Effect of credit rating changes on Australian stock returns

We study the impact credit rating revisions have on stock returns of Australian firms rated by Standard & Poor's and Moody's. Our evidence is consistent with that documented in the USA showing that only downgrades contain price‐relevant information. The reaction is most significant when the downgrade: (i) is unanticipated; (ii) is for an unregulated firm; and (iii) reduces the firm's rating by more than one category.     

Bayesian Conjoint Choice Designs for Measuring Willingness to Pay

In this paper, we propose a new criterion for selecting efficient conjoint choice designs when the interest is in quantifying willingness to pay (WTP). The new criterion, which we call the WTP-optimality criterion, is based on the c-optimality criterion which is often used in the optimal experimental design literature. We use a simulation study to evaluate the designs generated using the WTP-optimality criterion and discuss the design of a real-life conjoint experiment from the literature. The results show that the new criterion leads to designs that yield more precise estimates of the WTP than Bayesian D-optimal conjoint choice designs, which are increasingly being seen as the state-of-the-art designs for conjoint choice studies, and to a substantial reduction in the occurrence of unrealistically high WTP estimates.     

An analysis of differentiation strategies for Galician thermal centres

In the modern tourism industry, competitiveness no longer can be based solely on price; rather, it is necessary to consider other aspects that might generate competitive advantages. In particular, the provision of a wide range of products, services and activities, all of outstanding quality, may be decisive for creating greater demand. Thermal establishments are well aware of these dynamics. Accordingly, this research analyses, using quantitative techniques, whether Galician thermal establishments, including health resorts, spas and thalassotherapy centres, have achieved well-defined differentiation strategies.     

The interrelationships between brand and channel choice

We propose a framework for the joint study of the consumer’s decision of where to buy and what to buy. The framework is rooted in utility theory where the utility is for a particular channel/brand combination. The framework contains firm actions, the consumer search process, the choice process, and consumer learning. We develop research questions within each of these areas. We then discuss methodological issues pertaining to the use of experimentation and econometrics. Our framework suggests that brand and channel choices are closely intertwined, and therefore studying them jointly will reveal a deeper understanding of consumer decision making in the modern marketing environment.     

Tough on criminal wealth? Exploring the link between organized crime’s asset confiscation and regional entrepreneurship

This paper addresses the question “How does the fight against organized crime affect regional entrepreneurship?” We focus on asset confiscation in relation to alleged connections of their owners with organized crime, a highly debated policy measure against organized crime. Extending work on institutions and regional entrepreneurship, we propose that confiscation has contrasting effects on regional entries. On the one hand, confiscation of economic assets associated with criminal organizations’ legitimate activities in a region reduces competition and triggers renewal, fostering new entries. On the other hand, seizure of criminal organizations’ operational assets weakens their ability to exercise sovereignty, creating an institutional vacuum that lowers founding rates. Our results, based on a longitudinal study of Italian provinces between 2009 and 2013, provide support for both hypotheses. We also find that the negative effect associated with the confiscation of operational assets is mitigated when local governments have policies facilitating asset redeployment.     

KNOW YOUR CLIENT! INVESTOR PROFILE AND TAILOR‐MADE ASSET ALLOCATION RECOMMENDATIONS

We study how the investor profile influences the asset allocation recommendations of professional advisors. We find the investor's perceived risk attitude influences more the mix of risky assets, whereas the socioeconomic variables influence more the cash percentage. The recommendations are consistent with a diversification behavior driven by actual asset correlations. These findings support the utility of investor advisory that may help enhance the risk and return trade‐off. The main drawback of the recommendations may consist in the degree of customization that is limited by the small number of investor characteristics actually influencing the asset allocation.     

A decomposition formula for option prices in the Heston model and applications to option pricing approximation

By means of classical It? calculus, we decompose option prices as the sum of the classical Black?CScholes formula, with volatility parameter equal to the root-mean-square future average volatility, plus a term due to correlation and a term due to the volatility of the volatility. This decomposition allows us to develop first- and second-order approximation formulas for option prices and implied volatilities in the Heston volatility framework, as well as to study their accuracy for short maturities. Numerical examples are given.     

Bouncing back from a sudden-onset extreme event: exploring retail enterprises’ resilience capacity

ABSTRACT

A feature of recent decades has been the sudden and unexpected occurrence of catastrophic events seriously affecting people and territories. From an economic viewpoint, this has led scholars to pay increasing attention to factors and determinants taking enterprises face-to-face with extreme and catastrophic events, through the resilience lens. In this context, this study aims to contribute to the literature on resilience to natural disasters which is currently still limited in the business and management fields, both theoretically and empirically. This is particularly true as regards retailing, despite the key role played by retail in the aftermath and recovery periods following on from sudden-onset extreme events such as earthquakes.

The 2012 Emilia earthquake is a case in point with which to explore small retail enterprises’ resilience to sudden-onset disasters. Specifically, our empirical research consisted of administering a structured questionnaire to a sample of small retail enterprises which experienced an earthquake. The unit of analysis adopted was the retail enterprise. Data was processed applying Covariance-Based Structural Equation Modeling (CB-SEM). The structural model aims to verify the impact of sales capabilities, market orientation and networking capabilities on the resilience capacity of retail enterprises affected by an extreme event, controlling for certain financial indicators such as suppliers’ payment timeframes and the use of debt capital, as well as respondent age and gender. The findings show that all the antecedents analysed exert a significant and positive effect on small retail enterprises’ resilience capacity and ability to bounce back from natural disasters. Moreover, suppliers’ payment timeframes showed a direct relationship with retail enterprises’ resilience capacity, with lower use of debt capital equalling higher retail business resilience. Age and gender do not exert any significant effect. Scientific, managerial and public policy implications are derived.

Abbreviation: SEM     

Can individuals’ beliefs help us understand nonadherence to malaria test results? Evidence from rural Kenya

In malaria‐endemic countries about a quarter of test‐negative individuals take antimalarials (artemisinin‐based combination therapies [ACTs]). ACT overuse depletes scarce resources for subsidies and contributes to parasite resistance. As part of an experiment in Kenya that provided subsidies for rapid diagnostic test and/or for ACTs conditionally on being positive, we studied the association between beliefs on malaria status (prior and posterior the intervention) and decisions to get tested and to purchase ACTs. We find that prior beliefs do not explain the decision of getting tested (conditional on the price) and nonadherence to a negative test. However, test‐negative individuals who purchase ACTs report higher posterior beliefs than those who do not, consistent with a framework in which the formers revise beliefs upward, while the latters do not change or revise downward. We also do not find evidence that prior beliefs on ACT effectiveness and trust in test results play any major role in explaining testing or treatment behavior. Further research is needed to improve adherence to malaria‐negative test results.     

A note on the implied volatility of floating strike Asian options

Decisions in Economics and Finance - In this paper, we study the short-time behavior of the implied volatility for short-time floating strike Asian options. Our method is based on Malliavin...