A Markov regime switching approach for hedging energy commodities

This paper estimates constant and dynamic hedge ratios in the New York Mercantile Exchange oil futures markets and examines their hedging performance. We also introduce a Markov regime switching vector error correction model with GARCH error structure. This specification links the concept of disequilibrium with that of uncertainty (as measured by the conditional second moments) across high and low volatility regimes. Overall, in and out-of-sample tests indicate that state dependent hedge ratios are able to provide significant reduction in portfolio risk.     

Growth determinants,intra-distribution mobility,and convergence of state-level agricultural productivity in the USA

Stochastic kernels and state-level data are used in this paper to investigate mobility and convergence of the agricultural Total Factor Productivity (TFP) in the U.S.A. and to determine the influence of certain growth-related factors on the shape of the equilibrium TFP distribution. According to the empirical results, increasing returns to scale, materials intensity, and regional differences are likely to increase the dispersion of the cross-section TFP distribution, while higher rates of catchingup work towards reducing it. (JEL: Q16, O30, C14)     

Quadratic Differential Demand Systems and the Retail Demand for Pork in Great Britain

The primary objective of this paper is to derive a general synthetic quadratic (rank 3) differential demand system which nests within it a range of testable differential demand models including the quadratic AIDS, CBS, Rotterdam and NBR systems. A model selection test procedure is also outlined. These differential systems are then applied and tested to analyse the monthly retail demand for cuts of pork in Great Britain over the period 1989–2000. The empirical results suggest that a quadratic differential AIDS model is most appropriate for the pork demand system studied, but that the need for inclusion of quadratic income/expenditure terms is not universal for every cut within the demand system. Quadratic expenditure effects were appropriate for pork chops and leg roasts, but log linear expenditure effects were adequate for bellies, shoulders and loin roasts. Roasting cuts were expenditure and own price elastic, with pork loins, chops and bellies all expenditure and own price inelastic.     

Multiple Job Holding,Skill Diversification,and Mobility

In this article, we investigate the interrelated dynamics of dual jobholding, human capital, occupational choice, and mobility, using a panel sample (1991–2005) of UK employees from the British Household Panel Survey. The evidence suggests that individuals may be using multiple jobholding as a conduit for obtaining new skills and expertise and as a stepping‐stone to new careers, also involving self‐employment. Individuals doing a different secondary job than their primary occupation are more likely to switch to a new primary job in the next year, and a job that is different than their current primary employment. The results show that there are human capital spillover effects between primary and secondary employment.     

Improving performance through vertical disintegration: evidence from UK manufacturing firms

Unlike previous work on the vertical integration–performance relationship, we investigate the performance consequences of vertical disintegration. We offer a theoretical justification for the disintegration decision and we condition the disintegration effect on performance on the initial degree of firm integration, the timing and the direction of disintegration. Using a sample of UK manufacturing firms and controlling for disintegration endogeneity, we find that disintegration eventually results in improved operating performance, particularly when disintegration occurs as a reaction to poor performance and in cases of forward between‐sector disintegration. However, being highly integrated does not guarantee gains from disintegration. The implications of these findings are discussed. Copyright © 2008 John Wiley & Sons, Ltd.     

How Banks Apply Marketing Expertise to Develop New Derivatives

For banks operating in the fiercely competitive derivatives market, the difference between the leaders and the also-rans often boils down to their respective approaches to product innovation. To achieve market leadership in this highly volatile field, a bank must develop and continually refine the processes and the expertise necessary for identifying new areas of business and attracting and retaining customers. Although the development of derivatives is a complex, expensive process, such development efforts provide the means for satisfying existing clients as well as attracting new customers. F. Axel Johne and M. Panos Pavlidis examine the managerial practices of banks that are acknowledged leaders in bringing new derivatives to market ahead of their competitors. In particular, they examine how those first-mover banks apply their marketing expertise and they review the advantages those banks enjoy as a result of their success in product innovation. The banks studied fall into one of two groups: highly active innovators and less active innovators. The study reveals several significant differences between the two groups with respect to managing marketing inputs for product innovation purposes. First, compared to less active banks, the highly active innovators take a more sophisticated, market-based approach to identifying innovation opportunities. Rather than looking for innovations that offer a close fit with existing products and competencies, they analyze the benefits sought by target clients and initiate innovation efforts based on those analyses. Highly active innovators recognize the important role that internal marketing plays in encouraging functional specialists to work together for the purpose of identifying follow-on development opportunities. Internal marketing also helps to ensure that all parties understand and can support the planned innovation. The highly active innovators in this study do not take a formulaic approach to the development of new derivatives; instead, they rely on marketing expertise to identify and capitalize on business opportunities. Rather than concentrate solely on improving the core technical features of a product, the highly active innovators also recognize the importance of product augmentation innovation (to ensure the appropriate support for various market segments), process innovation (so they can reduce prices, when necessary), and market innovation (to ensure that they pursue the optimal mix of markets).     

Capacity utilization under dynamic profit maximization

Empirically implementable measures of optimal capacity utilization are developed from the dynamic profit maximization perspective. The primal measure is based on behavior of the firm's supply along an optimal path to the steady state. The dual measure is based on the behavior of the dynamic value function in the stock of the quasi-fixed input. Rates of optimal capacity utilization are estimated for the U.S. food processing and distribution sector over the period 1948–1991.     

Hedonic Price Analysis and Selectivity Bias

Hedonic valuation of quality attributes can be misleading when theassumption that these attributes are exogenous to sample selection isviolated. This paper considers the simultaneity between hedonic valuationand sample selection in the context of a model of producer behavior andinvestigates empirically the case where land is demanded for use as an inputeither in agricultural production or in touristic development. The empiricalanalysis suggests that failing to correct for sample selection results in abiased valuation of the effect of water salinity on agricultural land.