DOES THE ECONOMY MATTER? AN EMPIRICAL ANALYSIS OF THE CAUSAL CHAIN CONNECTING THE ECONOMY AND THE VOTE IN GALICIA

In this paper the causal chain connecting the economy and the vote in 2001 Galician regional elections is analyzed. Our findings demonstrate that economic voting is not just a matter of reactions to economic perceptions. It also depends to a great extent on two intermediate mechanisms: whether or not the incumbent is held responsible for economic outcomes and performance and voters' views of the relative economic management capabilities of opposition parties.     

Evidence on the Incremental Information Contained in the Components of Restructuring Charges

Among the new disclosures required by EITF 94–3 is the requirement that firms disclose the nature and amounts of the material components of a restructuring charge. The objective of this paper is to assess whether these components provide information to financial statement users beyond that contained in the aggregate charge. The evidence is consistent with the decomposition of the charge providing incremental information that would be lost if only the aggregate number is reported. The results also appear to suggest that analysts interpret restructurings as bad news and that inventory writedowns and employee terminations are interpreted as the most negative restructuring components.     

An Exploration of Asset Returns in a Production Economy with Relative Habits

This paper explores asset returns in a production economy with habit forming households. We show that a model with capital adjustment costs and relative habits is consistent with salient financial facts, such as the equity premium, the market price of risk, and the riskfree interest rate. These predictions are not at odds with good business cycle predictions. In the model, economy investment is strongly procyclical and more volatile than output, which in turn is more volatile than consumption. Moreover, consumption growth is positively autocorrelated and negatively (positively) correlated with future (past) stock returns.

Building a local identity through sellout crowds: the impact of brand popularity,brand similarity,and brand diversity of music festivals

Festival organizations must often balance commercial and artistic priorities when providing a platform for creative expression and regional identity building. However, research on the complex relationship between festival brand metrics and visitor attendance is limited. This relationship is particularly relevant to local governments, tourism boards, and festival organizers because, without reach and visitors, regional branding and identity building are likely to fall on deaf ears. Using data collected from 136 Dutch music festivals, as well as hierarchical regression analysis, this study confirms that a balancing act is necessary with respect to brand popularity, brand similarity, and brand diversity and that being too unique as a festival brand can become a double-edged sword. This finding is particularly relevant because many festival organizers often highlight innovativeness and uniqueness in their requests for funding, regional marketing support, and community engagement. The implications for festival organizers, destination marketers, and local governments are discussed.     

Government financial statistics and accounting in Europe: is ESA 2010 improving convergence?

This paper provides an empirical analysis of the impact of ESA 2010 on EU member states, looking at countries both individually and as a whole and analysing the global impact of the adjustments and the partial impacts of each category. Changing the system of national accounts has introduced conceptual and methodological changes, but there has not been any significant variation in the convergence/divergence between government financial statistics and budgetary accounting in reporting deficits. The effect on the deficits reported by individual member states was quite marked however.     

Modeling a Dynamic Portfolio for Pension Plans in Emerging Markets With Myopic and Nonmyopic Behavior

ABSTRACT

We introduce a dynamic formulation for the problem of portfolio selection of pension funds in the absence of a risk-free asset. In emerging markets, a risk-free asset might be unavailable, and the approaches commonly used may no longer be suitable. We use a parametric approach to combine dynamic programming and Monte Carlo simulation to gain additional flexibility. This approach is general in the sense that optimal asset allocation is tractable for all HARA utility functions in the absence of a risk-free asset. The traditional case composed of several risky assets and one risk-free asset is compared to a case in which the risk-free asset is unavailable.     

Endogenizing exogenous default barrier models: The MM algorithm

In this paper, we propose a Maximization–Maximization (MM) algorithm for the assessment of hidden parameters in structural credit risk models. Step M1 updates the value, volatility, and expected return on the firm’s assets by maximizing the log-likelihood function for the time series of equity prices; Step M2 updates the default barrier by maximizing the equity holders’ participation in the firm’s asset value. The main contribution of the method lies in the M2 step, which allows for ‘endogenizing’ the default barrier in light of actual data on equity prices. Using a large international sample of companies, we demonstrate that theoretical credit spreads based on the MM algorithm offer the lowest CDS pricing errors when compared to other, traditional default barrier specifications: smooth-pasting condition value, maximum likelihood estimate, KMV’s default point, and nominal debt.     

The market pricing of negative special items through time: an unintended consequence of regulation change?

Review of Quantitative Finance and Accounting - Prior research concludes that the implications of negative special items (NSIs) for future earnings are more fully reflected than earnings before...