Should smart investors buy funds with high past returns?

We fully characterize the equilibria in a gme between a fundmanager of unknown ability who control the riskiness of hisportfolio and investors who only observe realized returns. Wederive two types of equilibria. The first one is such that (i)investors invest in the fund if the realized return falls withinsome interval, i.e., is neither too low nor too high, (ii) agood manager picks a portfolio of minimal riskiness and (iii)a bad manager picks a portfolio with higher risk, "gambling"on a lucky outcome. The second type of equilibrium is more traditional:(i) investors invest in the fund if the observed return is largerthan some threshold, and (ii) good and bad managers choose thesame risk level.     

Works Councils,Collective Bargaining,and Apprenticeship Training – Evidence From German Firms

In this paper, we investigate the effects of works councils on apprenticeship training in Germany. The German law attributes works councils substantial information and co‐determination rights to training‐related issues. Thus, works councils may also have an impact on the cost‐benefit relation of workplace training. Using detailed firm‐level data containing information on the costs and benefits of apprenticeship training, we find that firms with works councils make a significantly higher net investment in training compared to firms without such an institution. We also find that the fraction of former trainees still employed with the same firm 5 years after training is significantly higher in the presence of works councils, thus enabling firms to recoup training investments over a longer time horizon. Furthermore, all works council effects are much more pronounced for firms covered by collective bargaining agreements.     

National representation in supranational institutions: The case of the European Central Bank

Supranational institutions face an important trade-off when hiring personnel. On the one hand, hiring decisions are based, as in most organizations, on a candidate’s professional qualifications. On the other hand, supranational institutions often aim for broad national representation. Reviewing evidence from the European Central Bank, we show that nationality is indeed relevant for both hiring and decision-making. Specifically, we find a disproportionately narrow spread of national representation in the top management of the ECB. Further, there is evidence for the existence of national networks between adjacent management layers. Finally, monetary policy decisions seem to be linked to national representation in the core business areas of the ECB. Examining a sample of 27 European countries over the period from 1999 to 2008, we estimate Taylor rules for alternative sets of euro area aggregates derived from different weighting schemes of national macroeconomic data. Our results indicate that weights based on national representation in the mid-level management of the ECB’s core business areas best describe the central bank’s interest-rate setting behavior.     

Firm growth and productivity in Belarus: New empirical evidence from the machine building industry

Using a unique dataset comprising information for (up to) 153 firms in the machine building sector in Belarus, we investigate the determinants of firm growth for an economy where state ownership of enterprises is widespread. We use panel data models based on generalizations of Gibrat’s law, total factor productivity estimates and matching methods to assess the differences in firm growth between private and state-controlled firms. Our results indicate that labor hoarding and soft budget constraints play a particularly important role in explaining differences in performance between these two groups of firms.     

Maritimer EU-Handel auf Wachstumskurs

Im Zuge der expansiven Entwicklung des internationalen Warenhandels z?hlte auch die Frachtschifffahrt in den vergangenen Jahrzehnten zu den wachstumsstarken Wirtschaftsbereichen. Die fortschreitenden weltweiten Integrationsprozesse, der weitere Abbau von Handelshemmnissen und die zu erwartende Steigerung des Wohlstands in zahlreichen Regionen der Welt werden auch in den kommenden Jahrzehnten eine deutliche Expansion der Frachtschifffahrt f?rdern und erfordern. Welche Potentiale ergeben sich für den Seehandel der EU-Staaten? Und wie werden die H?fen im europ?ischen Fahrtgebiet hiervon betroffen sein? Dr. Alkis H. Otto, 33, und Dr. Silvia Stiller, 39, sind am Hamburgischen WeltWirtschaftsInstitut als Senior Researcher und Jan Wedemeier, 28, Dipl.-Volkswirt, als Junior Researcher t?tig. Dr. Harald Gro?mann, 52, ist als Mitarbeiter bei der Beh?rde für Wirtschaft und Arbeit in Hamburg t?tig. * Dieser Artikel ist eine Zusammenfassung der von HWWI und Berenberg Bank gemeinsam verfassten Studie „Maritime Wirtschaft und Transportlogistik“, die in der Reihe „Strategie 2030 – Verm?gen und Leben in der n?chsten Generation“ erschienen ist.     

Guarantee funds for the travel industry: Protection of the consumer against the insolvency of his organizer/retailer

One of the problems addressed by the EU Directive on Package Travel (1990) is that of travellers who find themselves stranded in their holiday destination when their tour operator suddenly goes bankrupt. The recent insolvency of Austrian and German tour operators illustrates the relevance of this question. This paper argues that travellers should be protected against the risk of insolvency of tour operators. The paper sets out the reasons for this, the various ways of insolvency protection, and the implementation of the Package Travel Directive. It then sets out what is secured by the guarantee, the obligations of the organizer and retailer, the cross-border implications, the possibility to choose freely the means of security, guarantee funds, insurance and social security, bonds and guarantees, trusts, and EC implications. It is argued that Member States should provide a higher standard of protection than the minimum standard of the Directive. A traveller should be entitled to compensation not only for immaterial damage but also for pure economic loss, such as the higher costs of an equivalent trip. The paper also argues that refund of prepayments should not be limited to the period before the trip has started. The traveller should also be reimbursed for extra costs incurred if he decides to stay at his destination. Finally, a traveller should be entitled to take care of his own repatriation, should he wish to do so. The paper finally argues that Member States should be held liable for late implementation of the Directive.

