Noise Trading and the Management of Operational Risk; Firms,Traders and Irrationality in Financial Markets*

abstract Efficient market models cannot explain the high level of trading in financial markets in terms of asset portfolio adjustment. It is presumed that much of this excessive trading is irrational ‘noise’ trading. A corollary is that there must either be irrational traders in the market or rational traders with irrational aberrations. The paper reviews the various attempts to explain noise trading in the finance literature, concluding that the persistence of irrationality is not well explained. Data from a study of 118 traders in four large investment banks are presented to advance reasons why traders might seek to trade more frequently than financial models predict. The argument is advanced that trades do not simply occur in order to generate profit, but it does not follow that such trading is irrational. Trading may generate information, accelerate learning, create commitments and enhance social capital, all of which sustain traders' long term survival in the market. The paper treats noise trading as a form of operational risk facing firms operating in financial markets and discusses approaches to the management of such risk.     

Vacaciones y licencias en países desarrollados: los Estados Unidos a la zaga en cuanto a equilibrio entre vida profesional y vida familiar

Los autores comparan las normativas sobre vacaciones y licencias susceptibles de facilitar el equilibrio entre vida profesional y familiar de Australia, Canadá, República de Corea, Estados Unidos, Europa occidental y Japón utilizando un índice compuesto para clasificarlas. Los Estados Unidos figuran en último lugar: la concesión de vacaciones anuales al trabajador no es obligatoria y las licencias por motivos familiares se limitan a 12 semanas al año. Este bajo nivel de reglamentación podría deberse, según los autores, a una concepción mercantilista del empleo sumada a la creencia de que empleador y trabajadores tienen idéntica capacidad de negociación, visión no compartida por las demás democracias industrializadas.     

Real Asset Valuation under Imperfect Competition: Can We Forget About Market Fundamentals?

Real assets are usually valued by computing the stream of profits they can bring to a price‐taking firm in a liquid market. This method ignores market fundamentals by assuming that all the relevant information is included in the spot price. Our article analyses the bias resulting from such an approach when the market is imperfectly competitive. We propose a stylised two‐period model of the natural gas market with no uncertainty, focusing on strategic interactions between two types of oligopolistic players—pure traders and suppliers with downstream customers—who have access to storage. We show that the true value of storage capacity is not the same for traders and for suppliers. Comparing the latter value with the traditional price‐taking valuation reveals a systematic bias that tends to induce underinvestment.     

What does the future hold for giving? An approach using the social representations of Generation Y

• Nowadays, not‐for‐profit organizations and charities face the ageing of donors and a growing debate over monetary donation collection methods. They need to find solutions to attract younger generations of donors. Could this be done using the same methods applied to older generations? This present research investigates social representations (SRs) of giving by younger generations to understand how not‐for‐profit organizations and charities should approach them. The study focuses on SRs of a French sample of 276 individuals from Generation Y born between 1979 and 1991. It uses the free association technique. The results show paradoxical representations of giving. Institutionalization of giving is salient as representation of it as a freely consenting act. The paradox relies also in the strong presence of a relationship with others that parallels the gift as an individualistic choice.
• Generation Y individuals appear to be sociable, yet they evoke more sharing and solidarity than charity. Institutionalized forms of giving, particularly via charities and not‐for‐profit organizations, are rejected. These individuals seem to express their individuality through practices that resemble sharing rather than giving. From a managerial point of view, these results shed light on the factors liable to cause members of this generation to give, such as (i) the use of social networks, (ii) appealing to pleasure, festivities and efficiency rather than to guilt and duty, and (iii) encouragement to “work within the not‐for‐profit organization”.

Copyright © 2012 John Wiley & Sons, Ltd.     

Liberty and the Post‐utilitarian Society

Utilitarian foundations for limited government are shaky insofar as they assume rational and consistent individuals. Recently economists’ assumption of rational actors has come under sustained attack. Behavioural economics has suggested that people are plagued by irrational biases and inconsistencies. These developments have led to a post‐utilitarianism which is held to justify paternalistic interventions by the state via ‘sin taxes’, direct bans or new obligations. Individual responsibility is seriously undermined, as is faith in markets. Supporters of individual freedom need to move away from utilitarian reasoning, reassert core values of autonomy and responsibility, and define strict limits on the scope of government intervention.     

