Estimating and predicting multivariate volatility thresholds in global stock markets

We propose a general double tree structured AR‐GARCH model for the analysis of global equity index returns. The model extends previous approaches by incorporating (i) several multivariate thresholds in conditional means and volatilities of index returns and (ii) a richer specification for the impact of lagged foreign (US) index returns in each threshold. We evaluate the out‐of‐sample forecasting power of our model for eight major equity indices in comparison to some existing volatility models in the literature. We find strong evidence for more than one multivariate threshold (more than two regimes) in conditional means and variances of global equity index returns. Such multivariate thresholds are affected by foreign (US) lagged index returns and yield a higher out‐of‐sample predictive power for our tree structured model setting. Copyright © 2006 John Wiley & Sons, Ltd.     

The time-series properties of the risk premium in the Yen/Dollar exchange market

In this paper a VAR model is employed to construct a measure of the conditional expectations of the future yen/dollar spot rate. This measure allows us to examine the dynamics of an ex-ante time-series for the risk premium in the market. The VAR model produces ‘better’ forecasts than the survey responses for turbulent periods such as 1981–1982 and 1984–1985. The VAR-generated expectations are then used to construct a risk premium time-series. This risk premium series seems to be more reliable than the ones obtained using either survey data on expectations of the future spot exchange rate or the ex-post realized spot exchange rate. Tests on the risk premium series suggest that a risk premium was present, but that it was virtually constant throughout the sample. The conditional variance of the risk premium changed over time, but its unconditional distribution seemed stable across subsamples. Despite these features, the volatility of the series was substantial and varied considerably throughout the sample.     

Does it matter (for equilibrium determinacy) what price index the central bank targets?

What inflation rate should the central bank target? We address determinacy issues related to this question in a two-sector model in which prices can differ in equilibrium. We assume that the degree of nominal price stickiness can vary across the sectors and that labor is immobile. The contribution of this paper is to demonstrate that a modified Taylor Principle holds in this environment. If the central bank elects to target sector one, and if it responds with a coefficient greater than unity to price movements in this sector, then this policy rule will ensure determinacy across all sectors. The results of this paper have at least two implications. First, the equilibrium-determinacy criterion does not imply a preference to any particular measure of inflation. Second, since the Taylor Principle applies at the sectoral level, there is no need for a Taylor Principle at the aggregate level.     

Capital Controls, Risk, and Liberalization Cycles

The paper presents an overlapping‐generations model where agents vote on whether to open or close the economy to international capital flows. Political decisions are shaped by the risk over capital and labor returns. In an open economy, the capitalists (old) completely hedge their savings income. In contrast, in a closed economy, the workers (young) partially insulate wages from the productivity shocks. There are three possible equilibrium outcomes: economies that eventually remain open; those that eventually remain closed; and those that cycle between open and closed. In line with the stylized facts, cycles are more common in economies with intermediate development levels.     

Are the cultural accounting values a relevant issue for the SMEs’ financing options?

This paper aims to examine the financing options of the managers/owners of SMEs (small and medium-sized companies) from a point of view that incorporates cultural values, namely, conservatism and secrecy. Data were collected with the use of a questionnaire conducted for managers/owners of a sample of 1629 Portuguese SMEs, and with the use of accounting and financial information from the period 2009 to 2011. 438 managers/owners provided valid answers, corresponding to a response rate of 27%. Using multivariate regression techniques as a basis, the results showed that a significant number of managers/owners supported the negative relationship between conservatism/secrecy and the business financing options associated with a higher risk (debts with costs). The results also showed that a more significant number of managers/owners of national SMEs choose sources of financing in light of the pecking order theory.     

STORABLE GOOD MARKET WITH INTERTEMPORAL COST VARIATIONS

We investigate a firm's dynamic pricing policy in a storable good market where the cost of production varies over time. In anticipation of a cost increase, the firm selects its prices to affect consumer storage. Price dynamics hinge upon the curvature of demand and the magnitude of the consumer storage cost. When demand is not too convex, the consumers' reluctance to store leads the firm to reduce prices to stimulate consumer storage. This shapes the firm's cost pass-through and the price commitment effects. Our analysis provides a novel explanation for the well-documented puzzling patterns of incomplete and negative cost pass-through.     

MVM's Nonlinear Internationalization: A Case Study

This article aims to contribute to the international and East-West business literature by discussing the nature of nonlinear internationalization based on a case study of an Italian firm, Meccanica Valle Metauro S.r.l., that had activities in Central and Eastern Europe and other countries and by identifying causes of nonlinearities. The study concludes that nonlinear internationalization may be caused by different internal and external factors and actors; that it can occur once or several times; that foreign market exit may be temporary (followed by re-entry) and permanent; and that de-internationalization does not always mean a failure for the firm.     

Spatial Ethics Beyond the North–South Dichotomy: Moral Dilemmas in Favelas

Journal of Business Ethics - Western representation of countries from the Global South implies a dichotomist view of business ethics: on the one hand, universal ethics largely reproduces...