The determinants of recovery from the Black Saturday bushfire: demographic factors,behavioural characteristics and financial literacy

We investigate the contribution of demographic factors, behavioural characteristics and financial literacy to recovery from the financial losses inflicted by the Black Saturday bushfire. Behavioural characteristics (such as overconfidence, self-serving and loss aversion biases) in conjunction with bushfire survivors’ knowledge of financial indicators are used to determine recovery time. Data are collected through in-depth interviews with bushfire survivors, academics and experts in natural disasters. The results show that demographic, behavioural and financial literacy factors have the potential to enhance the recovery process.     

STRATEGIC ENTRY DETERRENCE: RECENT DEVELOPMENTS IN THE ECONOMICS OF INDUSTRY

Abstract. This paper reviews the recent developments in the economics of industry with respect to strategic entry deterrence. Starting from Bain's (1956) classical analysis, a simple two-stage game between an incumbent firm and a potential entrant is used to present the general structure of the entry deterrence problem. Commitments, credible threat and sub-game perfection are illustrated in this context. The various strategic variables that an incumbent firm can use to bar entry are discussed. The issue of whether a group of incumbents can non-cooperatively deter entry is taken up and some empirical evidence is reviewed.     

Collective rationality and functional wisdom of the crowd in far-from-rational institutional investors

The average portfolio structure of institutional investors is shown to reproduce the structure which optimally accounts for transaction costs when investment constraints are weak. Strikingly, this result emerges even though these investors are not aware of the existence of such law and despite the fact that their aims and tools are very heterogeneous. This extends the so-called wisdom of the crowd to much more complex situations in two important ways. First, wisdom of the crowd also holds for whole functions instead of a point-wise estimates. Second, this shows that in socio-economic systems, the optimal individual choice may only be found when the diversity of individual decisions is averaged out. Thus, rationality at a collective level does not need nearly rational individuals with well-aligned incentives. Finally we discuss the importance of accounting for constraints when assessing the presence of wisdom of the crowd.

     

Analyst versus model-based earnings forecasts: implied cost of capital applications

We find that a composite implied cost of capital (ICC) estimate – based on the earnings forecasts generated by cross-sectional models – is highly correlated with future realised returns in both portfolio- and regression-based tests. By contrast, we find very little evidence for an association with future realised returns for an ICC estimate based on analyst earnings forecasts. We also document the time-varying nature of expected returns and risk premia, and provide up-to-date estimates of an implied Australian market risk premium.     

Economic conditions and the motives for multiple open-market share buybacks

We examine the impact of business conditions on the frequency of share repurchases. The results generally indicate that share repurchase programs are positive and statistically significant in HIGH economic states relative to the other economic states. Segmenting the data into frequency of repurchases, we find evidence suggesting different economic states exert influence on frequent and infrequent but not occasional repurchase programs. Further, we show that firms that institute frequent share repurchasing programs experience stronger returns across different business cycles compared to infrequent and occasional share repurchasers.     

The Emerging New Concept of Services in the System of National Accounts and the Balance of Payments

The new manuals of the National Accounts and of the Balance of Payments are implementing new features regarding services. The paper points out the emergence of an innovative concept of services which is highly relevant but whose consequences may not be fully understood. This new perspective helps to focus on the true nature of services, but it also redefines the borders between services and goods. The paper addresses the problems left unresolved, or brought in, by the revisions. Furthermore, it studies the treatment of non‐financial services in the BOP as compared to the SNA. Although the two approaches have been rendered more compatible, the BOP still incorporates several inconsistencies. The hesitancy to completely implement the new services definition tends to somewhat blur the measurement of trade in services.     

COOPERATION INTER-REGIONALE: VERS UN ECHANGE D'EXPERIENCE

RESUME ** :  Ce papier examine les conditions d'une coopération particulière entre collectivités locales : une coopération nouée autour d'une relation d'apprentissage. Le point de départ de l'analyse tient en effet en l'expérience d'une région ayant développé un mode spécifique de coordination publique sur son territoire pour répondre à un événement particulier. Nous nous interrogeons ici sur les conditions dans lesquelles cette expérience peut être transmise à une autre région confrontée à une situation similaire. Cette possibilité d'échange peut en effet représenter un formidable outil décisionnel pour une collectivité. Des exemples de « coopérations décentralisées >> viennent illustrer notre propos.     

PARADIGM DEPLETION,KNOWLEDGE PRODUCTION AND RESEARCH EFFORT: CONSIDERING THOMAS KUHN'S IDEAS

This paper deals in a Stackelberg differential game with Kuhn (1962) ideas of paradigm depletion and resiliency. Paradigm is considered as potential knowledge, as a stock of ideas that can be harvested to produce science. The results are: (i) paradigm depletion can be optimal, (ii) the optimal editor's shadow price of potential knowledge must be non‐positive, if it is positive, the editor is a keeper of the orthodoxy rather than a scientist, (iii) editor's and/or researcher's impatience is bad for science, and (iv) in equilibrium editor's behavior does not matter for research effort, while only editor's behavior matter for the paradigm.     

Strategic managerial dishonesty and financial distress

This paper analyzes the effect of stricter sanctions against fraudulent disclosure in an economy where commercial lenders have only an imperfect information about the type of the firm they trade with. In the hybrid Bayesian equilibrium, some managers running fragile firms claim that their firm is solid only to benefit of better commercial credit terms. The default premium charged by the supplier over the normal cost can be interpreted here as an indirect bankruptcy cost. When the sanction gets heavier, both the default premium and the frequency of defaulting firms go up. Under given circumstances, these perverse effects might be offset by a decline in direct bankruptcy costs.