Pricing currency options with scheduled and unscheduled announcement effects on volatility

It is well documented that exchange rate volatility is time-varying and that it can be affected by scheduled events such as money supply announcements and unscheduled ones such as spot market interventions and interest rate changes. This study provides a European event model (E model) for currency call options that explicitly addresses the volatility effects of these two classes of events. Managers who are concerned with hedging in an environment of changing volatility may find the E model useful. The E and modified Black-Scholes (MBS) models have similar average errors in predicting option price changes across event windows and do better than a naive no-change prediction. The E model tends to reduce the underpricing of convex, short-term out-of-the-money options and the mispricing of most classes of convex options.     

Strategic human capital and the performance of public sector organizations

Organization scientists have long considered human capital as a strategic asset that contributes to organizational effectiveness. Whereas the strategic importance of human capital has been widely studied in the case of for-profit organizations, measurement difficulties and the role of human capital in the public sector have received little attention. The present study attempts to bridge this gap by suggesting a behavioral approach to measuring organization-specific human capital and examining its impact on the financial performance of local government authorities in Israel. The results confirm the strategic importance of human capital. Local government authorities that possess strategic human capital—namely, a workforce that is highly educated, that exhibits organization-specific competencies and experience, and that is valuable, unique, and imperfectly imitable—exhibited a better financial performance, as measured by a three-financial ratio scale over 2 fiscal years.     

The impact of access to consumer data on the competitive effects of horizontal mergers and exclusive dealing

We examine the influence of firms’ ability to employ individualized pricing on the welfare consequences of horizontal mergers. In a two‐to‐one merger, the merger reduces consumer surplus more when firms can price discriminate based on individual preferences compared to when they cannot. However, the opposite holds true in a three‐to‐two merger, in which the reduction in consumer surplus is substantially lower with individualized pricing than with uniform pricing. Further, the merger requires an even smaller marginal cost reduction to justify when an upstream data provider can make exclusive offers for its data to downstream firms. We also show that exclusive contracts for consumer data pose significant antitrust concerns independent of merger considerations. Implications for vertical integration and data mergers are drawn.     

Financial Sector Reforms,Bank Performance and Economic Growth: Evidence from Zambia

Abstract: This paper investigates the effects of market‐based financial sector reforms on the competitiveness and efficiency of commercial banks, and economic growth, in Zambia. The results show that reforms adopted in Phase II (strengthening of regulatory and supervisory, payments and settlements, and financial operations frameworks) and Phase III (implementation of a comprehensive financial sector development plan) had significant positive effects on bank cost efficiency. Macroeconomic variables such as per capita GDP and inflation were insignificant. Further, using an endogenous growth model in which industrial production is a proxy for GDP growth, it was found that bank cost efficiency, financial depth, Phase II and III financial sector reforms, the degree of economic openness, and rate of inflation were significant determinants of economic growth. Phase II policies and the inflation rate have negative effects while the rest of the variables have positive effects on economic growth. Some plausible policy lessons are offered.     

FDI spillovers in the Chinese manufacturing sector

This paper uses a new longitudinal dataset of more than 15,000 manufacturing firms to analyse the heterogeneous responses of firms to foreign direct investment in China. Domestic firms operating in sectors where foreign firms are also active have higher total factor productivity. However, the magnitude of such horizontal spillovers depends on the structure and origin of foreign ownership, the export status of firms and the characteristics of the special economic zones firms are operating in.     

Technical Efficiency of the Ghanaian Banking Industry and the Effects of the Entry of Foreign Banks

The effects of the entry of foreign banks and changes in bank concentration on the technical efficiency of domestic banks in Ghana over the period 2000–2008 is analyzed. Technical efficiency scores were obtained by the Data Envelopment Analysis. Then, the Tobit regression was used to analyze the impact of hypothesized explanatory variables on bank efficiency. Foreign bank share of total industry assets was used to proxy the impact of foreign banks. The findings suggest that efficiency of domestic banks has been positively affected by the entry of foreign banks and reduction in concentration. Thus, the central bank's policy of liberalizing the banking sector appears to be well placed.     

Does attractiveness sell? Women's attitude toward a product as a function of model attractiveness,gender priming,and social comparison orientation

In the present experiment, 85 female undergraduate students were presented with an advertisement for chewing gum, featuring an attractive or a moderately attractive same‐sex model. Participants were either primed on their gender or not. Results showed that gender‐primed women were willing to pay more for the product when it was promoted by an attractive model, and, with increasing levels of social comparison orientation, women showed a more positive attitude toward the product when it was promoted by an attractive as opposed to a moderately attractive model. In contrast, when they were primed on being a female, women were willing to pay less when the product was promoted by an attractive model, and, with increasing levels of social comparison orientation, they had a less positive attitude when the product was promoted by an attractive as opposed to a moderately attractive model. Implications for advertising are discussed. © 2011 Wiley Periodicals, Inc.     

The Gates Hillman prediction market

The Gates Hillman prediction market (GHPM) was an internet prediction market designed to predict the opening day of the Gates and Hillman Centers, the new computer science complex at Carnegie Mellon University. Unlike a traditional continuous double auction format, the GHPM was mediated by an automated market maker, a central agent responsible for pricing transactions with traders over the possible opening days. The GHPM’s event partition was, at the time, the largest ever elicited in any prediction market by an order of magnitude, and dealing with the market’s size required new advances, including a novel span-based elicitation interface that simplified interactions with the market maker. We use the large set of identity-linked trades generated by the GHPM to examine issues of trader performance and market microstructure, including how the market both reacted to and anticipated official news releases about the building’s opening day.