Dynamic Portfolio Choice with Parameter Uncertainty and the Economic Value of Analysts' Recommendations

We derive a closed-form solution for the optimal portfolio ofa nonmyopic utility maximizer who has incomplete informationabout the alphas or abnormal returns of risky securities. Weshow that the hedging component induced by learning about theexpected return can be a substantial part of the demand. Usingour methodology, we perform an "ex ante" empirical exercise,which shows that the utility gains resulting from optimal allocationare substantial in general, especially for long horizons, andan "ex post" empirical exercise, which shows that analysts’recommendations are not very useful. (JEL C61, G11, G24)     

The Contribution of the Urban Sector to Australian Economic Development Before 1914

This article examines the contribution of the urban sector to Australian economic development before the First World War. This contribution has often been seen in negative terms: contemporary observers generally thought that the major cities were to large and drained resources from the productive sectors of the economy, while some modern historians have portrayed cities as centres of poverty and environmental disamenity. The article evaluates these claims and presents a case for the urban sector having been a powerful stimulus to economic growth. The problems which Australian urbanization created did not stem from cities being too large, with more inhabitants than the number of well-paying jobs; rather, the general preference for low-density suburban living, and the ability of most of the population to be able to afford to live that way, meant that the cities would be expensive to build and difficult to service in a cost-effective way.     

Arbitrage and price revelation with asymmetric information and incomplete markets

This paper deals with the issue of arbitrage with differential information and incomplete financial markets, with a focus on information that no-arbitrage asset prices can reveal. Time and uncertainty are represented by two periods and a finite set S of states of nature, one of which will prevail at the second period. Agents may operate limited financial transfers across periods and states via finitely many nominal assets. Each agent i has a private information about which state will prevail at the second period; this information is represented by a subset S_i of S. Agents receive no wrong information in the sense that the “true state” belongs to the “pooled information” set ∩_iS_i, hence assumed to be non-empty.Our analysis is two-fold. We first extend the classical symmetric information analysis to the asymmetric setting, via a concept of no-arbitrage price. Second, we study how such no-arbitrage prices convey information to agents in a decentralized way. The main difference between the symmetric and the asymmetric settings stems from the fact that a classical no-arbitrage asset price (common to every agent) always exists in the first case, but no longer in the asymmetric one, thus allowing arbitrage opportunities. This is the main reason why agents may need to refine their information up to an information structure which precludes arbitrage.     

No-arbitrage Equilibria with Differential Information: An Existence Proof

On the example of a pure exchange financial economy with two periods incomplete nominal-asset markets and differential information of the adverse selection’s type, Cornet-De Boisdeffre (J Math Econ 38:393-410, 2002) introduced refined concepts of no-arbitrage prices and equilibria, which extended to the asymmetric information setting the classical concepts of the symmetric information literature. We now assess existence issues and extend a standard property of symmetric information models. Namely, we prove that a no-arbitrage equilibrium always exists, as long as financial markets preclude arbitrage, under the same standard conditions, whether agents have symmetric or asymmetric information.     

On farmland prices and rents in Japan

Historically, the Japanese farmland market has been strongly regulated, although fundamental changes in policy were introduced in 1967 and 1980. This article examines the relationship between farmland prices and rents in Japan for 1955–2000 using the cointegration procedure of Johansen et al. (2000) , which admits structural breaks. Results show the presence of a cointegrating relationship with a significant break in 1980. There is Granger‐causality from prices to rents, which suggests that rents are determined within an institutional setting according to farmland prices. The rent–price elasticity is unity, which supports the notion of efficiency in the farmland market.     

How Does FDI React to Corporate Taxation?

