Non-Gaussian diversification: When size matters

Classical portfolio theory informs investors that they should have a large number of assets in their portfolios in order to diversify risk. We show that the non-Gaussian features of stock return distribution may not allow for this risk protection in times of crisis. Moreover, we demonstrate empirically that, if investors are risk-averse and consider higher order moments, they have numerous incentives not to diversify their portfolios fully. This is caused by the evolution of both large losses and asymmetry of returns when the numbers of assets in a portfolio change.     

Volunteerism,compassion and religiosity as drivers of donations practices

• The topic of donations is one of high relevance and has been widely covered in contemporary marketing literature. It is a topic of interest to both theoreticians and practitioners alike, particularly due to its implicit links to fundraising activities and research. The reality of what makes an individual donor ultimately part with his money and give it away to a nonprofit organization is a hot contemporary topic. This study looks into the role of religiosity as a predictor of donations practices. Also volunteerism and compassion, two acts of pro‐social behaviour are analysed as predictors of donations practices. Using data collected from a survey of 612 charity donors in Portugal, the results show unequivocally that religiosity does influence donations practices, and so being a predictor of donations practices. Moreover, pro‐social behaviour is a predictor of donations practices when in the case of volunteerism, but not in the form of compassion.
• The findings are particularly useful for nonprofit organizations that want to attract and retain individual charitable donors and may also help to increase donation regularity, to obtain higher amounts, and donations both to religious and to secular organizations. Finally, it can be stated that the understanding of religiosity sheds light on knowledge about donations practices, and that this study also makes an important contribution to academia, as it is the first study conducted in Portugal that assesses the drivers of donations practices.

Copyright © 2015 John Wiley & Sons, Ltd.     

Hedging Housing Risk in London

This paper investigates the benefits of allowing households to compensate the portfolio distortion due to their housing consumption through investments in housing price derivatives. Focusing on the London market, we show that a major loss from over-investment in housing is that households are forced to hold a very risky portfolio. However, the strong performance of the London housing market means that little is lost in terms of expected returns. Even households with limited wealth are better off owning their home rather than renting and investing in financial assets, as long as they are willing to face the financial risk involved. In this context, access to housing price derivatives would benefit most poor homeowners looking to limit their risk exposure. It would also benefit wealthier investors looking for the high returns provided by housing investments without the costs of direct ownership of properties. Comparisons with French, Swedish and U.S. data provide a broader perspective on our findings.     

SELECTION BIAS CORRECTIONS BASED ON THE MULTINOMIAL LOGIT MODEL: MONTE CARLO COMPARISONS

Abstract.  This survey presents the set of methods available in the literature on selection bias correction, when selection is specified as a multinomial logit model. It contrasts the underlying assumptions made by the different methods and shows results from a set of Monte Carlo experiments. We find that, in many cases, the approach initiated by Dubin and MacFadden (1984) as well as the semi-parametric alternative recently proposed by Dahl (2002) are to be preferred to the most commonly used Lee (1983) method. We also find that a restriction imposed in the original Dubin and MacFadden paper can be waived to achieve more robust estimators. Monte Carlo experiments also show that selection bias correction based on the multinomial logit model can provide fairly good correction for the outcome equation, even when the IIA hypothesis is violated.     

Equilibrium in a reinsurance market: Introducing taxes

We introduce profit taxation in Borch's [1962] model of a competitive insurance market. We analyze the impact of taxation on equilibrium prices and characterize the cases where optimal risk sharing is preserved. In the case of Constant Relative Risk Aversion (CRRA) utility functions, this abstract characterization is translated into simple conditions involving the solvency ratios of the companies. The case of Constant Absolute Risk Aversion (CARA) utility functions is also studied.     

Patent Breadth, Patent Life, and the Pace of Technological Progress

In active investment climates where firms sequentially improve each other's products, a patent can terminate either because it expires or because a non-infringing innovation displaces its product in the market. We define the length of time until one of these happens as the effective patent life, and show how it depends on patent breadth. We distinguish lagging breadth, which protects against imitation, from leading breadth, which protects against new improved products. We compare two types of patent policy with leading breadth: (1) patents are finite but very broad, so that the effective life of a patent coincides with its statutory life, and (2) patents are long but narrow, so that the effective life of a patent ends when a better product replaces it. The former policy improves the diffusion of new products, but the latter has lower R&D costs.     

Wage and competition channels of foreign direct investment and new firm entry

Using a rich data set of the Dutch manufacturing sector between 1995 and 2010, we investigate the effect of foreign direct investment (FDI) on domestic new firm entry. The emerging empirical literature has focused on the direct relationship between FDI and entry, but has not explored the mechanisms behind the observed effect. Drawing on a simultaneous equations model, our analysis features both the direct effect of FDI as well as indirect effects through two channels: industry competition and wages. We estimate the parameters through 3SLS and take into account the endogeneity of competition and wages with respect to entry. Our results show that there is a significant negative direct effect of FDI on entry. At the same time, FDI decreases competition and increases wage levels, which then impact entry positively and negatively, respectively. The total effect of FDI is negative, but small and virtually disappears after one year. Policy implications are discussed.

     

Foreign banks in Japan: A study of a Japanese deregulation process

The deregulation of foreign banks in Japan, although corresponding in broad outline to world-wide trends, has diverged substantially in many particulars from patterns seen elsewhere. It has tended to be excruciatingly slow and piecemeal and to have been of minimal benefit to foreign banks. A review of this process leads to the conclusion that these characteristics result from organisational and political-bureaucratic factors inherent to the Japanese style of government which is, in turn, partially a reflection of Japanese culture. Although these non-economic factors have influenced the specific pattern of change, its overall direction appears to have been consistent with the broader national interest.The authors wish to acknowledge financial support from the Social Science and Humanities Research Council of Canada, the Florsheimer Center for Policy Studies, and the Krueger Center for Financial Research.     

Guilty by Association: The Perils of Celebrity Endorsement for Endorsed Brands and their Direct Competitors

The objective of the research presented in this article is to examine the possibility that the adverse effects on consumer brand attitudes engendered by the involvement of a celebrity endorser in a negative event may spill over brands of the same product category (i.e., competitors). The results of an experimental study with 165 adult consumers showed that a scandal involving an athlete endorser had a negative impact not only on the attitude toward the endorsed brand, but also on the attitude toward competitor brands. This suggests that brands strongly associated with one sport may be vulnerable in the context of a scandal falling upon a celebrity athlete endorsing one of their direct competitors.     

Eco-control: The influence of management control systems on environmental and economic performance

Eco-control is the application of financial and strategic control methods to environmental management. In this study, we investigate to what extent eco-control influences environmental and economic performance. Using survey-data from a sample of Canadian manufacturing firms, the results suggest that eco-control has no direct effect on economic performance. A mediating effect of environmental performance on the link between eco-control and economic performance is observed in different contexts. More specifically, eco-control indirectly influences economic performance in the context of (i) higher environmental exposure, (ii) higher public visibility, (iii) higher environmental concern, and (iv) larger size. This study contributes to the management accounting literature by providing insight into the roles and contributions of management accounting in the context of sustainable development.