Back to basics: The Comanor–Wilson MES index revisited

The present article attempts to investigate the validity of the Comanor–Wilson Minimum Efficient Size (MES) measure. The basic assumption is that firms that have exhausted scale economies are in non-increasing returns to scale. The same firms are also assumed to have a size greater than MES estimated on sales (total turnover), employment or fixed assets. Data Envelopment Analysis (DEA) is used, on a sample of firms in three Greek manufacturing industries, to classify firms in operation according to increasing or non-increasing returns to scale. On the basis of the results of the DEA input oriented model, the MES measure correctly predicts over 85% of the cases. A probit model is applied to those cases that are not identically predicted by MES concerning returns to scale. Results indicate that technical efficiency, size and age are the factors that compel MES to yield the same prediction as the DEA approach.

Efficiency and productivity growth in the banking industry of Central and Eastern Europe

We employ the directional technology distance function and provide estimates of bank efficiency and productivity change across Central and Eastern European (CEE) countries and across banks with different ownership status for the period 1998–2003. Our results demonstrate the strong links of competition and concentration with bank efficiency. They also show that productivity for the whole region initially declined but has improved more recently with further progress on institutional and structural reforms. Input-biased technical change has been consistently positive throughout the entire period suggesting that the reforms have induced favorable changes in relative input prices and input mix. However we find evidence of diverging trends in productivity growth patterns across banking industries and that foreign banks outperform domestic private and state-owned banks both in terms of efficiency and productivity gains. Overall, we find that productivity change in CEE is driven by technological change rather than efficiency change.     

Evaluation of technological and socio-economic issues affecting the deployment of home networks: evidence from the ICT-OMEGA project

Home networks (HNs) are rapidly becoming the next battlefield for various telecom carriers and companies. The European project ICT-OMEGA seeks to enable the convergence of the diverse wireless and wireline technologies at the Medium Access Control (MAC) layer. In such a world of converging, heterogeneous HN technologies, system designers needs to take into account several technical, economic and social aspects that will effect the development and the rate of adoption of HNs by the general public. Careful roadmapping is required to ensure a smooth transition from existing to the next generation HN systems. The objective of this paper is to provide an evaluation of the key technological and socio-economic issues, which may affect the deployment of HNs. Within the OMEGA project, such issues are addressed using surveys conducted by the project experts, designed based on the Analytic Hierarchy Process (AHP). In this paper, the results of the surveys, conducted using pairwise comparison (which is an important ingredient of AHP) are presented. Several critical aspects are identified and their importance is weighted. The conclusions drawn are important for the overall roadmapping effort of future HN technologies.     

Estimating diffusion and price elasticity with application to telecommunications

This paper aims to propose a new framework for estimating and forecasting diffusion of high technology products, along with the construction of a price index. Into that context, the “diffusion–price” model is presented, as an innovative concept providing a long term estimation of both price and diffusion elasticity. This corresponds to the bidirectional estimation of the mutual influence of the product’s price over its expected diffusion and vice versa. The discrete parts of the methodology are the use of a diffusion model for the initial estimation of diffusion, the construction of a price index function for estimating the pricing mechanism and, finally, the construction of the “diffusion–price” model for estimating and adjusting the diffusion level and price quantities. The case studies examined, whose solution was based on genetic algorithms, revealed remarkable results which can be used for business strategies development, as the pricing policy is able to make diffusion diverge substantially from the initial estimates. The case studies considered correspond to the ADSL technology diffusion in the wider European area.     

European common stochastic long-run trends

The paper examines convergence on the European level by using production functions which include capital and labor as factors of production. The methodology is based on principal-components analysis of common trends appropriate for heterogeneous panels. Using data for the 1960–1997 period and alternative specifications, it is found that convergence can be decisively rejected, although the number of common trends is relatively low (about four or five).     

A jump diffusion model for VIX volatility options and futures

Volatility indices are becoming increasingly popular as a measure of market uncertainty and as a new asset class for developing derivative instruments. Although jumps are widely considered as a salient feature of volatility, their implications for pricing volatility options and futures are not yet fully understood. This paper provides evidence indicating that the time series behaviour of the VIX index is well approximated by a mean reverting logarithmic diffusion with jumps. This process is capable of capturing stylized facts of VIX dynamics such as fast mean-reversion at higher levels, level effects of volatility and large upward movements during times of market stress. Based on the empirical results, we provide closed-form valuation models for European options written on the spot and forward VIX, respectively.     

Minority shareholders’ wealth effects and stock market development: Evidence from increase-in-ownership M&As

This paper examines, using a global M&A data set, the relationship between the target firm’s minority shareholders’ returns and a country’s stock market development in deals in which large shareholders increase their ownership stakes. For the purpose of this study, we use two measures of stock market development: (1) turnover over GDP, and (2) turnover over market capitalization. We provide evidence supporting the view that minority shareholders in target firms gain significantly more in countries with high stock market development than their counterparts in less-developed markets. Our results are robust to several firm and deal characteristics and provide evidence to policy makers that the degree of stock market development is a key determinant in improving minority shareholders’ welfare.     

Further insights on the relationship between SP500, VIX and volume: a new asymmetric causality test1

In the aim to explore the complex relationships between S&P500, VIX and volume we introduce a Granger causality test using the nonlinear statistic of Asymmetric Partial Transfer Entropy (APTE). Through a simulation exercise, it arises that the APTE offers precise information on the nature of the connectivity. Our empirical findings concretize the information flow that links volume, S&P500 and VIX, and merge the leverage effect and the asymmetric stock return-volume relationship into a unified framework of analysis. More specifically, when we condition on the tails, the detected causal channel provides empirical validation of the noise trading contribution to large swings in financial markets, because of the increase of trading volume and the subsequent worsening ability of market prices to adjust to new information.     

Inflation Transmission in Greater China

This paper examines inflation dynamics in Greater China. Using an asymmetric error correction model, we investigate how inflation in Hong Kong and Macao are related to inflation in Chinese Mainland. Our results based on data from July 1997 to December 2012 reveal that a long‐term equilibrium relation exists between inflation in Chinese Mainland and inflation in both Hong Kong and Macao, the two Special Administrative Regions of China. The degree of inflation pass‐through is higher for Macao than for Hong Kong. Moreover, we find no evidence of asymmetries in either Hong Kong and Macao's adjustment speeds towards long‐run equilibrium or in the short‐run pass‐through of accelerating or decelerating inflation in the Mainland. Collectively, our results show a close relationship among price dynamics of the three economies and call for a reconsideration of the exchange rate anchor in the Greater China Region.