Network or Independent Business? Entrepreneurs' Human,Social and Financial Capital as Determinants of Mode of Entry

When establishing a new business, entrepreneurs can decide to join a network of independent business partners rather than choose the alternative of independent business ownership. In this study, we use a probit model on a large database to study the human, social, and financial capital of French entrepreneurs who join franchising and comparable forms of networks. Results confirm that initial levels of human and social capital are significant determinants of network membership. We also show that an increase in the proportion of the project financed by debt increases the probability of joining a network. Copyright © 2014 John Wiley & Sons, Ltd.     

INTEREST RATE CORRIDOR,LIQUIDITY MANAGEMENT,AND THE OVERNIGHT SPREAD

We analyze the determinants of the overnight spread (the spread between the Borsa Istanbul overnight repo interest rate and the average funding rate of the Central Bank of the Republic of Turkey [CBRT]) using data from both the conventional and the new monetary policy episodes. We empirically document that the overnight spread has recently been influenced by various factors that are directly or closely related to the liquidity policy of the CBRT. (JEL E43, E52, C24)     

Forecasting South African inflation using non-linearmodels: a weighted loss-based evaluation

The conduct of inflation targeting is heavily dependent on accurate inflation forecasts. Non-linear models have increasingly featured, along with linear counterparts, in the forecasting literature. In this study, we focus on forecasting South African inflation by means of non-linear models and using a long historical dataset of seasonally adjusted monthly inflation rates spanning from 1921:02 to 2013:01. For an emerging market economy such as South Africa, non-linearities can be a salient feature of such long data, hence the relevance of evaluating non-linear models’ forecast performance. In the same vein, given the fact that 1969:10 marks the beginning of a protracted rising trend in South African inflation data, we estimate the models for an in-sample period of 1921:02–1966:09 and evaluate 1, 4, 12, and 24 step-ahead forecasts over an out-of-sample period of 1966:10–2013:01. In addition, using a weighted loss function specification, we evaluate the forecast performance of different non-linear models across various extreme economic environments and forecast horizons. In general, we find that no competing model consistently and significantly beats the LoLiMoT’s performance in forecasting South African inflation.     

Commodity futures hedging,risk aversion and the hedging horizon

This paper examines the impact of management preferences on optimal futures hedging strategy and associated performance. Applying an expected utility hedging objective, the optimal futures hedge ratio is determined for a range of preferences on risk aversion, hedging horizon and expected returns. Empirical results reveal substantial hedge ratio variation across distinct management preferences and are supportive of the hedging policies of real firms. Hedging performance is further shown to be strongly dependent on underlying preferences. In particular, hedgers with high risk aversion and short horizon reduce hedge portfolio risk but achieve inferior utility in comparison to those with low aversion.     

The Causal Relationship Between Economic Policy Uncertainty and Stock Returns in China and India: Evidence from a Bootstrap Rolling Window Approach

This article applies a bootstrap rolling-window causality test to assess the causal relationship between economic policy uncertainty (EPU) and stock returns in China and India. Empirical literature examining causality between two time series may suffer from inaccurate results when the underlying full-sample time series have structural changes. However, the bootstrap rolling-window approach enables us to identify possible time-varying causalities between time series based on sub-sample data. Using a twenty-four-months rolling window over the period 1995:02 to 2013:02 in China and 2003:02–2013:02 in India, we do find that there are bidirectional causal relationships between EPU and stock returns in several sub-periods rather than in the whole sample period. However, the association between EPU and stock returns is, in general, weak for these two emerging countries. Our findings have important implications for policy makers and investors.     

Rent Extraction by an Unregulated Essential Facility

This paper shows that consumers may benefit when a regulator chooses not to regulate a final product in an industry characterized by an unregulated essential facility sold through non-linear tariffs. Two main reasons drive this result. First, the regulator maximizes social welfare and values the final good production more than the producer itself. Second, the regulator has access to an extra source of financing with the public funds. Therefore, the essential facility seller can ask more of the regulator than of the final good producer.     

Correlated equilibrium and sunspot equilibrium

Summary We show by an example that the sunspot equilibria of a competitive economy are not equivalent to the correlated equilibria if sunspots generate transfers between (extrinsic) states of nature (through a contingent commodities market). Nevertheless, we prove that the sunspot equilibrium allocations of a standard overlapping generations economy coincide with the (strategic form) correlated equilibrium allocations of a natural market game mimicking the economy.     

Depositors’ Assessment of Bank Riskiness in the Russian Federation

In the period after the crises in the late 1990s, the banking industries in most emerging markets have undergone significant restructuring consistent with the Basel II Accord. The Central Bank of Russia’s efforts since 2000 have contributed to the consolidation and improvement of the banking industry. To measure the extent of market discipline in the Russian banking industry, we study the reaction of Russian depositors to excessive risk taking by large banks between 2000:1 and 2005:1. We find that during our analysis period, well-capitalized, more liquid banks significantly increase their deposits.     

Nearly-singular design in GMM and generalized empirical likelihood estimators

Nearly-Singular design relaxes the nonsingularity assumption of the limit weight matrix in GMM, and the nonsingularity of the limit variance matrix for the first order conditions in GEL. The sample versions of these matrices are nonsingular, but in large samples we assume these sample matrices converge to a singular matrix. This can result in size distortions for the overidentifying restrictions test and large bias for the estimators. This nearly-singular design may occur because of the similar instruments in these matrices. We derive the large sample theory for GMM and GEL estimators under nearly-singular design. The rate of convergence of the estimators is slower than root n$n$.