MGARCH models: Trade-off between feasibility and flexibility

Multivariate GARCH (MGARCH) models need to be restricted so that their estimation is feasible in large systems and so that the covariance stationarity and positive definiteness of conditional covariance matrices are guaranteed. This paper analyzes the limitations of some of the popular restricted parametric MGARCH models that are often used to represent the dynamics observed in real systems of financial returns. These limitations are illustrated using simulated data generated by general VECH models of different dimensions in which volatilities and correlations are interrelated. We show that the restrictions imposed by the BEKK model are very unrealistic, generating potentially misleading forecasts of conditional correlations. On the other hand, models based on the DCC specification provide appropriate forecasts. Alternative estimators of the parameters are important in order to simplify the computations, and do not have implications for the estimates of conditional correlations. The implications of the restrictions imposed by the different specifications of MGARCH models considered are illustrated by forecasting the volatilities and correlations of a five-dimensional system of exchange rate returns.     

Using DEA for measuring teachers’ performance and the impact on students’ outcomes: evidence for Spain

This research contributes to the ongoing debate about differences in teachers’ performance. We introduce a new methodology that combines production frontier and impact evaluation insights that allows using DEA as an identification strategy of a treatment with high and low quality teachers within schools to assess their performance. We use a unique database of primary schools in Spain that, for every school, supplies information on two classrooms at 4th grade where students and teachers were randomly assigned into the two classrooms. We find considerable differences in teachers’ efficiency across schools with significant effects on students’ achievement. In line with previous findings, we find that neither teacher experience nor academic training explains teachers’ efficiency. Conversely, being a female teacher, having worked five or more years in the same school or having smaller class sizes positively affects the performance of teachers.     

Increasing the skill utilization of expatriates

This article examines the utilization, underutilization, and misutilization of expatriate skills in overseas assignments. Using quantitative data from 268 expatriates from six Fortune 500 multinational corporations, the research first examines expatriates' utilization of eight distinct skills and how patterns of skill utilization influence important job attitudes. Then, using qualitative data from the expatriates, the research examines the subsidiary‐level, corporate‐level, and country‐ level factors which facilitate (or inhibit) skill utilization. The study highlights the idea that effective skill utilization depends not only on the selection and training of expatriates themselves, but also upon the level of skill and teamwork among host country nationals and the quality of support provided by the MNC as a whole. © 2000 John Wiley & Sons, Inc.     

Management of reengineering knowledge: AI‐based approaches

Knowledge about ‘best practices’ for reengineering can be critical to a firm's ability to evolve and respond to competition. As a result, this paper addresses the issue of how to manage reengineering knowledge. Multiple forms of knowledge representation are adapted to address two primary issues: When and what should a firm reengineer? Four different knowledge‐based models and prototypes are developed to illustrate capture of particular types of reengineering knowledge. The prototypes are used to draw inferences about issues in knowledge management and to illustrate feasibility. Distribution of best practices reengineering knowledge can then be accomplished using knowledge servers or making software and knowledge bases available to download off the world wide web. Copyright © 2000 John Wiley & Sons, Ltd.     

Mixed MNL models for discrete response

This paper considers mixed, or random coefficients, multinomial logit (MMNL) models for discrete response, and establishes the following results. Under mild regularity conditions, any discrete choice model derived from random utility maximization has choice probabilities that can be approximated as closely as one pleases by a MMNL model. Practical estimation of a parametric mixing family can be carried out by Maximum Simulated Likelihood Estimation or Method of Simulated Moments, and easily computed instruments are provided that make the latter procedure fairly efficient. The adequacy of a mixing specification can be tested simply as an omitted variable test with appropriately defined artificial variables. An application to a problem of demand for alternative vehicles shows that MMNL provides a flexible and computationally practical approach to discrete response analysis. Copyright © 2000 John Wiley & Sons, Ltd.     

The greening of industry: needs of the field

This article takes stock of some of the advances research on the greening of industry has made over the last decade and sets out an agenda for the next one. Obviously, a thorough review of all of the work on the greening of industry is outside the scope of this article. Instead we will only outline the evolution of the field and focus on the area of inquiry situated at the centre of greening of industry studies: the determinants and consequences of greening. These two questions were the focus of some of the first greening of industry studies and a multitude of works, especially on the determinants of greening, subsequently has identified numerous important insights. Yet, this area of inquiry also exemplifies major weaknesses within research in data on the greening of industry. Progress in our understanding of greening has been hampered by a lack of theoretical and methodological rigour. This article points out the resulting gaps in the scientific analysis of greening and lays out research necessary to improve our understanding of its causes and consequences. © 1998 John Wiley & Sons, Ltd and ERP Environment.     

