The United Kingdom and the stability of the Euro area: From Maastricht to Brexit

The two key events expected to mark the year 2019 were the 20th anniversary of the euro and Brexit. This paper examines the role of the United Kingdom on the stability of the euro area. We study stability from the perspective of synchronisation of economic activity in a core and periphery framework. We show the UK, since 1990, has become significantly more integrated with the EU economy. The UK moved from the periphery before 1990 to the core afterwards. We also find that the level of synchronisation of the UK economy has had the highest variability over time among all countries.     

Raising the bar (1)

In this editorial, we summarize and comment on the papers published in issue 11.1 so as to raise the bar in applied spatial economic research and highlight new trends. The first paper employs the J-test to discriminate between two economic-theoretical explanations for the wage curve. The second applies a two-step ML procedure to measure the impact of volatility on economic growth. The third tests for endogeneity in the Spatial lag of X (SLX) model and whether or not the model should be extended to contain a spatial lag. The fourth utilizes the gravity model to test whether or not grids should be merged into larger units of observations. Finally, the last adopts a time-space recursive model to test the ripple effect and (linguistic) border effect hypotheses on housing prices in Belgium.     

Knowledge Spillovers,ICT and Productivity Growth

This paper looks at the channels through which intangible assets affect productivity growth. The econometric analysis exploits a new data set on intangible investment (INTAN‐Invest) in conjunction with EUKLEMS productivity estimates for 10 EU member states from 1998 to 2007. We find that (a) the output elasticity of intangible capital depends upon ICT intensity, consistent with complementarities between ICT and intangible capital; (b) non‐R&D intangible capital has a higher estimated output elasticity than its factor share, as does (c) an index of labour composition. The last two findings are consistent with growth spillovers from investments in knowledge‐based/intangible capital and skills.     

Multiplicative habit formation and consumption: A note

A multiplicative form of the habit term in the utility function has some undesirable properties if the habit function is itself still additive (Wendner, 2003). A geometric form for the way the stock of habit accumulates can resolve these shortcomings.     

Urban development and expenditure efficiency in the 2000–2006 regional operational program of Sardinia

The Sardinian regional operational program 2007–2013 concerning the European Regional Development Fund (ERDF) (2007–2013 ROP-ERDF) respects the rules of the ERDF on the investments for territorial cohesion since it promotes their regional geographic concentration. These investments are evenly shared between large- and medium-sized urban areas, and disadvantaged zones. This paper analyzes the investment policies implemented by the Sardinian Region through the 2000–2006 ERDF based part of the Regional Operational Program (2000–2006 ROP-ERDF), in order to assess their effectiveness, in terms of expense efficiency, for urban areas and disadvantaged zones. The assessment of the expenditure efficiency of the 2000–2006 ROP-ERDF is very important to address the policies of the 2007–2013 ROP-ERDF in terms of geographic concentration. The essay analyzes the results of the 2000–2006 ROP-ERDF, with reference to the expenditure efficiency of Sardinian cities, represented through a geographic information system, by means of a multinomial logit model.     

The forecast quality of CBOE implied volatility indexes

We examine the forecast quality of Chicago Board Options Exchange (CBOE) implied volatility indexes based on the Nasdaq 100 and Standard and Poor's 100 and 500 stock indexes. We find that the forecast quality of CBOE implied volatilities for the S&P 100 (VXO) and S&P 500 (VIX) has improved since 1995. Implied volatilities for the Nasdaq 100 (VXN) appear to provide even higher quality forecasts of future volatility. We further find that attenuation biases induced by the econometric problem of errors in variables appear to have largely disappeared from CBOE volatility index data since 1995. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:339–373, 2005     

Options trading volume and stock price response to earnings announcements

We examine the effect of options trading volume on the stock price response to earnings announcements over the period 1996–2007. Contrary to previous studies, we find no significant difference in the immediate stock price response to earnings information announcements in samples split between firms with listed options and firms without listed options. However, within the sample of firms with listed options stratified by options volume, we find that higher options trading volume reduces the immediate stock price response to earnings announcements. This conforms with evidence that stock prices of high options trading volume firms have anticipated and pre-empted some earnings information in the pre-announcement period. We also find that higher abnormal options trading volume around earnings announcements hastens the stock price adjustment to earnings news and reduces post-earnings announcement drift.     

FILTER RULE TESTS OF THE ECONOMIC SIGNIFICANCE OF SERIAL DEPENDENCIES IN DAILY STOCK RETURNS

In this paper we examine the ability of filter rules to predict variation in expected daily returns for a sample of 120 Dow Jones and S&P 100 stocks from 1963 through 1989. Equally weighted portfolios of filter-rule-traded stocks consistently outperform a buy-and-hold portfolio of the same stocks before accounting for transaction costs. The difference in returns between filter rule and buy-and-hold portfolios is eliminated by one-way transaction costs of 12 basis points. The economic significance of daily stock return autocorrelations is estimated. A marginal 1 percent increase in a first-order autocorrelation increases filter rule returns by an estimated 3.84 percent.     

The information content of a convertible debt offer announcement

We develop a model of convertible debt financing that combines issue and call decisions into a common framework. The model suggests a role for refinancing costs in a manager's efforts to signal firm productivity to investors by an appropriate choice of debt issue terms. A cross section of convertible debt offers can be divided into two groups: a high conversion ratio group and a low conversion ratio group. The model predicts that high conversion ratios are negatively correlated with offer announcement stock returns and low conversion ratios are uncorrelated with offer announcement stock returns. The model is tested on a sample of 124 convertible debt offer announcements. Test results support model accuracy.