The two-fund separation theorem revisited

This paper resolves two issues regarding the traditional capital asset pricing model with one risk-free asset which seem to have been overlooked in the literature. First, it provides an elementary and complete proof of the two-fund separation theorem which accounts for the fact that asset demand may become undefined if the limiting slopes of the investor’s indifference curves are finite. Second, it shows that an additional limiting condition on investors’ risk aversions is generally necessary to guarantee existence of an equilibrium. Moreover, a generalized existence result is formulated which includes investors who in equilibrium may not invest in risky assets and a simple condition ensuring positive equilibrium asset prices is given.     

Truth claims and explanatory claims—An ontological typology of futures studies

Classifications of futures research are usually based on epistemological differences, but we complete these with ontological considerations. The article presents a typology of forecasts, i.e. statements on future events or states. It has two dimensions, truth claim and explanatory claim; each dimension has two values, making the claim or not making the claim. The four outcomes are: forecasts which make both truth claims and explanatory claims (predictions); forecasts which make truth claims, but not explanatory claims (prognoses); forecasts which make explanatory claims, but not truth claims (science fiction); and forecasts which make neither truth claims nor explanatory claims (utopias or dystopias). We regard each outcome as an ideal type, against which forecasts can be measured. We illustrate the use of the typology by presenting an example of each outcome.     

Mobilizing crisis management networks — Entrepreneurial behavior in turbulent contexts

Severe socio-economic issues that threaten peace, life or wellbeing of humans in specific regions of the world cannot be solved by any single actor. Wide networks of political, business, governmental, non-profit and humanitarian organizations are to be involved to change existing practices. Despite conflicting interests and competing behavior, involved organizations need to act collectively to initiate the change of commonly accepted practices, i.e. institutions. This is the space in the present study for examining network mobilization as a collective means to change institutions. Our aim is to answer the question: How are networks mobilized in crisis management to initiate institutional change processes in socio-economically turbulent contexts? We provide a framework of network mobilization for institutional change built on the IMP rooted network mobilization research and institutional entrepreneurship discussion. The framework is reflected upon by means of insights from an interview-based case study with representatives of governmental and non-governmental organizations involved in worldwide humanitarian peace-building. We identify, firstly, incentivizing, reticent and adaptational behaviors of network mobilizers to utilize legitimacy and relationship sediments as mobilization enablers. Secondly, these behaviors help network mobilizers to overcome actor visibility and unpredictability as mobilization obstacles in turbulent contexts.     

Social strategies that work

Although most companies have collected lots of friends and followers on social platforms such as Facebook, few have succeeded in generating profits there. That's because they merely port their digital strategies into social environments by broadcasting their commercial messages or seeking customer feedback. To succeed on social platforms, says Harvard Business School's Piskorski, businesses need to devise social strategies that are consistent with users' expectations and behavior in these venues--namely, people want to connect with other people, not with companies. The author defines successful social strategies as those that reduce costs or increase customers' willingness to pay by helping people establish or strengthen relationships through doing free work on a company's behalf. Citing successes at Zynga, eBay, American Express, and Yelp, Piskorski shows that social strategies can generate profits by helping people connect in exchange for tasks that benefit the company such as customer acquisition, marketing, and content creation. He lays out a systematic way to build a social strategy and shows how a major credit card company he advised used the method to roll out its own strategy.     

Foreign competition and the durability of US firm investments

How does the exposure to product market competition affect the investment horizon of firms? We study if firms have an incentive to shift investments toward more short‐term assets when exposed to tougher competition. Based on a stylized firm investment model, we derive a within‐firm estimator using variation across investments with different durabilities. Exploiting the Chinese World Trade Organization (WTO) accession, we estimate the effects of product market competition on the composition of US firm investments. Firms that experienced tougher competition shifted their expenditures toward investments with a shorter durability. This effect is larger for firms with lower total factor productivity.     

The link between the share of banks’ Level 3 assets and their default risk and default costs

Review of Quantitative Finance and Accounting - We empirically explore the risk relevance of Level 3 fair value estimates. Thereby we focus on banks’ default risk as well as banks’...     

Disentangling types of liquidity and testing limits-to-arbitrage theories in the CDS–bond basis

We disentangle asset-specific, market, and funding liquidity in the CDS–bond basis outside and during the 2007–9 global financial crisis. Our findings stress the importance of separating different types of liquidity, since all three measures have independently negative impacts on the basis. Funding liquidity emerges as the economically most important liquidity metric. While asset-specific liquidity is cross-correlated in both the cash and derivative markets, funding and market liquidity only matter for the cash market. We exploit the decomposition of the basis to test predictions of limits-to-arbitrage theories. We find strong evidence in favor of margin-based asset pricing and flight-to-quality effects.     

Changing interest rate responses to money announcements: 1977–1983

This paper investigates when and how the response of interest rates to money announcements changed in recent years. The response of both short and long rates rises in October 1979, but drops during 1981. During mid-1982, the response of long rates raises again, but without a change in the response of short rates. Despite a number of ex post explanations for these shifts, none of the major hypotheses of why interest rates respond to money announcements provides a complete ex ante explanation of these response shifts.     

Analyzing networks in communication: a mixed methods study of a political debate

Quality & Quantity - How can we detect and analyze network ties in non-reactive communication data? Previous network research mostly relies on the mere occurrence of events between actors...