Variance swaps,non-normality and macroeconomic and financial risks

This paper studies the determinants of the variance risk premium and discusses the hedging possibilities offered by variance swaps. We start by showing that the variance risk premium responds to changes in higher order moments of the distribution of market returns. But the uncertainty that determines the variance risk premium – the fear by investors to deviations from normality in returns – is also strongly related to a variety of macroeconomic and financial risks associated with default, employment growth, consumption growth, stock market and market illiquidity risks. We conclude that the variance risk premium reflects the market willingness to pay for hedging against these financial and macroeconomic sources of risk. An out-of-sample asset allocation exercise shows that the inclusion of the variance swap reduces the modified value-at-risk with respect to a portfolio holding exclusively the equity market portfolio.     

The behavioural consequences of self‐congruency in volunteers

The authors of this paper studied some aspects of volunteers from a marketing angle in order to analyse the differences in the self‐concept of volunteers collaborating with either charitable, or ecological organisations; to examine the differences between the images of charitable and ecological organisations; and to show the role of self‐congruency as an influence on of the type of organisation with which to collaborate. Some conclusions derived from this study can be used to attract volunteers through corporative social marketing actions. Copyright © 2004 Henry Stewart Publications     

An evaluation of the management of the Finnish employment service

This paper analyses the efficiency of the Finnish Employment Service's management in selecting unemployed individuals who are offered a job. The database used considers short-term unemployed individuals who face the same labour market conditions in 1996. Duration analysis with a Weibull model has been performed in order to study the determinants of the transition probability from unemployment into employment and the impact of receiving job offers through the Employment Service (ES). In order to carry this out, it has been taken into account that the reception of such job offers may be endogenous because the ES selects the individuals who will receive the offers. The empirical results suggest that the decisions made by the ES are adequate in the sense that they increase the benefit of society, compared with a random assignment of the vacancies offered through the ES. Moreover, the effects of the other determinants depend on whether the individual receives offers. The results also point out that individuals who receive no offers through the ES are more likely, as time passes by, to be discouraged in searching for a job than those who do.     

Job exit of men: new job destination versus unemployment destination

Job exit of men over the age of forty is described and analysed using monthly observations derived from the 1988-89 UK Retirement Survey. A competing risks model is described and estimated. The results show that tenure and age determine transitions from a job to a new one, whereas those transitions from a job to unemployment are also determined by business cycle variables.     

Extension services,product quality and yields: the case of grapes in Argentina

This article studies the impact of publicly subsidized agricultural extension services on yields and product quality. We use panel data from grape producers in Mendoza, Argentina to estimate the impacts of farmer trainings. We find a negative overall impact on yields and evidence of a positive average impact on the adoption of higher‐quality grape varieties. By analyzing the dynamic pattern of the estimated effects, we find evidence of a temporary decrease in yields suggesting the existence of an adjustment process following the introduction of higher‐quality grapes. The overall negative effect on yield is driven by a sharp drop in the year of participation. This fades after year one, and two to three years after treatment we observe increases in higher‐quality grape production. Findings reinforce the importance of temporal dimension of extension services.     

Different Pathways that Suggest Whether Auditors’ Going Concern Opinions are Ethically Based

Several critics have reopened the continuing debate regarding the credibility of the auditing profession in part because of auditors’ reluctance to issue warning signals to investors. At the root of auditors’ lack of independence issues are conflicts of interest resulting from the structural features of auditor–client relationship. The Throughput Model (TP) is advanced to illustrate how ethical issues may be influenced by conflicts of interest. In the first stage, the TP provides an isolation of auditors’ ethical positions from six ethical different perspectives. In the second stage, previous TP theory is built upon by arguing a simultaneous analysis of how conflicts of interests may induce auditors’ behavior. We conclude that in the current low litigation risk environment, auditors’ ethical behavior (both conscious and unconscious) is clearly ‹unbalanced’ favoring the reluctance to issue warning signals. Finally, we offer a discussion of potential solutions to improve ethical issues.

Debt,diversification and earnings management

In this article we use panel-estimation techniques to calculate discretionary accruals (DAC) and to produce a better understanding of the nature of the relation between debt and earnings management. Consistent with the transparency hypothesis (which suggests that diversification increases the complexity of firms’ activities and reduces their transparency to outsiders), we find that for less-diversified (more transparent) firms, debt reduces positive discretionary accruals, whereas in relatively more-diversified (less transparent) firms the impact of debt becomes positive. Our paper shows that marginal increases in debt provide the incentives for managers to manipulate earnings, and diversification provides the needed context for this accounting practice to be possible. We have also found that only in the sub-sample of aggressive firms, those that manage discretionary accruals with enough magnitude to increase income, do lenders exert their control. Some firms, however, take advantage of diversification to avoid this control. Our findings are robust to several earnings-management measures and methodologies.     

Brazil's Experiment with Corporate Governance

The adoption of special listing segments by the São Paulo Stock Exchange in the year 2000 was an important step forward for the Brazilian equity market. Bovespa's introduction of the Novo Mercado and its Special Corporate Governance Levels 1 and 2 provided concrete, standardized certification of corporate commitments to higher governance standards that could be readily observed and verified by all market participants. What evidence do we have that this experiment in corporate governance has been a success? One indication is the performance of the Brazilian stock market itself, along with its ability to attract foreign investors. From 2002 to mid‐2008, the market capitalization of Bovespa companies increased by over 700%, while average daily volume grew almost tenfold. And as of June 2008, international investors represented 37% of total value, up from 26% in 2002. What's more, the growth in the three differentiated governance segments has been even more remarkable. Starting with 15 companies in 2001, the special governance segments had a total of 161 listings by early 2009. And by the end of 2008, the companies listed in the three differentiated segments accounted for more than 60% of Bovespa's total market capitalization and 73% of all trades. Perhaps even more telling, over 70% of the Brazilian IPOs issued between 2001 and 2008 were placed in the special governance segments. In this article, the authors summarize the findings of their study of the reaction of stock prices to the announcement by 31 Brazilian companies of their intent to list on one of the special governance exchanges. Their analysis showed that the companies choosing to list in these segments experienced an increase in both the value and the liquidity of their shares. In light of this evidence, such corporate decisions can be seen as functioning as publicly verifiable signals of commitment to greater transparency and investor protection. And the fact that the listing requirements of the special segments are stricter than those of Brazilian securities legislation means that stock exchanges—and the companies that choose to list on them— effectively have the option to initiate or lead investor protection reforms, as opposed to just complying with them. Thus, in countries where governance legislation is weak and the progress of reform is slow, stock markets can play a key role in helping companies differentiate themselves through exchange‐defined governance codes.     

Addendum: Gender discrimination and intergenerational transmission of preferences

The paper ‘Gender discrimination and intergenerationaltransmission of preferences’ was published in Oxford