The informational content of implied volatility

Implied volatility is widely believed to be informationallysuperior to historical volatility, because it is the 'market's'forecast of future volatility. But for S&P 1 00 index options,the most actively traded contract in the United States, we findimplied volatility to be a poor forecast of subsequent realizedvolatility. In aggregate and across subsamples separated bymaturity and strike price, implied volatility has virtuallyno correlation with future volatility, and it does not incorporatethe information contained in recent observed volatility.     

Organizational performance in a regulated environment: The role of strategic orientation

This study explores the influence of governmental regulation on organizational strategies and performance outcomes. Drawing on literature in strategic management, we provide a longitudinal empirical analysis of viable strategies in the U.S. domestic airline industry during a 6-year period (1965-70) when it was regulated by the Civil Aeronautics Board. Results indicate that air carriers were indeed able to articulate coherent strategic postures despite regulatory constraints, and were thus able to influence profitability.     

The Dynamics of Dealer Markets Under Competition

The behavior of competing dealers in securities markets is analyzed. Securities are characterized by stochastic returns and stochastic transactions. Reservation bid and ask prices of dealers are derived under alternative assumptions about the degree to which transactions are correlated across stocks at a given time and over time in a given stock. The conditions for interdealer trading are specified, and the equilibrium distribution of dealer inventories and the equilibrium market spread are derived. Implications for the structure of securities markets are examined.     

The structure of telephone tariffs

This paper compares the structure of telephone tariffs adopted by three types of organisation: government-owned systems responsible for both posts and telephones, government-owned systems responsible for telephones alone, and privately-owned telephone systems. It is found that privately-owned systems are significantly more likely to adopt three or more peak-load pricing periods. They are also more likely to differentiate tariffs by category of subscriber, and to offer lower rates for shared lines, but these differences are only significant if private telephone systems are compared with government systems responsible for both posts and telephones. Postal responsibility alone has little or no effect on these aspects of tariffs. The paper thus provides limited support for the view that ownership systematically affects behaviour.     

A Comparative Literature Survey of Islamic Finance and Banking

There has been large-scale growth in Islamic finance and banking in Muslim countries and around the world during the last twenty years. This growth is influenced by factors including the introduction of broad macroeconomic and structural reforms in financial systems, the liberalization of capital movements, privatization, the global integration of financial markets, and the introduction of innovative and new Islamic products. Islamic finance is now reaching new levels of sophistication. However, a complete Islamic financial system with its identifiable instruments and markets is still very much at an early stage of evolution. Many problems and challenges relating to Islamic instruments, financial markets, and regulations must be addressed and resolved. In this paper, we provide a comprehensive comparative review of the literature on the Islamic financial system. Specifically, we discuss the basic features of the Islamic finance and banking. We also introduce Islamic financial instruments in order to compare them to existing Western financial instruments and discuss the legal problems that investors in these instruments may encounter. The paper also gives a preliminary empirical assessment of the performance of Islamic banking and finance, and highlights the regulations, challenges and problems in the Islamic banking market.     

Can a Shorter Workweek Induce Higher Employment? Mandatory Reductions in the Workweek and Employment Subsidies

This paper presents a unified model of the impact on employment of a mandatory reduction in work hours in combination with an employment subsidy to reduce quasi-fixed costs of employment, while attempting to maintain worker's take-home pay or welfare level. Achieving the dual policy objectives of enhancing employment and maintaining worker income is not necessarily feasible. Nevertheless, a reduction in the legal workweek may induce a degree of downward wage flexibility, while an employment subsidy to firms accommodates downward wage rigidity. It may be possible, therefore, to increase employment with a policy that combines a reduction in the workweek with an employment subsidy. In general, however, the long run employment outcome is ambiguous, and a decline in output cannot be ruled out. More direct policy measures whose impact can be assessed with greater certainty—in particular, removing structural rigidities in the labor market—should be given priority to decrease long term unemployment.     

Substitution of Noncash Payment Instruments for Cash in Europe

The substitution of noncash (check, giro, credit and debit card) payments for cash transactions is of interest for monetary policy and for determining central banks' future seigniorage revenue. We develop a novel method for approximating the share of cash transactions using public information on currency stocks, noncash payments, and card payment technology for 10 European countries. We also provide a forecast of future cash use by country. The trend in cash substitution across countries is quite similar, but the countries themselves are at significantly different stages in this process. The spread of debit and credit card payments has been the key factor behind the substitution away from cash as the use of electronic cash is still in its infancy.     

Reliance on R&D Partnerships: The Influence of Short-Term R&D Bias and The Nature of Competition

Reports indicate that capital markets frequently focus on short-term corporate financial performance. Arguments suggest that the R&D projects of many firms are skewed towards short-term, low-risk projects with relatively modest expected benefits, reflecting both a response by companies to financial market pressure to maintain short-term returns and a short-term R&D bias. Anecdotal evidence suggests that one response to short-term R&D bias by firms is for them to seek R&D partnerships with customers and suppliers. A theory is developed which suggests that when firms compete on the basis of product costs, they are likely to seek partnerships with customers and suppliers in order to respond to short-term R&D pressures. In contrast, when competition is innovation-based, firms are unlikely to pursue R&D partnerships in response to short-term R&D bias. The results of an empirical study provide support for this proposition.