Inflation Expectations and Risk Premiums in an Arbitrage‐Free Model of Nominal and Real Bond Yields

Differences between yields on comparable‐maturity U.S. Treasury nominal and real debt, the so‐called breakeven inflation (BEI) rates, are widely used indicators of inflation expectations. However, better measures of inflation expectations could be obtained by subtracting inflation risk premiums (IRP) from the BEI rates. We provide such decompositions using an affine arbitrage‐free model of the term structure that captures the pricing of both nominal and real Treasury securities. Our empirical results suggest that long‐term inflation expectations have been well anchored over the past few years, and IRP, although volatile, have been close to zero on average.     

The appropriateness of default investment options in defined contribution plans: Australian evidence

For participants in defined contribution (DC) plans who refrain from exercising investment choice, plan contributions are invested following the default investment option of their respective plans. Since default investment options of different plans vary widely in terms of their benchmark asset allocation, the most important determinant of investment performance, participants enrolled in these options face significantly different wealth outcomes at retirement. This paper simulates the terminal wealth outcomes under different static asset allocation strategies to evaluate their relative appeal as default investment choice in DC plans. We find that strategies with low or moderate allocation to stocks are consistently outperformed in terms of upside potential of exceeding the participant's wealth accumulation target at retirement as well as downside risk of falling below that target outcome by aggressive strategies whose allocation to stocks approach 100%. The risk of extremely adverse wealth outcomes for plan participants also does not appear to be very sensitive to asset allocation. Our evidence suggests the appropriateness of strategies heavily tilted towards stocks to be nominated as default investment options in DC plans unless plan providers emphasize predictability of wealth outcomes over adequacy of retirement wealth.     

The Demand for Life Insurance Policy Loans

Previous research has examined the demand for life insurance policy loans using aggregate policy loan data. In contrast, we use a detailed household survey data set containing life insurance and policy loan information to alternatively, and in some cases more directly, examine the four hypotheses traditionally associated with policy loan demand. Our research provides the first U.S. evidence (in the post–World War II period) in support of the policy loan emergency fund hypothesis. In particular, we find that the more detailed emergency fund proxies used here reveal a significantly positive relation between loan demand and recent expense or income shocks.     

Efficiency in the National Basketball Association: a stochastic frontier approach with panel data

We investigate how closely NBA teams play up to their potential. We find that shooting, rebounding, stealing the ball and blocking shots raise the number of potential wins while turnovers lower it. We also learn that better coaching and defensive prowess raise a team's win efficiency. Copyright © 2006 John Wiley & Sons, Ltd.     

Does knowledge explain trust behaviors and outcomes? The different influences of initial knowledge and experiential knowledge on personal trust interactions

This paper examines the influences of initial knowledge and experiential knowledge on trust behaviors and trust outcomes, respectively, at an interpersonal level. We use an experimental dynamic trust game, and our results show that (1) the initial knowledge that exists a priori between a trustor and a trustee helps to explain the trustor's trust behaviors toward the trustee, and (2) the experiential knowledge gained directly by a trustor during a specific trust interaction with a trustee influences the trust outcome, i.e. the difference between the original expectations of the trustor and the subsequent trust behaviors. Our results contribute to human resource literature by clarifying the specific influences of different types of knowledge on interpersonal trust relationships (e.g. between managers and employees) and by supplementing the traditional notion that trust within a firm develops slowly by showing that personal expectations have an immediate and important influence on trust output.     

The Value Relevance of Greenhouse Gas Emissions Allowances: An Exploratory Study in the Related United States SO2 Market

This paper examines the valuation implications of greenhouse gas (GHG) emissions allowances. We posit that the value of a firm's bank of emission allowances has two components that are likely to be positively valued by the capital market: (1) an asset value component; and (2) a real option value component. Since the necessary data to examine this research hypothesis in the setting of GHG emission allowances is not yet available, we test our conjecture by examining the value relevance of sulfur dioxide (SO₂) emission allowances held by US electric utilities. Empirical results reveal that the capital market assigns a positive price to a firm's bank of SO₂ emission allowances, consistent with the argument that emission allowances have, at least, an asset value component that is assigned a positive price by the market. We also find weak evidence consistent with the market assigning a real option value to the allowance banks.     

Human resource management: when research confronts theory

Research exploring the relationship between human resource management (HRM) and outcomes such as corporate performance encounters a range of significant practical difficulties. Using two surveys as illustrative cases, this paper examines the practical challenges of operationalizing and measuring HRM, measuring the various outcomes and assessing the relationship between HRM and corporate performance. Despite the problems, it is suggested that significant progress has been made. While possible solutions to some of the problems are put forward, it is argued that a key requirement remains more clearly specified theory, particularly theory about the nature of HRM.