The inflation rates may accelerate after all: panel evidence from 19 OECD economies

The stationarity of inflation has many important economic implications. Most panel-based empirical studies do not handle cross-sectional dependence, which will result in power distortion. This paper applies a nonlinear IV estimator to calculate the test statistic of panel unit root (Chang in J Econom 110:261–292, 2002), which accounts for general cross-sectional correlation. Using monthly inflation rates, two statistics proposed by Im et al. (J Econom 115:53–74, 2003) reject the unit root; however, the nonlinear IV statistic accepts the unit root. That is, the ignored cross-sectional correlation may lead to over-rejection of the unit root null. In a nutshell, unlike current literature, the inflation rates may accelerate after all.     

The trend and the measurement of world inequality over extended periods of accounting

The principal result of this paper is the demonstration of a method for measuring an index of (e.g.) nominal GNP over extended periods of time and the inequality thereof. ‘Snap shot’ inequality for specific points in 1964, 1972 and 1980 is also reported and decomposed for six subgroups in 122 countries.     

Option Trading and the Intervalling Effect Bias in Beta

Prior studies show that the beta coefficient of a security changes systematically as the length of measurement interval is varied. This phenomenon, which is called the intervalling effect bias in beta, has been attributed to the friction in the trading system that causes the delays in the price-adjustment process. This study shows that option listing is associated with a decline in the beta intervalling effect bias. The decline is most pronounced for small firms. We also find that our sample firms grow significantly after option listing. Since prior research indicates that market value is a major determinant of the magnitude of the intervalling effect, we re-examine our results using a subsample that controls for market value. The results indicate that the decline in the beta bias from the pre-listing to post-listing period is still prevalent after we control for the change in firm size. Overall, the evidence is consistent with the notion that option trading reduces the delays in the price-adjustment process, which in turn reduces the intervalling effect bias in beta.     

Bond indenture provisions and the risk of corporate debt

This paper examines the effect of alternative bond indenture provisions on the allocation of risk among the firm's claimants. The approach taken here differs from that of earlier studies in that risk allocation is examined while the firm's leverage (in market value terms) is held constant. In this context, four indenture provisions are examined: (1) the time to maturity, (2) the promised payment schedule, (3) financing restrictions and (4) priority rules. It is concluded that risk is transferred from stockholders to bondholders as the time to maturity and promised payment increase appropriately. Furthermore substitution of longer-term debt for an equal amount of shorter-term debt also increases the risk to bondholders while decreasing the risk to stockholders. The analysis shows that a coupon bond can be represented by a unique discount bond with the same risk and value. This permits the characterization of the effective maturity of a risky debt issue, a concept analogous to the stochastic duration of a default-free coupon bond. These results are shown to be independent of the means used to finance the debt issue. Finally, it is concluded that the relative risk associated with different bonds issued by the same firm cannot be determined by the structure of priority rules alone. It is also necessary to consider the timing of the promised payments compared to that of the other debt issues in the firm's capital structure.     

THE VALUE OF A FORWARD CONTRACT IN FOREIGN CURRENCIES

Under some assumptions a valuation model for a forward contract in foreign currencies is developed. The model produces the value of the contract which is consistent with the value of other types of forward contract; the initial value is zero, and subsequent values are the present values of the differences between the forward rate when the contract is written and current forward rates.     

An Empirical Examination of the Parimutuel Sports Lottery Market versus the Bookmaker Market

A sports lottery in Korea presents a unique opportunity for comparing a parimutuel‐type sports lottery market against a bookmaker market outside the realm of horse racing. Using two‐ and three‐game soccer final‐score betting in the sports lottery market in Korea, which features matches in the English Premier League, we compare winning payoffs in this parimutuel‐type sports lottery against corresponding payoffs from an established bookmaker market in the United Kingdom. We find that for outcomes with relatively high payouts (that is, lower‐probability events), winning bets placed in the sports lottery market have greater payoffs than corresponding bets placed in the bookmaker‐based market. However, the opposite is true for outcomes with relatively low payouts (that is, higher‐probability events). Results suggest that participants in the sports lottery market tend to bet more toward high‐probability events than the amount implied by the bookmaker's odds. Results also suggest that the favorite‐longshot bias is still present in the bookmaker market, even when there is less threat of privately informed bettors than in horse racing.     

Will Japan,Taiwan or the US be isolated by China? A macroeconomic game approach

In Taiwan, Japan and even the United States, economic isolation has become a major concern due to the growing Chinese economy, which may lead to welfare losses for the isolated countries. On the basis of the framework developed by Plasmans et al. [Plasmans, J., Engwerda, J., van Aarle, B., Di Bartolomeo, G., Michalak, T., 2005. Dynamic Modelling of Monetary and Fiscal Cooperation Among Nations. Springer], this paper establishes a four-player game with an open-loop information structure to measure possible losses by an international policy coordination approach instead of the conventional free trade agreements. We simulate macroeconomic adjustments of the four countries according to the different institutional scenarios and economic shocks. The baseline simulation and sensitivity analyses indicate that Taiwan can get benefit by participating in coalitional mechanisms including China. In addition, most of the feasible policy coalitions cannot come into effect without US participation. This implies that at the current stage the US rather than China should be the main economic partner of Taiwan and Japan to prevent them from being economically marginalized.     

A discussion of refractive medical behavior from an experiential marketing viewpoint

Since the launch of National Health Insurance System, the financial source of funding for hospital financing has been reduced. Meanwhile, more and more customers attach importance to the experience of the medical process. Our study adopts "strategic modules of experiential marketing" by Schmitt to be the theoretical basis and proceed with in-depth interviews to discuss the influence of "medical behavior" on customers' experiences. We interviewed 32 patients who had a refractive surgery experience. The results show there are 10 propositions, which could be developed from 5 experiential modules - SENSE, FEEL, THINK, ACT, and RELATE - of customers' medical experiences. This study clarifies the experiences of customers during the process of a refractive surgery experience in order to provide medical institutions with the direction of experiential marketing to consider how to use experiential providers to reinforce customers' experiences.