Forecasting the volatility of asset returns: The informational gains from option prices

A new class of forecasting models is proposed that extends the realized GARCH class of models through the inclusion of option prices to forecast the variance of asset returns. The VIX is used to approximate option prices, resulting in a set of cross-equation restrictions on the model’s parameters. The full model is characterized by a nonlinear system of three equations containing asset returns, the realized variance, and the VIX, with estimation of the parameters based on maximum likelihood methods. The forecasting properties of the new class of forecasting models, as well as a number of special cases, are investigated and applied to forecasting the daily S&P500 index realized variance using intra-day and daily data from September 2001 to November 2017. The forecasting results provide strong support for including the realized variance and the VIX to improve variance forecasts, with linear conditional variance models performing well for short-term one-day-ahead forecasts, whereas log-linear conditional variance models tend to perform better for intermediate five-day-ahead forecasts.     

When natural resources run out,market knowledge steps in: Lessons on natural resource deployment from a longitudinal study in a resource-scarce region of Ethiopia

With the increasing scarcity of natural resources, the ability to maintain quality standards during resource-scarce times becomes more critical for business performance. Theories on managing resource scarcity cannot be easily tested in contexts where resources are still abundant. This study therefore turns to an emerging market context in which natural resource availability naturally varies strongly between seasons, namely, that of Ethiopian pastoralists who for many generations learned to adapt to natural resource scarcity. Central to our theory is the natural resource deployment capability, which is the ability of a business to make efficient and effective use of available resources to maintain business performance during resource-scarce times. Using three-wave longitudinal data from 120 pastoral family-based livestock businesses, the study shows that when resources are scarce or extremely scarce, market knowledge helps to better deploy the scarce natural resources, leading to higher product quality. The findings imply that businesses with a better understanding of markets have stronger natural resource deployment capability. The lesson for businesses that are confronted with approaching resource scarcity is therefore to strengthen their ability to deploy resources efficiently and effectively by strengthening their market knowledge in which such capability is rooted.     

Balancing Conflicts of Interest when Employing Spouses

Employees can be put in situations where they are required to make decisions on behalf of the organization as part of their job duties. In these situations, organizations desire that employees make these decisions in the organization’s best interest. In an attempt to ensure that decisions are made in the best interest of the organization, some organizations implement anti-nepotism policies and no spouse rules. While the intent is to minimize conflicts of interest among employees, these policies exact costs to organizations. The present paper examines the costs and benefits of these types of policies, as well as the effects of family-friendly benefits, on organizations. The examination is further laid out in terms of four examples of how these policies and rules can be reframed into conflict of interest policies, allowing organizations to fully experience the benefits of increasing the size of the labor pool by being able to consider spouses and family members as potential applicants, while minimizing conflicts of interest. Finally, recommendations concerning the use of focused conflict of interest policies are made.

A replication and extension of quality management into the supply chain

As competition moves beyond a single firm into the supply chain, researchers are beginning to explore quality management (QM) in a supply chain context. The literature suggests that supply chain management (SCM) consists of internal practices, which are contained within a firm, and external practices, which cross organizational boundaries integrating a firm with its customers and suppliers. Supplier quality management and customer focus are two QM practices that are also clearly in the domain of SCM. In this study we investigate how these two supply chain management-related quality practices lead to improved performance and examine the practices that precede and mediate those relationships. In doing so, we replicate and extend the relationships among the QM practices and their effects on firm performance suggested in Kaynak [Kaynak, H., 2003. The relationship between total quality management practices and their effects on firm performance. Journal of Operations Management 21, 405–435] using survey data gathered from firms operating in the U.S. The inclusion of customer focus and supplier quality management in the QM model supports the importance of internal and external integration for quality performance. Implications of the results for researchers and practitioners are discussed, and further research implications are suggested.     

Psychological safety climate and workplace bullying in Vietnam’s public sector

The bureaucratic and impersonal nature of public management can fertilize workplace bullying and risks for psychological health and safety. Psychological safety climate (PSC) is an important indicator to reduce psychological hazards. Yet, there have been few studies conducted to examine the existence of PSC in the public sector in non-Western economies. This study examined the implementation of PSC and its effects on 274 employees from six branches of a Vietnamese public sector organization. The results suggest that senior management in organizations should consider positive work conditions and an effective system of policies, procedures, and practices for the prevention of psychosocial hazards.     

Raising the bar (5)

Raising the bar (5). Spatial Economic Analysis. This editorial summarizes and comments on the papers published in this issue 12(1) so as to raise the bar in applied spatial economic research and highlight new trends. The first paper examines the impact of the level of education on the decision to migrate and finds that it is approximately twice as large if both variables are modelled simultaneously. The second paper is one of the first papers to introduce a spatial component to models of international environmental agreements and to develop an exciting overlap with New Economic Geography. The third paper provides a tool, applied to Beijing, with which urban economic planners can investigate the role of variation and selection mechanisms in cluster development and identify possible paths of growth. The fourth paper contributes to the existing literature on retail geography by examining the role of consumption possibilities as an urban amenity. The fifth paper develops a Bayesian estimator of a linear regression model with spatial lags among the dependent variable, the explanatory variables and the disturbances. Finally, the sixth paper develops a semi-parametric generalized method of moments (GMM) estimator for a spatial autoregressive model with space-varying coefficients of the explanatory variables and a spatial autoregressive coefficient common to all units.     

The Employee Engagement Scale: Initial Evidence for Construct Validity and Implications for Theory and Practice

Interest in the employee engagement construct has gained increasing attention in recent years. Measurement tools focused on nuanced areas of engagement (i.e., job engagement and organizational engagement) have been offered; however, no measure of employee engagement has been advanced despite persistent calls in the research. We present the development, method, and results of a three‐dimensional employee engagement measurement tool developed for use in the human resource and management fields of study. Across four independent studies, the employee engagement scale (EES) was found to consist of three subfactors (cognitive, emotional, and behavioral) and a higher‐order factor (employee engagement). Across a series of four studies, we explored the factor structure and reliability of the EES (Study 1), then refined the scale, confirmed the factor structure, and examined reliability and both convergent and nomological validity evidence (Study 2). Next (Study 3), we completed a final reduction in scale items and examined additional evidence of reliability and nomological validity as well as evidence of discriminant validity. Finally (Study 4), we tested for evidence of incremental validity. In the implications for theory and practice section, we discuss the importance of an employee engagement measure aligned alongside an agreed‐upon definition and framework. Limitations and future directions for research—such as the need for further psychometric testing and exploring issues of measurement invariance—are discussed. © 2016 Wiley Periodicals, Inc.     

Why Unions in the United States will Die: American Labor Organizations in the Age of Trump

This essay analyzes the effects of Donald Trump’s election as President on organized labor in the United States and, more specifically, on the demographic of workers responsible for his electoral college victory. The argument is that culture rather than economics explains Trump’s success in capturing key industrial states. His support depended on white middle-aged male voters without college degrees, the same cohort that makes up the backbone of unions in the United States. The likelihood is that Trump’s policies will further immiserate the American working class rather than reinvigorate it. In three key areas, Trump’s presidency will result in lower union membership density and higher inequality of wealth. The cultural orientation of Trump’s supporters outweighed politics, policy, and competence in selecting a national leader.