Earnings Forecasts and the Information Contained in Spinoff Announcements

This study examines spinoff announcements in conjunction with financial analysts’ forecasts of earnings. The analysis shows that spinoff announcement abnormal returns are significantly related to the firm's information environment as proxieci by financial analysts’ earnings prediction errors. The findings also indicate that analysts significantly increase their short-term earnings forecasts in response to spinoffs, but do not significantly revise their long-term earnings forecasts. However, the earnings revisions are not significantly different across prediction error groups, which confirms that spinoff-related abnormal returns cannot be attributed solely to expected performance gains.     

The Effect of Risk Context on the Value of a Statistical Life: a Bayesian Meta-model

This paper presents the first value of statistical life (VSL) meta-analysis that empirically estimates correction factors for ‘out of context’ benefits transfer (BT) purposes. In the field of mortality risk reductions elicited willingness to pay values in one risk context, say road safety, are frequently applied in other risk contexts like air pollution. However, differences in risk perception and the population at risk across contexts are likely to result in diverging VSL estimates. In a meta-analysis of 26 international stated preference studies, a Bayesian model is estimated regressing contingent values for mortality risk reductions, originating from three different risk contexts, on the characteristics of the risk reduction itself and additional variables characterizing the underlying studies. A willingness to pay (WTP) premium for mortality risk reductions in the air pollution and general mortality risk context relative to improving road safety is observed. Evaluated at the mean, road safety VSL estimates should be multiplied by a factor 1.8 before being applicable in the air pollution context. Moreover, in an illustrative BT exercise we find limited overlap in the set of context specific predictive VSL distributions. Consequently, ‘out of context’ BT results in a substantial over- or underestimation of the VSL.     

On Blending Competitive Trade Models

Three standard models typically discussed in the theory of international trade are the Ricardian model, the Heckscher‐Ohlin model and the Specific‐Factors model. Models are often compared with each other, in an attempt to analyze which model is best or fits reality better. Instead, I suggest that these international trade models can often be blended to take account of finite changes when, as a country develops, the appropriate model to be used changes as the pattern of production changes. Trade allows countries to produce fewer commodities than it consumes, and which commodities are selected to be produced may change as the economy grows in the size of its endowment bundle and/or technology changes. At issue is not only the question of which commodities are produced, but also how many commodities are produced, especially with reference to the number of productive factors.     

Do Institutions Matter for Foreign Direct Investment?

Using a panel of 69 countries during 1981 and 2005, we investigate the role of institutions in determining foreign direct investment (FDI). We find that institutions are a robust predictor of FDI and that the most significant institutional aspects are linked to propriety rights. Using a novel data set, we also study the impact of institutions on FDI at the sectoral level. We find that institutions do not have a significant impact on FDI in the primary sector but that institutional quality matters for FDI in manufacturing, and particularly in services.     

The influence of personality on active and passive use of social networking sites

Managers are more and more interested in social networking sites because they provide opportunities for strengthening relationships with customers as well as site content and service. Using social networking sites effectively, however, depends on understanding both the psychological attributes and social interactions of participants. This paper addresses these topics by presenting the results of a two‐study inquiry into the importance of two personality traits (consumer innovativeness and expressiveness) to active and passive use of social networks among Italian consumers. In Study 1 ( n = 753) it was found that innovativeness is positively related to active and passive use. Study 2 ( n = 277) revealed that self‐identity expressiveness and social identity expressiveness positively influence only active use. These results suggest that managers need to distinguish bet‐ween, and differentially encourage, joining and browsing such sites on the one hand and actively contributing to them on the other. Managers can also enhance the impact of their social networking sites by taking into account social and self‐identity expressiveness to increase affiliation and market share and by encouraging consumers to use these sites actively. © 2011 Wiley Periodicals, Inc.     

Disaggregate Real Exchange Rate Behaviour

In this paper, we re-examine the “PPP Puzzle” using sectoral disaggregated data. Specifically, we first analyse the mean reversion speeds of real exchange rates for a number of different sectors in 11 industrial economies and then focus on relating these rates to variables identified in the literature as key determinants of CPI-based real exchange rates, namely: the trade balance, productivity and the mark up. In particular, we seek to understand to what extent the relationships existing at the aggregate level are borne out at the disaggregate level. We believe that this analysis can help shed light on the PPP puzzle.

The evaluation of a surveillance system for violent and non-intentional injury mortality in Colombian cities

Since 2002, the Institute for Peace Promotion and Injury/Violence Prevention (CISALVA) at the Universidad del Valle, Cali, Colombia and the Colombia Program at Georgetown University have developed and implemented 21 epidemiologically based municipal crime observatories in intermediate-sized municipalities in Colombia. These crime observatories serve as monitoring centres that provide low cost, geo-referenced methods of data collection and analysis, which allow cities to develop more responsive policies and prevention programmes and enhance governance. This article focuses on the methodology employed and lessons learned that may be applicable to similar settings. Worth noting within the results was a significant decrease in homicides after the first year of the programme. Whether or not such results could be attributed to the method or to the nature of the interventions and policy initiatives stemming from it remains open to conjecture.     

Strategic tariffs, tariff jumping, and heterogeneous firms

The majority of research to date investigating strategic tariffs in the presence of multinationals finds a knife-edge result where, in equilibrium, all foreign firms are either multinationals or exporters. Utilizing a model of heterogeneous firms, we find equilibria in which both pure exporters and multinationals coexist. We utilize this model to study the case of endogenously chosen tariffs. As is standard, Nash equilibrium tariffs are higher than the socially optimal tariffs. Unlike existing models with homogeneous firms, we find that non-cooperative tariffs promote the existence of low-productivity firms relative to the socially optimal tariffs. This highlights a new source of inefficiency from tariff competition not found in models of homogeneous firms. In addition, we find that in many cases the Nash equilibrium tariff when FDI is a potential firm structure is lower than when it is not. As a result, FDI improves welfare by mitigating tariff competition.     

Vapor cloud source modeling workshop chairman's report

The objective of the source Modeling Workshop was to discuss our current state of knowledge about source term modeling, and to identify specific areas where research is needed.