Equity market integration in emerging Balkan markets

This paper examines long-run relationships among five Balkan emerging stock markets (Turkey, Romania, Bulgaria, Croatia, Serbia), the United States and three developed European markets (UK, Germany, Greece), during the period 2000-2009. Conventional, regime-switching cointegration tests and Monte Carlo simulation provide evidence in favour of a long-run cointegrating relationship between the Balkan emerging markets within the region and globally. Moreover, we apply the Asymmetric Generalized Dynamic Conditional Correlation (AG-DCC) multivariate GARCH model of Cappiello et al. (2006), in order to capture the impact of the 2007-2009 financial crisis on the time-varying correlation dynamics among the developed and the Balkan stock markets. Results show that stock market dependence is heightened, supporting the herding behaviour during the 2008 stock market crash period. Our findings have important implications for international portfolio diversification and the effectiveness of domestic policies, as these emerging markets are exposed to external shocks.     

Market risk model selection and medium-term risk with limited data: Application to ocean tanker freight markets

The estimation of medium-term market risk dictated by limited data availability, is a challenging issue of concern amongst academics and practitioners. This paper addresses the issue by exploiting the concepts of volatility and quantile scaling in order to determine the best method for extrapolating medium-term risk forecasts from high frequency data. Additionally, market risk model selection is investigated for a new dataset on ocean tanker freight rates, which refer to the income of the capital good — tanker vessels. Certain idiosyncrasies inherent in the very competitive shipping freight rate markets, such as excessive volatility, cyclicality of returns and the medium-term investment horizons – found in few other markets – make these issues challenging. Findings indicate that medium-term risk exposures can be estimated accurately by using an empirical scaling law which outperforms the conventional scaling laws of the square and tail index root of time. Regarding the market risk model selection for short-term investment horizons, findings contradict most studies on conventional financial assets: interestingly, freight rate market risk quantification favors simpler specifications, such as the GARCH and the historical simulation models.     

What motivates R&D professionals? Evidence from decentralized laboratories in Greece

The challenge for research and development (R&D) professionals management is to meet the corporate objectives for effectiveness, productivity and profitability with the needs of technical employees for motivation, reward and satisfaction. Despite the continuous upgrading of the strategic importance of knowledge and technology, human resource management paid little attention to the distinctive characteristics of those highly educated knowledge workers, especially in an international perspective. Based on a large-scale survey of multinational enterprises' (MNEs') decentralized R&D laboratories in Greece, this paper offers insights on the perceived impact of intrinsic and extrinsic compensation on performance. Focused on three distinctive types of research implemented by MNEs, results record the existence of a multifaceted context of researchers' needs and satisfaction determinants, which is differentiated among the different roles of R&D laboratories. Our findings witness that in an EU peripheral economy, R&D professionals are motivated by extrinsic rewards and mainly by economic compensation.     

Heterogeneity of the determinants of euro-area sovereign bond spreads; what does it tell us about financial stability?

In this paper, we assess the movements of euro area sovereign bond yield spreads vis-à-vis the German Bund as processes specified across different levels of volatility and subject to movements in asset prices and economic conditions. The determinants we use are grouped into domestic and euro-area aggregates, thus allowing us to derive results on their relative explanatory power and compare them across time and the spectrum of countries. We find that volatility influences the deterministic processes of the euro area sovereign spreads and that identical determinants have effects on spreads that vary considerably across countries. Furthermore, we find that variables reflecting investment confidence conditions and perceptions for the upcoming economic activity are significant determinants and their significance remains, to a large extent, even when controlling for fiscal variables.     

Model-free versus Model-based Volatility Prediction

The well-known ARCH/GARCH models for financial time series havebeen criticized of late for their poor performance in volatilityprediction, that is, prediction of squared returns.¹ Focusingon three representative data series, namely a foreign exchangeseries (Yen vs. Dollar), a stock index series (the S&P500index), and a stock price series (IBM), the case is made thatfinancial returns may not possess a finite fourth moment. Takingthis into account, we show how and why ARCH/GARCH models—whenproperly applied and evaluated—actually do have nontrivialpredictive validity for volatility. Furthermore, we show howa simple model-free variation on the ARCH theme can performeven better in that respect. The model-free approach is basedon a novel normalizing and variance–stabilizing transformation(NoVaS, for short) that can be seen as an alternative to parametricmodeling. Properties of this transformation are discussed, andpractical algorithms for optimizing it are given.     

Job Creation by Assisted Rural Firms: a European North-South Perspective

The present paper reports results from a comparative analysis of the effectiveness of regional policy schemes in areas of Scotland and Greece. Discretionary schemes are of a lower gross cost per job than automatic ones in both countries. Additionality was found to be very high among all schemes in both countries. Results indicate that future policy design should be decentralised and highly adapted to local conditions. In the case of Greece, the dominant top-bottom style of policy making acts as major constraints in the adoption of more decentralised policy design and delivery mechanisms. In the case of Scotland such a task is easier to accomplish.     

International Evidence on Import Demand

The paper examines import demand behavior in five industrial countries, namely France, Italy, the Netherlands, the UK, and the US. It uses econometric techniques organized around maximum likelihood cointegration analysis, dynamic OLS and fully modified estimation to estimate long-run import demand functions. In addition, we examine the short-run dynamics of import demand by using impulse response functions based on VAR analysis. The empirical results indicate the importance of relative prices and domestic demand for most countries examined.     

Starting Your Career With a Fixed-Term Job: Stepping-Stone or “Dead End”?

This paper uses panel data from the UK and Germany to investigate the difference in the learning effect between workers who enter the labour market with a fixed term and a permanent job. Our results verify the existence of a wage penalty for entering the labour market with a fixed-term contract for the British males (7.1%) and especially for the British females (21.2%). British females also have a very strong learning effect that is especially large for temporary starters. In Germany, the initial wage penalty for temporary starters is smaller than in the UK—4.5% for the males and 3% for the females—and is persistent only for the males. Although initial wage differences are mitigated through the accumulation of skills on the job, this process differs between temporary and permanent starters. This suggests that the type of the starting contract may be a feature of labour market segmentation.