Forecasting interest rates with shifting endpoints

We consider forecasting the term structure of interest rates with the assumption that factors driving the yield curve are stationary around a slowly time‐varying mean or ‘shifting endpoint’. The shifting endpoints are captured using either (i) time series methods (exponential smoothing) or (ii) long‐range survey forecasts of either interest rates or inflation and output growth, or (iii) exponentially smoothed realizations of these macro variables. Allowing for shifting endpoints in yield curve factors provides substantial and significant gains in out‐of‐sample predictive accuracy, relative to stationary and random walk benchmarks. Forecast improvements are largest for long‐maturity interest rates and for long‐horizon forecasts. Copyright © 2013 John Wiley & Sons, Ltd.     

The two-fund separation theorem revisited

This paper resolves two issues regarding the traditional capital asset pricing model with one risk-free asset which seem to have been overlooked in the literature. First, it provides an elementary and complete proof of the two-fund separation theorem which accounts for the fact that asset demand may become undefined if the limiting slopes of the investor’s indifference curves are finite. Second, it shows that an additional limiting condition on investors’ risk aversions is generally necessary to guarantee existence of an equilibrium. Moreover, a generalized existence result is formulated which includes investors who in equilibrium may not invest in risky assets and a simple condition ensuring positive equilibrium asset prices is given.     

New Service Development: An Analysis of 27 Years of Research *

This study examines the state of the art in new service development (NSD) research published in the period between 1982, when the first NSD article appeared in an academic journal, and 2008. First, a multisource search was conducted, which resulted in the identification of 145 NSD‐related articles. Then, a content analysis was performed of these articles using multiple classifier variables with regard to general publication characteristics, focus of the research, and the research methodology that was employed. By examining the results, a number of developments in and patterns of scholarly research in NSD are revealed. More specifically, it appears that the greatest attention in the early writings was on a narrow set of NSD topics like critical success factors and the NSD process, which were predominantly investigated through large‐scale surveys with single respondents in the U.S., Canadian, and U.K. financial services industry. The analytical techniques that were used at that time were rather simple. In contrast, in recent NSD works there is an expansion of research topics (such as customer involvement and the organization of NSD) that are increasingly investigated in high‐tech service industries in Europe through qualitative research designs. Also, multiple respondent studies have started to appear in NSD investigations, while analytical techniques have also become more advanced. This pattern clearly uncovers signs of increasing maturation for the NSD discipline. In addition, some underresearched areas are identified, leading to suggestions for future research into this growing and important field.     

The Tipping Point of Design: How Product Design and Brands Interact to Affect Consumers’ Preferences

Existing research on product design has demonstrated the importance of aesthetics in generating favorable consumer responses. However, the literature has only recently begun to explore if and to what extent the impact of product design is influenced by brand strength. Whereas some research indicates that strong brands may benefit less strongly from aesthetically attractive designs, other research suggests that attractive designs are more persuasive when they are paired with a strong brand. In this research, these two competing predictions were tested through three studies with German car buyers. In Study 1, participants were exposed to a fictitious car that was paired with a randomly chosen brand name. In Study 2, participants were presented with a set of existing cars and were asked to choose one. Both studies yield converging evidence and show that product design and brands interact in a positive fashion, suggesting that attractive designs exert a greater influence on consumers’ decision processes when they are accompanied by a strong brand. Study 3 extended these findings by demonstrating that strong brands only increase the impact of attractive designs when perceived risk is high but not when it is low.     

Why they moved — Emigration from the Swedish countryside to the United States, 1881–1910

Swedish emigration rates were among the highest in Europe in the late nineteenth century. The majority of the emigrants originated from the countryside. In the article the determinants of emigration from the Swedish countryside to the United States are explored using panel regression methods on a newly constructed dataset consisting of yearly observations for 20 counties over the period 1881–1910. Amidst sharp fluctuations the emigration rate declined over the long term, which is explained by a rise in the standard of living and improved employment opportunities at home. Persistent regional differences in the emigration rate are explained by regional differences in population density and emigration tradition.     

Real call options to enlarge foreign subsidiaries – The moderating effect of irreversibility on the influence of economic volatility and political instability on subsequent FDI

This paper develops a real option model to explain the decision of enlarging a new foreign subsidiary by subsequent investment. The model is tested on a panel of 1148 subsidiaries in 22 host countries. The findings complement the traditional process model of firm internationalization. Rather than abiding by an incremental pattern of investment, internationalizing firms seem to keep foreign investment strategies flexible and build up their subsidiaries contingent upon the interaction of economic volatility and irreversibility of investment. However, the moderating effect of irreversibility on the relationship between uncertainty and investment may not hold for downside risks such as political instability.     

Financial amplification of foreign exchange risk premia

Theories of financial frictions in international capital markets suggest that financial intermediaries' balance sheet constraints amplify fundamental shocks. We present empirical evidence for such theories by decomposing the U.S. dollar risk premium into components associated with macroeconomic fundamentals, and a component associated with financial intermediary balance sheets. Relative to the benchmark model with only macroeconomic state variables, balance sheets amplify the U.S. dollar risk premium. We discuss applications to financial stability monitoring.     

Social media? Get serious! Understanding the functional building blocks of social media

Traditionally, consumers used the Internet to simply expend content: they read it, they watched it, and they used it to buy products and services. Increasingly, however, consumers are utilizing platforms—such as content sharing sites, blogs, social networking, and wikis—to create, modify, share, and discuss Internet content. This represents the social media phenomenon, which can now significantly impact a firm's reputation, sales, and even survival. Yet, many executives eschew or ignore this form of media because they don’t understand what it is, the various forms it can take, and how to engage with it and learn. In response, we present a framework that defines social media by using seven functional building blocks: identity, conversations, sharing, presence, relationships, reputation, and groups. As different social media activities are defined by the extent to which they focus on some or all of these blocks, we explain the implications that each block can have for how firms should engage with social media. To conclude, we present a number of recommendations regarding how firms should develop strategies for monitoring, understanding, and responding to different social media activities.     

Markets as networks: implications for strategy-making

Based on empirical studies of firm exchange activities in business markets, this paper outlines a business network view of the firm-market relationship, which differs fundamentally from the view assumed by neo-classical economic theory. We define business networks as sets of connected business relationships. Thus business relationships and connections between relationships are the critical elements in the business network view. It is assumed, as suggested by the Uppsala internationalization process model, that an interplay between knowledge and commitment development is the mechanism that drives the relationship and network development process. Against this background the paper discusses how strategic change is analyzed in literature on alliances and networks. In conclusion the paper presents a set of propositions about strategy-making in business network settings.