The excess co-movement of commodity prices reconsidered

This paper provides an empirical reconsideration of evidence for excess co-movement of commodity prices within the framework of univariate and multivariate GARCH(1, 1) models. Alternative formulations of zero excess co-movement are provided, and corresponding score and likelihood ratio tests are developed. Monthly time series data for two sample periods, 1960–85 and 1974–92, on up to nine commodities are used. In contrast to earlier work, only weak evidence of excess co-movement is found.     

Cross‐market correlations and transmission of information

We investigate characteristics of cross‐market correlations using daily data from U.S. stock, bond, money, and currency futures markets using a new multivariate GARCH model that permits direct hypothesis testing on conditional correlations. We find evidence that arrival of information in a market affects subsequent cross‐market conditional correlations in the sample period following the stock market crash of 1987, but there is little evidence of such a relationship in the precrash period. In the postcrash period, we also find evidence that the prime rate of interest affects daily correlations between futures returns. Furthermore, we find that conditional correlations between currency futures and other markets decline steeply a few months before the crash and revert to normal dynamics after the crash. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:1059–1082, 2002     

Bayesian analysis of the two‐part model with endogeneity: application to health care expenditure

This paper studies the effect of managed care on medical expenditure using a model in which the insurance status is assumed to be endogenous. Insurance plan choice is modeled through the multinomial probit model. The medical expenditure variable, the outcome of interest, has a significant proportion of zeros that are handled using the two‐part model, extended to handle endogenous insurance. The estimation approach is Bayesian, based on the Gibbs Sampler. The model is applied to a sample of 20 460 individuals obtained from the Medical Expenditure Panel Survey. The results provide substantial evidence of selectivity. Copyright © 2006 John Wiley & Sons, Ltd.     

When is cash good or bad for firm performance?

Research summary: Cash can create shareholder value when used for adaptation to unfolding contingencies, but can also reduce value when appropriated by other stakeholders. We synthesize arguments from the behavioral theory of the firm, economic perspectives like agency theory, and the value‐creation versus value‐appropriation literatures to argue that the implications of cash for firm performance are context‐specific. Cash is more beneficial for firms operating in highly competitive, research‐intensive, or growth‐focused industries that are typical of contexts requiring adaptation in the face of uncertainties. Conversely, cash is more detrimental to performance in firms that are poorly governed, diversified, or opaque, as are typical of contexts where stakeholder conflicts, information asymmetries, or power imbalances can encourage value appropriation by other stakeholders. Managerial summary: Cash can create shareholder value when used for adaptation to unfolding contingencies, but can also reduce value when appropriated by other stakeholders. While cash‐rich firms have higher performance on average, with those in the 75th percentile having a market‐to‐book value 15 percent higher than those in the 25th percentile, we find that the performance benefits of cash depend on the context. Cash is more beneficial for firms operating in highly competitive, research‐intensive, or growth‐focused industries that are typical of contexts requiring adaptation in the face of uncertainties. Conversely, cash is more detrimental to performance in firms that are poorly governed, diversified, or opaque, as are typical of contexts where stakeholder conflicts, information asymmetries, or power imbalances can encourage value appropriation by other stakeholders. Copyright © 2015 John Wiley & Sons, Ltd.     

Emerging challenges for R&D executives — an American perspective

In recent years, many companies have witnessed dramatic changes in their business environment. Emergence of global markets and competitors coupled with new competitive strategies based on quality, speed and/or alliances have forced business managers — especially in the United States — to adopt new management strategies, structures and systems. These in turn have caused many R&D executives to progress from their traditional agenda of managing R&D activities in domestic laboratories to a new agenda of coordinating and integrating technology development and exploitation on a world-wide basis. This paper discusses this evolution of R&D management agenda in the United States and its implications. It also reviews the approaches being used and the experiences being gained by the American R&D management community to address the emerging challenges.     

Relational contracts with subjective peer evaluations

We study optimal dynamic contracting for a firm with multiple workers where compensation is based on public performance signals and privately reported peer evaluations. We show that if evaluation and effort provision are done by different workers (e.g., consider supervisor‐agent hierarchy), first‐best can be achieved even in a static setting. However, if each worker both exerts effort and reports peer evaluations (e.g., consider team setting), effort incentives cannot be decoupled from truth‐telling incentives. This makes the optimal static contract inefficient. Relational contracts based on public signals increase efficiency. Interestingly, the optimal contract may ignore signals that are informative about effort.     

Temporal Evolution of Mortality Indicators

Abstract

In Spain, as in other developed countries, significant changes in mortality patterns have occurred during the 20th and 21st centuries. One reflection of these changes is life expectancy, which has improved in this period, although the robustness of this indicator prevents these changes from being of the same order as those for the probability of death. If, moreover, we bear in mind that life expectancy offers no information as to whether this improvement is the same for different age groups, it is important and necessary to turn to other mortality indicators whose past and future evolution in Spain we are going to study. These indicators are applied to Spanish mortality data for the period 1981–2008, for the age range 0–99. To study its future evolution, the mortality ratios have to be projected using an adequate methodology, namely, the Lee-Carter model. Confidence intervals for these predictions can be calculated using the methodology that Lee and Carter apply in their original article for expected lifetime confidence intervals, but they take into account only the error in the prediction of the mortality index obtained from the ARIMA model adjusted to its temporal series, excluding other sources of error such as that introduced by estimations of the other parameters in the model. That is why bootstrap procedures are preferred, permitting the combination of all sources of uncertainty.     

Factors influencing the decision to hire contract labour by Indian manufacturing firms

ABSTRACT

Over a third of workers employed in the Indian formal manufacturing sector are ‘contract’ workers – hired through the services of labour contractors, facing lower wages and no job security in relation to regular workers. We investigate the role of a variety of factors that influence the decision of employers to hire in contract workers, using information from a specially commissioned survey of manufacturing firms. While there are immediate cost advantages that tilt firms towards hiring in contract labour, a counterforce has employers favouring regular workers in firms that have a large proportion of their workforce concentrating on production activity – probably instances where long-term human capital investment by regular workers is important for the firm.

Abbreviation: CLA: Contract Labour (Regulation and Abolition) Act, 1970 ASI: Annual Survey of Industries NIC: National Industrial Classification MSME: Micro, Small and Medium Enterprises SEZ: Special Economic Zone ICRIER: Indian Council for Research on International Economic Relations     

Strategy-proof and individually rational social choice functions for public good economies: A note

Summary. Serizawa [3] characterized the set of strategy-proof, individually rational, no exploitative, and non-bossy social choice functions in economies with pure public goods. He left an open question whether non-bossiness is necessary for his characterization. We will prove that non-bossiness is implied by the other three axioms in his characterization. Received: October 17, 1997; revised version: January 19, 1998