Toward a North American Security Perimeter? Assessing the trade,FDI, and welfare impacts of liberalizing 9/11 security measures

This paper examines the trade, FDI, and welfare impacts of (liberalizing) 9/11 security measures at the Canada–US border. First, the study provides econometric estimates of the impact of post 9/11 security measures on bilateral (US–Canada) trade flows. Second, we compute sectoral tariff rates “equivalent” to the 9/11 security measures using these econometric estimates together with a three-region nine-sector general equilibrium model. Finally, we assess for both the Canadian and the US economies: 1) the (general equilibrium) impacts on trade, FDI, and welfare, of (liberalising) the 9/11 US security measures and 2) the economic impacts of a change of security paradigm toward a North American Security Perimeter within a Customs Union that would liberalize the Canadian and US 9/11 security measures at the Canada–US border and shift them at the external security perimeter.     

Risk and performance estimation in hedge funds revisited: Evidence from errors in variables

This paper revisits the performance of hedge funds in the presence of errors in variables. To reduce the bias induced by measurement error, we introduce an estimator based on cross sample moments of orders three and four. This Higher Moment Estimation (HME) technique has significant consequences on the measure of factor loadings and the estimation of abnormal performance. Large changes in alphas can be attributed to measurement errors at the level of explanatory variables, while we emphasize some shifts in the economic contents of the equity risk premiums by switching from OLS to HME.     

A Worldwide Survey of Business Ethics in the 1990s

This unique collection of reports encompasses a wide range of challenges and activities of business ethics in most parts of the world. In the introduction, after a brief explanation of the sixfold questionnaire and its assumptions, I try to highlight a number of striking features contained in these reports, which may help to delineate the state-of-the-art of business ethics at national and regional levels. As a result of this international comparison, the following features deserve particular attention: the relevance of semantics, corruption, leadership, corporate responsibilities, the need for case studies, business ethics as a social institution, and the question as to how important international issues really are.     

Investment under demand uncertainty: The newsboy problem revisited

In this article we study the effect of uncertainty on an entrepreneur who must choose the capacity of his business before knowing the demand for his product. The unit profit of operation is known with certainty, but there is no flexibility in our one-period framework. We show how the introduction of global uncertainty reduces the investment of the risk-neutral entrepreneur and, even more, that of the risk-averse one. We also show how marginal increases in risk reduce the optimal capacity of both the risk-neutral and the risk-averse entrepreneur, without any restriction on the concave utility function and with limited restrictions on the definition of a mean preserving spread. These general results are explained by the fact that the newsboy has a piecewise-linear, and concave, monetary payoff with a kink endogenously determined at the level of optimal capacity. Our results are compared with those in the two literatures on price uncertainty and demand uncertainty, and particularly, with the recent contributions of Eeckhoudt, Gollier, and Schlesinger [1991, 1995].     

What drives international equity correlations? Volatility or market direction?

We consider impulse response functions to study the impact of both return and volatility on the correlation between international equity markets. Using data on the US (as the reference country), Canada, the UK and France equity indices, empirical evidence shows that without taking into account the effect of return, there is an (asymmetric) effect of volatility on correlation. The volatility seems to have an impact on correlation especially during downturn periods. However, once we introduce the effect of return, the impact of volatility on correlation disappears. These observations suggest that, the relation between volatility and correlation is an association rather than a causality. The strong increase in the correlation is driven by the past of the return and the market direction rather than the volatility.     

Concentrated Announcements on Clustered Data: An Event Study on Biotechnology Stocks

In spring 2000, three events—two political statements by Bill Clinton and Tony Blair and a breakthrough announcement by Celera Genomics—had a major impact on biotechnology stocks. We analyze their effects over a comprehensive set of biopharmaceutical companies, using a composite return-generating model with an industry-specific patent-based factor. Our results show that stocks can be clustered according to their responsiveness to political and scientific events. Furthermore, we emphasize different impacts on the market value of intangible assets for each cluster, suggesting that growth options are valued with different criteria for therapeutics, and technology-based subsectors.