Short term persistence in mutual fund market timing and stock selection abilities

Using daily return data from 448 actively managed mutual funds over a recent 9-year period, we look for persistence, over two consecutive quarters, in the ability of funds to select individual stocks and time the market. That is, we decompose overall fund performance into excess returns resulting from stock selection and timing abilities and we separately test for persistence in each ability. We find persistence in the ability to time the market only among well performing funds and in the ability to select stocks only among the very best and worst performers. The existing literature patterns appear only when funds are ranked by their overall performance, which includes stock selection, market timing and fees. With respect to overall performance, there is persistence among most poorly performing and only the top well performing funds. Furthermore, the profitability of a winner-picking strategy depends on the rebalancing frequency and potentially the size of the investment. Small investors cannot profit, whereas large investors can take advantage of the class-A share fee structure and realize positive abnormal returns by annually rebalancing their portfolios.     

The stiglitz-ellerman rejoinder: Our main criticisms remain unanswered

The rejoinder by the US economists Joseph Stiglitz and David Ellerman (S and E) is welcome above all as a clear acknowledgement that our interpretation of what we called the "Stiglitz Perspective" (but what we apparently should now call the "Stiglitz-Ellerman Perspective") is correct. However, S and E make a determined attempt to belittle the differences between their and our perspectives. This they do by emphasising broad agreement between us on the drawbacks of voucher privatization while largely ignoring our main criticisms: that they overlook the critical role of new non-state, mainly private, firms in successful transitions'; that they underplay the pre-transition causes of the transformational recession in the former Soviet Union (FSU) and Central Europe (CE); and that they chose China rather than Central European and Baltic countries, for the purpose of assessing reforms and performance in Russia and the Commonwealth of Independent States (CIS). S and E continue to argue as if the choice of methods for privatising state-owned enterprises (SOEs) has been crucial for the success or otherwise of transition - hence their singular preoccupation with privatisation to insiders. We wish to change the terms of this debate by drawing attention to the evidence which shows that what really matters are de novo firms and therefore the reforms and policies which foster their growth.     

The dissent voting behaviour of central bankers: what do we really know?

We examine the determinants of the dissent in central bank boards voting records about monetary policy rates in the Czech Republic, Hungary, Sweden, the UK and the US. In contrast to previous studies, we consider 25 different macroeconomic, financial, institutional, psychological or preference-related factors jointly and use Bayesian model averaging (BMA) to formally assess the attendant model uncertainty. We find that the rate of dissent is between 5% and 20% for the examined central banks. Our results suggest that most of the examined regressors, including factors that capture the effects of inflation and output, are not robust determinants of voting dissent. This result suggests that unobserved characteristics of central bankers and different communication strategies drive the dissent, rather than the level of macroeconomic uncertainty.     

Mixed systems with minimal and maximal lifetime variances

We consider the mixed systems composed of a fixed number of components whose lifetimes are i.i.d. with a known distribution which has a positive and finite variance. We show that a certain of the k-out-of-n systems has the minimal lifetime variance, and the maximal one is attained by a mixture of series and parallel systems. The number of the k-out-of-n system, and the probability weights of the mixture depend on the first two moments of order statistics of the parent distribution of the component lifetimes. We also show methods of calculating extreme system lifetime variances under various restrictions on the system lifetime expectations, and vice versa.     

Patriotic name bias and stock returns

Companies whose names contain the words “America(n)” or “USA” earn positive abnormal returns of about 6% per annum during World War II, the Korean War, and the War on Terrorism. These abnormal returns are not realized immediately upon the outbreak of each of the wars but are accumulated gradually during wartime. Given that no such effect is observed for the Vietnam War, we hypothesize that major, victorious wars arouse investors' patriotic feelings and cause them to gradually and perhaps subconsciously gravitate toward stocks whose name has a patriotic flavor.     

Financial distress of companies in Poland

The study examines main determinants of financial distress of companies in Poland during the recent transformation period. Data compose a sample of 1995–97 annual financial statements of 200 unlisted companies in Poland. Degree of financial distress is expressed either by the binomial variable or by the trinomial ordered variable. The attempted models (binomial and trinomial logit) explain the distress variable for 1997 by the financial indicators evaluated on the basis of financial statements from previous years. The results are sensitive to the choice of explanatory variables in the models. The forecast accuracy of the estimated models lies in the range of 80–90 percent. In the second half of the 1990's, the financial condition of companies in Poland was determined by the degree of liquidity, profitability, and the financial leverage variables.     

