Signaling safety

Contrary to signaling models’ central predictions, changes in the level of cash flows do not empirically follow changes in dividends. We use the Campbell (1991) decomposition to construct cash-flow and discount-rate news from returns and find the following: (1) both dividend changes and repurchase announcements signal changes in cash-flow volatility (in opposite directions); (2) larger cash-flow volatility changes come with larger announcement returns; and (3) neither discount-rate news, nor the level of cash-flow news, nor total stock return volatility change following dividend changes. We conclude cash-flow news—and not discount-rate news—drive payout policy, and payout policy conveys information about future cash-flow volatility.     

Internationalization choices and Italian firm performance during the crisis

We focus on the relationship between internationalization choices and performance of Italian firms during the first period of the financial crisis (2007–2010). Making use of a new firm-level database, we build a six-class taxonomy of firms’ internationalization activities; then we estimate firms’ performance as a function of internationalization forms, also estimating propensity score and Heckman selection models in order to control for endogeneity and sample selection bias. Over the period 2007–2010, Italian firms moved (on average) towards more complex forms of internationalization. Empirical analysis finds that these upward changes are related with positive effects on firms’ (labour) productivity, also in a period characterized by the 2009 trade collapse. These findings put additional emphasis on the issue of the diversification of both products and markets as a goal to be pursued by firms, even in times of crisis, to remain competitive and make profits.     

Forecasting With the Standardized Self‐Perturbed Kalman Filter

We propose and study the finite‐sample properties of a modified version of the self‐perturbed Kalman filter of Park and Jun (Electronics Letters 1992; 28 : 558–559) for the online estimation of models subject to parameter instability. The perturbation term in the updating equation of the state covariance matrix is weighted by the estimate of the measurement error variance. This avoids the calibration of a design parameter as the perturbation term is scaled by the amount of uncertainty in the data. It is shown by Monte Carlo simulations that this perturbation method is associated with a good tracking of the dynamics of the parameters compared to other online algorithms and to classical and Bayesian methods. The standardized self‐perturbed Kalman filter is adopted to forecast the equity premium on the S&P 500 index under several model specifications, and determines the extent to which realized variance can be used to predict excess returns. Copyright © 2016 John Wiley & Sons, Ltd.     

Why do Graffiti Writers Write on Murals? The Birth,Life, and Slow Death of Freeway Murals in Los Angeles

For three decades graffiti writers have marked the Olympic Festival freeway murals painted in celebration of the 1984 Olympic Games in Los Angeles (LA). These high‐profile murals, which once symbolized LA's status as the ‘Mural Capital of the World', became palimpsests on which graffiti writers painted their monikers, perhaps unwittingly contributing to their eventual destruction. Local government, muralists and residents have bemoaned the murals' slow death, though have not been able to identify or understand the motives for such vandalism, interpreting it as ‘mindless', ‘animalistic' vandalism perpetrated by ‘kids' who simply lack respect. I argue that the burial of these murals under layers of paint must be understood in the context of competing claims made to public space. Relying on rare personal interviews with the graffiti writers who participated in their destruction, I answer the question ‘Why do graffiti writers write on murals?', while situating the birth and life of the Olympic murals within a larger historical discussion about Chicano/a mural making, urbanization, freeway construction, and the growth of the graffiti subculture in the United States' paradigmatic global city.     

Project Finance Collateralised Debt Obligations: an Empirical Analysis of Spread Determinants

Credit rating is the most important variable in determining tranche spread at issue on collateralised debt obligations (CDOs) issues backed by project finance (PF) loans. Factors that are important for pricing in the case of corporate bonds, such as market liquidity and weighted average maturity, are also relevant for determining spreads for these securities. Furthermore, the nature of the underlying assets has a substantial impact on CDO pricing: Primary market spread is significantly higher when the underlying PF loans bear a higher level of market risk and when the proportion of projects still under construction in the securitised portfolio is larger.     

Adam Smith on Relations of Subordination, Personal Incentives and the Division of Labour

In elaborating his stadial approach to economic and social progress, Smith placed special emphasis on the evolution of the conceptual pair authority/subordination. The aim of this paper is to analyse the reciprocal relations which link together the evolution of the relations of subordination, personal incentives, and the division of labour with special reference to the agricultural and the commercial stages. In the former case, Smith pointed out the exclusive role performed by personal incentives in increasing labour productivity, a role which is consistent with his manifest preference for the figure of the 'independent small-scale proprietor'. In the latter case we note a change of emphasis due both to the pervasive role of the division of labour in increasing labour productivity, and—as a by-product of this change—to the emergence of a new form of relation of subordination. In this new context the division of labour engenders a new form of property polarisation, one connected no longer to land but to capital accumulation. Moreover, because of its harmful effects on the mental capacity of manufacturing workers, the division of labour appears to act as an obstacle against social mobility, and this in turn further reinforces the process of property polarisation.