THE FUNDING OF TRADITIONAL ORGANISED CRIME IN RUSSIA

The changed economic and political situation in Russia since the 1990s brought about a qualitative transformation of Russian organised crime, particularly in organisational and behavioural patterns. In particular, a pronounced shift from violent crime towards economic crime is being observed. Criminals try to establish and exercise control over legitimate businesses via corrupt politicians, local authorities and/or law enforcement officials. A tendency towards the consolidation of criminal groups within given territories is also discernible, whilst there are signs of increased interregional integration among different criminal organisations.     

Secular Outlook for Global Growth: 2015–34

Fidelity’s Asset Allocation Research Team employs a multi-time-horizon asset allocation approach that analyzes trends among three temporal segments: tactical (short term), business cycle (medium term), and secular (long term). This report focuses exclusively on secular trends that may influence the long-term outlook for various asset classes. Key takeaways are the following:??Slower growth is expected to result in a historically lower interest-rate climate and less of a tailwind to equities. ??With the economy providing the backdrop for asset markets, our secular GDP growth forecasts are the foundation for developing long-term capital market assumptions. ??Our forward-looking, global approach emphasizes the key components of GDP growth—population and productivity—and calculates the critical drivers that have been most predictive. ??Over the next 20 years, global growth is expected to be somewhat slower, due primarily to deteriorating demographics in most countries, particularly aging populations in advanced economies. ??Emerging Asia is expected to grow more slowly, due in part to less catch-up potential after a period of rapid growth, though developing economies in general should continue to experience faster relative growth. ??Slower world growth will lead to lower-than-historical-average interest rates and provide less of a boost to equity returns, but global opportunities for investment are still expected to expand.     

Financial Misrepresentation and Its Impact on Rivals

This paper examines how the announcement of an accusation of fraudulent financial misrepresentation affects industry rivals of the accused firm. Consistent with the importance of the industry competition effect, we find that rivals in less competitive industries benefit from the event. However, in competitive industries, the information spillover effect dominates the competition effect, resulting in negative returns to rival shareholders following the event. The spillover effect increases in importance with the severity of the accusation and is more important for opaque rivals and for rivals that had positive stock price reactions to past positive earnings surprises of the accused firm.     

Towards a General Theory of Good-Deal Bounds*

We consider an incomplete market in the form of a multidimensional Markovian factor model, driven by a general marked point process (representing discrete jump events), as well as by a standard multidimensional Wiener process. Within this framework, we study arbitrage-free good-deal pricing bounds for derivative assets, thereby extending the results by Cochrane and Saá Requejo (2000) to the point process case, while, at the same time, obtaining a radical simplification of the theory. To illustrate, we present numerical results for the classic Merton jump-diffusion model. As a by-product of the general theory, we derive extended Hansen-Jagannathan bounds for the Sharpe Ratio process in the point process setting. *We gratefully acknowledge financial support from the Jan Wallander and Tom Hedelius foundation. We thank Anders Forsgren, Krister Svanberg, and Jan Kallsen for a number of very helpful comments. We are very grateful to Mathias Stolpe for providing us with the optimization code used in our numerical example. A number of very helpful comments from the editor and an anonymous referee has greatly improved the paper.     

Can social spending cushion the inequality effect of globalization?

This paper examines whether social spending cushions the effect of globalization on within‐country inequality. Using information on disposable and market income inequality and data on overall social spending, and health and education spending from the ILO and the World Bank/WHO, we analyze whether social spending moderates the association between economic globalization and inequality. The results confirm that economic globalization—especially economic flows—associates with higher income inequality, an effect driven by non‐OECD countries. Health spending is strongly associated with lower inequality, but we find no robust evidence that any kind of social spending negatively moderates the association between economic globalization and inequality.