Choices of savings options related to trust in banks’ competence,benevolence and stability

The study investigates whether beliefs in professional investor skill in conjunction with trust in banks and other fund managers explain choices of options for long-term savings. From questionnaire data obtained for a population-based sample (n=178) and a sample of undergraduates (n=186), two index measures were constructed, one of beliefs in the skill of professional investors and another of trust in fund managers. The trust index was aggregated for the three interrelated components: competence, benevolence and stability. Regression analyses of the likelihood of savings in an actively managed fund showed an expected effect of investor-skill beliefs that was mediated by trust in the fund manager. In addition, self-reported knowledge played a larger role than trust for choices of passively managed index funds and in particular for own investment in stocks.     

Stochastic volatility and time-varying country risk in emerging markets

This study suggests an alternative method to estimate time-varying country risk. We first apply a new multivariate stochastic volatility (SV) model to a set of emerging stock markets. To estimate the SV model, we use a Bayesian Markov chain Monte Carlo simulation procedure. By applying the deviance information criterion, we show that the new model performs well relative to alternative multivariate SV models. We then compute the conditional betas for the different markets and compare the results with an often-used procedure based on multivariate GARCH models. We show that the new multivariate SV model more accurately captures the time-varying nature of country risk. The conditional betas show signs of large variations, indicating the importance of taking time-varying country risk into consideration when managing emerging market portfolios.     

Corporate Spin-offs and the Significance of Founders’ Informal Relations

Research on corporate spin-offs has suggested that spin-off firms have advantages over other new entrants in an industry because of their origin. These advantages have been argued to lie with the founders’ prior industry experience, and with the opportunity to form sourcing agreements with the parent firms. This paper inquires into an additional aspect of prior experience, founders’ informal relations. The use and benefits of such informal relations to source resources necessary for growth were analysed in three spin-offs in the Swedish telecommunications industry. The findings show that the spin-offs derived a variety of benefits from the use of founders’ informal relations, in particular in staffing the spin-offs, but also to acquire resources when other means of sourcing were unavailable. The results indicate that future research on corporate spin-offs as well as corporate spin-outs may need to account better for this variable in order to explain spin-off growth, and hence success.     

The medical doctors as gatekeepers in the sickness insurance?

Based on a randomized experiment, we estimate effects from notification to medical doctors of tighter monitoring of their Medical Certificates (MCs). Both the time prescribed by the doctor certificates for sick leave (prescribed sick leave) and the impact on the length of the actual sickness absence (actual sick leave) is studied. We find no effect on the total number of prescribed sick leave days. However, we do find an increase in both prescribed and actual sick leave with a 25% work inability. We also find that the notification letter causes an increase in actual sick leave (i.e. the number of reimbursed sick days). We discuss a number of potential explanations for this rather surprising result.     

On the jump activity index for semimartingales

Empirical evidence of asset price discontinuities or “jumps” in financial markets has been well documented in the literature. Recently, Aït-Sahalia and Jacod (2009b) defined a general “jump activity index” to describe the degree of jump activities for asset price semimartingales, and provided a consistent estimator when the underlying process contains both a continuous and a jump component. However, only large increments were used in their estimator so that the effective sample size is very small even for large sample sizes. In this paper, we explore ways to improve the Aït-Sahalia and Jacod estimator by making use of all increments, large and small. The improvement is verified through simulations. A real example is also given.     

Low‐inflation Targeting and Long‐run Unemployment*

The model of Akerlof, Dickens and Perry (2000) (ADP) predicts that low inflation may cause unemployment to persist at high levels. When applied to U.S. data, their results strongly rejected the conventional NAIRU model. We apply the ADP model to Swedish data. The fact that our Swedish data also reject the NAIRU model has a number of interesting implications for the Swedish economy and, potentially, for other European countries as well. The results indicate that raising the Swedish inflation target from 2 to 4 percent would bring long‐run unemployment down by several percentage points. The possibility of ADP‐type long‐run Phillips curves also across the euro countries may raise some concern about the EMU project. While detailed studies on other countries are needed, there is nothing to suggest that these non‐vertical Phillips curves would not differ considerably across the euro countries. Any single inflation level targeted by the ECB would then generate excess unemployment in individual member states.     

Exogeneity in structural equation models

The practical relevance of several concepts of exogeneity of treatments for the estimation of causal parameters based on observational data are discussed. We show that the traditional concepts, such as strong ignorability and weak and super-exogeneity, are too restrictive if interest lies in average effects (i.e. not on distributional effects of the treatment). We suggest a new definition of exogeneity, KL-exogeneity. It does not rely on distributional assumptions and is not based on counterfactual random variables. As a consequence it can be empirically tested using a proposed test that is simple to implement and is distribution-free.     

A Monte Carlo study on the pitfalls in determining deterministic components in cointegrating models

Recently the use of the so-called ‘Pantula principle’ has been suggested as a means of determining deterministic components in cointegrating models (see Ahking in Journal of Macroeconomics 24, 2002, and Hatemi-J in Economic Modelling 19, 2002). Moreover, the procedure is suggested in the widely used CATS in RATS program (see [Hansen, H., Juselius, K., 1995. CATS in RATS. Estima, United States]). In this paper, we examine, by means of Monte Carlo simulation, the properties of the ‘Pantula principle’. We investigate the five models contained within the Johansen methodology and find that the ‘Pantula principle’ is heavily biased towards choosing the model with an unrestricted constant when the model with a restricted trend is the true one. We suggest a modification that reduces this bias to an important extent.     

Engineers’ non-scientific models in technology education

Engineers commonly use rules, theories and models that lack scientific justification. Examples include rules of thumb based on experience, but also models based on obsolete science or folk theories. Centrifugal forces, heat and cold as substances, and sucking vacuum all belong to the latter group. These models contradict scientific knowledge, but are useful for prediction in limited contexts and they are used for this when convenient. Engineers’ work is a common prototype for the pupils’ work with product development and systematic problem solving during technology lessons. Therefore pupils should be allowed to use the engineers’ non-scientific models as well as scientific ones when doing design work in school technology. The acceptance of the non-scientific models for action guidance could be experienced as contradictory by pupils and teachers alike: a model that is allowed, or even encouraged in technology class is considered wrong when doing science. To account for this, different epistemological frameworks must be used in science and technology. Technology is first and foremost what leads to useful results, not about finding the truth or generally applicable laws. This could cause pedagogical problems, but also provide useful examples to explain the limitations of models, the relation between model and reality, and the differences between science and technology.     

Derivative Usage by Nonfinancial Firms in Sweden with an International Comparison

This paper provides survey evidence on the use of derivatives among Swedish nonfinancial firms. The evidence is compared with the findings by Bodnar et al. (1995, 1996) and Berkman et al. (1997) for the USA and New Zealand, respectively. By comparing firms in Sweden with firms in New Zealand and the USA differences in derivative usage can be related to differences in their underlying economies and history of trading in derivatives. Among other issues, the results showed that (1) 52% of the nonfinancial firms in Sweden used derivatives compared with 53% in New Zealand and 39% in the USA; (2) the usage of derivatives was more common among larger than among smaller firms; (3) the principal use of derivatives was for hedging purposes and those firms that engaged in speculative activity tended to be larger rather than smaller firms; and (4) lack of knowledge about derivatives within the firm was the issue of most concern for financial directors. The latter was in contrast with the USA where lack of knowledge was the issue of least concern.