A Quantitative Approach to National Culture and Employment Law

A quantitative approach was used to investigate whether the values underlying countries’ national cultures were related to the strictness of their employment laws. The relationship between these constructs was found to be a statistical artifact of the impact of the historical roots of the various countries’ legal systems. An earlier version of this paper was presented at the annual meeting of the Administrative Sciences Association of Canada, Toronto, May 2005.     

On the Observability of Plans in Dynamic Choice Problems Involving Risk: Comment about J. Hey

We show that in dynamic choice problems, the observability of a decision maker's first move does reveal his plan for the dynamic choice problem, only under strong restrictions about the structure of his preferences. These restrictions imply consequentialism which in turn implies dynamic consistency, a condition which is not necessarily satisfied by experimental subjects.     

Tipping

We investigate the trading of institutions immediately beforethe release of analysts’ initial buy recommendations.We document abnormally high institutional trading volume andbuying beginning five days before recommendations are publiclyreleased. Abnormal buying is related to initiation characteristicsthat would require knowledge of the content of the report—suchas the identity of the analyst and brokerage firm, and whetherthe recommendation is a strong buy. We confirm that institutionsbuying before the recommendation release earn abnormal profits.Our results are consistent with institutional traders receivingtips regarding the contents of forthcoming analysts’ reports.(JEL G14, G18, G24)     

Uncovering the value of planning in new venture creation: A process and contingency perspective

Researchers are engaged in a major debate on the value of business planning in new venture creation. This study suggests a potential resolution by applying a process and contingency perspective. The results indicate that planning is beneficial, yet planning processes need to be governed by different planning regimes depending on the type of founding environment. In highly dynamic environments, entrepreneurs will get most value from planning when they focus on select planning activities, and speed up the planning task. In less dynamic environments, they are better of pursuing a munificent approach to planning. The analysis thus reveals a major component of theorization on business planning that has been neglected in previous discussions. As for entrepreneurship teaching and practice, the findings suggest the importance of an adaptive, “toolkit” approach to business planning. Hypotheses were developed based on information-processing and decision-making theory and were tested with an ordered probit analysis on a sample of 100 start-ups backed by venture capital.     

Order Flow and Liquidity around NYSE Trading Halts

We study order flow and liquidity around NYSE trading halts. We find that market and limit order submissions and cancellations increase significantly during trading halts, that a large proportion of the limit order book at the reopen is composed of orders submitted during the halt, and that the market-clearing price at the reopen is a good predictor of future prices. Depth near the quotes is unusually low around trading halts, though specialists and/or floor traders appear to provide additional liquidity at these times. Finally, specialists appear to 'spread the quote' prior to imbalance halts to convey information to market participants.     

Turning Points in the U.S. Civil War: Views from the Grayback Market

This article introduces a new high-frequency time series of Confederate money prices taken from the newspapers of Richmond and leading cities in the Eastern Confederacy. The new grayback series is tested for turning points. The empirical analysis suggests that turning points in the Confederate grayback market were different from those identified in the Northern greenback market by Willard, Guinnane, and Rosen (1996). It appears that war did not always have symmetric effects on Northern and Southern money prices. Financial and commercial matters fluctuate under the successes and reverses of the war like ebb and tide, and it is not to be wondered that under the great military events that are now transpiring [Gettysburg], there should be a suspension of operations in [gold] trade. (Richmond Examiner July 9. 1863. p. 1)     

TAXING LAND VALUE IS JUST ANOTHER QUESTIONABLE TAX

There has recently been much public debate about the introduction of a land value tax. To its supporters such a tax promises to achieve several goals simultaneously. On closer inspection, however, the arguments in favour of land value taxation are not convincing. On the contrary, the economic foundations on which proponents of this tax rely are dubious, and there are significant legal, moral and practical problems with land value taxation.     

BESSEL PROCESSES, ASIAN OPTIONS, AND PERPETUITIES

Using Bessel processes, one can solve several open problems involving the integral of an exponential of Brownian motion. This point will be illustrated with three examples. The first one is a formula for the Laplace transform of an Asian option which is "out of the money." The second example concerns volatility misspecification in portfolio insurance strategies, when the stochastic volatility is represented by the Hull and White model. The third one is the valuation of perpetuities or annuities under stochastic interest rates within the Cox-Ingersoll-Ross framework. Moreover, without using time changes or Bessel processes, but only simple probabilistic methods, we obtain further results about Asian options: the computation of the moments of all orders of an arithmetic average of geometric Brownian motion; the property that, in contrast with most of what has been written so far, the Asian option may be more expensive than the standard option (e.g., options on currencies or oil spreads); and a simple, closed-form expression of the Asian option price when the option is "in the money," thereby illuminating the impact on the Asian option price of the revealed underlying asset price as time goes by. This formula has an interesting resemblance with the Black-Scholes formula, even though the comparison cannot be carried too far.