Euro conversion and return dynamics of European financial markets: a frequency domain approach

Using a frequency domain approach, we compare the spectra of equity market index returns for the 12 Euro-zone countries, the UK, the US, and Japan, over several time frames before and after the introduction of the Euro. In the immediate aftermath of the Euro-introduction, we find a reduced volatility over all frequencies, in which no strong cyclical components are present. However, in the long run, equity markets exhibit a volatility increase: the larger European equity markets develop dynamics that exhibit strikingly similar patterns, while the smaller European equity markets appear to follow dynamics closely resembling white noise. The similarity in dynamics is a likely candidate to explain the increase in correlation among the European markets. Furthermore, the European equity markets initially exhibited dynamics that resembled those of the US, while after the introduction of the Euro, the dynamics of the European Markets exhibits patterns similar to those found the UK. This suggests a change in the dynamic interdependency between the UK and the European markets and an increased convergence of UK market behavior with that behavior dominant in the Euro-zone. The findings may provide important implications for investors seeking to take advantage of international diversification.     

The effects of interactive leadership on human resource management in Singapore's banking industry

Reviewing the literature about interactive leadership and its effects on human resource management in business organizations, this paper proposes that interactive leadership has two major components: interaction skills and team building. Both components have positive effects on employees' trust in their leaders, on employees' motivation and employees' commitment to their companies. Based on these hypotheses, the paper develops an empirical test of the effectiveness of interactive leadership in Singapore's banking industry. Seventy-seven middle-level managers participated in this study by responding to a questionnaire about their leaders, their motivation, their commitment and their trust in these leaders. The results support the hypotheses and suggest some important implications for human resource management in business organizations, especially for human resource management in Oriental societies.     

Demand for Customized Products, Production Flexibility, and Price Competition

We examine markets where, in addition to production of standard (core) products, mass customization is technologically feasible. We compare a setting where a monopolist provides both standard and custom goods to a setting where an entrant joins the custom market and find customers' tastes affect the social desirability of entry. The entrant is unconcerned about the impact of its custom production on the incumbent's core product market and in some cases may supply more custom products than is socially desirable. Entry enhances (reduces) social welfare if consumers' core valuations are positively (negatively) related to their value added for customization.     

Are Reports of Discrimination Valid? Considering the Moral Hazard Effect

A bstract .   Antidiscrimination laws are designed to prompt employers to stop excluding black workers from jobs they offer and from treating them unequally with respect to promotion and salaries once on the job. However, a moral hazard effect can arise if the existence of the laws leads black employees to bring unjustified claims of discrimination against employers. It has been argued that employers may become more reluctant to hire black workers for fear of being subjected to frivolous lawsuits.
Using the Multi-City Study of Urban Inequality (MCSUI), we find that male and female black workers are far more likely than whites to report racial discrimination at work. This is the case even when a host of human capital and labor market factors are controlled for. Further, nearly all black workers who report they have been discriminated against on the job in the MCSUI Surveys also show statistical evidence of wage discrimination. This is not the case for white males or females. We find little evidence to support a moral hazard effect.     

Effects of limit order book information level on market stability metrics

Using an agent-based model of the limit order book, we explore how the levels of information available to participants, exchanges, and regulators can be used to improve our understanding of the stability and resiliency of a market. Ultimately, we want to know if electronic market data contains previously undetected information that could allow us to better assess market stability. Using data produced in the controlled environment of an agent-based model’s limit order book, we examine various resiliency indicators to determine their predictive capabilities. Most of the types of data created have traditionally been available either publicly or on a restricted basis to regulators and exchanges, but other types have never been collected. We confirmed our findings using actual order flow data with user identifications included from the CME (Chicago Mercantile Exchange) and New York Mercantile Exchange. Our findings strongly suggest that high-fidelity microstructure data in combination with price data can be used to define stability indicators capable of reliably signaling a high likelihood for an imminent flash crash event about one minute before it occurs.     

Grades as incentives

This paper examines how grade incentives affect student learning across a variety of courses at two universities, using for identification the discrete rewards offered by the standard A–F letter-grade system. We develop and test five predictions about the provision of study effort and the distribution of numerical course averages in the presence of the thresholds that separate these discrete rewards. Surprisingly, all are rejected in our data. There is no evidence that exam performance is improved for those students that stand to gain the most from additional study.     

Technical efficiency analysis correcting for biases from observed and unobserved variables: an application to a natural resource management project

This article brings together the stochastic frontier framework with impact evaluation methodology to compare technical efficiency (TE) across treatment and control groups using cross-sectional data associated with the MARENA Program in Honduras. A matched group of beneficiaries and control farmers is determined using propensity score matching techniques to mitigate biases stemming from observed variables. In addition, possible self-selection arising from unobserved variables is addressed using a selectivity correction model for stochastic frontiers recently introduced by Greene (J Prod Anal 34:15?C24, 2010). The results reveal that average TE is consistently higher for beneficiary farmers than the control group while the presence of selectivity bias cannot be rejected. TE ranges from 0.67 to 0.75 for beneficiaries and from 0.40 to 0.65 for the control depending on whether biases were controlled or not. The TE gap between beneficiaries and control farmers decreases by implementing the matching technique and the sample selection framework decreases this gap even further. The analysis also suggests that beneficiaries do not only exhibit higher TE but also higher frontier output.     

Hedging effectiveness of fertilizer swaps

The fertilizer swaps market is a potential tool to protect against fertilizer price risk. The swaps evaluated here are cash settled using The Fertilizer Index. Hedge ratios and hedging effectiveness are calculated for urea and DAP diammonium phosphate (DAP)) swaps. Urea and DAP swaps perform poorly as a hedging tool over a one-week horizon. As the hedging horizon increases, the hedging effectiveness of swaps improves. The swaps are more effective in mitigating risk across ocean freight routes than across inland routes. The limited hedging effectiveness is due to high spatial basis risk in fertilizer markets.     

Birth,Death, and Consumption: Overlapping Generations and the Random Walk Hypothesis

This paper studies the time-series behavior of consumption in a model that incorporates birth, death, and a precautionary motive for saving. Consumption of an individual agent is a random walk. However, aggregate consumption is a random walk if and only if the sum of the death rate and population growth rate is zero. Failure of the random walk hypothesis should not be attributed to finite horizons perse, but rather to inter-generational transfers caused by birth and death. Unlike certainty-equivalent models, the expected growth of consumption depends on financial wealth, rather than wage income or human capital. [D91, E21]     

Economic Education Research: Part II,New Directions in Theoretical Model Building

This article on research methodology in economic education is the second in a three-part series. The first, which appeared in the Winter 1983 issue of this Journal, focused on issues and questions economic education researchers should address. The present article provides suggestions for the development of theoretical models in which these issues and questions can be conceptualized, organized, and formally stated as empirically testable hypotheses. The final article will review statistical and econometric techniques appropriate for model estimation and statistical testing of specific hypotheses about teaching methods and other issues related to the production of economic learning.