Hysteresis and sluggishness in Portuguese unemployment, 1977–88

The phenomenon of unemployment persistence led to the development of alternative theories of unemployment. Among these the ‘hysteresis’ concept by Blanchard and Summers (1987) received a wide interest. Based on this notion we developed a generalized model that nests Blanchards and Summers' theory. Using this framework we conducted an empirical investigation for the Portuguese labour market (1977–88). The results obtained point towards the existence of labour demand sluggishness, wage inertia and unemployment hysteresis. The model also suggests the existence of a rather inelastic labour demand curve.     

Time-varying risk The case of the American computer industry

A bivariate GARCH-in-mean model for individual stock returns and the market portfolio is designed to model volatility and to test the conditional Capital Asset Pricing Model versus the conditional Residual Risk Model. We find that a univariate model of volatility for individual stock returns is misspecified. A joint modelling of the market return and the individual stock return shows that a major force driving the conditional variances of individual stocks is the history contained in the market return variance. We find that a conditional residual risk model, where the variance of the individual stock return is used to explain expected returns, is preferred to a conditional CAPM. We propose a partial ordering of securities according to their market risk using first and second order dominance criteria.     

Hybrid approach with an expert system and a genetic algorithm to production management in the supply net

A new approach to solving production management problems in the supply net is proposed. An expert system designed to help companies in medium-term and short-term production planning is discussed. The proposed expert system considers alternative process plans for a job and outsourcing, when a bottleneck exists in the machine. The proposed hybrid system uses the output of the expert system as the input of the genetic algorithm. The output of the genetic algorithm is a near optimal schedule. The proposed method does not require any unrealistic assumptions. It can be used to solve highly complicated and non-linear functions of a realistic problem. Copyright © 2007 John Wiley & Sons, Ltd.     

The Valuation of Insurance under Uncertainty: Does Information about Probability Matter?

In a laboratory experiment we test the hypothesis that consumers' valuation of insurance is sensitive to the amount of information available on the probability of a potential loss. In order to test this hypothesis we simulate a market in which we elicit individuals' willingness to pay to insure against a loss characterised either by known or else vague probabilities. We use two distinct treatments by providing subjects with different information over the vague probabilities of loss. In general we find that uncertainty about probabilities has a weak impact on consumers' valuation of insurance. However, additional information about probabilities tends to marginally increase the price individuals are willing to pay to insure themselves. Implications for the insurance market are derived.     

Optimal dividend policy and growth option

We analyse the interaction between the dividend policy and the decision on investment in a growth opportunity of a liquidity constrained firm. This leads us to study a mixed singular control/optimal stopping problem for a diffusion that we solve quasi-explicitly by establishing a connection with an optimal stopping problem. We characterize situations where it is optimal to postpone the distribution of dividends in order to invest at a subsequent date in the growth opportunity. We show that uncertainty and liquidity shocks have an ambiguous effect on the investment decision.      

Economic Exchange Rate Exposure of U.S.-Based MNCs Operating in Europe

This study focuses on the economic exchange rate exposure of 168 U.S.-based multinational corporations (MNCs) with foreign operations primarily in Europe. The sampling plan and other refinements may improve the estimation of exposure and detection of relevant determinants. Operating characteristics that represent economic exposure are evaluated for their ability, to explain cross-sectional differences in exposure. More specifically, the degree of imbalance, which is a proxy for matching cash inflows and outflows, and proportion of export sales are able to explain differential exposure. Furthermore, shifts in the degree of imbalance and proportion of export sales are found to significantly explain shifts in exposure.     

Who owns the long term? Perspectives from global business leaders

Day-to-day management is challenging enough for CEOs. How do they manage for the long term as well? We posed that question to four top executives of global companies. According to Maurice Levy, chairman and CEO of Publicis Groupe, building the future is really about building the present and keeping close to the front line--those who deal with your customers and markets. He also attributes his company's success in large part to knowing when to take action: In a market where clients' needs steer your long-term future, timing is everything. UPS Chairman and CEO Mike Eskew emphasizes staying true to your vision and values over the long run, despite meeting obstacles along the way. It took more than 20 years, and many lessons learned, to produce consistent profits in what is today the company's fastest-growing and most profitable business: international small packages. Wulf H. Bernotat, CEO of E.ON, examines the challenges facing business leaders and politicians as they try to balance energy needs against potential environmental damage. He calls for educating people about consumption and waste, and he maintains that a diverse and reliable mix of energy sources is the only way to ensure a secure supply while protecting our environment. Finally, Marianne Barner, the director of corporate communications and ombudsman for children's issues at IKEA, discusses how the company is taking steps to improve the environment and be otherwise socially responsible. For example, it's partnering with NGOs to address child labor issues and, on its own, is working to help mitigate climate change. IKEA's goals include using renewable sources for 100% of its energy needs and cutting its overall energy consumption by 25%.