Why Gaussian macro-finance term structure models are (nearly) unconstrained factor-VARs

This paper explores the implications of filtering and no-arbitrage for the maximum likelihood estimates of the entire conditional distribution of the risk factors and bond yields in Gaussian macro-finance term structure model (MTSM) when all yields are priced imperfectly. For typical yield curves and macro-variables studied in this literature, the estimated joint distribution within a canonical MTSM is nearly identical to the estimate from an economic-model-free factor vector-autoregression (factor-VAR), even when measurement errors are large. It follows that a canonical MTSM offers no new insights into economic questions regarding the historical distribution of the macro risk factors and yields, over and above what is learned from a factor-VAR. These results are rotation-invariant and, therefore, apply to many of the specifications in the literature.     

Relational Capital and Performance of International Joint Ventures in Vietnam

Relational capital (RC), which is defined as mutual trust, respect, understanding, and close friendship between individuals in a business partnership, is one of the foremost important elements of the international joint venture (IJV) relationship. However, only relatively few researchers have hitherto attempted to measure this concept or its antecedents and consequences on joint ventures (JVs). This article examines the links between RC and relational factors, such as inter-partner flexibility, cultural sensitivity, goal clarity, information exchange and conflict management, and how RC contributes to performance of the IJVs in Vietnam. Based on an extensive questionnaire survey, the study found significant relationships between these relational factors and RC and between RC and performance of the IJVs. The findings suggest that investment in RC between partners is critical for the success of the IJV. In this regard, this research highlights the mediating roles of inter-partner flexibility, goal clarity, and conflict management.     

Sending Vietnamese Rice Farmers Back to School: Further Evidence on the Impacts of Farmer Field Schools

This study evaluates the impact of farmer field schools (FFS) on knowledge, insecticide use, and yield using a nonconsecutive, two‐year panel data that allows one to control for nonrandom selection. Regression analysis using a difference‐in‐difference approach indicates FFS training did not result in statistically significant impacts on insecticide use and yield over the period of time examined. However, there is some evidence that FFS had an “initial” knowledge impact, but it was not sustained over time. Retraining FFS graduates may be an attractive option to help maintain knowledge and improve performance over time, but we do not find empirical evidence on the effectiveness of this strategy based on a small sample of retrained farmers. La présente étude examine l’impact du programme Champ‐École‐Paysan (CEP) (Farmer Field Schools – FFS) sur l’acquisition des connaissances, l’utilisation d’insecticides et le rendement, à l’aide de données de panel non consécutives recueillies sur une période de deux ans et permettant de maîtriser la sélection non aléatoire. Une analyse de régression utilisant la méthode de différence de différences a révélé que la formation offerte dans le cadre du programme CEP n’a pas eu d’impact statistiquement significatif sur l’utilisation d’insecticides ni sur le rendement au cours de la période visée par l’étude. Toutefois, il semble que le programme CEP a eu un impact sur l’acquisition des connaissances au début, mais que cet impact n’a pas été soutenu au fil du temps. Le recyclage des participants au programme CEP peut constituer une option intéressante pour le maintien des connaissances et l’amélioration du rendement au fil du temps. Par contre, l’étude d’un petit échantillon de producteurs recyclés n’a pas fourni de preuve empirique permettant de croire à l’efficacité de cette stratégie.     

