Traders' strategic behavior in an index options market

We analyze traders' strategic behavior in an index options market, examining the relationships among expected duration, frequency of trades, trade size, and time to maturity using a modified ACD model. Using intraday data at‐the‐money put and call options, we obtain the following results: (1) Frequency of trades contains more information about future option price volatility than does trade size. This may result from institutional or large traders who have issued naked options using the delta‐neutral strategy to hedge those options. This also suggests that informed traders use their informational advantage little by little, rather than all at once. (2) Option volatility increases as the maturity date approaches, contradicting the prediction of the Black‐Scholes model. (3) The duration of the previous interval has a persistent effect on expected duration of the current interval. (4) For the estimation of the modified ACD model, the standardized distribution of duration is Weibull with γ < 1, not exponential. (5) The duration in the options market exhibits an inverse U‐shaped diurnal pattern, much like that of the U.S. stock market. However, unlike in the U.S. stock market, the index options duration becomes much shorter right before lunch hour (12:00 pm). © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:105–133, 2005     

Capital market equilibrium without riskless assets: heterogeneous expectations

The existence theorem of Allingham (Econometrica 59:1169–1174, 1991) for the capital asset pricing model (CAPM) is generalized to the case where agents have heterogeneous expectations on the return distribution and the mean-variance utility functions are quasiconcave. This result is built upon new conditions which are distinct from and weaker than the conditions imposed on the CAPM in the literature.      

Effects of Imported Intermediate Varieties on Plant Total Factor Productivity and Product Switching: Evidence from Korean Manufacturing

By utilizing previously unexplored plant–product data on Korean manufacturing, and detailed import data for 1991–1998, this paper empirically investigates whether greater access to imported intermediate varieties enhanced plant total factor productivity and product‐switching behavior. First, consistent with previous empirical studies, we find that a plant that belonged to industries with higher imported intermediate variety growth experienced higher productivity growth. Second, our empirical results suggest that increased imported intermediate varieties stimulated the product‐switching behavior of domestic plants. Because product‐switching behavior (i.e. simultaneously adding and dropping products) could be understood as a part of the continual process of ‘creative destruction’ within plants, our results imply that imported intermediate variety growth may be one of the channels through which resource reallocation within plants can be promoted.     

Competition,comparison, and innovation

Competitive firms can make a comparison with each other and easily figure out the better strategy, while monopoly firms cannot. Therefore, a competitive firm may be more likely to try low cost innovations than a monopoly firm may.     

Liquidity and initial public offering underpricing

Using eight measures of liquidity, and addressing the potential endogeneity of initial returns, we find underpricing generally increases the secondary market liquidity of IPOs over the first year of trading, irrespective of the horizon over which liquidity is measured. For two model specifications over the eight measures, fifteen regressions display signs consistent with higher underpricing increasing liquidity and thirteen of these are statistically significant. We also find higher initial returns are significantly negatively correlated with the probability of informed trade. Furthermore, the liquidity effects of underpricing survive the lockup date, suggesting they are not quickly dissipated.     

Services cultural alignment in offshoring: The impact of cultural dimensions on offshoring location choices

Empirical research on the growing wave of services offshoring has examined the impact of several key factors such as wages and personnel quality on firm choices of offshore locations. However, examinations of culture in services offshoring to date have largely been confined to the relatively coarse concept of aggregate cultural differences between the home and host countries. We propose that specific cultural attributes are more closely aligned with successful service provision. We empirically examine our theoretical development of service cultural alignment and investigate the impact of cultural dimensions on the location of service offshoring projects. In addition, we examine whether Western and Asian firms have different cultural preferences in terms of the location of services offshoring projects. We find that host countries with lower levels of Hofstede's uncertainty avoidance as well as higher levels of individualism and power distance are able to attract greater numbers of service offshoring projects, even after controlling for macroeconomic, linguistic, and risk-related factors. We did not find that Western and Asian firms have different cultural preferences in this regard. We discuss implications of the findings with respect to theory, managerial practice, and governmental policy.     

Integrated Reporting and Assurance of Sustainability Information: An Experimental Study on Professional Investors’ Information Processing

Sustainability-related non-financial information is increasingly deemed value relevant. Against this background, two recent trends in non-financial reporting are frequently discussed: integrated reporting and assurance of sustainability information. Using an established framework of information acquisition, evaluation, and weighting, this experimental study investigated how the choice of reporting format interacts with the voluntary assurance of sustainability information. The results from a sample of professional investors underline the important role of assurance in the context of voluntary disclosure and illustrate the relevant interaction with the reporting format. Assurance of sustainability information positively affected professional investors’ evaluation of a firm’s sustainability performance, resulted in a higher weighting of this information, and led to higher investment-related judgments. However, this assurance effect was weaker in the case of integrated reporting compared to separate reporting. We attribute this effect to a cognitive bias in decision-making when assured financial performance and non-assured sustainability performance are presented in the same report.     

The Effectiveness of Single‐Sex Schools through Out‐of‐School Activities: Evidence from South Korea

Students’ out‐of‐school activities and time use can play a crucial role in facilitating the effect of schools on students’ achievement. Using data from Seoul, South Korea, where students are randomly assigned into schools, we show that when single‐sex schools improve students’ test performance, their effect is positive on students’ time spent on study‐related out‐of‐school activities. Our results indicate that out‐of‐school activities explain roughly 21%–30% of the effect of single‐sex schooling on test performance.     

Revisiting U.S. country of origin labeling trade damage estimates how does an equilibrium displacement model perform under different scenarios

Mexico and Canada successfully challenged the U.S. mandatory country of origin labeling (COOL) requirements for beef and pork as inconsistent with World Trade Organization (WTO) rules, which ultimately led to arbitration over the level of trade lost due to the COOL measure. During this phase of the dispute, Mexico, Canada, and the United States provided the Arbitration Panel with estimates of the trade losses caused by COOL that were produced using different quantitative methods. The U.S. estimates were based on an equilibrium displacement model (EDM). This article presents a version of the EDM used by the U.S. Government to calculate trade losses due to COOL. The Panel developed its own analysis combining econometric analysis and an EDM that used only supply-side information to calculate changes in Canadian and Mexican livestock trade. The U.S. EDM includes both the supply and demand sides of the market. We use the U.S. EDM and the Panel's assumptions to re-estimate the value of lost trade due to COOL. The inclusion of demand-side effects and domestic COOL costs produces lower estimated trade damages than those produced using the Panel's analysis, validating the EDM as a useful quantitative tool for this type of trade policy analysis.