Robust subsampling

We characterize the robustness of subsampling procedures by deriving a formula for the breakdown point of subsampling quantiles. This breakdown point can be very low for moderate subsampling block sizes, which implies the fragility of subsampling procedures, even when they are applied to robust statistics. This instability arises also for data driven block size selection procedures minimizing the minimum confidence interval volatility index, but can be mitigated if a more robust calibration method can be applied instead. To overcome these robustness problems, we introduce a consistent robust subsampling procedure for M-estimators and derive explicit subsampling quantile breakdown point characterizations for MM-estimators in the linear regression model. Monte Carlo simulations in two settings where the bootstrap fails show the accuracy and robustness of the robust subsampling relative to the subsampling.     

Networks in markets and the propensity of companies to collaborate: An empirical test of three mechanisms

We propose and test hypotheses about three endogenous mechanisms that may be driving the observed network structure of producers’ markets. We use data that we have collected on collaborative network ties among producers. Estimates of Exponential Random Graphs Models (ERGM) support our hypotheses.     

Paying for observable luck

This article examines why CEOs are rewarded for luck, namely for observable shocks beyond their control. I propose a simple hidden action model where the agent has implicit incentives to avoid bankruptcy. After signing the contract, but before acting, the agent observes a signal on future luck. Implicit incentives are weaker after good news, and call for higher pay‐for‐performance sensitivity in good times. As a result, managerial pay is tied to luck. The model is also consistent with recent evidence of asymmetric pay for luck, that is, a larger exposure of managerial pay to good luck than to bad.     

The Cyclicality of Markups in a Model with Adjustment Costs: Econometric Evidence for US Industry

In this paper we investigate the impact of demand fluctuations on market power in US manufacturing industries. We impose on a model with adjustment costs the minimum structure necessary to recover a measure of markups. Markups are allowed to vary with both the state and future evolution of demand and estimates of price-cost margins are obtained from the Euler equation for capital. We conduct the empirical investigation for US two-digit manufacturing industries using annual data covering the 1952–1985 period. We find that markups are inversely related to current demand. However, given the state of demand, they vary directly with expectations of future demand changes.     

Taking Real Options Beyond the Black Box

Finance theorists have long argued that DCF undervalues investment opportunities with significant flexibility to respond to future events and that real options valuation methods provide a solution to that problem. But for most corporate managers, real options analysis continues to be a "black box" when applied to real investment decisions.
This paper begins by considering why these approaches have not yet made it to the mainstream of practical application. It then shows how a traditional DCF approach can undervalue a project that provides management with operating flexibility and illustrates a case study that demonstrates to senior management how a real options valuation method with a few clear value drivers can build upon and be made consistent with the traditional DCF framework.
Critical to this process is ensuring consistency with the company's planning assumptions such as future price forecasts and discount rates. The article shows how to separate the static ("optionless") DCF value from the additional real options value that is shown to be a direct consequence of the assumptions about price dynamics.     

On Some Effects of International Fragmentation of Production on Comparative Advantages,Trade Flows and the Income of Countries

In traditional trade models, whether based on technological differences or on relative factor endowments, merchandise composition and directions of trade are derived from closed‐economy conditions. But nowadays one of the basic assumptions of traditional trade models, i.e. that production processes are integrated within just one country, is being increasingly violated as previously integrated productive activities are segmented and spread over an international network of production sites: as a result, an increasingly large share of trade flows is made up of intermediate and unfinished goods being transferred from one country to another in order to be processed. In this paper we submit that such new configuration of production processes has important effects on at least three dimensions of economic research. First, we show that international disintegration of production processes leads to a lessening of the power of comparative advantages when it comes to explaining both merchandise composition and directions of trade, while it is the concept of absolute advantage to become increasingly relevant; second, we show that empirical measures of revealed comparative advantages are inherently misleading if they do not account for differences in the stage‐of‐processing of traded goods; third, we estimate a simple model of aggregate demand accounting for international trade in intermediates: results of estimation lend support to our prior that participation of a country in the process of international fragmentation of production plays a specific and significant role in determining its year‐over‐year change in GDP.     

Rational preferences under ambiguity

This paper analyzes preferences in the presence of ambiguity that are rational in the sense of satisfying the classical ordering condition as well as monotonicity. Under technical conditions that are natural in an Anscombe?CAumann environment, we show that even for such a general preference model, it is possible to identify a set of priors, as first envisioned by Ellsberg (Q J Econ 75:643?C669, 1961). We then discuss ambiguity attitudes, as well as unambiguous acts and events, for the class of rational preferences we consider.     

Dimensions of CEO–Board Relations

Interactions between CEOs and their boards of directors are a prominent focus of management and strategy research. Despite the extensive literature on CEO–board relations, to date there has been limited integration of theoretical perspectives and measurement schemes. Through an extensive analysis of published studies, we hope to facilitate future research on CEO–board relations. We begin with a comparison of key theoretical approaches. Next, we conduct a content analysis of 51 empirical articles. We find that prior studies have an unbalanced focus regarding both topics and theoretical perspectives, and that there is limited consistency in the choice of measures. Based on this review, we lay out a number of promising directions for future research. We also find that, while there has been progress in international research on CEO–board relations, there are still many unanswered questions regarding the generalizability of governance theories across different geographic settings.