Individualism,Uncertainty Avoidance,and Earnings Momentum in International Markets

This study examines whether cultural dimensions such as individualism and uncertainty avoidance can explain the variation in the profitability of the earnings momentum strategies in international markets. Using the time‐varying cultural indices of Tang and Koveos (2008) for 30,383 firms from 41 countries over the period 1995–2008, we show that the level of individualism in a country is positively associated and the level of uncertainty avoidance is negatively associated with earnings momentum profits. Our findings are robust to the inclusion of a comprehensive set of control variables and alternative cultural metrics. The central message is that we emphasize the necessity to go beyond the assumption of perfect rationality and to account for innate differences among international investors to explain how accounting information is incorporated into stock prices. We recommend that cultural dimensions be included in cross‐country research to account for innate differences among international investors.     

The economic significance of conditional skewness in index option markets

This study examines whether conditional skewness forecasts of the underlying asset returns can be used to trade profitably in the index options market. The results indicate that a more general skewness‐based option‐pricing model can generate better trading performance for strip and strap trades. The results show that conditional skewness model forecasts, when combined with forward‐looking option implied volatilities, can significantly improve the performance of skewness‐based trades but trading costs considerably weaken the profitability of index option strategies. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:378–406, 2010     

Size Does Matter: Technical and Scale Efficiency in Indian State Tax Jurisdictions

Data Envelopment Analysis (DEA) is used to measure tax efficiency in 15Indian states from 1980/81 to 1992/93. Tax efficiency is shown to be conditional on state gross domestic product (SDP), agriculture's share in state SDP,and a poverty index. The considerable remaining efficiency differences areattributable to the small size of some tax jurisdiction rather than to technical inefficiency. Multilateral Malmquist tax indices show that six of the states were consistently efficient, while three were consistently inefficient. Tax efficiency grew at an average annual rate of 3.9% until 1986/87, but growth ceased after that date for all but two states.     

Adopting bioenergy crops: Does farmers’ attitude toward loss matter?

We apply prospect theory to examining farmers’ economic incentives to divert a share of their land to bioenergy crops (miscanthus and switchgrass in this study). Numerical simulation is conducted for 1,919 rain‐fed U.S. counties to identify the impact of loss aversion on bioenergy crop adoption, and how this impact is influenced by biomass price, discount rate, credit constraint status, and policy instruments. Results show that ignoring farmer's loss aversion causes overestimation of miscanthus production but underestimation of switchgrass production, particularly when farmers are credit constrained and have a high discount rate. We find that establishment cost subsidy induces more miscanthus production whereas subsidized energy crop insurance induces more switchgrass production. The efficacy of these two policy instruments, measured by biomass production increased by per dollar of government outlay, depends on the magnitude of farmers’ loss aversion and discount rate.     

Conservation capital and sustainable economic growth

An endogenous growth model, which links pollution to ineffectiveinput-use, is developed to examine the potential for achievingbalanced growth while preserving the environment through investmentin conservation capital. We derive conditions under which individualpreferences for environmental quality and private incentivesfor investment in conservation capital can lead to non-decreasingenvironmental quality with balanced growth even in the absenceof environmental regulations. Additionally, conditions underwhich investment in conservation capital can enable an environmentallyregulated economy to achieve a higher rate of sustainable balancedgrowth than otherwise are analysed.     

The impact of financial development,economic growth,income inequality on poverty: evidence from India

This paper examines the impact of financial development, economic growth and income inequality on poverty in India from 1970 to 2015 by employing the autoregressive distributed lag (ARDL) bounds testing procedure. The findings reveal a robust long-run relationship between financial development, economic growth, inequality and poverty. Results show that financial development and economic growth help in poverty reduction in India, whereas income inequality and inflation aggravate poverty. Empirical evidence of the Granger-causality test supports the presence of unidirectional causality from financial development and economic growth to poverty. Moreover, bidirectional causality exists between inequality and poverty. The present study provides evidence on which the policymakers may proceed with detailed investigation of how specific financial sector policies and interventions can be deployed as effective instruments for achieving favorable economic growth and income distribution. The study recommends that policies geared toward increasing financial development and economic growth should be adopted to reduce the high level of poverty and inequality currently prevailing in India.     

Globalization and Voluntary Environmental Management in Developing Countries

Weak capacity to enforce regulations and sanction violators, and an emphasis on economic growth in developing countries has led to concerns about worsening environmental conditions and the potential for these countries becoming pollution havens for multinational corporations. International environmental standards, voluntary programs, and public disclosure programs have gained popularity because they engage market participants in providing incentives for self-regulation and have the potential to substitute for the lack of domestic regulatory capacity. This paper analyzes the motivations for firms to undertake voluntary environmental management and reviews the empirical evidence on the type of firms participating in such initiatives and their effectiveness in improving environmental performance. We also consider the special case of China that has witnessed dramatic globalization following its acceptance into the World Trade Organization and participation by its firms in global supply chains. We conclude with a discussion of the effectiveness of these efforts as a substitute for weak regulatory and civic society pressures in these countries.     

Oligopolies with (Somewhat) Environmentally Conscious Consumers: Market Equilibrium and Regulatory Intervention

We consider a horizontally differentiated duopoly where consumers care about the product's “greenness.” Firms can be asymmetric: they may differ in the product's intrinsic value and may also differ in their chosen level of greenness. We examine the choice of greenness and the implications of various policy interventions. We show that (i) the choices of product greenness are strategic substitutes, (ii) the high‐intrinsic quality firm produces the greener product, (iii) the low‐quality firm's greenness may increase with the cost of its provision or decrease with consumer willingness to pay for it, (iv) a minimum quality standard (MQS) leads the greener firm to lower its environmental quality and can even reduce average quality, (v) greenness is underprovided even if consumers fully internalize the externality, and (v) an MQS can reduce welfare if the greenness of the high‐quality firm exceeds the MQS, even when environmental quality is underprovided. The effects of policy interventions on profits differ qualitatively across polices and firms: A firm that lobbies for one type of intervention may lobby against another similar one, and a firm may lobby for an intervention while its competitor may lobby against it. A subsidy for the development costs of a green product can financially hurt both firms.     

How is the worker’s weekly hour related to wage over the life cycle? The U.S. evidence

The current study estimates the relationship between weekly hours and weekly wage over the life cycle of a representative sample of workers. Recognizing the endogeneity of these two variables, the study estimates both equations in a simultaneous equations framework and demonstrates that the relationship between weekly hours and weekly wage is not uniform over the worker’s life cycle. These two variables are negatively related when the workers are young and have a positive relationship when they are matured adults. This conclusion remains valid for both men and women. Our robustness check further confirms that workers respond to wage increases differently at different stages of their working career. This has interesting policy implications. Any policy to influence the worker’s hours decision through wage incentive must consider the stage of his/her working career.