Unintended hedging in ambiguity experiments

We describe an ambiguity hedging problem in Ellsberg experiments, where combinations of individually ambiguous bets eliminate aggregate ambiguity, and which may yield incorrect classifications of ambiguity averse subjects. We propose a new classification consistent with this hedging possibility.     

The effects of open skies agreements on transatlantic air service levels

This paper examines the effects of Open Skies agreements on service levels in transatlantic aviation markets. Our route analysis reveals that Open Skies agreements between European countries and the US have resulted in both increases and decreases in service levels. Of the 22 European countries with US Open Skies agreements in place by 2007, only seven demonstrated increases in service levels while six showed reductions. Five countries saw no significant change and the remaining four have yet to receive direct transatlantic service, suggesting that liberalization alone does not lead to service level increases.     

How important are semi-annual earnings announcements? An information event perspective

Using a method that avoids the need to specify earnings expectations, we demonstrate that the period surrounding the semi-annual announcement of Australian firms' earnings is, on average, an important source of information. Although there is substantial year-to-year variation, we observe no evidence of any significant time trend, and also conclude that a shift from Australian domestic generally accepted accounting principle to International Financial Reporting Standards did not impact the association between earnings announcement windows and stock returns. We also find no evidence that the informativeness of earnings announcements varies systematically with firm size, analyst following or economic news (i.e., positive vs. negative stock returns, profits vs. losses), although we do observe significant variation across industries. Our conclusion is further supported by contrasting the earnings release date with the days immediately prior to release, or high information days other than earnings announcement windows. Using a more precise event window relative to prior studies (i.e., 3 h vs. 3 days), we confirm that earnings announcements contain significant new information about fundamentals.     

A Markov switching analysis of contagion in the EMS

This paper applies the multivariate version of the Forbes and Rigobon (2002) contagion test, as proposed by Dungey et al. (2005a), to detect contagion effects in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS). Crisis and non-crisis observations are determined endogenously via a Markov-switching vector autoregression (MSVAR). We show that the MSVAR is suitable for this purpose, as it does particularly well in identifying the 11 realignments of the ERM. We examine whether Denmark’s rejection of the Maastricht Treaty and Italy’s competitiveness problems affected other EMS participants and find evidence for contagion.     

How efficient is the market for Australian firms’ earnings information?

We construct a measure of the speed with which forecasts issued by sell-side analysts accurately forecast future annual earnings. Following Marshall, we label this measure earnings information flow timeliness (EIFT). This measure avoids the aggregation problem inherent in price-based measures of information efficiency. We document large variation in EIFT across firm-years, and show that EIFT is positively associated with the extent of analyst following, consistent with increased analyst coverage improving the speed with which earnings-related information is recognised. We also find that EIFT is higher for firm-years classified as ‘bad news’ (i.e., where analysts’ forecasts at the start of the financial period exceed the reported outcome). However, when we separately consider instances where analysts appear to forecast non-GAAP (or ‘street’) earnings rather than GAAP earnings, we find that the greater timeliness of bad news is concentrated among observations where analysts forecast non-GAAP earnings, where unusual items are typically excluded. We conclude that the market for accounting information is more efficient for negative operating outcomes than for negative outcomes reflecting unusual items.     

Are paper winners gamblers? Evidence from Australian retail investors

This study examines stock market gambling using a comprehensive set of investor characteristics and past portfolio performance measures. We find that retail investors overinvest in ‘lottery stocks’, stocks with gambling‐like properties. Significant portfolio underperformance is the result of gambling through lottery stocks. Investors are more likely to gamble following recent portfolio paper gains, regardless of realised performance, providing new evidence that paper gains trigger a house money effect. Investors trading greater values or holding more stocks, and older and female investors, are less likely to invest in lottery stocks.     

Family,Place and the Intergenerational Transmission of Union Membership

This article examines the importance of family, gender and place to the intergenerational transmission of trade union membership. Using data from the British Household Panel Survey, we show that union membership among parents influences the union joining behaviour of young workers. These effects are particularly apparent among daughters and where both parents are members of unions. The effects of parental membership are also stronger among those born in areas characterized by relatively high levels of union density. Parental effects are therefore important to our understanding of the persistence of regional variations in levels of trade union membership.     

Power, conflict, and cooperation: The impact of guanxi in Chinese marketing channels

This paper tests the impact of guanxi on behaviors among firms in a Chinese marketing channel. Guanxi is operationalized in this paper as emotional closeness and interactive state. We find that the emotional closeness between channel-boundary personnel of firms has a positive impact on their exercise of noncoercive power, a negative impact on their exercise of coercive power, and a negative impact on the perceived conflict between them. In addition, emotional closeness has an indirect but positive impact on perceived cooperation. Interactive state between the boundary personnel of two firms has a positive impact on a firm exercising noncoercive power and a negative impact on perceived conflict between them. At the same time, it is positively related to a firm exercising coercive power. This shows not only the significant influence of guanxi on a firm's channel behaviors but also the constructive effects of both emotional closeness and interactive state on marketing channel behaviors in China.     

Frailty models with applications to the study of infant deaths on birth timing in Ghana and Kenya

In hazard models, it is assumed that all heterogeneity is captured by a set of theoretically relevant covariates. In many applications however, there are ample reasons for unobserved heterogeneity due to omitted or unmeasured factors. If there is unmeasured frailty, the hazard will not only be a function of the covariates but also of the unmeasured frailty. This paper discusses the implications of unobserved heterogeneity on parameter estimates with application to the analysis of infant death on subsequent birth timing in Ghana and Kenya using DHS data. Using Lognormal Accelerated Failure Time models with and without frailty, we found that standard models that do not control for unobserved heterogeneity produced biased estimates by overstating the degree of positive dependence and underestimating the degree of negative dependence. The implications of the findings are discussed.