Turning over Turnover

This article applies the methodology of Bai and Ng (2002, 2004)for decomposing panel data into systematic and idiosyncraticcomponents to both stock returns and turnover panels. This approachworks well for both returns and turnover, despite the presenceof severe heteroscedasticity and nonstationarity of individualstocks' turnover. We test the mutual fund separation model ofLo and Wang (2000). Trading due to systematic risk in returnscan account for 66% of systematic turnover. Thus, portfoliorebalancing due to systematic risk is a very important motivefor stock trading. Finally, several common turnover measuresmay understate the impact of stock trading.     

The relationship between cost system complexity,purposes of use,and cost system effectiveness

This paper uses survey data from 133 Dutch, medium-sized manufacturing firms to examine the associations between cost system complexity (in terms of the applied overhead absorption procedures), purposes of use, and cost system effectiveness. First, factor analysis identifies two underlying dimensions of cost system purposes of use, which refers to the range (scope) of purposes for which the cost system is used, among nine widely used purposes: cost system usage for product planning and cost management purposes. Next, the joint effect of cost system complexity and usage for product planning and cost management purposes on cost system effectiveness, as proxied by the intensity of use of and level of satisfaction with the cost system, is examined. The results robustly indicate that at higher (lower) levels of usage for product planning purposes, cost system complexity negatively (positively) affects cost system intensity of use, while at higher (lower) levels of usage for cost management purposes, cost system complexity positively (negatively) affects cost system intensity of use and satisfaction. This implies that when cost system design (i.e., its level of complexity) and its purposes of use are better aligned, the cost system is more effective.     

Product Packaging Metaphors: Effects of Ambiguity and Explanatory Information on Consumer Appreciation and Brand Perception

Product packaging is an important means for communicating product and brand benefits. Research suggests that visual metaphors may be particularly suited in this context, however, the conditions under which metaphors are effective are not yet well understood. In the research reported herein, effects of metaphor ambiguity and explanatory information on consumer appreciation and brand personality perceptions are tested. Study 1 shows that explicit information explaining the metaphor increases consumer appreciation and positively affects brand perception, but only for ambiguous metaphors. Study 2 shows that drawing consumer attention to packaging design by means of a visual packaging cue may be equally or even more effective for enhancing consumer appreciation and steering brand personality perceptions. In addition, Study 2 shows that effects of explanatory information and information type vary with participants’ readiness to engage in metaphor processing. Together, the results provide greater insight into the effects of metaphors in product design and provide guidelines to packaging designers.     

What Corporate Governance Can Learn from Catholic Social Teaching

This reflection focuses on what insights Catholic Social Teaching (CST) can provide for corporate governance. I argue that the ‘standard’ agency theory is overly reductionist and insufficiently incorporates important economic limitations (such as asymmetric information, incomplete contracts, and the need for coordination) as well as human frailty. As a result, such agency theory insufficiently distinguishes firms from markets, which can easily relativize how we treat others and facilitate rationalization of unethical behavior. I then explore how three pillars of CST—human dignity, solidarity, and subsidiarity—can help overcome these limitations. CST proposes a vision of the business corporation as a community of persons, working together in cooperative business relationships toward the shared purpose of contributing to human flourishing.     

Hedonic price models and indices based on boosting applied to the Dutch housing market

We create a hedonic price model for house prices for six geographical submarkets in the Netherlands. Our model is based on a recent data-mining technique called boosting. Boosting is an ensemble technique that combines multiple models, in our case decision trees, into a combined prediction. Boosting enables capturing of complex nonlinear relationships and interaction effects between input variables. We report mean relative errors and mean absolute error for all regions and compare our models with a standard linear regression approach. Our model improves prediction performance by up to 39% compared with linear regression and by up to 20% compared with a log-linear regression model. Next, we interpret the boosted models: we determine the most influential characteristics and graphically depict the relationship between the most important input variables and the house price. We find the size of the house to be the most important input for all but one region, and find some interesting nonlinear relationships between inputs and price. Finally, we construct hedonic price indices and compare these with the mean and median index and find that these indices differ notably in the urban regions of Amsterdam and Rotterdam. Copyright © 2008 John Wiley & Sons, Ltd.     

Small firm internationalization,innovation, and growth

This paper studies the effect of internationalization on innovation and firm performance (employment growth and sales growth) taking the interdependencies among the variables into account. Given the potential endogeneity, this study uses theory-driven instrumental variables and structural equation modelling to estimate the direct and indirect effects of internationalization. Firm-level data is obtained from a survey of 150 Dutch small firms that took part in an export promotion program. The main results show that internationalization has a positive impact on innovation. Internationalization increases firm performance directly and indirectly through innovation, while the direct impact of innovation on firm performance is insignificant. We contribute to the literature of export promotion programs as our results suggest that they not only increase small firm internationalization but also affect innovation and firm growth.     

No Terroir in the Cold? A Note on the Geography of Geographical Indications

Geographical Indications (GIs) are increasingly important instruments of agricultural and food regulations and are growing as contentious issues in trade negotiations and disputes. GIs can improve welfare but they can also be a protectionist instrument. The EU has the most GIs in the world, but they are concentrated in the south of the EU. Even excluding wine, there are seven times more food GIs per capita in the southern EU Member States than in other EU Member States. This note discusses several factors which may explain the geographic concentration of GIs in the south of the EU.     

Economic valuation of habitat defragmentation: A study of the Veluwe, the Netherlands

This paper offers an economic value assessment of a nature protection programme in the Veluwe, the Netherlands. This programme involves two defragmentation scenarios: the first scenario connects the central part of the Veluwe with river forelands in a north-eastern direction (i.e. the meadows of the IJssel river), while the second scenario is focussed on defragmentation in a south-western direction (i.e. the meadows of the Rhine river). The valuation is based on a questionnaire that was administered during face-to-face interviews in the area and through the Internet. We employ a contingent valuation approach to assess the respondents' willingness to pay for the realisation of the defragmentation scenarios. It appears that the mean willingness to pay (WTP) for the two defragmentation scenarios is € 162.2 (lognormal distribution) per respondent. Because the Veluwe is considered a nature park of national importance, we performed an aggregation of individual WTP estimates over Dutch households. With the resulting aggregate estimates we can compare the total costs and benefits of the two scenarios for habitat defragmentation in the Veluwe. In addition, we test whether respondents value the two scenarios equally. We also check whether the methods of data collection (face-to-face interviews and Internet questionnaires) have distinct influences on the stated WTP responses.     

Random incentive systems in a dynamic choice experiment

Experiments frequently use a random incentive system (RIS), where only tasks that are randomly selected at the end of the experiment are for real. The most common type pays every subject one out of her multiple tasks (within-subjects randomization). Recently, another type has become popular, where a subset of subjects is randomly selected, and only these subjects receive one real payment (between-subjects randomization). In earlier tests with simple, static tasks, RISs performed well. The present study investigates RISs in a more complex, dynamic choice experiment. We find that between-subjects randomization reduces risk aversion. While within-subjects randomization delivers unbiased measurements of risk aversion, it does not eliminate carry-over effects from previous tasks. Both types generate an increase in subjects’ error rates. These results suggest that caution is warranted when applying RISs to more complex and dynamic tasks.