Return and price volatility of bonds with different credit risk

This article analyzes the relative price and monthly holding period return volatility of bonds with differing credit risk. The research proceeds by decomposing the causes of price volatility into that due to duration and yield volatility. Lower duration, due to higher coupon rate, and relatively stable yields, due to the behavior of credit risk and risk aversion over the business cycle, may well make lower quality issues such as A and Baa industrials exhibit less volatility than high-quality issues such as Aaa industrials and United States Treasury issues.     

Structural Stability and Models of the Business Cycle

Ever since the pioneering work of Jan Tinbergen, econometric modelers have been aware of the danger that their models can be unstable over time and across policy environments. Work over the past fifteen years has produced a set of statistical procedures for identifying and modeling structural instability. This essay summarizes some of those procedures, uses them to discuss changes in the U.S. business cycle over the past four decades, and surveys some new research that tackles the widespread challenge of structural instability.     

Quality signaling via strikethrough prices

Why do firms often advertise their current price together with their past price? Although consumers expect high quality products to have high prices, such firms may optimally charge lower prices when faced with low production costs. Thus in markets in which quality is difficult to ascertain and costs often fall over time, for example technology products, high quality firms may face a challenge of signaling their quality through current price alone. In this paper we develop a price signaling model in which uninformed consumers draw inference not only from the current price but also the prior period's price (the “strikethrough price”) if the firm chooses to disclose it. We find that a high quality firm benefits from using strikethrough pricing when the prior probability of high quality is relatively low while the probability of costs falling is relatively high.     

The Optimal Redemption Schedule of Serial Municipal Debt: A Dynamic Reconciliation of Revenues,Reinvestment Rates and the Term Structure

The purpose of our research is to developan algorithm that optimally schedules municipaldebt redemptions. It is our hypothesis thatsegmented investor demand, the existing termstructure, the temporal behavior of municipalproject revenues and reinvestment opportunitiesfor interim revenue surpluses are all factorswhich should impact the optimal debt schedulingproblem in a unique and economically meaningfulway. For example, investor preference for shortermaturities and an upward sloping term structureof interest rates should, ceteris paribus,increase the proportion of debt scheduled to berepaid early in the redemption horizon. Ifinvestor demand is limited to a relatively smallgeographic area, such limited demand should bereflected in higher yields. If municipal projectrevenues increase over time then a largerproportion of the debt should be scheduled to beredeemed later. Unfortunately, realisticacknowledgements of the nature of the municipaldebt financing problem create an objectivefunction and a set of constraints which are fartoo complex to yield simple reduced formpresentations of the optimal principalredemptions. Consequently, solutions to theoptimal debt schedule and tests of theconjectures articulated above weresimulated.     

Retailer Dominance and Quality Variation: Observations and a Theoretical Explanation

A number of consumer and business reports suggest that slightly lower quality (or feature) versions of products are being sold through dominant retailers, while higher quality versions continue to be sold through weaker retailers and, customers are uninformed about such subtle differences. We study two intriguing questions based on this phenomenon namely (1.) why are lower quality-lower priced versions sold primarily through dominant retailers and not the weaker retailers? (2.) Why do sometimes the weaker retailers not inform customers about these quality differences? Using a game theoretic model, we find that when quality is noncontractible an increase in retail dominance leads to a decrease in quality offered by the dominant retailer vis-à-vis the weaker retailer. However, we show that the weaker retailer does not have an incentive to advertise its higher quality if quality differences are not too high. This situation arises endogenously when the dominant retailer is not too powerful as compared to the weaker retailer or when retail differentiation is high. The motivation for this result is traced to the threat of increased competition in the event of such advertising.     

A dynamic factor model framework for forecast combination

A panel of ex-ante forecasts of a single time series is modeled as a dynamic factor model, where the conditional expectation is the single unobserved factor. When applied to out-of-sample forecasting, this leads to combination forecasts that are based on methods other than OLS. These methods perform well in a Monte Carlo experiment. These methods are evaluated empirically in a panel of simulated real-time computer-generated univariate forecasts of U.S. macroeconomic time series.     

Interorganizational teams as boundary spanners between supplier and customer companies

Extant research has largely ignored the phenomenon of interorganizational teams, which consist of members from both supplier and customer companies. This study examines the degree to which team interorganizationality influences team performance in a business-to-business context. On the basis of resource-dependence theory and boundary theory, the author argues that team interorganizationality positively influences team effectiveness, particularly when uncertainty is high. The hypotheses testing is based on multiple informant data collected from members and leaders of 225 teams in various industries. The results show the positive influence of team interorganizationality on team effectiveness. In addition, uncertainty-related moderator variables (company-related, market-related, and technological uncertainty) strengthen the link between team interorganizationality and team effectiveness. Ruth Maria Stock (ruth.stock@uni-hohenheim.de) is a professor of business administration and management at the University of Stuttgart-Hohenheim, Germany. She holds a master’s degree in psychology from the University of Hagen, Germany, a PhD in business administration from the University of Mannheim, Germany, and a habilitation degree from the University of Bundeswehr, Hamburg, Germany. She has published in various forums, including theJournal of the Academy of Marketing Science, Psychology & Marketing, andJournal of Business-to-Business Marketing. Her main research areas include market-oriented management and business-to-business marketing.