Subjective Well‐Being and Income: A Re‐Examination of Satiation Using the Regression Kink Model With an Unknown Threshold

A methodological challenge in testing Easterlin's paradox, which states that increasing income fails to boost happiness beyond a satiation point, lies in the determination of this threshold if it exists. In the existing literature, various levels of GDP per capita have been chosen based upon visual inspection of the scatter plots of the data. The estimated income–well‐being gradients are sensitive to the choice of such kink points. We first replicate the results in Stevenson and Wolfers (American Economic Review, Papers and Proceedings 2013; 103 (3): 598–604), then apply the methods proposed in Hansen (Journal of Business and Economic Statistics 2016), which estimate the regression kink model with an unknown threshold, to the data in Stevenson and Wolfers ( 2013 ) to re‐examine the two modified versions of Easterlin's hypothesis. In most cases, we do not find the existence of any kink point. In the few cases where a kink point is detected, the estimated kink point thresholds are different from those chosen in the previous literature. Overall, we find no evidence of a satiation point, which is in support of Stevenson and Wolfers ( 2013 ). Copyright © 2016 John Wiley & Sons, Ltd.     

International ambidexterity and firm performance in small emerging economies

Conventional IB theories stress the importance and implications of a firm's exploitative strategy. However, the unprecedented competitive nature of contemporary business necessitates firm “ambidexterity” — the simultaneous execution of exploitation and exploration activities. Using balanced panel data of 207 Taiwanese firms spanning six years, this research examines the effects of international ambidexterity on firm performance. Findings reveal that ambidexterity promotes a firm's performance. For firms from small emerging economies, international ambidexterity is highly vulnerable to environmental complexity and sensitive to previous international experience and the firm's capability to conduct international business. These factors significantly moderate firm performance.     

Aggregate Australian Takeovers: A Review of Markov Regime Switching Models

This article reviews the case of modeling merger waves in the Australian market for the period 1972–2004. Three Markov switching models are examined, the Gaussian AR(1), Poisson AR(1), and State‐Space autoregressive moving average (ARMA) (1,1), to find which gives the best fit. The State‐Space Markov switching ARMA(1,1) model is found to be the best for describing Australian takeover activity as estimation results based on it have a lower Bayesian information criterion score than the other two models. Each model's ability to predict a ‘wave’ is then tested by including its estimated probability in a macroeconomic model to explain merger activity. The State‐Space model also performs better because the inclusion of its estimated probability substantially increases the explanatory power of the regression model (measured by the regression adjusted R²). In addition, it predicted a takeover wave in 2009, which was closer to the actual incidents of takeover activity in the market at that time than the predictions of the other two models. The results are robust when the measure of takeover activity is changed from the number of takeover bids to the proportion of takeover bids relatively to the number of exchange‐listed companies. JEL classification: G34, C32.     

Consequences of Riding Takeover Waves: Australian Evidence

This paper uses Australian data to analyze takeover bid premiums and long‐term abnormal returns for mergers that occur during wave and non‐wave periods. Findings reveal that bid premiums are slightly lower in wave periods, and bidding firms earn normal post‐takeover returns (relative to a portfolio of firms matched on size and survival) if their bids were made in non‐wave periods. However, bidders who announced their takeover bids during wave periods exhibit significant underperformance. For mergers that took place within waves, there is no difference in bid premiums nor is there a difference in the long‐run returns of bidders involved during the first half and second half of the waves. We find that none of prominent theories of merger waves (managerial, misvaluation, and neoclassical) can fully account for Australian takeover waves and their effects. Instead, our results suggest that Banal‐Estanol et al.'s screening theory of merger activity, by combining the misvaluation and neoclassical theories, may provide a better explanation.     

A note on the performance of regime switching hedge strategy

We characterize conditions under which the regime switching (RS) hedge strategy will perform better than the ordinary least squares (OLS) hedge strategy. The result can be extended to the case where the GARCH effects prevail. Specifically, these conditions would allow the RS‐GARCH hedge strategy to dominate both OLS and GARCH hedge strategies. © 2011 Wiley Periodicals, Inc. Jrl Fut Mark     

Investor protection and cross-border acquisitions of private and public targets

We examine the announcement-period acquirer returns and target values for a large sample of cross-border acquisitions by U.S. firms, differentiating between private and public targets and paying particular attention to the legal protection of minority shareholders in the target country. For high-protection target countries, acquirer announcement-period returns are significantly negative for public targets and significantly positive for private targets. For low-protection target countries, the acquirer returns are significantly positive for public targets and insignificantly different from zero for private targets. For public targets, acquirer returns are decreasing and target-firm values and acquisition premia are increasing with the level of investor protection. For private targets, investor protection does not affect acquirer returns or target-firm values. We find that bidder returns decrease with the level of creditor protection in the target country and increase with the quality of accounting standards. Our results also show that in low- protection countries, firm-level corporate governance mechanisms, such as higher insider ownership, may substitute for the lower level of investor protection.     

Price limit changes,order decisions,and stock price movements: an empirical analysis of the Taiwan Stock Exchange

Review of Quantitative Finance and Accounting - This study examines the relationships among price limit changes, order submission decisions, and stock returns in the Taiwan Stock Exchange....     

A note on the hedging effectiveness of GARCH models

This note compares the hedging effectiveness of the conventional hedge ratio and time-varying conditional hedge ratios (of which GARCH ratio is a special case). It is shown that, in large sample cases, the conventional hedge ratio provides the best performance. For small sample cases, a sufficiently large variation in the conditional variance of the futures return is required to produce the opposite result. The result is due to the fact that the hedging effectiveness measure is based upon the unconditional variance; meanwhile, the conventional hedge ratio minimizes the unconditional variance and the conditional hedge ratio aims at minimizing the conditional variance.     

Financial assistance for study abroad students: An economic analysis

This paper examines the scholarship payback policy embedded in a study abroad program. A full payback policy requires a student to return the whole amount of the scholarship should he fail to achieve a target post-program performance, whereas a partial payback policy requires a payback amount in proportion to the extent of the under-performance. It is found that, the university should adopt a fixed amount scholarship to maximize the average post-program ability. There is also an optimal partial payback policy.     

Bank risk in uncertain times: Do credit rationing and revenue diversification matter?

We show that bank risk rises, particularly for larger banks and those with greater interest-sensitive liabilities, during times of economic policy uncertainty through two economic channels: “credit rationing” and “revenue diversification.” The credit rationing channel shows that economic policy uncertainty increases aggregate loan spreads, exacerbating both adverse selection and moral hazard problems leading to higher bank risk. The revenue diversification channel suggests that as economic policy uncertainty reduces bank profits from traditional interest-based products, banks diversify into other non-traditional activities, thereby increasing their instability. Overall, our findings highlight the impact of economic policy uncertainty on exacerbating bank risk.