The Determinants of Subprime Mortgage Performance Following a Loan Modification

We use vector error correction models to examine the interdependence between the high and the low price tiers during the latest housing market boom and bust. For 118 of the 364 US statistical areas analyzed, the tiered price indexes are bound by a long-run relationship. In general, low tier homes appreciated more than high tier homes in the past two decades. In contrast to previous periods of high volatility, however, low tier homes appreciated more during the boom and lost more value during the bust of the market. We find a shift in the long-run equilibrium during the bubble —the cointegration parameter that ties the tiers together is greater in absolute value during the bubble period compared to the periods of more moderate appreciation and depreciation rates. Moreover, the shift in the long-run equilibrium can be explained by differences in subprime originations across housing markets. We also find that short run price dynamics is driven by momentum in both segments of the market.     

Are There Rational Bubbles in REITs? New Evidence from a Complex Systems Approach

This study applies a complex systems approach to test for the presence of rational bubbles in the Equity REITs market. The applied model is based on theoretical implications of the evolution of prices under rational bubble regimes. The advantage of the approach is twofold. The model is able to detect rational bubbles while they rise and to predict the most likely time of their collapse. We apply the model to daily price data on U.S. Equity REITs from 1989 to 2011. Our findings suggest the existence of a bubble for the period of 2003 to 2007. Tests for sub-markets reveal that the bubble developed in the Residential REITs market, but not in the Office REITs market.     

The pricing of temperature futures at the Chicago Mercantile Exchange

This paper analyzes observed prices of US temperature futures at the Chicago Mercantile Exchange (CME). Results show that an index modeling approach without detrending captures the prices exceptionally well. Moreover, weather forecasts significantly influence prices up to 11 days ahead. It is shown that valuations of temperature futures relying on a model without detrending yield biased valuations by overpricing winter contracts and underpricing summer contracts. Several trading strategies are devised to exploit the mispricing observed at the CME and to demonstrate that speculating on temperature futures can not only generate high overall returns, but also perform well on a risk-adjusted basis.     

Managing foreign R&D laboratories in China

This paper focuses on the management of R&D units established by foreign companies in China, investigating R&D missions, site build-up, integration with the parent organization, and overall performance measurement. The research is based on 37 qualitative expert interviews with local R&D directors and managers conducted between 2001 and 2004, using a semi-structured research questionnaire, and semi-quantitative research done on 199 foreign R&D labs in China. Cultural influences on R&D management, location advantages, expatriate involvement, and organizational evolution of local laboratories are discussed. We find that foreign R&D laboratories in China are not only important vehicles for local market development but also increasingly important sources of locally developed technology.     

A Framework for Market Discipline in Bank Regulatory Design

Abstract:   Given current debates on the future direction of regulatory design, the first objective of this paper is to contextualise the issues surrounding bank market discipline. Accordingly, the paper raises awareness of the current key themes within incentive‐based regulatory design and analyses the theory underlying market discipline. This leads to the creation of a theoretical framework of market discipline, which provides a powerful tool for understanding the conditions necessary for effective market discipline and for assessing the findings of market discipline‐related empirical research. The second objective is to emphasise the suitability of the theoretical framework for debates on contemporary market discipline and aiding future bank regulatory policy design, in particular, how to incorporate suitable, incentive mechanisms in international banking regulation.     

Structure and characteristics of top management teams as antecedents of outside executive appointments: a three-country study

We examine top management team (TMT) structure and characteristics as potential endogenous antecedents of outside appointments of non-CEO senior executives, an executive category that has not yet received significant research attention despite its importance for corporate outcomes. In doing so, we draw on human capital and similarity-attraction theories, thus combining two complementary managerial decision rationales. Additionally addressing the pressing need for cross-country TMT research, this study empirically analyzes a unique sample of 880 non-CEO TMT appointments at large non-financial corporations in France, Germany and the UK between 2006 and 2010. Overall, the results show that TMT endogenous factors such as structure, new executive characteristics and incumbent TMT characteristics may hold significant explanatory power for new executives' origin. Beyond the individual explanatory factors, the comparative nature of the study reveals three distinct country profiles of the degree by which the two theoretical rationales appear to influence appointment decisions.     

Sanctions for repeat offenders: a question of wealth?

In a two‐period standard law‐enforcement model, individuals observe or break the law. In addition, individuals may offend accidentally. When sanctions are limited by individual wealth constraints, the government chooses appropriate sanctions for first and repeat offenders and the level of monitoring. We assume a welfare‐oriented government and derive subgame‐perfect equilibria for constant, increasing and decreasing sanctions depending on the individual wealth level.     

Banking regulation in the European union: Some issues and concerns

Banking regulation and supervision in the EU today has to be conducted in accordance with the Single Market legislation promulgated by the European Commission. The creation of a European Single Market in financial services, which was provided for in the Treaty of Rome of 1957 and in the Single European Act of July 1987 which revised it, was originally planned for completion by the end of 1992, although the final pieces of the jigsaw were not in place until the beginning of 1996. This article explains what the European Single Market in financial services represents, the rationale for it, and the measures, including the use of legally binding Directives, adopted to deliver it on the banking front. It concludes with a discussion and analysis of some of the issues and concerns which implementation of the Single Market program for banking services has given rise to, with special emphasis being placed on the evolution of minimum capital standards for banks.