The Impact of Gender Similarity on Employee Satisfaction at Work: A Review and Re‐Evaluation*

abstract We used data from the British 1998 Workplace Employee Relations Survey (WERS98) to examine key unanswered questions about the impact of gender similarity on employee satisfaction at work. The study sample consisted of 11,848 men and 11,278 women from over 1700 workplaces across Britain. In line with gender‐specific compositional arguments, the effects of gender similarity were found to be asymmetrical for men and women, with similarity tending to have a greater positive impact on men than on women. The effects involved were primarily linear in nature. Net of the potentially confounding influence of other factors, they were also found to be quite weak, weaker than has commonly been suggested in the literature.     

Executives’ Orientations as Indicators of Crisis Management Policies and Practices*

ABSTRACT The paper examines effects of executives’ orientations on crisis management awareness and practices, drawing on the simplicity and paradox management theories. It is suggested that a focus on single‐sided management constitutes an antecedent of crisis proneness. Employing a set of key corporate domains and based on a holistic organizational approach, the study aims at assessing the extent to which companies are crisis prone or prepared. In a sample of 82 Istaeli business and not‐for‐profit organizations it was found that human resource management, strategy, structure, and unlearning factors significantly predicted crisis preparedness. These results suggest that unlearning, despite a mere allusion to this correlate in the simplicity and paradox management theories, correlates better with crisis preparedness. By contrast, traditional strategy‐related and structural effects were marginally related to crisis management policies. Implications and suggestions for further research are proposed.     

Organizational mindfulness,mindful organizing,and environmental and resource sustainability

The research theorizes that environmental vulnerability can be minimized through mindfulness‐based strategies, and redesigning organizing processes, so that richer thinking is activated more quickly among greater number of people all of whom try to update their knowledge regardless of the knowledge source. It empirically evaluates the effects of organizational mindfulness and mindful organizing on resources and environmental sustainability. The model was tested in a very appropriate setting—Saudi Arabia, where increasing demand for and supply of energy culminates in unsustainable resources utilization and rise in greenhouse gas emissions and other environmental vulnerabilities. Data were collected from Saudi firms operating in the oil and gas sector and analyzed using SmartPLS software. The measurement and structural models were evaluated. The measurement model exhibits adequate model fit. The tests for the structural models show that four (of five) dimensions of organizational mindfulness (viz., commitment to resilience, deference to expertise, preoccupation with failure, and reluctance to simplify interpretations) and mindful organizing are significantly related at 5% significance level. Sensitivity to operations has no significant relationship with mindful organizing. Mindful organizing is significantly related to environmental and resources sustainability. Moreover, mindful organizing fully or partially mediates in the relationship between some of the dimensions of organizational mindfulness and environmental and resources sustainability. The study is one of the first to integrate mindfulness‐based approaches to sustainability and environmental research.     

What have we learnt about board gender diversity as a business strategy? The appointment of board subcommittees

This paper explores whether a board's gender diversity influences the voluntary formation of its board subcommittees. Female board directorship may become a business strategy for firms if it affects the appointment of board subcommittees. We hypothesize that the voluntary creation of board subcommittees is affected by the presence of female directors on boards; the presence of independent, executive, and institutional female directors; and the proportion of shares held by female directors on boards. Board gender diversity has been measured as a proportion and with Blau's index. The results show that independent female directors are positively associated with the likelihood of voluntarily setting up all or some of the committees and a supervision and control committee. The presence of executive female directors negatively influences the probability of forming all or some of the committees, an executive committee and a supervision and control committee. The percentage of shares held by female directors has a positive effect on the voluntary creation of an executive committee. The findings also report that women directors and institutional female directors do not contribute to the voluntary creation of board subcommittees. Our evidence shows that female board directorship impacts the demand of internal control mechanisms such as board subcommittees, suggesting that firms should take it into account as a business strategy. The main implications derived from this research are relevant for Spanish policymakers and researchers because board gender diversity may play a significant role in the decision‐making processes of firms and may influence firms' outcomes.