A comparative analysis of leveraged recapitalization versus leveraged buyout as a takeover defense

Two types of defensive scheme—leveraged buyout (LBO) and leveraged recapitalization (LR)—are examined. In particular, this article examines (1) whether the two similar defensive tactics affect stockholder returns differently and (2) what firm attributes are associated with stockholder gains in LBO and LR announcements. This study finds that stocks of both LBO and LR firms, on average, exhibit significant positive abnormal returns during the announcement period, but that the latter experience substantially smaller returns than the former. This study further finds that while mitigation of agency problems associated with a firm's free cash flow is present for both LR and LBO firms, it is more pronounced for the LBO firms. These results provide evidence that a firm with higher free cash flow could benefit a greater reduction of agency costs by going private through a LBO plan than by remaining public through a LR plan.     

New Product Development in Rapidly Changing Markets: An Exploratory Study

Rapid technological change can be both a blessing and a curse. For example, investors and firms of all sizes hope to reap the rewards that may arise from the apparent convergence of the computer, telecommunications, and entertainment industries. With the high level of uncertainty inherent to such rapidly changing markets, however, those potentially dazzling returns are counterbalanced by a daunting level of risk. John Mullins and Daniel Sutherland suggest that firms operating in such markets require NPD practices that can mitigate risk, manage uncertainty, and, of course, increase the likelihood of new product success. To gain insight into the NPD practices that can meet those challenges, they conducted in-depth interviews with managers who were directly involved in NPD projects at US WEST, Inc., a large, multinational firm in the telecommunications industry. The study focused on identifying practices that help the firm bring new products into rapidly changing markets quickly, efficiently, and effectively. A key objective of their study was to go beyond the basics—for example, the use of cross-functional teams—to identify specific practices that allow the firm to address the various levels of uncertainty that characterize its markets. They identify three levels of uncertainty that confront firms operating in rapidly changing markets. First, potential customers cannot easily articulate needs that a new technology may fulfill. Consequently, NPD managers are uncertain about the market opportunities that a new technology offers. Second, NPD managers are uncertain about how to turn the new technologies into products that meet customer needs. This uncertainty arises, not only from customers' inability to articulate their needs, but also from managers' difficulties in translating technological advancements into product features and benefits. Finally, senior management faces uncertainty about how much capital to invest in pursuit of rapidly changing markets as well as when to invest. The study identifies six practices that help the firm address the uncertainty and risk inherent in its rapidly changing markets. For example, market research in this firm's NPD process focuses more on probing than it does on measuring. Involvement of prospective customers in idea generation and the use of prototypes early in the NPD process help the firm uncover customer needs and market opportunities. Large-scale, quantitative market research focuses primarily on determining market size and price points.     

Beyond technical skills training: The impact of credit counseling on the entrepreneurial behavior of Ugandan youth

There is low take‐up of financial credit among youth in Uganda because potential beneficiaries perceive associated risks as high. This study assesses the determinants of entrepreneurial risk tolerance among Ugandan youth using experimental data from a randomized control trial and a real‐life investment‐risk experiment. Credit counseling was provided to young men and women aged 18–35 who owned a business to educate them about the obligations and commitments associated with financial credit. The intervention had a significant impact on demand for credit and related intermediate outcomes such as ownership of a bank account and investment in assets. The study finds that youth exhibited lower demand for credit after business training because of increased awareness regarding the actual risks associated with receiving credit. Our findings reinforce national strategies to promote soft skills for business entrepreneurship that extend beyond standard business training.     

Long-term consequences of short-term precipitation shocks: evidence from Brazilian migrant households

We find that large short-term precipitation shocks damage the long-term income of households that have permanently migrated from rural to urban areas. This outcome is consistent with the behavior of credit-constrained rural households who are willing to accept lower long-term income in urban areas following the depletion of their productive assets during an adverse shock. Our empirical evidence suggests that there may be a link between large precipitation shocks in rural areas and urban poverty. Further exploration is warranted on the mechanisms by which natural disasters cause these long-term losses.