Services Linkages and the Value Added Content of Trade

Working with a set of global social accounting matrices spanning intermittent years from 1992 to 2011, this paper examines the services embodied in trade on a value added basis. Data include not only the direct and indirect contribution of services to value added contained in a given country's exports, but also the extent to which third‐country value added in services, through intermediate linkages of imported goods and services, is also embodied in production and trade. Our data indicate, in line with previous findings, that the ratio of value added to gross trade has been decreasing both for goods and for services, which is consistent with growing vertical production fragmentation. On the other hand, while value added in goods sectors including indirect exports is less than the gross value of exports, in services, it is greater, highlighting the service intensity of trade.     

The dynamics of long-term growth

The authors have studied the effect of tool-making on man's evolution. They argue that growth is not exponential, but hyperbolic, and that a positive feedback exists linking technological development to population. Exploring the nature of this mechanism in order to improve the predictive capability of global models is the goal of the article.     

Information transfer and conference calls

A long-standing literature documents intra-industry capital market co-movements around earnings releases, yet the dynamics of these information transfers remain largely unexplored. We provide evidence on both the sources and channels of information transfers by separating two distinct events within the reporting window using intra-day data and by exploring potential mechanisms of information flows. We document that the co-movement of absolute and signed stock returns over the conference call windows of announcing firms and their industry peers are statistically and economically larger than the co-movement over the corresponding earnings announcement windows. Turning to mechanisms, we find that shared analyst coverage, coverage by analysts providing industry recommendations, shared institutional ownership, and joint financial media mentions are each individually and incrementally associated with higher rate of information transfer over both the earnings announcement and conference call windows. Textual analyses reveal that peer mentions and macroeconomic discussions both significantly contribute to conference call information transfers.     

Public policy and the establishment of large stores in Belgium

Belgian public policy towards retailing has been viewed as being politically motivated and frustrating the ambitions of large retailers by being biased towards independent retailers. This paper analyses the impact of the Business Premises Act on the development of supermarkets and hypermarkets. It concludes that the Act has had an impact although this may have been an unintended one in that retailers have changed behaviour to surmount the Act.     

Implications of the Dominant Design in Electronic Initiation Systems in the South African Mining Industry

This article analyzes an emerging technological innovation, namely, electronic initiation systems for mining explosives in South Africa. The concept of electronic initiation is presenting itself as a challenge to traditional initiation systems, particularly cap-and-fuse and shock tube technologies. From a technology strategy viewpoint, the challenge is to determine the nature of the managerial decisions that have to be addressed. The Utterback-Abernathy innovation model is used to assess the evolution of the emerging technology; it is found that the technology is still in the fluid phase and that a dominant design has not yet emerged. Since the dominant design is a very important milestone in the evolvement of the product with regard to both the technical and the business aspects, the immediate managerial focus should be on the evaluation factors that may influence the emergence of the dominant design. The emergence of a dominant design is, however, a complex process that depends on the interplay between a myriad of issues, including technological, market, social, economic, and related aspects. The paper anticipates the technological future of the innovation by exploring the factors that may influence the dominant design of electronic initiation systems, and casts the findings in a format that is useful for managerial decision support.     

Does Correlation Between Stock Returns Really Increase During Turbulent Periods?

Correlations betwen international equity markets are often claimed to increase during periods of high volatility. Therefore the benefits of international diversification are reduced when they are most needed, i.e. during turbulent periods. This paper investigates the relationship between international correlation and stock-market turbulence. We estimate a multivariate Markov-switching model, in which the correlation matrix varies across regimes. Subsequently, we test the null hypothesis that correlations are regime-independent. Using weekly stock returns for the S&P, the DAX and the FTSE over the period 1988–99, we find that international correlations significantly increased during turbulent periods.
(J.E.L.: C53, G15).     

The Asymmetric Commodity Inventory Effect on the Optimal Hedge Ratio

Hedging strategies for commodity prices largely rely on dynamic models to compute optimal hedge ratios. This study illustrates the importance of considering the commodity inventory effect (effect by which the commodity price volatility increases more after a positive shock than after a negative shock of the same magnitude) in modeling the variance–covariance dynamics. We show by in‐sample and out‐of‐sample forecasts that a commodity price index portfolio optimized by an asymmetric BEKK–GARCH model outperforms the symmetric BEKK, static (OLS), or naïve models. Robustness checks on a set of commodities and by an alternative mean‐variance optimization framework confirm the relevance of taking into account the inventory effect in commodity hedging strategies.     

A dynamic model of advertising by the regulated firm

A profit-maximizing firm subject to price regulation typically seeks alternative variables to control if the regulatory constraint is binding. Advertising may be one such variable. By shifting the demand curve inward or outward between rate hearings, the firm may increase its earnings above the allowed level. Here, a simple discrete-time optimal-control model is proposed to examine the dynamic implications of advertising by the regulated firm. Our results indicate that, in the long run, the combined effect of regulation and advertising leads to a steady-state equilibrium that is closer to the minimum point on the firm's long-run average-cost curve than the original output level. Thus, an invisible-hand property is established that pushes the regulated firm to shift its demand curve toward the minimum point on its long-run average-cost curve in the presence of regulation. As a result, the well-known allocative inefficiency created by rate-of-return regulation (PMC), on which so much has been written over the past 100 years, is reduced (and, under certain conditions, eliminated) if the regulated firm is allowed to advertise.