Product survival analysis for the App Store

We empirically analyze both free and paid products on the top 100 Free and Grossing charts in the Korea App Store using Weibull parametric survival analysis on the product level. The findings are as follows: First, influences of ranking, customer ratings, and contents size on product survival are different for free and paid products. Customer ratings and contents size critically affect product survival when the price is zero. Second, the early entrant advantage exists in App Store, which results from a ranking system in the App Store and consumer learning. However, the effect of early entrant advantage differs between the Free and Grossing charts; the benefit of early entrant advantage is greater on the Free chart than that on the Grossing chart. Finally, we provide a competitive profit model that is related to free products.     

Do controlling shareholders' expropriation incentives imply a link between corporate governance and firm value? Theory and evidence

We develop and test a model that investigates how controlling shareholders' expropriation incentives affect firm values during crisis and subsequent recovery periods. Consistent with the prediction of our model, we find that, during the 1997 Asian financial crisis, Asian firms with weaker corporate governance experience a larger drop in their share values but, during the post-crisis recovery period, such firms experience a larger rebound in their share values. We also find consistent evidence for Latin American firms during the 2001 Argentine economic crisis. Our results support the view that controlling shareholders' expropriation incentives imply a link between corporate governance and firm value.     

Modeling severity risk under PD–LGD correlation

In this article, a generic severity risk framework in which loss given default (LGD) is dependent upon probability of default (PD) in an intuitive manner is developed. By modeling the conditional mean of LGD as a function of PD, which also varies with systemic risk factors, this model allows an arbitrary functional relationship between PD and LGD. Based on this framework, several specifications of stochastic LGD are proposed with detailed calibration methods. By combining these models with an extension of CreditRisk+, a versatile mixed Poisson credit risk model that is capable of handling both risk factor correlation and PD–LGD dependency is developed. An efficient simulation algorithm based on importance sampling is also introduced for risk calculation. Empirical studies suggest that ignoring or incorrectly specifying severity risk can significantly underestimate credit risk and a properly defined severity risk model is critical for credit risk measurement as well as downturn LGD estimation.     

A dynamic demand analysis of the United States air-passenger service

This study examines the short- and long-run effects of various determinants on the demand for US air passenger-services using the Johansen cointegration analysis and a vector error-correction (VEC) model. Results show that, in the long-run, airfare, disposable income and NASDAQ have significant effects on US air travel demand. The combined short-run dynamic effects of disposable income, NASDAQ, population and airfare jointly explain changes in air passenger-miles. Finally, we find that the 9/11 terrorist attacks drop air passenger demand by 5% during 2001:Q3-2002:Q2, which in turn pushes down the seat capacity by 4%. However, it has little impact on airfare.     

The role of stochastic volatility and return jumps: reproducing volatility and higher moments in the KOSPI 200 returns dynamics

This paper investigates the role of stochastic volatility and return jumps in reproducing the volatility dynamics and the shape characteristics of the Korean Composite Stock Price Index (KOSPI) 200 returns distribution. Using efficient method of moments and reprojection analysis, we find that stochastic volatility models, both with and without return jumps, capture return dynamics surprisingly well. The stochastic volatility model without return jumps, however, cannot fully reproduce the conditional kurtosis implied by the data. Return jumps successfully complement this gap. We also find that return jumps are essential in capturing the volatility smirk effects observed in short-term options.

Productivity dynamics and the cleansing effect of two recessions: Evidence from the manufacturing sector in Korea

In general, recessions provoke the exit of a greater number of firms from the market. Less productive firms are more likely to exit and release their former resources to the remaining, more productive firms. The present study investigates two recessions in Korea: the Asian financial crisis and the global financial crisis. The main objective of the present study is to analyse the process of creative destruction in a recession, specifically the cleansing effect. We measured total factor productivity using micro‐level manufacturing plant data from 1993 to 2013. We decomposed the source of the changes in total factor productivity to measure the cleansing effect in two large recessions. During the first recession in the 1990s, there was no evidence to support a cleansing effect hypothesis. In contrast, during the second recession in the 2000s, there was evidence of a cleansing effect. In addition, we found differences in market selection criteria in the two recessions; by the second crisis, the market selection criteria had changed to enable a more conducive environment for the creative destruction process.     

Limit to improvement: Myth or reality?: Empirical analysis of historical improvement on three technologies influential in the evolution of civilization

The evolution of civilization appears to have primarily resulted from continuous improvement made possible by technological advances. A group of social evolutionists and economists have identified, among others, energy, transport, as well as information and communication to be the three most influential technologies. On the other hand, a number of eminent scholars have cited several forces, natural, physiological, technological, as well as environmental which can place a limit on on-going improvement.The purpose of this paper is to empirically explore the continuous improvement process as well as the limit placed on these three technologies. Using the framework of both connected and disconnected multiple technology S-curves and X-factor, historical improvement data on these three elements have been analyzed. The results of our analysis indicate that improvement in general has continued without limit mainly due to a series of emerging new technologies. These emerging technologies can be either connected or disconnected from the existing mature technologies. Our preliminary analysis shows that much of the past improvement comes from new technologies that on first serious application appear to be substantially superior from earlier technologies. In addition, enormous continuous improvement, which has accompanied both connected and disconnected new technologies appear to have played the critical role in sustaining the evolution of civilization. The paper discusses a number of policy implications and suggests topics for future research.     

Family firm succession and performance

We analyse more than half a million businesses from the Census Bureau’s 2007 Survey of Business Owners with less survivorship and size biases. After controlling for firm- and owner-specific characteristics, we find family businesses generate fewer receipts and less employment and payroll. Family businesses involving a second-generation owner-manager show better performance. On the other hand, those managed by founder-owners show worse performance. These results of all firms, mostly small businesses, are contrary to the previous studies of large public firms. However, for a subsample of 2064 businesses large enough to be listed on a US stock exchange, the results become consistent with the previous large-firm studies.     

How are gold returns related to stock or bond returns in the U.S. market? Evidence from the past 10-year gold market

Although the gold market over the past decade has been soaring relative to its prior history, there have been few studies on the relationship between the gold market and other major financial markets based on the past decade of data. To re-investigate how the gold market interacts with the stock market and the bond market, we re-visit economic and financial characteristics of gold using the past 10-year data in terms of co-integration, causality, predictive power, and extreme returns. We find that while gold returns are not co-integrated with stock returns and bond returns, gold returns have a unidirectional causality with both of them. Also, we discover that gold returns have some predictive power on subsequent short-term stock returns. Under extreme market scenarios, it turns out that gold returns tend to deteriorate more simultaneously with bond returns than stock returns. This means that gold can better serve as a safe haven for stock in a relative sense during temporary market downturns.