Do boutique investment banks have the Midas touch? Evidence from M&As

We study whether the meteoric rise of boutique advisors in mergers and acquisitions (M&As) is justified by their buy-side performance. We find that acquiring firms represented by boutique advisors generate superior short- and long-run abnormal returns over those employing full-service advisors. This effect is mainly prominent in private deals, interindustry mergers, and deals involving inexperienced acquirers, where valuation uncertainty tends to be higher. Overall, our results reflect that acquirer shareholders benefit from boutique investment banks' high level of industry expertise and independent advice, supporting the rising demand for their financial advisory services.     

Dangers of commitment under rational expectations

Within a New Keynesian framework, interest rate rules that respond to public expectations lead to determinate and expectationally stable solutions for any level of commitment, as shown by Waters (Macroecon Dyn 13(4):421–449, 2009). That paper also demonstrates gains to commitment, under least square learning, though over-commitment can lead to some very poor outcomes for some parameter values. This paper shows an identical outcome under rational expectations. The optimal level of commitment is unchanged if there are observation errors in the policymaker’s knowledge of public expectations, which is not the case under learning. However, if there is sufficient policymaker uncertainty about the parameter values, partial commitment is best.     

Nonlinear models for strongly dependent processes with financial applications

This paper is motivated by recent evidence that many univariate economic and financial time series have both nonlinear and long memory characteristics. Hence, this paper considers a general nonlinear, smooth transition regime autoregression which is embedded within a strongly dependent, long memory process. A time domain MLE$MLE$ with simultaneous estimation of the long memory, linear AR$AR$ and nonlinear parameters is shown to have desirable asymptotic properties. The Bayesian and Hannan–Quinn information criteria are shown to provide consistent model selection procedures. The paper also considers an alternative two step estimator where the original time series is fractionally filtered from an initial semi-parametric estimate of the long memory parameter. Simulation evidence indicates that the time domain MLE$MLE$ is generally superior to the two step estimator. The paper also includes some applications of the methodology and estimation of a fractionally integrated, nonlinear autoregressive-ESTAR$ESTAR$ model to forward premium and real exchange rates.     

Attention to Fairness versus Profits: The Determinants of Satisficing Pricing

We investigate determinants of the competitive behaviour of satisficing, non‐profit‐maximizing pricing. Taking a behavioural approach, we argue that pricing decisions are motivated by fairness objectives as well as the desire to achieve economic objectives. We draw from the attention‐based view to build our theoretical model explaining the contextual conditions that are most likely to be associated with attention to fairness relative to attention to achieving maximum profits when setting prices. Our hypothesized predictors of satisficing pricing decisions encompass the institutional context in which the firm is embedded, the exchange context with customers and suppliers, and the context internal to the firm. Hypotheses are tested with survey data of over 3000 firms from 15 countries. We find that the decision to set prices at a satisficing level is remarkably common, and its prevalence is associated with contextual factors that are consistent with greater attention to fairness concerns.     

Model misspecification effects for biased samples

The model misspecification effects on the maximum likelihood estimator are studied when a biased sample is treated as a random one as well as when a random sample is treated as a biased one. The relation between the existence of a consistent estimator under model misspecification and the completeness of the distribution is also considered. The cases of the weight invariant distribution and the scale parameter distribution are examined and finally an example is presented to illustrate the results.     

The Market Performance of Socially Responsible Investment during Periods of the Economic Cycle – Illustrated Using the Case of FTSE

The debate about socially responsible investment (SRI) portfolio performance compared with its non‐SRI counterparts remains inconclusive. This paper contributes to the debate by adding a new approach, examining the issue of a full economic circle through economic boom, recession and recovery. We compare stock performance of two value‐weighted investment portfolios: FTSE4Good (SRI portfolios) and FTSE 350 (conventional portfolios) from 2004 to 2011 including 2007 to 2009 financial crash. The results indicate the SRI portfolio performed better and recovered its value quicker in post‐crisis than the non‐SRI portfolio, indicating that SRI portfolios are more resilient to economic turmoil and market shocks. Copyright © 2015 John Wiley & Sons, Ltd.     

Working and Caring for a Child with Chronic Illness: Challenges in Maintaining Employment

This paper shares some pertinent findings from an initial, qualitative stage of a larger, national study currently being undertaken in Australia, exploring the support needs of parents who are working full time and caring for a child with chronic illness. The findings presented here depict the negative impact of these parents caring responsibilities on their work life and the increased stress they experience trying to maintain full time employment. In-depth interviews revealed how these parents had to rearrange their working hours, use up their leave entitlements, work unsatisfactory hours, sacrifice their careers and even change their jobs in order to balance their dual roles. In addition, the findings also highlight the negative and unsupportive attitude that employers had towards these parents. These employment conditions were extremely stressful and frustrating for parents affecting their physical and emotional well being.     

Aggregate stock market behavior and investors’ low risk aversion

This paper studies whether investors’ high risk aversion can be avoided in a representative-agent model that is able to explain aggregate stock market behavior in the US financial market. We present a consumption-based asset pricing model with a representative agent who has a ‘catching up with the Joneses’ preference to show that high risk aversion can be avoided in a representative-agent model that can help explain many of the empirically observed properties of the aggregate stock market return, including the equity premium and risk-free rate puzzles, the predictability of long-horizon stock returns, and the ‘leverage effect’ in return volatility.     

Why the structure of capital and the useful lives of its components matter: A test based on a model of Austrian descent

This paper centers on the structure of capital and the useful lives of its components by considering an economy with two representative firms, one producing a necessity and another producing a luxury. This difference determines their reinvestment opportunities. Therefore, while the one applies replacement, the other adopts scrapping. However, as these capital policies lead to different service lives, the analysis confronts the issues raised by Miller (Review of Income and Wealth 29:284–296, 1982, Review of Income and Wealth 36:67–82, 1990) and deals with them by drawing on Haavelmo’s (A study in the theory of investment, Chicago: The University of Chicago Press, 1960) suggestions regarding the aggregation of capital. Among other findings, it turns out that the simulation results are highly robust, thus demonstrating that real-world implications may be even stronger than strictly suggested by the model.