Risk compensation in wages – a replication

We use data from Germany, The Netherlands, Portugal and Spain to test for the effect of earnings variation on individual earnings. We replicate estimates for the USA and find that the variance of earnings in an occupation affects individual wages positively while the skewness of earnings has a negative effect. Both results are in conformity with wage compensation for risk averse workers. First version received: March 2001/Final version received: July 2002 We are grateful to two anonymous referees for valuable comments.     

Longitudinal Meta-analysis

The goal of meta-analysis is to integrate the research results of a number of studies on a specific topic. Characteristic for meta-analysis is that in general only the summary statistics of the studies are used and not the original data. When the published research results to be integrated are longitudinal, multilevel analysis can be used for the meta-analysis. We will demonstrate this with an example of longitudinal data on the mental development of infants. We distinguish four levels in the data. The highest level (4) is the publication, in which the results of one or more studies are published. The third level consists of the separate studies. At this level we have knowledge about the degree of prematurity of the group of infants in the specific study. The second level are the repeated measures. We have data about the test age, the mental development, the corresponding standard deviations, and the sample sizes. The lowest level is needed for the specification of the meta-analysis model. Both the way in which the multilevel model has to be specified (the Mln-program is used) as the results will be presented and interpreted.     

The Performance of European Index Funds and Exchange‐Traded Funds

European index funds and exchange‐traded funds underperform their benchmarks by 50 to 150 basis points per annum. The explanatory power of dividend withholding taxes as a determinant of this underperformance is at least on par with fund expenses. Dividend taxes also explain performance differences between funds that track different benchmarks and time variation in fund performance. Our results imply that not only fund expenses, but also dividend taxes can result in a substantial drag on mutual fund performance.     

On the Use of Multifactor Models to Evaluate Mutual Fund Performance

We show that multifactor performance estimates for mutual funds suffer from systematic biases and argue that these biases are a result of miscalculating the factor premiums. Because the factor proxies are based on hypothetical stock portfolios and do not incorporate transaction costs, trade impact, and trading restrictions, the factor premiums are either over- or underestimated. We argue that factor proxies based on mutual fund returns rather than on stock returns provide better benchmarks to evaluate professional money managers.     

Credit cycles and macro fundamentals

We use an intensity-based framework to study the relation between macroeconomic fundamentals and cycles in defaults and rating activity. Using Standard and Poor's U.S. corporate rating transition and default data over the period 1980–2005, we directly estimate the default and rating cycle from micro data. We relate this cycle to the business cycle, bank lending conditions, and financial market variables. In line with earlier studies, the macro variables appear to explain part of the default cycle. However, we strongly reject the correct dynamic specification of these models. The problem is solved by adding an unobserved dynamic component to the model, which can be interpreted as an omitted systematic credit risk factor. By accounting for this latent factor, many of the observed macro variables loose their significance. There are a few exceptions, but the economic impact of the observed macro variables for credit risk remains low. We also show that systematic credit risk factors differ over transition types, with risk factors for downgrades being noticeably different from those for upgrades. We conclude that portfolio credit risk models based only on observable systematic risk factors omit one of the strongest determinants of credit risk at the portfolio level. This has obvious consequences for current modeling and risk management practices.     

NOTES ON CONTRIBUTORS

Abstract

Within public administration and policy sciences the concept of policy networks nowadays is well accepted. Not much attention has been paid so far to strategies aimed at institutional design. Therefore, in this article, we develop a conceptual framework to study institutional design more thoroughly. We do this by specifying the nature and variety of institutional rules that guide the behaviour of actors within networks. Given this categorization of rules, we identify possible strategies to change network rules. Next, we focus on the strategic context of attempts to influence the nature of institutional rules: the process of institutional design. We conclude with suggestions to apply the conceptual framework to empirical research into the forms, impacts and implications of attempts to change the institutional features of policy networks.     

Human resource strategy for the new ICT-driven business context

The influence of technology developments on the content and arrangement of work is a recurring theme in many publications. Advances in information and communication technology (ICT) are reshaping internal organizational design and necessitate new types of employee capabilities and behaviour. As will be illustrated, ICT developments create a heightened level of business and market dynamics. Arguably, these dynamics affect the required capabilities and behaviour of employees even more strongly. Similarly, the way businesses are operating, and customer, supplier and business partner relationships are formed, is also affected by the rapid ICT progress. Key drivers shaping the new business context will be addressed. This paper argues that the trends and developments illustrated necessitate revision of traditionally held beliefs and paradigms. Said revision has important implications for the strategy and management of human resources, whereby the focus on employee behaviour is crucial. Two key aspects of a human resource strategy will be discussed, identified as HR alignment and HR enablement. With the focus on employee behaviour, attention should be given to the organizational context, since this context determines employee behaviour. Said context is defined by organizational culture, management practices and various organizational structures and systems. In view of the necessary organizational change associated with the developments illustrated, the importance of consistency and coherence between the elements of the organizational context is stressed. Establishing change under conditions of consistency and coherence is therefore identified as a crucial organizational competence.