A Look Back at Modern Finance: Accomplishments and Limitations

In a conversation held in June 2016 between Nobel laureate Eugene Fama of the University of Chicago and Joel Stern, chairman and CEO of Stern Value Management, Professor Fama revisited some of the landmarks of “modern finance,” a movement that was launched in the early 1960s at Chicago and other leading business schools, and that gave rise to Efficient Markets Theory, the Modigliani‐Miller “irrelevance” propositions, and the Capital Asset Pricing Model. These concepts and models are still taught at prestigious business schools, whose graduates continue to make use of them in corporations and investment firms throughout the world. But while acknowledging the staying power of “modern finance,” Fama also notes that, even after a half‐century of research and refinements, most asset‐pricing models have failed empirically. Estimating something as apparently simple as the cost of capital remains fraught with difficulty. He dismisses betas for individual stocks as “garbage,” and even industry betas are said to be unstable, “too dynamic through time.” What's more, the wide range of estimates for the market risk premium—anywhere from 2% to 10%—casts doubt on their reliability and practical usefulness. And as if to reaffirm the fundamental insight of the M&M “irrelevance” propositions—namely, that what companies do with the right‐hand sides of their balance sheets “doesn't matter”—Fama observes that “we still have no real resolution on the key questions of debt and taxes, or dividends and taxes.” But if he has reservations about much of modern finance, Professor Fama is even more skeptical about subfields now in vogue such as behavioral finance, which he describes as “mostly just dredging for anomalies,” with no underlying theory and no testable predictions. Although he does not dispute that a number of well‐documented traits from cognitive psychology show up in individual behavior, Fama says that behavioral economists have thus far failed to come up with a testable theory that links cognitive psychology to market prices. And he continues to defend the concept of “efficient markets” with which his name has long been closely associated, while noting that empirically based asset pricing models such as his (with Ken French) “three‐factor” CAPM have produced much better results than the standard CAPM.     

The Business Case for Gender Diversity: Examining the Role of Human Resource Management Investments

Integrating opposing theoretical perspectives from the past literature, the authors hypothesize and test a U‐shaped curvilinear relationship between gender diversity and workforce productivity. They further propose that the curvilinear effects vary depending on the levels of an organization's human resource management (HRM) investments in pay, benefit, training, and communication; that is, the patterns are more salient when HRM investments are high rather than low. To enhance understanding of how HRM investments have impact on diverse employees, the authors also examine the moderating influence of organizational identification of diverse members that can exert proximal influence on the diversity‐productivity relationship. As predicted, results reveal that high levels of HRM investments influence the gender diversity–workforce productivity association to form a U‐shaped curvilinear relationship. Organizational identification also yields the same moderating patterns. Research and practical implications are discussed. © 2015 Wiley Periodicals, Inc.     

Security design,market risk and round quotes in the treasury bond market

Prior literature finds that the tendency of price-endings to cluster on rounder fractions increases with price volatility. We estimate the separate influences and relative importance of the determinants of price volatility, security design and market risks. Our data is from a market setting that is ideal for isolating and studying the relations of interest. Results for both quote and trade prices indicate that the tendency to use round price-endings increases with both a security’s inherent risk, attributable to security design, and variation over time in market risks. Security design influences clustering more than market risks, but market risks are influential in determining clustering once security design is fixed. The estimated effects are strongest in the on-the-run market segment where liquidity facilitates the aggregation of information into price.     

Developing wine trails as a tourist attraction in Israel

The objective of this paper is to suggest marketing strategies for the development of wine trails in Israel as tourist attractions. Both inbound and domestic tourists were surveyed as to their motives for visiting wineries and their experiences from those visits. The expectations of tourists with regard to the wine trail experience were compared with the beliefs of winery operators. The findings showed that there was a high degree of understanding of tourist needs among the winery operators. Nevertheless, augmentation of the winery experience is necessary if wine trail tourism is to further develop. Copyright © 2004 John Wiley & Sons, Ltd.     

Brentuximab vedotin in relapsed/refractory Hodgkin lymphoma post-autologous stem cell transplant: a cost-effectiveness analysis in Scotland

Objective: To evaluate cost-effectiveness of brentuximab vedotin in patients with relapsed/refractory Hodgkin lymphoma who have received autologous stem cell transplantation, from a Scottish healthcare payer perspective.

Methods: A Microsoft Excel-based partitioned survival model comprising three health states (progression-free survival [PFS], post-progression survival, and death) was developed. Relevant comparators were chemotherapy with or without radiotherapy (C/R) and C/R with intent to allogeneic hematopoietic stem cell transplantation (alloSCT). Data were obtained from the pivotal phase II single-arm trial in 102 patients (SG035-0003; NCT00848926), a systematic literature review and clinical expert opinions (where empirical evidence was unavailable). PFS and overall survival for brentuximab vedotin were estimated using 5-year follow-up data from SG035-0003, and extrapolated using event rates observed for comparator treatments from published survival data. Resource use included drug acquisition and administration; alloSCT; treatment of adverse events; and long-term follow-up. Deterministic and probabilistic sensitivity analyses were conducted to evaluate the impact of uncertainty.

Results: In the base case, the incremental cost-effectiveness ratio (ICER) for brentuximab vedotin was £38,769 per quality-adjusted life year (QALY) vs C/R, whereas C/R with intent to alloSCT was dominated by brentuximab vedotin. ICERs for brentuximab vedotin generated by the deterministic sensitivity analysis ranged between £32,000–£54,000 per QALY. Including productivity benefits reduced the ICER to £28,881 per QALY.

