Dividend Forecast Biases in Index Option Valuation

Since the early days of option pricing theory,the assumption that the dividends on the underlying stock or index over the life of the contract are known has not been challenged. We examine the sensitivity of index option prices to the assumption of dividend uncertainty. We consider a number of issues related to the forecasting of dividends and build a dividend forecasting model that passes several rigorous tests for unbiasedness. We then generate option prices using contemporary market levels and interest rates. We find that prices generated with the actual dividends are unbiased with respect to those generated using the forecasted dividends. The magnitudes of the forecast errors, however, are sufficiently large to suggest a concern, but the percentage errors are consistently small, typically amounting to less than two percent of the option price. We conclude that the convenient assumption that the stream of future dividendsis known is probably innocuous. This revised version was published online in November 2006 with corrections to the Cover Date.     

Purchasing Power Parity and aggregation bias for a developing country: The case of Mexico

This paper investigates long-run Purchasing Power Parity (PPP) between the US and Mexico. We use a panel of disaggregated price data between the US and Mexico with a long time series to look at two types of aggregation bias. The first is examined in Imbs et al. — which we refer to as estimator aggregation bias — and the second is put forth by Broda and Weinstein — hereafter, data aggregation bias. The findings indicate substantial estimator aggregation bias and data aggregation bias. Although estimates using aggregate data and imposing homogeneous coefficients provide little evidence of PPP, findings with disaggregated data and heterogeneous coefficient estimators offer strong support. The results also suggest the presence of small-sample bias as examined in Chen and Engel, but with little effect on the qualitative results. Tradable goods and non-tradable goods show little distinction in convergence rates. Estimated half-lives are lower under flexible than fixed exchange rates and indicate rapid convergence during the Mexican peso crisis.     

Skill-Specific rather than General Education: A Reason for US–Europe Growth Differences?

In this paper, we develop a model of technology adoption and economic growth in which households optimally obtain either a concept-based, general education or a skill-specific, vocational education. General education is costly to obtain, but enables workers to operate new production technologies. Firms weigh the cost of adopting and operating new technologies against increased profits and optimally choose the level of adoption. We show that an economy whose policies favor vocational education will grow slower in equilibrium than one that favors general education. More importantly, the gap between their growth rates will increase with the growth rate of available technology. By characterizing the optimal Ramsey education policy we also demonstrate that the optimal subsidy for general education increases with the growth rate of available technology. Our theory suggests that European education policies that favored specialized, vocational education might have worked well, both in terms of growth rates and welfare, during the 1960s and 1970s when available technologies changed slowly. However, in the information age of the 1980s and 1990s when new technologies emerged at a more rapid pace, they might have contributed to an increased growth gap relative to the United States.     

Salespeople’s use of upward influence tactics (UITs) in coping with role stress

Researchers’ attentions have recently focused on how salespeople cope with role stress. This study focuses on salespersons’ use of six upward influence tactics (UITs) with the immediate sales manager, and how salespeople use UITs to lessen the impact of two role stressors (perceived role conflict and role ambiguity) associated with the sales job. The study also evaluates the potential moderating role of UITs on relationships between role stress and manager satisfaction and propensity to leave. Analysis of data gathered from a heterogeneous sample revealed differences in use of UITs between salespeople classified as either high or low in role stress. Salespeople who perceive high role conflict employ assertiveness and upward appeal UITs more frequently. Salespeople who perceive high role ambiguity use exchange and coalition-building UITs more frequently. Results also suggest that salespersons’ use of assertiveness and ingratiation UITs exacerbate relationships between perceived role ambiguity and two outcomes: satisfaction with supervisor and propensity to leave. Implications of the study findings for sales managers are reviewed, as are implications for further research. His research interests are in the areas of personal selling and sales management. His work has appeared inJournal of Education for Business, Journal of Marketing Theory and Practice, and various national and international conference proceedings. Jeffrey K. Sager, Ph. D., conducts research in the areas of salesperson turnover and job stress. His work has appeared in theJournal of the Academy of Marketing Science, Journal of Personal Selling and Sales Management, andJournal of Business Research. His research interests are in the fields of strategic management and organizational behavior. His research has been published in theAcademy of Management Journal, Journal of Applied Psychology, and several other journals.