The pricing of firms with expected losses/profits: The role of January

We examine the role of January in the relation between expected losses/profits and future stock returns. We predict and find that the relation between expected losses/profits and future returns reverses from the usual positive relation in non‐January months to a negative one in January. The reverse January relation is consistent across sample years, is observed in the United States and international markets, and is incremental to other variables associated with January returns. At least part of the reverse January relation is explained by tax‐loss selling. Further analysis shows that the reverse January relation results in a temporary price drift away from fundamental value. In other words, we find that abnormal positive (negative) future returns do not always indicate past under(over)valuation. Overall, our results illustrate the importance of controlling for the effect of January when examining how investors price expected losses/profits.     

Does the source of debt financing affect default risk?

We examine whether the source of debt financing is important for assessments of firms’ default risk. This study reveals that during the 2007–2010 financial crisis, firms that depend mainly on financing from banks suffer higher increases in default risk than do firms with no such dependence. Conversely, firms that rely solely on financing from public debt markets do not experience significant increases in default risk. These findings suggest that the bank supply shock theory explains the transmission of financial shocks to the real economy. Finally, firms that depend on bank financing cannot offset the adverse impacts of bank lending shocks by substituting bank loans with publicly traded debt.     

Personalities of Travel Agents with Strong Sales Records in Taiwan

Studies have shown that a certain personality leads to higher job performance. This finding has led many companies to use personality traits when they hire employees. Despite abundant studies on personality, little is known about suitable personality traits for travel agents, especially in Taiwan. With 230 travel agents working in sales departments for corporate clients and transient travelers in Taiwan, their personalities, actual sales records, and managers’ performance evaluations were used to identify significant personality traits affecting job performance. The results reflect different personality traits for travel agents working with corporate clients and individual transient travelers. The results revealed that travel agents working with corporate contracts have strong commanding and continuative personalities but weak innovative and independent personalities. On the contrary, the agents working with transient travelers showed strong innovative, commending, independent, and sympathy personalities but a weak deliberate personality. Based on the findings, the implications are discussed.     

An investigation of international hotel productivity considering quasifixed inputs and negative outputs

This paper explores the productivity of international hotels by considering the number of guest rooms and the area of the catering department as quasifixed inputs, because neither can be easily changed over a short period. We introduce a range-adjusted measure model to incorporate both quasifixed inputs and negative outputs and propose a nonradial Malmquist productivity index to estimate dynamic productivity. The results show that chain-operated hotels were unable to generate operational synergy to enhance their competitiveness, but their productivity outperformed that of independently operated hotels in cross-period aspect. Finally, we provide improvement suggestions for managers.     

Empirical mode decomposition–based least squares support vector regression for foreign exchange rate forecasting

To address the nonlinear and non-stationary characteristics of financial time series such as foreign exchange rates, this study proposes a hybrid forecasting model using empirical mode decomposition (EMD) and least squares support vector regression (LSSVR) for foreign exchange rate forecasting. EMD is used to decompose the dynamics of foreign exchange rate into several intrinsic mode function (IMF) components and one residual component. LSSVR is constructed to forecast these IMFs and residual value individually, and then all these forecasted values are aggregated to produce the final forecasted value for foreign exchange rates. Empirical results show that the proposed EMD-LSSVR model outperforms the EMD-ARIMA (autoregressive integrated moving average) as well as the LSSVR and ARIMA models without time series decomposition.     

DECENTRALIZED ONE-TO-MANY BARGAINING

We study a one-to-many bargaining model in which one active player bargains with every passive player on how to share the surplus of a joint project. The order of bargaining is not fixed and the active player decides whom to bargain with in each period. Our model admits a rich set of equilibria and we identify the upper and lower bounds of equilibrium payoffs. We also examine whether two natural ordering protocols often assumed in existing studies can sustain endogenously. Although the queuing protocol may indeed arise in an equilibrium, the rotating protocol is in general not self-enforcing.     

Jump risk of Presidential election: evidence from Taiwan stock and foreign exchange markets

This article employs jump-diffusion models, including the ARJI model and the GARCH-jump model, to examine jump intensity and volatility of Taiwan stock and foreign exchange markets during a Presidential election period. The empirical results indicate that, firstly, the ARJI model fits data better than the GARCH-jump model. Secondly, the Presidential election events enhance the jump intensity of both markets and the jump-induced variance is higher than diffusion-induced variance. It reveals the importance of the discrete jump process during a Presidential election period, and might provide some implications for option pricing or hedging strategy. Due to the intervention of the Central Bank in the foreign exchange market during a Presidential election period, the results indicate that jump intensity and volatility of jump size are more moderate.     

UNIFIED CHINA AND DIVIDED EUROPE

This article studies the causes and consequences of political centralization and fragmentation in China and Europe. We argue that a severe and unidirectional threat of external invasion fostered centralization in China, whereas Europe faced a wider variety of smaller external threats and remained fragmented. Political centralization in China led to lower taxation and hence faster population growth during peacetime compared to Europe. But it also meant that China was more vulnerable to occasional negative population shocks. Our results are consistent with historical evidence of warfare, capital city location, tax levels, and population growth in both China and Europe.     

The impact of a conglomerate merger on its vendors and rivals – a case study of Google's acquisition of Motorola

This study explores the valuation effects of the conglomerate merger on an acquiring firm and its stakeholders. We examine Google's acquisition of Motorola and the impact that it had on Google's vendors and rivals. The empirical results suggest that the announcement of this deal led to positive market reaction among Android's vendors, primarily due to Google's ability to use Motorola's extensive patent portfolio to help protect Android's vendors from a potential patent infringement war in the future. Our results also find that when the Open Handset Alliance members obtain help from Motorola's patents or get new technology, an increase in shareholder wealth among Android's vendors and a decrease in shareholder wealth among Android's rivals are likely to occur.     

Endogenous preferential treatment in centralized admissions

We study a model of centralized admissions in which schools are allowed to pre‐commit to admitting qualified applicants who rank them as their top choices over more qualified applicants who do not. A less popular school may use the pre‐commitment to steal applicants who otherwise would not choose it as their top choice (the stealing motive); a popular school may use the pre‐commitment to prevent its own applicants from being stolen (the preemptive motive). We identify the conditions for these two motives to exist. We also clarify the relationship of this phenomenon with that of pre‐arrangement of school places.