Financial forecasts in the presence of asymmetric loss aversion, skewness and excess kurtosis

We present closed-form results for the out-of-sample forecasts under the joint presence of asymmetric loss and non-normality, extending the results of Granger [1969. Operations Research Quarterly 20, 199–207; 1999. Spanish Economic Review 1, 161–173] and Christoffersen and Diebold [1997. Econometric Theory 13, 808–817]. We consider the LinEx and Double LinEx loss functions and non-normal distributions in the form of the Gram–Charlier class. We show how the preference asymmetries interact with the distribution asymmetries to determine optimal forecasts which contain the optimal predictors under symmetry and normality as special cases. We also examine the implications of our results for the development of forecast rationality tests, extending the work of Batchelor and Peel [1998. Economics Letters 61, 49–54]. Our results are relevant for the design of efficient investment and risk management policies.     

The influence of culture on accountants' application of financial reporting rules

The objective of this study is to examine the influence of national culture on accountants' application of accounting rules. Based on a refinement of Gray's (1988 ) framework, this study hypothesizes Greek accountants will be more likely (less likely) to recognize contingent liabilities (assets) than U.S. accountants (H1). It also hypothesizes that Greek accountants will be less likely to disclose the existence of both contingent assets and liabilities than U.S. accountants (H2). The results do not support H1. No significant differences are found between Greek and U.S. accountants' recognition decisions involving both contingent assets and liabilities. However, supplemental analyses show that U.S. accountants consistently exhibited more conservatism than Greek accountants. In line with expectations, Greek accountants are less likely to disclose information (i.e., were more secretive) than U.S. accountants, providing strong support for H2. Implications for both research and practice also are discussed.     

How CEOs manage growth agendas

When does it make sense for companies to grow from within? When is it better to gain new capabilities or access to markets by merging with or acquiring other companies? When should you sacrifice the bottom line in order to nurture the top line? In a thought-provoking series of essays, five executives--Kenneth Freeman of Quest Diagnostics, George Nolen of Siemens USA, John Tyson of Tyson Foods, Kenneth Lewis of Bank of America, and Robert Creifeld of Nasdaq--describe how they have approached top-line growth in various leadership roles throughout their careers. They write candidly about their struggles and successes along the way, relaying growth strategies as diverse as the companies and industries they represent. The leaders' different tactics have almost everything to do with their companies' particular strengths, weaknesses, and needs. Freeman, for instance, emphasizes the importance of knowing when to put on the brakes. When he first became CEO of Quest, he froze acquisitions for a few years so the company could focus on internal processes and "earn the right to grow." But for Greifeld, it's all about innovation, which "shakes up competitive stasis and propels even mature businesses forward." The executives agree, though, that companies can grow (and can do so profitably) by distinguishing their offerings from those of other organizations. As Ranjay Gulati of Northwestern's Kellogg School of Management points out in his introduction to the essays, no matter what strategies are in play,"it's important to remember that growth comes in many forms and takes patience.... The key is to be ready to act on whatever types of opportunities arise."     

The effect of personality on virtual communications in warfare

Individuals and corporations worldwide are increasing their use of computer‐mediated‐communications (CMC) systems and processes. Such endeavors are shortening lines of communications, yet simultaneously distancing understanding. Winston Churchill once opined that the British and the Americans are two great peoples separated by a common language. Some relate aspects of culture as the source of Churchill's quote. Separating factors may be more engrained than was previously believed or theorized. The authors examined a high‐stress setting in which the trappings of culture disappear leaving only the basic emotional and cognitive survival aspects of personality: the environment of military combat. The study examined the relationship of an individual's ability to function efficiently using virtual communications and processes while under extreme stress. Observing the results of the study's individual‐environment relations raise the question of whether personality is a factor in virtual team efficiency.     

The Solow growth model: vector autoregression (VAR) and cross-section time-series analysis

The paper examines whether the Mankiw et al. results regarding the Solow model are specific tothe statistical methodology used. Therefore, instead of using cross-section data, annual data were used and the Solow model was investigated using a Vector AutoRegression (VAR) analysis for the G7 countries, and cross-section time-series data for the G3 countries. Analysis shows that, in both cases, the Mankiw et al. results generally hold. It also shows that the use of annual data can play an important and complementary role in revealing the differences in the growth process between individual countries.     

Decision making and planning under low levels of predictability: Enhancing the scenario method

In this paper we review and analyse scenario planning as an aid to anticipation of the future under conditions of low predictability. We examine how successful the method is in mitigating issues to do with inappropriate framing, cognitive and motivational bias, and inappropriate attributions of causality. Although we demonstrate that the scenario method contains weaknesses, we identify a potential for improvement. Four general principles that should help to enhance the role of scenario planning when predictability is low are discussed: (i) challenging mental frames, (ii) understanding human motivations, (iii) augmenting scenario planning through adopting the approach of crisis management, and (iv) assessing the flexibility, diversity, and insurability of strategic options in a structured option-against-scenario evaluation.     

The Trade Boards Act of 1909 and the Alleviation of Household Poverty

This article examines the effects of the 1909 Trade Boards Act on women's wage rates and income contributions to poor households. The Act established boards charged with setting minimum hourly wages in selected low-paid trades, and the majority of workers affected before the First World War were women. Many of the women whose wages were raised by the Act were the wives and daughters of low-skilled workers, while many others were sole earners who supported children or elderly parents. Our main finding is that the Trade Boards Act was effective in reducing household poverty rates among the women whose wages it would have increased.