Limitations: Limitations include lack of comparative data from this single arm study and the heterogeneous population. Inconsistent baseline characteristic reporting across studies prevented complete assessment of heterogeneity and the extent of potential bias in clinical and cost-effectiveness estimates.

Conclusions: Although the base case ICER is above the threshold usually applied in Scotland, it is relatively low compared with other orphan drugs, and lower than the ICER generated using a previous data cut of SG035-0003 that informed a positive recommendation from the Scottish Medicines Consortium, under its decision-making framework for assessment of ultra-orphan medicines.     

Consumers' Attitudes Towards Intermission Time Utilization In Movie Theatres

This article discusses the issue of cinema screen commercials and suggests that it should be considered within the context of movie theatre intermission time utilization, where the other alternatives are short, commercially sponsored films or illuminated theatres. A two-stage attitudinal survey of movie goers shows that the majority prefer to have something on the screen during intermission time. Respondents expressed negative attitudes towards cinema screen commercials, resulting in short, commercially sponsored films being the most preferred alternative. Negative attitudes do not imply agreement with the banning of commercials, nor a willingness to share its costs. The relative ranking of illuminated theatres over cinema screen commercials changed after respondents were exposed to the economic implications of their choice.     

Relationship banking and escalating commitments to bad loans

The relationship banking literature suggests that business relationships play an important role in the loan decisions of small banks. We test one aspect of this hypothesis using a cross-sectional panel dataset of small banks located in Texas from 1994 to 2002. Our results suggest that small banks located in smaller counties escalate their commitment to bad loans when compared with those located in larger counties, even after controlling for psychological and social factors that influence escalation tendencies. These results highlight the need for small banks to trade-off the positive benefits of adopting a relationship banking strategy against its unintended negative consequence. We provide some suggestions on how small banks may lessen their escalation tendencies despite adopting a relationship banking strategy. The results of this study also suggest that small and medium-sized enterprises (SMEs) that develop strong relational bonds with small banks may benefit from continued access to credit facilities, especially during periods when they experience financial distress.     

A reduced version of the horizontal and vertical individualism and collectivism scale: A four-country assessment

Individualism/Collectivism is the most widely used cultural dimension in the marketing literature; yet researchers suggest that distinctions within cultures, such as the horizontal and vertical dimensions of Individualism and Collectivism (Singelis et al., 1995; Shavitt et al., 2006), may provide better insights into consumption behavior and responses to marketing stimuli. However, the 32-item attitudinal scale typically used to measure H/V dimensions has been plagued by measurement problems limiting its use and applicability in cross-cultural marketing and consumer research. This paper presents data from six samples in four countries (China, Denmark, India, the U.S.) conducted to test a parsimonious and psychometrically stable 14-item scale measuring the horizontal/vertical and individualist/collectivist dimensions of culture. Theoretical and methodological support for the new scale is offered. The 14-item reduced scale adequately taps into the domain of the construct.     

Medical costs in patients with heart failure after acute heart failure events: one-year follow-up study

Aims: This study investigated annual medical costs using real-world data focusing on acute heart failure.

Methods: The data were retrospectively collected from six tertiary hospitals in South Korea. Overall, 330 patients who were hospitalized for acute heart failure between January 2011 and July 2012 were selected. Data were collected on their follow-up medical visits for 1 year, including medical costs incurred toward treatment. Those who died within the observational period or who had no records of follow-up visits were excluded. Annual per patient medical costs were estimated according to the type of medical services, and factors contributing to the costs using Gamma Generalized Linear Models (GLM) with log link were analyzed.

Results: On average, total annual medical costs for each patient were USD 6,199 (±9,675), with hospitalization accounting for 95% of the total expenses. Hospitalization cost USD 5,904 (±9,666) per patient. Those who are re-admitted have 88.5% higher medical expenditure than those who have not been re-admitted in 1 year, and patients using intensive care units have 19.6% higher expenditure than those who do not. When the number of hospital days increased by 1?day, medical expenses increased by 6.7%.

Limitations: Outpatient drug costs were not included. There is a possibility that medical expenses for AHF may have been under-estimated.

Conclusion: It was found that hospitalization resulted in substantial costs for treatment of heart failure in South Korea, especially in patients with an acute heart failure event. Prevention strategies and appropriate management programs that would reduce both frequency of hospitalization and length of stay for patients with the underlying risk of heart failure are needed.     

Role of international politics on agri‐food trade: Evidence from US–Canada bilateral relations

A well‐functioning trade relationship between Canada and the United States is crucial to the economic vitality of the Canadian agri‐food industry. However, agri‐food trade is more susceptible than other sectors to political interventions. The Trump presidency has strained Canada–US relations and his trade policy actions have significantly increased trade restrictions and trade policy uncertainty and undermined the rules‐based global trading system. We examine the pattern of agri‐food trade between the two countries and find that the upward trajectory of bilateral agri‐food trade ended in 2013. Although this flatlining predates the Trump administration, we show that Trump increased trade policy uncertainty starting in 2017 and likely impacted further expansion of trade. We examine what might change under the Biden presidency and argue that the new administration is likely to restore strong relationships with allies and work to rebuild important international institutions such as the World Trade Organization (WTO). Although protectionist forces will continue to impact bilateral agri‐food trade, we expect closer political ties between a Biden administration and the Canadian Prime Minister. This should have a positive effect on the Canadian agri‐food industry by reducing trade uncertainties, thereby increasing agri‐food trade between Canada and the United States.