Contrarian Investment in the Dutch Stock Market

The efficient markets hypothesis states that at any times security prices fully reflect all available information. Contrarian investment strategies do not recognize the efficiency of capital markets. They call for buying undervalued stocks, i.e. stocks with a low price relative to their fundamentals. The idea behind such a strategy is to take advantage of the extrapolation behaviour of naive investors. Using a fresh and extensive data set from the Dutch stock market, we found that these strategies yield an outperformance without a higher risk. Our results make it hard to maintain the efficient market hypothesis.     

Competition in the electricity industry in England and Wales

When the electricity industry was privatized, the governmentmade structural changes to encourage competition in generationand in supply to consumers. The conventional power stationswere only divided between two companies, however, and we showthat duopolistic competition in an unregulated spot market mightimply undesirably high prices. Most sales are hedged in thecontract market, which makes the spot market more competitive,and a realistic threat of entry could also force generatorsto keep their prices down. In the event, a large amount of entrytook place, supported by the regional electricity companies'franchise monopoly over smaller consumers. That monopoly endsin 1998, so that further entry might become very difficult,while competition between firms already in the generation marketis still limited. Vertical integration between the major generatorsand regional electricity companies might make entry even harder,and should be blocked until the industry is more competitive.     

Social development and macroeconomic policy

We have a clear idea of what it is that South Africa needs and deserves, both now and in the future. We also all agree that in order to create the conditions which will address those needs, we will have to go without some things in the short term. Until now, we, in this House, have not agreed on what it is that we should part with for the common good ...²     

The Short-Run Relationship Between Sectoral Shifts and U.S. Labor Market Fluctuations

Monthly data for the aggregate U.S. economy are used to assess competing hypotheses concerning the relationship between sectoral employment shifts and fluctuations in the unemployment rate. It is shown that sectoral shifts are caused by major work stoppages, aggregate fluctuations unrelated to permanent sectoral shifts, a reallocation-timing effect, and allocative shocks at the sectoral level. Larger employment shifts are associated with higher unemployment during slow growth periods and lower unemployment during above-average growth periods. Models are presented which demonstrate that both aggregate and allocative shocks are causes of cyclical increases in unemployment.     

Foreign entry,quality, and cultural distance: product-level evidence from US movie exports

This paper investigates the effect of quality on foreign entry using data on international movie exports and direct and revealed measures of movie quality. Strict quality sorting is predicted by a model of firm heterogeneity. An alternative model is random entry, in which entry decisions are independent of the movie’s quality. I develop a discrete choice model that allows for both of these extremes as special cases, and use graphical techniques and simulations to compare their predictions to the data. I then use regression analysis to estimate the effect of quality on the propensity to enter foreign markets. A one-standard-deviation increase in quality increases the probability of entry by 25–50 %. Systematic differences in taste for different genre types are used to estimate a measure of cultural distance between countries. Movies in “culturally dependent” genres are less likely to enter foreign markets and their probability of entry is less sensitive to quality. The cultural distance measure enters a gravity equation of US bilateral trade significantly.     

The Case Against a U.S.-Arms Monopoly

The U.S. government is the dominant player in the global arms market. Existing literature emphasizes the many benefits of an international U.S. government arms monopoly including: regional and global balance, stability and security, the advancement of U.S. national interests, and domestic economic benefits from international sales. The purpose of this paper is to balance this largely one-sided treatment of the U.S. government’s dominant position in the international arms market. We discuss several negative consequences and costs associated with U.S. arms sales which call into question the net benefit of the U.S. government’s control over global arms.     

A New Class of Revealed Comparative Advantage Indexes

Open Economies Review - This paper draws upon a critical analysis of the three RCA indexes in Vollrath (1991) to propose a new class of RCA indexes. The baseline RCA index in this new class rests...