Efficiency tests with overlapping data: an application to the currency options market

This paper presents the results of an empirical study into the efficiency of the currency options market. The methodology derives from a simple model often applied to the spot and forward markets for foreign exchange. It relates the historic volatility of the underlying asset to the implied volatility of an option on the underlying at a specified prior time and then proceeds to test obvious hypotheses about the values of the coefficients. The study uses panel regression to address the problem of overlapping data which leads to dependence between observations. It also uses volatility data directly quoted on the market in order to avoid the biases which may occur when ‘backing out’ volatility from specific option pricing models. In general, the evidence rejects the hypothesis that the currency option market is efficient. This suggests that implied volatility is not the best predictor of future exchange rate volatility and should not be used without modification: the models presented in this paper could be a way of producing revised forecasts.     

On Licensing Under Bertrand Competition

This paper considers licensing by an innovating firm to its competitor in a differentiated duopoly with Bertrand competition. A principal finding is that royalty licensing may be superior to fee licensing for the innovating firm both when the innovation is drastic and when the innovation is non-drastic.     

Fees for Reefs: Economic Instruments to Protect Mexico’s Marine Natural Areas

Stated preference methods can be used to estimate the demand function where no price variation has been observed before. This is the situation of the Mexican coral reef natural protected areas, where after the 2002 approval of a $20 pesos fee (US$1.80) the Ministry of the Environment is now considering increasing the amount of the fee, not only to raise more revenue for the park, but also to curb the number of visitors in the cases where there is excess demand. There are concerns that the very success of the reefs is bringing associated environmental damage that threatens its sustainable use. To estimate the reaction of visitors to different fee levels, we carried out a contingent valuation survey, and constructed with its results an aggregate demand for each park. This demand was then divided by seasons and nationalities, to explore the benefits and costs of differentiating fees, looking at both the revenue maximising and the welfare maximising fees. Finally we discuss how these fees would change when environmental damage functions are taken into account. The recommendation is that increasing fees up to the point where they cover both private and environmental costs would bring the highest amount of economic benefit compatible with the sustainable use of these complex and wondrous marine ecosystems.     

Global Reporting Initiative and social impact in managing corporate responsibility: a case study of three multinationals in the forest industry

We examine recent evolution in corporate responsibility in the forest industry, an important natural‐resource‐based industry which is under rapid internationalisation and structural change under challenging financial pressures. We address two recent trends in corporate communication: corporate disclosure, that is the adoption of consistent external reporting standards [namely the Global Reporting Initiative (GRI) ], and the growing awareness of engagement with and impact on local communities through philanthropy, generation of prosperity, communication and the social impact of core activities. This study uses a comparative qualitative case approach to forest industry multinational enterprises (MNEs) based on a combination of secondary (reporting, company newsletters and other documentation) and interview data. Three large‐scale multinational forest industry firms, all pursuing different strategies in terms of internationalisation and geographical and product diversification, were chosen for the study: Stora Enso, SCA and Sappi Ltd. Our results show that the overall quality of sustainability reporting has improved in these companies from 2005 to 2009 with the adoption of GRI. However, based on our fourfold categorisation of social impact, the core social impact indicator in GRI (SO1) has been interpreted very differently in these MNEs, and the adoption of GRI has not actually much improved the comparability of the reports or transparency of practices.     

Demand for education, and its estimation

Since education produces major externalities and has important merit want characteristics, the estimation of a demand schedule is extremely difficult. Demand estimation for higher education is made somewhat easier because of the great importance of the associated costs and the relevant private substitutes, i.e. private colleges and universities. Therefore higher education is a good candidate for the application of the individual (economic) preference approach, which is based on the assumption that individuals are aware of their need for education about as they are aware of their needs for products provided by the open market.

The estimation of demand for primary and secondary education can rely only to a minor extent on the individual (economic) preference approach. The voter's behavior approach analysis is likely to be more directly applicable. Study of the behavior of voters and the behavior of legislators and members of school boards can shed light on the demand for education. Analytic insight can be gained also by the “voting with one's feet”, and the “calculus of consent” methods.

Finally, benefit-cost analysis can be applied in situations where education gives an extremely weak demand signal. In education we often are less interested in overall benefit-cost estimates than in the benefit-cost positions in which different important interest groups find themselves with regard to education. Such analysis requires the identification of significant interest groups, bargaining strategies, and bargaining patterns, as well as of ways in which education decision makers respond to group pressures.     

Do Eco‐friendly VMD and Store Reputation Increase Satisfaction of Retail Customers?

This study builds on previous research to investigate the effect of the benefits of eco‐friendly VMD (visual merchandising) on satisfaction as well as the effect of satisfaction on store attitude. This also testifies the moderating effects how the benefits of eco‐friendly VMD affect customer satisfaction by store reputation. A total of 363 responses were used to examine the process through which core benefits and relational benefits of retailers with eco‐friendly VMD affect psychological satisfaction and social satisfaction. This is a unique study offering empirical evidence that psychological and social satisfactions are the mechanisms through which benefits of eco‐friendly VMD lead to store attitude. Results indicate that information benefit and psychological benefit result in positive psychological satisfaction and social satisfaction, which in turn leads to positive store attitude in retail customers.     

Comparison of Effects from Different Institutions: Public Credit Guarantee in Korea*

We aim to compare the activities of the two main credit guarantee institutions in Korea. There has been mounting criticism that although these institutions were mandated to play different roles in financing small and medium‐sized enterprises (SME), their operations are, in fact, similar, and many SME receive overlapping support from both institutions. Using the propensity score matching method (allowing for multiple, mutually exclusive support scenarios) to compare the effects of PCG on different institutions, the present study provides suggestions to help the government make decisions regarding the consolidation of PCG funds. The results suggest that the institutions function differently and target different SME. However, overlapping support enables firms to expand their sales only, indicating the existence of inefficiency in the case of overlapping support to firms.     

Health,Education and Emergence from the Development Trap

Abstract: This paper studies the emergence of developing countries from a development trap. It shows that countries whose dynamics exhibits several growth peaks can be considered as cases of equilibrium jump. Applying this criterion to a sample of 65 countries that were initially very poor in 1950, it identifies 13 such countries, called ‘emerging economies’. Comparing emerging and non‐emerging economies in the 1950s and early 1960s, it shows that economic take‐offs starting in the 1960s can be related to health and education in the early 1950s, while other possible factors, such as savings, openness and democracy are not significant.     

An approximation method to derive confidence intervals for quantiles with some applications

Standard jackknife confidence intervals for a quantile Q _y (β) are usually preferred to confidence intervals based on analytical variance estimators due to their operational simplicity. However, the standard jackknife confidence intervals can give undesirable coverage probabilities for small samples sizes and large or small values of β. In this paper confidence intervals for a population quantile based on several existing estimators of a quantile are derived. These intervals are based on an approximation for the cumulative distribution function of a studentized quantile estimator. Confidence intervals are empirically evaluated by using real data and some applications are illustrated. Results derived from simulation studies show that proposed confidence intervals are narrower than confidence intervals based on the standard jackknife technique, which assumes normal approximation. Proposed confidence intervals also achieve coverage probabilities above to their nominal level. This study indicates that the proposed method can be an alternative to the asymptotic confidence intervals, which can be unknown in practice, and the standard jackknife confidence intervals, which can have poor coverage probabilities and give wider intervals.