Based on a panel of bilateral FDI flows among 11 OECD countries over 1984–2000, we show that, although agglomeration-related factors are strong determinants of FDI, tax differentials also play a significant role in understanding foreign location decisions. We further investigate non-linearities in the impact of tax differentials, and explore the impact of tax schemes. Our results are consistent with the imperfect competition literature which underscores the possibility of tax differentials across countries in equilibrium.JEL Code: F21, H25, H87     

Party time: recreation rituals in the world of B2B

Abstract

We examine the role of business parties in business markets: why do B2B companies spend such large amounts of money to sponsor events meant for public consumption, such as sporting events, when most of their activity involves selling to other organisations? Drawing from extensive qualitative fieldwork in the world of tennis tournaments, we detail the specific universe of parties that happen backstage, between companies sponsoring these events. This context helps illuminate the critical role of business parties in business networks. Far from being mere recreation at the company’s expense, business parties are important opportunities for executives to develop and manage their relationships. We show that a business party functions as a particular kind of ritual by creating a distinct universe with its own language, gestures, and other modes of interaction.

Summary statement of contribution Our theoretical contribution to the literature on relationship marketing is to detail the unifying function of business parties in local business markets, where relationships with a variety of organisations are key to a company’s success. Our methodological contribution is to illustrate the relevance of anthropological approaches and concepts, such as rituals, to the world of B2B.     

Sport as a cultural system: sports policies and (new) ethnicities in Lyon and Birmingham

‘Sport promotes integration’: this idea seems to be commonly accepted both in France and in the UK, even though the authorities in each country see the issue of ‘ethnic minorities’ very differently. This article draws on research based on interviews with the main actors of ‘socio–sports’ policies in the cities of Lyon and Birmingham and on analysis of consultation procedures and official documents, to show that sport provides a set of symbolic markers that helps the authorities, professionals and ‘ethnic minorities’ to get their bearings in an uncertain multicultural situation. Although ‘ethnic minorities’ try to control the direction of sports policies in pursuit of their own objectives, their strategies tend to be ‘routinized’ around markers legitimized by the authorities in response to the success of certain sporting practices. Sports policies, therefore, promote ‘security’ of identity for these ‘minorities’ by ‘mapping’ their environment using the values and principles of sport. ‘Le sport favorise l’int´gration’: cette idée semble communément admise en France et en Grande–Bretagne alors même que leurs autorités respectives envisagent de manière très différente la question des ‘minorités ethniques’. À partir d’une recherche fondée sur des entretiens avec les principaux acteurs des politiques ‘socio–sportives‘ des villes de Lyon et de Birmingham, et sur l’analyse des procédures de concertation et des documents officiels, l’analyse montre que le sport trace des repères symboliques qui permettent aux pouvoirs publics, aux professionnels et aux ‘minorités ethniques’ de s’orienter dans une réalité multiculturelle incertaine. Mais si ces dernières tentent de contrôler l’orientation des politiques sportives de manière à poursuivre leurs propres objectifs, leurs stratégies tendent également à se ‘routiniser’ autour des repères que les pouvoirs publics ont légitimé pour répondre au succès des pratiques sportives. Les politiques sportives favorisent dès lors la ‘sécurisation’ identitaire de ces ‘minorités’ en ‘cartographiant’ leur environnement à l’aide des valeurs et des principes du sport.     

Firm-network characteristics and economic robustness to natural disasters

This article proposes a theoretical framework to investigate economic robustness to exogenous shocks such as natural disasters. It is based on a dynamic model that represents a regional economy as a network of production units through the disaggregation of sector-scale input-output tables. Results suggest that disaster-related output losses depend on direct losses heterogeneity and on the economic network structure. Two aggregate indexes - concentration and clustering - appear as important drivers of economic robustness, offering opportunities for robustness-enhancing strategies. Modern industrial organization seems to reduce short-term robustness in a trade-off against higher efficiency in normal times.     

Shipment frequency of exporters and demand uncertainty

This paper examines how exporting firms adapt to the uncertainty stemming from demand volatility. By using monthly customs data from France, we decompose exports into different extensive and intensive margins including two novel margins: the number of months the firms exported (frequency) and the average export value per month. We establish four empirical patterns. First, firms export less to markets with higher demand volatility. Second, this effect is mainly explained by the frequency margin. Third, volatility affects the frequency margin through two channels: indirectly through lower trade volume and directly through logistics re-optimization. In particular, our results suggest that firms send less frequent, larger shipments to more uncertain markets conditional on total exports. Fourth, the effect of demand volatility is magnified on markets with longer time-to-ship. We propose that these observations are in line with simple stochastic inventory management approaches.