Heteroskedasticity-consistent covariance matrix estimators for spatial autoregressive models

In the presence of heteroskedasticity, conventional test statistics based on the ordinary least squares (OLS) estimator lead to incorrect inference results for the linear regression model. Given that heteroskedasticity is common in cross-sectional data, the test statistics based on various forms of heteroskedasticity-consistent covariance matrices (HCCMs) have been developed in the literature. In contrast to the standard linear regression model, heteroskedasticity is a more serious problem for spatial econometric models, generally causing inconsistent extremum estimators of model coefficients. This paper investigates the finite sample properties of the heteroskedasticity-robust generalized method of moments estimator (RGMME) for a spatial econometric model with an unknown form of heteroskedasticity. In particular, it develops various HCCM-type corrections to improve the finite sample properties of the RGMME and the conventional Wald test. The Monte Carlo results indicate that the HCCM-type corrections can produce more accurate results for inference on model parameters and the impact effects estimates in small samples.     

Persistence in Portuguese mutual fund performance

Recent evidence suggests that future performance is predictable from past performance, that is, funds with superior (inferior) performance in the past are likely to remain good (bad) performers in the future. This research addresses the persistence of mutual fund performance in a European regional market (the Portuguese equity fund market). Some of the problems in evaluating fund persistence are identified in the context of limited sample size and using the peer group median as a benchmark for contingency table analysis of performance persistence. The criteria for assessing performance persistence based on the contingency table methodology of repeated winners and losers are presented in terms of significance statistics, adjusted for small sample bias. The adjustments are accomplished through the Yates continuity correction and Fisher's exact p-value. The appropriateness of each criteria under different circumstances is also discussed. The analysis of the returns of all Portuguese domestic equity funds, since a representative number was established, shows some performance persistence (on a quarterly basis). The persistence, however, is reduced when the returns are controlled for the various dimensions of risk. Significant risk persistence has been documented. Furthermore, for more or less frequent intervals of measurement, the industry persistence is rejected, although individual funds exhibit superior/inferior performance.     

Trade, inequality, and the political economy of institutions

This paper investigates the relationship between international trade and the quality of economic institutions. We model institutions as fixed costs of entry, in a framework that has two key features. First, preferences over entry costs differ across firms and depend on firm size. Larger firms prefer to set higher costs of entry, in order to reduce competition. Second, these costs are endogenously determined in a political economy equilibrium. Trade opening can lead to higher entry costs when it changes the political power in favor of a small elite of large exporters, who in turn prefer to install high entry barriers.     

The Buyer–Supplier Relationship: An Integrative Model of Ethics and Trust

Dialogues between companies and actors of society often start as a result of a public scandal or in a situation of crisis. They can lead to short-term public relations activism or to long-term reputation gains. On the basis of cases and of a typology of forms of dialogues, the author develops ethical criteria and conditions for a successful dialogue – the ethical basis for such criteria being values such as equality, freedom and participation. A special focus is put on challenges that often result from dialogues such as the ethical judgment of compromises. This article proposes ethical criteria to evaluate compromises. This leads to a model of ethical dialogue.     

Bayesian Inference in Spatial Sample Selection Models

In this study, we consider Bayesian methods for the estimation of a sample selection model with spatially correlated disturbance terms. We design a set of Markov chain Monte Carlo algorithms based on the method of data augmentation. The natural parameterization for the covariance structure of our model involves an unidentified parameter that complicates posterior analysis. The unidentified parameter – the variance of the disturbance term in the selection equation – is handled in different ways in these algorithms to achieve identification for other parameters. The Bayesian estimator based on these algorithms can account for the selection bias and the full covariance structure implied by the spatial correlation. We illustrate the implementation of these algorithms through a simulation study and an empirical application.     

Can Trade Agreements Curtail Trade Creation and Prevent Trade Diversion?

This paper investigates how pre‐existing preferential trade agreements (PTAs) dilute the trade creation effect and shield the trade diversion effect of new PTAs. Countries having pre‐existing PTAs enjoy smaller gains in intra‐bloc trade because of the dilution effect and experience smaller losses or even gains in extra‐bloc trade because of the shielding effect. The findings support the proposition that PTAs could be used to fend off future trade diversion.     

Is ‘oil and gas’ industry of ASEAN5 countries integrated with the US counterpart?

ABSTRACT

This paper employs the VARMA-MGARCH-ABEKK model and Granger causality on 15 years’ daily time series data to examine investment opportunities in the oil and gas industries for ASEAN5 countries relative to the US counterpart. It shows that the latter leads the former in decomposing integration into cross-country effects on returns and conditional return volatilities. The empirical results show that investors can gain an international intra-industry diversification benefit in Malaysia, the Philippines, Singapore and Vietnam by holding US oil and gas assets in their portfolios whereas Asian oil and gas assets may result in negative shocks due to the increase in return volatilities for Malaysia, Singapore and Vietnam. However, Thailand are insensitive to the cross-country intra-industry diversification. While making trading decisions, investors should be aware of the impulse responses of ASEAN oil and gas markets from the shocks in the US and the Asian markets and their asymmetric spill over effects.     

The Effect of Low‐ versus High‐Variance in Product Reviews on Product Evaluation

This research investigates whether the effect of low‐ versus high‐variance product reviews on the evaluation of a product about which consumers have favorable or unfavorable prior expectation can vary depending on product type, the argument quality of product reviews, and the number of reviewers. The data across three laboratory experiments demonstrate that high‐variance product reviews are more likely than low‐variance product reviews to undermine product evaluation when consumers have unfavorable prior expectation about a product. When consumers have favorable prior expectation, however, high‐variance product reviews can enhance or undermine product evaluation depending on product category, the argument quality of reviews, and the number of reviewers. The findings are explained by the type of causal attribution consumers make, such that high‐variance product reviews can allow consumers to make biased product evaluation consistent with their prior expectation when the causes of variance in the product reviews are attributed to the reviewers rather than to the product. However, when the causes of variance are attributed to the product rather than the reviewers, high‐variance product reviews can undermine product evaluation regardless of the favorability of prior expectation.     

Business responses to climate change: strategies for reducing greenhouse gas emissions in Vietnam

This study identifies the climate change strategies adopted by firms in developing countries to reduce their greenhouse gas (GHG) emissions. First, a framework is developed to classify and assess the GHG emission strategies of companies; second, it is then improved by using data on their implementation collected from 185 companies operating in 10 energy-intensive industries in Vietnam. We find that multinational subsidiaries engage in various climate change activities and have a higher level of implementation than those of domestic firms. Further, the most active and proactive companies are large in size and from Europe, the United States and Japan.