The role of implied volatility in forecasting future realized volatility and jumps in foreign exchange,stock, and bond markets

We study the forecasting of future realized volatility in the foreign exchange, stock, and bond markets from variables in our information set, including implied volatility backed out from option prices. Realized volatility is separated into its continuous and jump components, and the heterogeneous autoregressive (HAR) model is applied with implied volatility as an additional forecasting variable. A vector HAR (VecHAR) model for the resulting simultaneous system is introduced, controlling for possible endogeneity issues. We find that implied volatility contains incremental information about future volatility in all three markets, relative to past continuous and jump components, and it is an unbiased forecast in the foreign exchange and stock markets. Out-of-sample forecasting experiments confirm that implied volatility is important in forecasting future realized volatility components in all three markets. Perhaps surprisingly, the jump component is, to some extent, predictable, and options appear calibrated to incorporate information about future jumps in all three markets.     

The ‘third hand’: Private sector consultants in public sector accounting change

Abstract

This paper explores the role of large private sector consulting firms in the promotion and implementation of public sector accrual accounting. By focusing on an early adopter of accrual accounting for its entire public sector, this research presents an analysis of the activities of large consulting firms in the process of a significant public sector accounting change. The role of consultants in the change is presented by analysing primary data extracted from archival sources and oral histories provided by a number of prominent actors classified as users of information (politicians), producers of information (bureaucrats) or accounting consultants. The role and impact of the consulting firms' actions can be better understood by applying concepts of non-coercive isomorphism and the interplay between self-interest and perceived public interest. The consulting firms are shown to have used phantom images to promote the case for accounting change. This was done with a zealous belief that bringing public sector accounting into line with private sector accounting was an inherently righteous objective.     

Good Analytical Research

The purpose of this commentary is to address the issues raised by Ohlson from the point of view of analytical accounting research. The aim is not only to provide some input to young researchers who are going to publish good research using analytical methods, but also to give some hints to help users of analytical accounting research to understand and interpret the findings of this type of research. Ohlson has taken on a task of identifying a set of critical factors which are likely to lead to successful research. Good research is defined as research that makes an impression. Thus, it is not enough to get the research published – not even in a premier journal. The research should have an impact, the community should learn something. As Ohlson notes, there is enough ‘ordinary’ research. In my view this is the right attitude. Short-term optimization is also widespread in the research community and that is not what we should strive for. With the objective in place, I will continue to analyze the question in relation to analytical research. I start out discussing the aim of analytical research by providing a few examples of good models. The first is the Feltham-Ohlson model and the second is the agency model. Both are simple and elegant models dealing with difficult issues. The analysis proceeds to characterize good models. A good model is a simple model that zooms in on the problem under scrutiny. It is a ‘minimal’ model that contains the problem and nothing outside the problem. I then proceed to characterize good research in an analytical framework. This is research that tackles a problem that is of interest to the users and the researcher. In this process I also identify current notable analytical research. Finally, I contrast this to the recommendations of Ohlson.     

Consumers’ Grouping of Organic and Conventional Food Products—Implications for the Marketing of Organics

A detailed account of the way consumers choose to group different varieties of organic and conventional food produce might have practical implications in terms of improved space management in supermarkets and better targeted promotions of organic products. The results presented here were obtained in a case study using a web-based questionnaire and 849 Danish consumers. The consumers were asked to group the contents of a virtual basket of organic and non-organic fruits and vegetables into two smaller baskets. A significant share of the consumers grouped the food products according to whether or not they were organic. These consumers were found to have significantly higher levels of confidence in the benefits of organic produce, to state significantly higher levels of organic consumption and higher willingness to pay for organoleptic attributes of fresh milk, than consumers who placed fruits in one basket and vegetables in the other.     

Mandatory CSR and sustainability reporting: economic analysis and literature review

Review of Accounting Studies - This study collates potential economic effects of mandated disclosure and reporting standards for corporate social responsibility (CSR) and sustainability topics. We...     

Developing Ethical Confidence: The Impact of Action-Oriented Ethics Instruction in an Accounting Curriculum

While there is considerable support for integrating ethics education in accounting curricula, research presents conflicting evidence on how best to incorporate it. A review of accounting ethics scholarship highlights criticisms of the literature, including limited research into actual behavior and a lack of theory. We report the results of a study that is theory based, captures behaviors rather than attitudes, and explores the effect of repeated practice to develop voice efficacy. We examine the impact of two types of ethics instructions. Across four classes in an accounting curriculum, one student cohort participated in traditional ethics instruction, while the other cohort participated in Giving Voice To Values (GVV) instruction. We collected student responses to an ethical challenge and conduct a between-subject analysis. The results reveal consistent unethical behavior in the traditional cohort but not in the GVV cohort, indicating that faculty should consider the use of this pedagogy in accounting ethics education.     

Securities regulation,household equity ownership,and trust in the stock market

Review of Accounting Studies - Using aggregate data from national accounts, we study whether strengthening and harmonizing securities regulation across the European Union increases household equity...     

Modelling the joint behaviour of electricity prices in interconnected markets

The liberalization of energy markets worldwide during recent decades has introduced severe implications for the price formation in these markets. Especially within the European day-ahead electricity markets, increased physical connections between different market areas and a joint effort on optimizing the aggregate social welfare have led to highly connected markets. Consequently, observing the exact same hourly day-ahead prices for two or more interconnected electricity markets in Europe happens frequently. This affects the modelling of such prices and in turn the valuation of derivatives written on prices from these market areas. In this paper, we propose a joint model for day-ahead electricity prices in interconnected markets composed of a combination of transformed Ornstein–Uhlenbeck processes. We discuss the properties of the model and propose an estimation procedure based on filtering techniques. Furthermore, the properties of the model reveal that analytical prices are attainable for, e.g., forwards and spread options.     

Building Entrepreneurship in Subsistence Markets: Microfranchising as an Employment Incubator

Scholars indicate significant interest in business models that support entrepreneurial behavior in developing markets [Wankel C., editor. Alleviating Poverty through Business Strategy. New York: Palgrave Macmillan 2008]—particularly as they relate to job creation. This research introduces microfranchising as a business model adaptation that helps low-income individuals overcome non credit-related barriers to entry in obtaining employment. This study reveals a clear challenge for researchers—to better understand microfranchising and the extent to which the practice creates employment and enables individual business success. Largely unanswered questions concern the profiles of typical microfranchisees as well as the impacts of microfranchising on low-income individuals in subsistence marketplaces. This preliminary research focuses on one type of microfranchise operating in Accra, Ghana. Using data from microfranchises enables the exploration of whether workers in subsistence markets benefit from the microfranchise model. In comparing a microfranchise business with comparably-sized non-franchised businesses, this analysis finds preliminary evidence that the microfranchise creates starter jobs. Baseline results highlight microfranchisee characteristics and indicate that this form of microfranchising positively impacts savings and profits.     

A Special Breed?– A Longitudinal and Cross‐Sectional Study of Norwegian Budgeting and Financial Civil Servants

Abstract: This paper focuses on civil servants in the central Norwegian civil service whose main tasks are budgeting, supervision and accounting. The main research questions are: (a) What is their typical demographic profile? (b) How has their demographic profile changed over time? (c) What are the effects of having budgeting, supervising and accounting as a main task on civil servants’ attitudes and behaviour? The main findings are that they have a specific profile. There are significant differences between ministries and central agencies as well as changes over time and also marked differences with other civil servants regarding their attitudes and behavior.