Are the dynamic linkages between the macroeconomy and asset prices time-varying?

We estimate a number of multivariate regime switching VAR models on a long monthly US data set for eight variables that include excess stock and bond returns, the real T-bill yield, predictors used in the finance literature (default spread and the dividend yield), and three macroeconomic variables (inflation, industrial production growth, and a measure of real money growth). Heteroskedasticity may be accounted for by making the covariance matrix a function of the regime. We find evidence of four regimes and of time-varying covariances. We show that the best in-sample fit is provided by a four state model in which the VAR(1) component fails to be regime-dependent. We interpret this as evidence that the dynamic linkages between financial markets and the macroeconomy have been stable over time. The four-state model can be helpful in forecasting applications and provides one-step ahead predicted Sharpe ratios.     

CHOQUET INSURANCE PRICING: A CAVEAT

We show that, if prices in a market are Choquet expectations, the existence of one frictionless asset may force the whole market to be frictionless. Any risky asset will cause this collapse if prices depend only on the distribution with respect to a given nonatomic probability measure; the frictionless asset has to be fully revealing if such dependence is not assumed. Similar considerations apply to law-invariant coherent risk measures.     

Kickstarting growth in bus patronage: Targeting support at the margins

This paper presents an assessment of the performance of the Kickstart and Bus Route Development Grant schemes in England and Scotland which aimed to move marginal or new bus services towards commercial operation. Three key aspects are addressed, namely: the bidding and implementation process; performance against objectives and the future potential of the approach. The evidence suggests that this form of transformational support appears to offer a better return than subsidy that supports the status quo or indeed patronage based support.     

Perceived value of interactive digital textbook and adaptive learning: Implications on student learning effectiveness

The authors studied the perceived value of an interactive digital textbook LearnSmart (McGraw-Hill Education, New York, NY) and examined its implications on adaptive learning and student learning effectiveness. Constructionism and constructivism provided the theoretical foundation. Data were collected from an American public university over three semesters. Multiple regression analysis results show that LearnSmart improves students’ perceived competency and their satisfaction with LearnSmart, thus increasing their perceived value of using LearnSmart. In addition, perceived value of LearnSmart varies across different course delivery formats and devices, while perceived challenge has no influence on perceived value. Pedagogical implications and future research directions are discussed.     

Civil economy: definition and strategies for sustainable well-living

The civil economy paradigm presented in this paper has two main characteristics. First, it identifies the philosophical roots of the limits of our socioeconomic system in the reductionist views of human beings, corporations, and well-being. The three reductionist views not only fail to capture an important part of the reality, but also produce poverty of sense of life (also defined as eudaimonic well-being) and of life satisfaction, thereby generating a suboptimal level of well-being. The civil economy paradigm proposes an alternative where it is acknowledged that (1) part of the individuals depart from purely self-regarding preferences and develop other-regarding and relational skills enabling them to overcome social dilemmas, (2) part of the productive system depart from the profit maximization paradigm and aim to satisfy the interests of a wider range of stakeholders beyond shareholders, and (3) well-being is, beyond GDP, the stock of cultural, environmental, spiritual, and economic resources that a community can enjoy. The second qualifying point of the civil economy paradigm is that it proposes a richer four-hand approach to political economy (as an alternative to the traditional two-hand approach) where actions of the traditional invisible hand of the market and the visible hand of institutions in solving failures are complemented and supported by the complementary action of the two additional hands of grassroot citizens’ participation and socially and environmentally responsible companies. In our paper, we explain and document that these two additional hands are already at work, thereby confirming that the reductionist hypothesis on individuals and corporations is rejected by empirical evidence. In the paper, we argue that the civil economy paradigm, by increasing social participation and generativity of all actors, has the power of bridging the gap between the current suboptimal and the socially optimal sense of life (well described in the concept of “common good”). We as well provide evidence showing that the paradigm is far from being unrealistic and that its sprouts are already working in several fields of our society, preparing a more thorough transformation and full replacement of the old paradigm at a theoretical level that is near to come.     

Financial Intermediation and the Costs of Trading in an Opaque Market

Municipal bonds trade in opaque, decentralized broker-dealermarkets in which price information is costly to gather. We analyzea database of trades between broker-dealers and customers inmunicipal bonds. These data were only released to the publicwith a lag; the market was opaque. Dealers earn lower averagemarkups on larger trades, even though dealers bear a higherrisk of losses with larger trades. We estimate a bargainingmodel and compute measures of dealer’s bargaining power.Dealers exercise substantial market power. Our measures of marketpower decrease in trade size and increase in the complexityof the trade for the dealer. (JEL G0, G24)     

Organizing for Radical Innovation: Exploring Novel Insights

While radical innovation brings extensive economic rewards to firms, it is an activity fraught with risk. Prior research has shown that such risks mainly stem from organizational arrangements (at the level of individuals, teams, firms, and inter firm collaborations), which are inadequate or inefficient to support radical innovation. The papers in this special issue on “Organizing for Radical Innovation: Exploring Novel Insights” take stock of past work and provide novel insights about how to organize for radical innovation. The overarching idea linking them is that radical innovation hinges on the creation of fundamentally new knowledge and the continuous stimulation of creativity. Thus, organizational arrangements that support such processes play a crucial role in explaining and predicting the successful commercialization of breakthrough ideas, radically new technologies, and solutions. In particular, the field of science, which in essence aims for the systematic production of new knowledge, can be a valid source of inspiration for how individuals, teams, firms, and interfirm collaborations should organize for radical innovation. Moving from these premises, in this introductory paper, we offer an overview of the topic of organizing for radical innovation and highlight possible linkages with the organizing principles. Then, we summarize the main insights from the papers in this special issue and use their core ideas to sketch a novel research agenda for scholars working at the intersection of organization theory, economics of science, and management of innovation.     

Weak time-derivatives and no-arbitrage pricing

Finance and Stochastics - We prove a risk-neutral pricing formula for a large class of semimartingale processes through a novel notion of weak time-differentiability that permits to differentiate...