursing facility industry

Approximately 50% of nursing facilities in Texas petitioned for bankruptcy during the 1998–2004 period. Using a logit regression model tested for robustness, we find nursing facilities that are profit-seekers, chain members, pay higher than average wage rates, accept more intensive-care residents and obtain a larger than average portion of their funding from public sources are highly vulnerable to negative changes in regulatory policy decisions on Medicare and Medicaid reimbursement. Larger facilities having higher than average occupancy rates and quality of care are less susceptible to adverse decisions. The model correctly classifies a facility as either bankrupt or solvent in about 75% of cases. We also examine the duration of bankruptcy using accelerated failure-time models. It appears that the duration of bankruptcy depends on location, out-of-state ownership, length of ownership, volume of resident days supplied, total cost and proportion of revenues from Medicaid.