Front Line Work In the ‘New Model Service Firm’: Australian and Japanese Comparisons

This article assesses the claims of the management literature regarding two important aspects of front line service work; job content and relations with the immediate supervisor. It does this, firstly, by examining the relevant research literatures and, secondly, by presenting evidence from two firms based in Australia and from one based in Japan. These firms were chosen as approximating to the ideal type of the ‘new model service firm’. Evidence on knowledge, skills and creativity in the three sites suggests important commonalities with, and differences from, the ‘routine worker’ ideal type. the major difference lay in the considerable amount of internal contextual knowledge that was required in the role. Relations with the immediate supervisor were examined by focusing on the social relations of control and learning. the evidence on control and learning, cumulatively, indicated a tendency towards the supervisor adopting less of a direct control role and adopting more of a hierarchical teaching role.     

Continuous-time term structure models: Forward measure approach

The problem of term structure of interest rates modelling is considered in a continuous-time framework. The emphasis is on the bond prices, forward bond prices and so-called LIBOR rates, rather than on the instantaneous continuously compounded rates as in most traditional models. Forward and spot probability measures are introduced in this general set-up. Two conditions of no-arbitrage between bonds and cash are examined. A process of savings account implied by an arbitrage-free family of bond prices is identified by means of a multiplicative decomposition of semimartingales. The uniqueness of an implied savings account is established under fairly general conditions. The notion of a family of forward processes is introduced, and the existence of an associated arbitrage-free family of bond prices is examined. A straightforward construction of a lognormal model of forward LIBOR rates, based on the backward induction, is presented.     

Evaluating changes in the monetary transmission mechanism in the Czech Republic

We investigate the evolution of the monetary policy transmission mechanism in the Czech Republic over the course of the 1996–2010 time period through the use of a time-varying parameters Bayesian vector autoregression model with stochastic volatility. We evaluate whether the response of GDP and the price level to exchange rate or interest rate shocks has changed over time, focusing on the period of the recent financial crisis. Our results suggest that prices have become increasingly responsive to monetary policy shocks. However, in terms of credible intervals, the stability of the monetary policy transmission mechanism in the Czech Republic cannot be rejected. Furthermore, it is demonstrated that the exchange rate pass-through has largely remained stable over time.     

Cross channel effects of search engine advertising on brick & mortar retail sales: Meta analysis of large scale field experiments on Google.com

We investigate the cross channel effects of search engine advertising on Google.com on sales in brick and mortar retail stores. Obtaining causal and actionable estimates in this context is challenging: Brick and mortar store sales vary widely on a weekly basis; offline media dominate the marketing budget; search advertising and demand are contemporaneously correlated; and estimates have to be credible to overcome agency issues between the online and offline marketing groups. We report on a meta-analysis of a population of 15 independent field experiments, in which 13 well-known U.S. multi-channel retailers spent over $4 Million in incremental search advertising. In test markets category keywords were maintained in positions 1-3 for 76 product categories with no search advertising on these keywords in the control markets. Outcomes measured include sales in the advertised categories, total store sales and Return on Ad Spending. We estimate the average effect of each outcome for this population of experiments using a Hierarchical Bayesian (HB) model. The estimates from the HB model provide causal evidence that increasing search engine advertising on broad keywords on Google.com had a positive effect on sales in brick and mortar stores for the advertised categories for this population of retailers. There also was a positive effect on total store sales. Hence the increase in sales in the advertised categories was incremental to the retailer net of any sales borrowed from non-advertised categories. The total store sales increase was a meaningful improvement compared to the baseline sales growth rates. The average Return on Ad Spend (ROAS) is positive, but does not breakeven on average although several retailers achieved or exceeded break-even based only on brick and mortar sales. We examine the robustness of our findings to alternative assumptions about the data specific to this set of experiments. Our estimates suggest online and offline are linked markets, that media planners should account for the offline effects in the planning and execution of search advertising campaigns, and that these effects should be adjusted by category and retailer. Extensive replication and a unique research protocol ensure that our results are general and credible.