Reciprocal value propositions in practice: Constraints in digital markets

The value proposition concept, while forming a central foundational premise of service-dominant (S-D) logic, has nevertheless been treated somewhat ambiguously. Recent work in attempting to address this has focused through a S-D logic lens on the reciprocal nature of value propositions. Important to this work has been a focus on communicative interactions and resource integration between network suppliers and customers. Overall, value proposition thinking has not studied in detail their adoption and use in practice. Considering the compelling notion of reciprocity, there have been recent calls for research to consider reciprocal value propositions in practice. The overall aim of this paper, therefore, was to explore how reciprocal value propositions are developed (or not) in practice at the network level. The study was set in the mobile television (TV) sector, which, as an internet-driven sector, is viewed as particularly pertinent. To conduct the study an S-D logic and Industrial Marketing and Purchasing (IMP) Group framework are integrated for the first time. A key finding is that while the reciprocal value proposition concept is theoretically intuitive, it is by no means inevitable in practice. Reciprocal value propositions were found to be simultaneously constrained, and, potentially enabled by these constraints in practice. At an overall level this paper contributes to the ongoing collaborative process, which aims to move S-D logic from a framework to a theory. More specifically, we provide new insights into the development of reciprocal value propositions in practice.     

CEO Optimism and the Credibility of Open-Market Stock Repurchase Announcements

Given their low-cost and low level of commitment, open-market stock repurchase announcements are often viewed by the market with a degree of skepticism, leading to a weak initial market reaction followed by positive stock price drifts. The authors argue that the repurchase announcements made by optimistic CEOs should be more credible than those made by nonoptimistic CEOs. Our results show that optimistic CEOs are more likely to actually buy back their shares after the announcements and the abnormal returns following repurchase announcements are larger for optimistic CEOs. This evidence suggests that CEO optimism is an important factor that the market seems to overlook while evaluating the credibility of open-market repurchase announcements. Our main contribution is to link one of the most important managerial traits, optimism, to the open-market repurchases.     

CEO Risk‐Taking Incentives and the Cost of Equity Capital

In this paper, we show that the sensitivities of an executive's wealth to changes in stock prices (deltas) decrease the implied cost of equity capital while the sensitivities of an executive's wealth to changes in stock volatility (vegas) increase the implied cost of equity capital. Our findings demonstrate that shareholders understand the risks of firms’ future projects as embedded in executive compensation and price these risks into the cost of equity capital accordingly. The findings have strong implications for optimal executive compensation contract design, project evaluation and cost of capital estimation.     

The price of variance risk

Between 1996 and 2014, it was costless on average to hedge news about future variance at horizons ranging from 1 quarter to 14 years. Only unexpected, transitory realized variance was significantly priced. These results present a challenge to many structural models of the variance risk premium, such as the intertemporal CAPM and recent models with Epstein–Zin preferences and long-run risks. The results are also difficult to reconcile with macro models in which volatility affects investment decisions. At the same time, the data allows us to distinguish between different disaster models; a model in which the stock market has a time-varying exposure to disasters and investors have power utility fits the major features of the variance term structure.     

Responses to World Oil and Coal Shocks, in a Short-Run Fuel Substitution Tax Model

This article examines effects on major Australian macroeconomic and structural variables of simultaneous shocks to world oil and black coal prices. The illustrative numerical results have been produced with the short-run fuel substitution tax model, ORANI-LFT. The current version of that model reflects the Australian Governmet's pre-1988 oil regulatory framework, and the simulations reported in this study reflect the recent switch from significant dependence on crude oil levy revenue to petroleum products excise revenue. Empirical results show that combined world oil and coal price shocks lead to substantially different effects than would occur from an oil shock alone. A major implication of this, for a small open economy such as Australia, is that particular attention has to be paid to the interdependence of world energy market, both when analysing the effects of such shocks and when formulating appropriate macroeconomic and energy policy responses. It is also pointed out how the model could be modified for investigating effects under deregulated oil market regimes.     

Regional differences in the production processes of financial and social outputs of microfinance institutions

This study uses panel data of microfinance institutions across the world to compare production processes across regions, assess the relevance of unobserved heterogeneity and estimate economies of scale. Comparing a financial production process to a multidimensional production process that accounts for the presence of outreach in the objective function suggests that financial and social output reflect complements in South Asia but not in other regions. Furthermore, we find substantial economies of scale for a pure financial production process. However, accounting for outreach lowers estimated economies of scale, suggesting that producing outreach creates high transaction costs and requires exploitation of local knowledge.