Baltic Dry Index and iron ore spot market: dynamics and interactions

Baltic Dry Index (BDI) is often included in the iron ore spot price. Iron ore market experienced a transition in pricing mechanism from the annual negotiated price to the one based on spot market price in 2008/2009. This paper investigates the dynamics of and the interactions between BDI and iron ore spot price in the regime of the new pricing mechanism. In addition to controlled variables, we find significant spillover interactions between BDI and the iron ore market. We also detect mean-reversion movement in the iron ore market, signalling certain inefficiency in the market pricing.     

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.     

Determinants of the Confucius Institute establishment

This paper investigates the determinants of the Confucius Institute (CI) establishment. It is shown that FDI, trade, geographical distance, developing country, and English speaking are important factors whereas GDP and population are marginally significant. Overall, CIs are under-represented in a non-English, distant, less wealthy developing country that trades infrequently with China. The results suggest that the CI network will have greater global impacts when new or more CIs are established in non-English speaking developing countries. However, potential mutual benefits between China and these under-representing countries should be preconditions in order to attract CIs in the countries.     

MEASURING THE EFFECT OF SEXUAL ORIENTATION ON INCOME: EVIDENCE OF DISCRIMINATION?

The effect of nonheterosexuality on individual income is estimated using 1991–1996 General Social Survey data. Other researchers have concluded that homosexuals earn less than similarly qualified workers, in contrast to the popular perception that homosexuals are more affluent than nonhomosexuals. Using improved statistical techniques, this article finds noticeable earnings effects that go in opposite directions across genders. Nonheterosexual men earn 22% less than heterosexual men, and nonheterosexual women earn 30% more than heterosexual women. These findings, viewed together with previous empirical work on this topic, help narrow the field of theories that can explain the sexual-orientation earnings gaps present in the data.     

ECONOMIC POLICY UNCERTAINTY AND BOARD MONITORING: EVIDENCE FROM CEO TURNOVERS

We examine whether economic policy uncertainty (EPU) affects a board's chief executive officer (CEO) replacement decision. We find that high EPU reduces the likelihood of forced CEO turnover. Our results support the idea that performance assessment may be more difficult when uncertainty is high. We provide evidence that succession planning may be important to firms in reducing the effects of EPU, as firms with an identifiable heir apparent are not influenced by high EPU. Likewise, voluntary CEO turnovers are not affected by EPU. Overall, our results provide evidence that boards make personnel decisions in response to external macroeconomic pressures.     

A further note on the optimality of the OLS hedge strategy

This note considers the hedging effectiveness of a dynamic hedge strategy as compared to the conventional OLS strategy. The conditions for the superiority of the OLS strategy are identified. It is argued that these conditions are frequently satisfied and therefore one expects to find the dominance of the OLS strategy over any dynamic strategy in the empirical work. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:308–311, 2008     

Optimal futures heading: Quadratic versus exponential utility functions

Although quadratic and exponential utility functions both lead to mean‐variance expected utility analysis, this study demonstrates that the two approaches produce different optimal futures hedging decisions. Specifically, the deviation between the optimal production level and the optimal futures position is always smaller under the exponential utility framework. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28: 208–211, 2008     

Derivative trading by utility firms

This paper examines the use of derivatives by a utility company. The hedging problem for utilities is atypical; the goal is not strictly to minimize average costs. Rather, the objectives are to minimize the upside risk associated with extreme bills, volatility of bills, and average expected bills for consumers. We characterize the optimal positions on futures contracts and options on futures that a utility company should assume. The results indicate that the use of derivatives (both futures and options on futures) is an efficient means of optimizing the objective functions without exposing consumers to speculative risk.