Risk management of precious metals

This paper examines volatility and correlation dynamics in price returns of gold, silver, platinum and palladium, and explores the corresponding risk management implications for market risk and hedging. Value-at-Risk (VaR) is used to analyze the downside market risk associated with investments in precious metals, and to design optimal risk management strategies. We compute the VaR for major precious metals using the calibrated RiskMetrics, different GARCH models, and the semi-parametric Filtered Historical Simulation approach. The best approach for estimating VaR based on conditional and unconditional statistical tests is documented. The economic importance of the results is highlighted by assessing the daily capital charges from the estimated VaRs.     

Herding by foreign investors and emerging market equity returns: Evidence from Korea

This paper studies the effect of herding by foreign investors on stock returns in the Korean market. We conduct both pre and post-liberalization analyses and utilize a three-stage least squares analysis in order to control for the simultaneous relationship. We find evidence of a significant impact of foreign investor herding on stock returns in addition to intra-year positive feedback trading by foreign investors. However, changes in domestic institutional ownership do not have any significant effect on stock returns. In addition, foreign investors tend to buy/sell shares that domestic institutions sell/buy in the herding year.     

Managerial attitudes to social responsibility: A comparative study in India and Britain

Changes in the understanding of the relationship between business and society have led to increased interest in and discussion of the notion of corporate social responsibility.This paper offers an empirical analysis of the perceptions of top executives in the West Midlands, U.K., and in Delhi, District Ghaziabad, India, of the notion of corporate social responsibility. Organisational changes and involvement in social action programmes, and problems of implementing and monitoring Social Responsibility in two cultures, India and Britain, were explored.The results of this study are compared with results obtained from studies on American companies and some significant similarities and differences are noted.Finally, some of the implications of the acceptance of the relevance of social responsibility to industry and the social involvement of industry are discussed. A. Farooq Khan is Associate Professor at the Faculty of Commerce of the Aligarh Muslim University. He has been awarded the Common-Wealth Scholarship (1975–1978) and he visited Hungary under the Indo-Hungarian Cultural Exchange Programme (1984–1985). He has published over thirty papers and two books: Business and Society, S. Chand & Co. Ramnagar, New Delhi, 1985; and Social Responsibility and Management, Faculty of Commerce Publication, Aligarh, 1983.Adrian Atkinson is Managing Director of Human Factor Consultants (UK) Ltd.     

Intertemporally Dependent Preferences and the Welfare Cost of Capital Income Taxation

The welfare cost of capital income taxation is analyzed utilizing intertemporally dependent preference operationalized using a variable rate of time preference. It is shown that if households exhibit increasing marginal impatience, then the welfare cost of capital income taxation is inversely related to the elasticity of the rate of time preference with respect to consumption. Therefore, the welfare cost of capital income taxation reported using time additive preferences may not be robust. Numerical examples show that the use of time additive preferences could result in the welfare cost of capital income taxation to be overestimated by as much as 25%.     

Predictors for total hospital and cardiology cost claims among patients with atrial fibrillation initiating dabigatran or acenocoumarol in The Netherlands

Aims: The prevalence of atrial fibrillation (AF) has increased over the past years due to aging of the population, and healthcare costs associated with AF reflect a significant financial burden. The aim of this study was to explore predictors for the real-world AF-related in-hospital costs in patients that recently initiated anticoagulation with acenocoumarol or dabigatran.

Methods: Predictors for claimed total hospital care costs and cardiology costs in AF patients were explored by using hospital financial claims data from propensity score matched patient groups in a large Dutch community hospital. This study analyzed the total dataset (n?=?766) and carried out a secondary analysis for all matched pairs of anticoagulation naïve AF patients (n?=?590) by ordinal regression.

Results: Dabigatran was a predictor for significantly lower cardiology and total hospital care costs (Odds Ratio [OR]?=?0.43, 95% confidence interval (CI)?=?0.33–0.57; and OR?=?0.60, 95% CI?=?0.46–0.79, respectively). Female gender was a predictor for lower total hospital care costs. Predictors for an increase in total hospital care costs were the occurrence of stroke or systemic embolism, major bleeding, and minor bleeding. The costs predictors were comparable when limiting the analysis to patients that were anticoagulation naïve. Age and CHA₂DS₂-VASc were not predictors for either cardiology or total hospital care costs in both analyses.

Conclusion: Dabigatran treatment was as a predictor for lower cardiology costs and lower total hospital care costs in AF patients that initiated oral anticoagulation.     

Structured problem solving for materiel managers

A structured approach to problem solving and solution documentation is one of the keys to continuous improvement. Without it, it is quite possible to solve the wrong problem, to solve the right problem in the wrong way, or (maybe worst of all) to solve the same problem over and over again. Companies that have figured out how to solve the right problems in the right way, once and for all, will ultimately move forward much faster than their competitors.     

A note on causality and the structure-performance controversy

Interindustry, cross-sectional studies of structure and performance assume, according to the market power doctrine, that structural variables are exogenous to performance, though this notion has been questioned at different times by a number of industrial organization economists. This study uses a time series approach to test the validity of this notion at the line of business level. Sims' causality tests were performed for three separate firms and the interrelationships over time between the firm's market share and rate of return were estimated (i.e., do changes in a firm's market share occur prior to changes in the firm's rate of return or do changes in the firm's rate of return occur prior to changes in a firm's market share). Two of the three firms examined failed to exhibit the unidirectional causality assumed by the conventional structure-performance paradigm. These results, even though derived from a limited number of undiversified firms, suggest that the issue of causality must be settled before the functional form of the model can be specified.     

Estimating Volatility Persistence in Oil Prices Under Structural Breaks

Policy makers and financial market participants are interested in knowing how shocks affect the volatility of oil prices over time. We accurately compute the volatility persistence by incorporating endogenously determined structural breaks into a GARCH model. Contrary to previous findings, we find that oil shocks dissipate very quickly but have a strong initial impact. Understanding this behavior is not only important for derivative valuation and hedging decisions but for broader financial markets and the overall economy, for which there are significant consequences.