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Garantiefonds für die Reisebranche: Schutz des Verbrauchers bei Insolvenz seines Reiseveranstalters oder -büros

Zusammenfassung Die EG-Pauschalreiserichtline befaßt sich unter anderem mit dem Insolvenzproblem: Reisende sitzen am Urlaubsort fest, wenn ihr Reiseveranstalter plötzlich zahlungsunfähig wird. Die letzten Insolvenzen großer österreichischer und deutscher Reiseveranstalter zeigen die praktische Bedeutung dieses Problems. Der Beitrag argumentiert zunächst rechtspolitisch, daß und warum Reisende gegen dieses Insolvenzrisiko geschützt werden sollten. Dann werden verschiedene Möglichkeiten der Insolvenzabsicherung und damit der Umsetzung der Richtline erläutert. Insbesondere werden behandelt: der Umfang der Absicherung, die Pflichten von Veranstalter und Reisebüro, die freie Wahl der Sicherungsmittel, Garantiefonds, private Versicherung und Sozialversicherung, Bankgarantien, Treuhandschaften und andere Sicherungsmittel, sowie Implikationen aus dem Europarecht. Es wird der Standpunkt vertreten, daß die Mitgliedstaaten einen höheren Schutzstandard vorsehen sollten als den Minimalstandard der Richtline. Der Reisende sollte auch einen Anspruch auf Ersatz seines immateriellen Schadens sowie reinen Vermögensschadens haben, wie etwa die höheren Kosten einer Ersatzreise. Auch sollte die Rückerstattung von Anzahlungen nicht auf die Zeit vor Reiseantritt beschränkt werden. Dem Reisenden sollten seine höheren Aufwendungen ersetzt werden, wenn er am Urlaubsort bleiben will. Schließlich sollte der Reisende in der Lage sein, seine Rückreise gegen Kostenersatz selbst zu organisieren. Bezüglich verspäteter Umsetzung der Richtline wird die Ansicht vertreten, daß Mitgliedstaaten für daraus erwachsende Schäden dem Reisenden gegenüber haften.

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Harald Halbhuber has a law degree from the University of Vienna. During his studies he spent one term at the University of Utrecht as an Erasmus exchange student. His address is: Hietzinger Hauptstrasse 109, A-1130 Wien. Ewoud Hondius is Professor of Civil Law at the University of Utrecht. His address is: Molengraaff Instituut voor Privatrecht, Nobelstraat 2A, 3512 EN Utrecht, Netherlands.     

Varianzquotiententests und Random Walk Verhalten internationaler Aktienmärkte

Variance ratio tests can be considered the state-of-the-art methodology for testing stock markets for random walk behavior. This article reviews recent developments in the area. Furthermore, it analyzes whether the recent financial crisis has influenced the random walk behavior of international stock markets. Our findings based on individual and multiple variance ratio tests can be summarized as follows: (i) There appears to be less evidence against the random walk hypothesis in industrialized markets than there is in emerging markets. (ii) Industrialized countries’ stock market behavior seems to be less affected by the financial crisis than the one of emerging markets. (iii) The choice of individual or multiple variance ratio test does not crucially influence our main conclusions.     

The U.S. Postal Savings System and the collapse of building and loan associations during the Great Depression

Building and loan associations (B&Ls) financed over half of new houses constructed in the United States during the 1920s but they lost their predominance within the following decades as they were pushed to convert into Savings and Loans (S&Ls). This study examines whether the U.S. government-insured Postal Savings System attracted funds away from B&Ls precisely when they needed them the most in the Great Depression. Annual town- and county-level data from 1920 through 1935 for three states show that the sudden rise in local postal savings was associated with local downturns in B&Ls. Using a panel vector autoregression, we find that postal savings significantly reduced the amount of money in B&Ls, yet B&Ls had no significant effect on postal savings banks. Alternatively, postal savings had no significant effect on commercial banks. The results suggest that this competitive dynamic prevented B&Ls from rebounding in the mid-1930s and helped contributed to Great Depression's local real estate lending decline.     

Volatility of Tax Payments and Dividend Payouts*

Dividends are a key mechanism for shareholders to discipline managers and mitigate agency conflicts. This study examines whether the volatility of tax payments is associated with dividend payouts. Consistent with the predictions, results suggest that firms with more volatile tax payments are less likely to pay dividends overall and their dividends are lower in magnitude when doing so. These effects are economically significant and incremental to a firm's operating risk. The link between volatile tax payments and the likelihood of dividend payouts is weaker for firms that distribute dividends to alleviate agency conflicts. Similarly, the link between volatile tax payments and the amount of dividend payouts is weaker for firms that hold more cash for tax reasons. Taken together, these findings add to our understanding of the economic consequences of volatile tax payments and the determinants of dividend payouts.