Managing wealth: A new approach

This paper investigates how well ‘mid-worth’ individuals are served by the financial services industry in the UK. It defines and analyses the new phenomenon of ‘mid-worth’ individuals: the rapid growth in the number of people with significant liquid assets available for investment. It then considers how well these individuals are served by the most common investment products and concludes that most individuals are so poorly served that the result is seriously damaging to their long-term financial health. The paper investigates the main reasons for this: a lack of understanding of the relationship between risk and return, and what can only be described as a conspiracy of ‘mystification’, resulting in customers standing even less chance of understanding the risk-return relationship. The consequence of this is that investors end up paying far too much for ‘heavily packaged’ investment products with the result that they may find they have much less money available to them when they need it most—in old age. The research for this paper was sponsored by Close Wealth Management.     

Stock options as a means of adding value in business markets: A powerful potential communication vehicle for business marketing managers

In this paper, the authors argue that stock options are a highly effective marketing communications (marcoms) medium, which due to their influence on the profitability of the organisation, possess characteristics that should be included in strategic marketing planning for financial and non-financial organisations. This study aims to test whether stock options can be used as a means for marketing strategists to build effective branding and loyalty programmes.It is argued that the strategic role of stock options in marketing decision making adds value in business markets. Stock options play a unique role in marketing and in the achievement of corporate goals and targets. The study is supported by the findings of a questionnaire survey based on a sample of Greek companies, grouped into two categories. The first category consists of the most profitable organisations supplying business markets, listed on the Athens Stock Exchange (ASE) and the second consists of large financial organisations.     

Budget deficits and interest rates in Germany

This study uses the basic tools of cointegration to determine whether there exists a long-term relationship between budget deficits and nominal interest rates in Germany. Maximum eigenvalue, trace, and likelihood ratio tests all affirm that there does apparently exist a long-term relationship between the budget deficit and the nominal interest rate. Accordingly, regression studies and formal causality tests have a reasonable basis for investigating whether budget deficits lead to higher interest rates in Germany.     

Speculative attacks and currency crises: The Mexican experience

By using data from the Mexican economy, this paper estimates a speculative attack model of currency crises in order to identify the role of macroeconomic fundamentals and early warning signals of a potential currency crisis. A deterioration in fundamentals appears to generate high one-step-ahead probabilities for the observed regime changes during the sample period 1982–1994. Particularly, foreign reserve losses, expansionary output, monetary and fiscal policies, an increase in inflation differentials and the share of short-term foreign currency-indexed debt, and an appreciation of the real exchange rate appear to have contributed to the speculative pressures and the associated regime changes.     

The European monetary system: Crisis and future

This paper examines the immediate and the fundamental causes of the crsis that hit the European Monetary System in September 1992 and August 1993 and the obstacles that European countries face in trying to achieve their ultimate goal of full monetary union, including a single currency and a union-wide central bank by the end of this decade. The conclusion that follows from the paper is that achieving full monetary union in Europe by the end of this decade is certainly possible but not certain. A major recession or other shock affecting asymmetrically more than one large member nation could derail or at least delay the process of monetary union. Although major benefits are expected to flow from monetary union in Europe, even more important are the political benefits that such a union would provide to its members.     

The behavior of foreign currency holdings during currency crises: Causes and consequences

This paper evaluates the current literature on dollarization and finds it to be disappointing in its ability to explain many of the prevailling features of the dollarizations experiences in Latin America, Eastern Europe and the Former Soviet Union. The paper takes a different approach to the standard empirical studies, which usually extend a demand for money function to include international variables, by analyzing foreign currency holding behaviors in response to the sustainability and credibility of the exchange rate regime. The results are very promising and explain some of the previously unexplained phenomena which arise from dollarization.     

Sequential control of time series by functionals of kernal-weighted empirical processes under local alternatives

Motivated in part by applications in model selection in statistical genetics and sequential monitoring of financial data, we study an empirical process framework for a class of stopping rules which rely on kernel-weighted averages of past data. We are interested in the asymptotic distribution for time series data and an analysis of the joint influence of the smoothing policy and the alternative defining the deviation from the null model (in-control state). We employ a certain type of local alternative which provides meaningful insights. Our results hold true for short memory processes which satisfy a weak mixing condition. By relying on an empirical process framework we obtain both asymptotic laws for the classical fixed sample design and the sequential monitoring design. As a by-product we establish the asymptotic distribution of the Nadaraya-Watson kernel smoother when the regressors do not get dense as the sample size increases.Acknowledgements The author is grateful to two anonymous referees for their constructive comments, which improved the paper. One referee draws my attention to Lifshits paper. The financial support of the Collaborative Research Centre Reduction of Complexity in Multivariate Data Structures (SFB 475) of the German Research Foundation (DFG) is greatly acknowledged.     

Theoretical perspectives on strategic environmental management

Strategic Environmental Management (SEM) incorporates into firms' core strategies the transformation of products and processes that they believe an environmentally concerned society will increasingly demand. Significant threads have to do with the discovery of cost savings and market opportunities from reducing environmental impacts. SEM, like the environmental regulation hypothesis associated with Michael Porter, implies that society's efforts to reduce external environmental costs often lead to identification of hitherto-ignored or undeveloped profit possibilities. This would be surprising from the standpoint of neoclassical economic theory, to the extent that SEM utilizes available information about the potential costs and benefits of projects. Within the framework of evolutionary, capabilities-based theories of the firm, however, this discovery and its exploitation in SEM make perfect sense. Capabilities theory would imply that firms' intrinsic path dependence may previously have obscured such opportunities. This paper examines the theory of SEM, its implications for neoclassical and capabilities theories of the firm, and survey results drawn from the author's work with member companies in a regional pollution prevention roundtable. RID="*" IDI have enjoyed the able and insightful research assistance of Justin Vernon. Cooperation from the companies that participated in the survey, and financial support from Allegheny College and its Center for Economic and Environmental Development, are gratefully acknowledged. Reviewers for this journal provided numerous, valuable suggestions. Responsibility for the material herein remains mine alone.