An Empirical Investigation of the Campbell-Cochrane Habit Utility Model

Abstract:  This paper tests whether the Campbell and Cochrane (1999) habit utility model generates a valid stochastic discount factor for the 25 Fama-French size/book-to-market and size/momentum sorted portfolios. Campbell and Cochrane (1999) derive a consumption based habit utility asset pricing model and calibrate it to aggregate US stock market data. However, they do not test whether their model is consistent with a larger cross section of asset returns. We test their model using the methodology of Hansen and Jagannathan (1991) and Burnside (1994) . In contrast to previous studies, we find that for reasonable parameter values, the model's stochastic discount factor is inside the Hansen-Jagannathan bounds and therefore satisfies the necessary conditions for a valid stochastic discount factor. We trace the difference between our results and previous studies to the method used to estimate the model's parameters and the parameter values themselves.     

Risk Taking and Performance of Public Insurers: An International Comparison

We investigate how investor protection, government quality, and contract enforcement affect risk taking and performance of insurance companies from around the world. We find that better investor protection results in less risk taking, as do higher quality government and greater contract enforceability. However, we find only limited evidence that these factors influence firm performance. We conclude that better overall operating environments result in less risk taking by insurers without the concomitant decline in performance. These results imply that better investor protection environments benefit policyholders and outside stockholders by preventing corporate insiders from expropriating wealth from policyholders and outside stockholders.     

Effects of Public Job Training Programmes on the Employment Outcome of Displaced Workers: Results of a Matching Analysis,a Fixed Effects Model and an Instrumental Variable Approach Using Korean Data

This study employs the matching method, the fixed effects model and the instrumental variable (IV) approach to estimate the employment effect of training programmes on displaced workers in Korea. The results of the matching and logit analyses suggest a positive training effect on employment. However, the fixed effects model showed a substantial reduction in the estimated training effect and the IV approach showed no training effect. This provides clear evidence of positive selection into training. The results of the IV approach suggest that training favoured male and educated workers, whereas female, less educated and older workers were disadvantaged by training programmes.     

An exploratory study examining information technology adoption and implementation in full-service restaurant firms

The purpose of the paper is to explore and compare the current use of information technology-related advances in chain and independent full-service restaurants, the factors that motivate managers of these types of restaurants to decide whether or not to implement such technology, and how these managers perceive the impact of technology on the firm. A case study analysis involving four San Francisco Bay Area full-service restaurants was conducted to examine the framework of full-service restaurants to implement new technology. Propositions are developed that purport the information technology adoption and implementation characteristics of full-service restaurant firms while elucidating the distinctiveness between chain and independent firms.     

Bayesian estimation of a random coefficient model

This paper carries out a Bayesian analysis of the Hildreth-Houck (1968) random coefficient model and applies it to some cross-section production function data. Posterior distributions for mean coefficients, actual coefficients, variances and variance ratios are derived. The variance ratio posteriors are largely uninformative but they do lead to relatively informative densities on the variances, and the problem of negative variance estimates, obtained with previous techniques, is overcome. Posterior densities for the mean coefficients are not extremely sensitive to the variance ratios.     

Operational modes for multinational corporations in post-apartheid South Africa: A proposal for a code of affirmative action in the marketplace

The economic and socio-political impact of multinational corporations (MNCs) on third world countries has been the subject of intense debate and controversy leading to charges of exploitation and colonization on the one hand, and demands for codes of conduct on the other. This article examines the working of one of the most comprehensive of such codes under the most reprehensible political conditions, i.e., the operations of U.S.—based multinational corporations in South Africa under the acgis of the Sullivan Principles. It is argued that despite the best intentions, and considerable social goodwill, the Sullivan Principles were seriously flawed both as to goals and as to means of achieving them. Finally, it suggests a new approach to developing standards of MNC behavior in third world countries which emphasizes those areas of activities that are directly under the control of MNCs, and offers targets of achievement to which MNCs can and should be held accountable.The paper is a revised and expanded version of a keynote speech delivered by the author at the First Biannual Conference on Advances in Management, Orlando, Florida March 25–28, 1992.S. Prakash Sethi is Professor and Associate Director, Center for Management, Baruch College, The City University of New York. He is also the Economic Policy Advisor to the National African Federated Chamber of Commerce and Industry (NAFCOC), which is the largest and the oldest organization of Black business and industry people in South Africa.     

Mobilizing grassroots’ technological innovations and traditional knowledge, values and institutions: articulating social and ethical capital

The Honey Bee Network has helped provide a sort of loose platform to converge creative, but uncoordinated individuals across not only Indian states having varying cultural, linguistic and social ethos, but also in 75 other countries around the world. What the Network is trying to do in a rather quiet manner may transform the way the resources—in which poor people are rich—are used in the future. These resources are their knowledge, innovations and sustainable practices.I first argue that the classical concept of social capital does not distinguish between the trust in society created for social good versus social ‘bad’. For instance, the trust among members of the mafia and other socially undesirable networks does not constitute social capital. I am also trying to emphasize that part of social trust which is guided by higher ethical values which may not have become social norms as yet. This is being characterized as ethical capital. Finally, I conclude that the Honey Bee Network has tried to articulate the social and the ethical capital of society at the grassroots to demonstrate how local individuals and communities are trying to solve local problems without any outside help.     

Relating strategy and structure to flexible automation: A test of fit and performance implications

This study analyzed various strategy and structure choices to determine their fit relationship with flexible automation (FA). ¹Using the moderator hypothesis, we proposed that the more strategy and structure choices complemented FA's competences, the higher would be the performance impact of FA. Data from 87 FA users indicate that quality and flexibility strategies, described as complementary to FA's strengths, interact positively with FA. Low cost strategy, described as conflicting with FA, interacts negatively. Organic structure, viewed as complementary to FA, has only main effects whereas a mechanistic structure interacts negatively. At the manufacturing level, skill diversity and team approaches, considered as complementary to FA, interact positively. While a subgroup analysis of high-low performers lends additional support to these relationships, analysis of industry subgroups indicates that some relationships are industry specific. We discuss the implications of these findings for research and practice.     

On the Behavior of Import Demand of Korea

In this paper, I provide estimates of the Import demand function for Korea for the period of 1971 – 1988. Second, considering the possibility of structural change in our data period, we test the stability of the coefficients. Cusum of squares test result shows the constancy of the parameters broken between pre-1980 and post-1981 data. The estimation result based on data only after 1981 shows that the income elasticity becomes less responsive over time and the relative prices do not exercise significant influence on Korean imports.