The value of columnists’ stock recommendations: an event study approach

This study examines the value of stock recommendations made by columnists in three leading business magazines; Business Week, Forbes, and Fortune during the period 2000–2003. Empirical results suggest that the anomalous returns documented in prior studies on columnists are sample specific and are not representative of columnist recommendations in general. We also investigate whether columnists’ timing, content and style affect the market reaction to recommendations. We find that recommendations that contain references to management or provide merger & acquisition related rumor trigger significantly greater market reactions. Finally, our long-term performance analysis of columnist recommendations suggests that investors following columnists’ advice during the 2000–2003 period would not have consistently earned abnormal returns controlling for market risk, book-to-market, size, and momentum effects.     

Value of knowledge—Technology strategies in different knowledge regimes

This paper introduces a knowledge-based view of the firm, which enables us to analyze how the firm should build up its technology strategies in order to capture profits from knowledge assets through knowledge creation, replication, integration and transfer. The basic idea is to shed light on the mechanisms that make it possible, first, to create value from knowledge assets, second, to protect the value created by using different protection mechanisms (such as legal means or tacitness) and, third, to share the value created between the innovator, imitators and partners (open innovation model). In our model we derive technology strategies based on different knowledge bases and their characteristics. By means of our simulation experiments we open up some black boxes behind technology strategies that are often launched only as empirical generalizations, such as Freeman’s famous technology strategy typology. Our tool can also be used as a framework when the dynamic effects of technology strategies are traced and empirically scrutinized.     

Innovation type and external knowledge search strategies in KIBS: evidence from Canada

Service Business - Do different types of innovation require distinct kinds of external knowledge search strategies? This paper explores this question using an original innovation survey of 385 KIBS...     

Early warning systems for currency crises: The Turkish case

Different severe financial crises episodes occurred in the Turkish economy in the last two decades. These crises led to severe economic and social consequences for Turkey in terms of increasing interest rates, large reserves losses, considerable currency depreciations, high output losses and high unemployment rates. This paper aims to illustrate the essential determinants of these crises by developing a multivariate logit model which estimates the predictive ability of sixteen economic and financial indicators in a sample that covers the period from January 1990 to December 2008. The empirical findings show that the Turkish crises are mainly due to excessive fiscal deficits, high money supply growths, sharp rises in short-term external debt, growing riskiness of the banking system (in particular currency and liquidity mismatches), and external adverse shocks.     

Integrating competing conceptions of risk: A call for future direction of research

The goal of this paper is to propose a theoretical framework that integrates between what has been traditionally presented in the risk literature as two opposing perspectives: the positivist‐probabilistic and the contextualist. Acknowledging the differences between the two, we argue that a reconciliation of both could deepen and expand our understanding of risk, enlarge the scope and utilization of research methodologies, and bridge the gap between lay people's and experts' conceptions of risk. This line of thinking reflects a dialectical approach in suggesting integration (‘synthesis’), while acknowledging the existence of differences and oppositions (‘antitheses’). In 1986, Bruner's conceptualization of two irreducible, and at the same time, possibly integrated modes of thought can serve as a promising direction for researching risk. We further suggest how this line of thinking can be integrated utilizing the mixed‐method design in the study of risk. We claim that the positivist‐probabilistic and contextualist perspectives represent two different approaches to understanding and studying risk, and that any attempt to reduce or ignore one at the expense of the other would result in a limited understanding of the phenomenon.     

The Federal Reserve’s balance sheet and overnight interest rates: Empirical modeling of exit strategies

This paper provides a comprehensive study of the interplay between the Federal Reserve’s balance sheet and overnight interest rates. We model both the supply of and the demand for excess reserves. Treating outright securities holdings of the Federal Reserve as a policy tool, we estimate the effects of unconventional monetary policy on overnight funding rates. Further, we offer the first empirical assessment of the FOMC’s principles of the exit strategy. Assuming a path for removing monetary policy accommodation that is consistent with the FOMC’s exit principles, we project that the federal funds rate increases to 70 basis points by 2016, settling in a corridor bracketed by the discount rate and the interest rate on excess reserves, as excess reserves of depository institutions decline to near zero.     

Budget deficits and interest rates: a fresh perspective

We extend the literature on budget deficits and interest rates in three ways: we examine both advanced and emerging economies and for the first time a large emerging market panel; explore interactions to explain some of the heterogeneity in the literature; and apply system Generalized Method of Moments (GMM). There is overall a highly significant positive effect of budget deficits on interest rates, but the effect depends on interaction terms and is only significant under one of the several conditions: deficits are high, mostly domestically financed, or interact with high domestic debt; financial openness is low; interest rates are liberalized; or financial depth is low.     

Survey of recent developments

The president reconstituted his cabinet in early December, focusing primarily on the economic team. The highly experienced Boediono was appointed as Coordinating Minister for Economic Affairs, while Sri Mulyani Indrawati was promoted from chair of the planning agency to become Minister of Finance. The former economics coordinating minister, Aburizal Bakrie, was made Coordinating Minister for Social Affairs—out of the economic limelight, but still with considerable influence. These changes overall have been well received by the markets, as indicated by a considerable strengthening of the rupiah.

The challenges facing the new cabinet remain immense, however. On a range of macroeconomic variables, performance has fallen well short of the government's targets. Output growth declined to just 4.9% p.a. in the December quarter from 6.5% a year earlier. Investment growth has fallen to a very low level, giving rise to concern about the creation of job opportunities. In a booming global economy, exports grew by only 7.4% in the four quarters to December, despite Indonesia's wealth of natural resources. The inflation rate doubled from September to October to almost 18% p.a., although subsequent price increases have been much slower.

The president's anti-corruption campaign continues to generate much attention. The number of corruption cases involving government officials and state enterprise managers brought to the courts continues to increase. Some high-profile cases have resulted in convictions, but others have not. The campaign seems likely also to be extended to judicial reforms, which are clearly crucial, but one urgent issue yet to be tackled directly is the widespread suspicion that funding of major political parties derives largely from abuse of power by government officials.

Numerous floods and landslides early in 2006 resulted in deaths, injuries and considerable physical damage. The frequency of such natural disasters has risen significantly over time, suggesting that governments at all levels need to develop mechanisms to manage them and implement policies to mitigate or prevent them.

Reconstruction progress in Aceh and Nias during 2005 was disappointingly slow. The reconstruction authority predicts dramatic improvement in 2006, but there appears to be a need to clarify the relationships among its three components, and to make some adjustments to its master plan, particularly in relation to land use planning. A reallocation of available funds among major activities, better coordination of implementing organisations, and a rethinking of conflicts between the authority's roles as implementation agency and coordinating agency may all be needed if the ambitious and urgent targets are to be met.     

Regulation, market structure and service trade liberalization

In this paper, we develop a theoretical method to quantify the importance of regulation and market structure on the success of service trade liberalization. For this purpose, we incorporate a single imperfectly competitive service sector that can take on various market structures into a standard computational general equilibrium model. We apply our framework to analyze the impact of partial telecom liberalization in Tunisia. We show that if the regulatory environment guarantees competition, Tunisia's welfare can improve up to 0.65%. If a cartel is formed between the domestic incumbent and foreign entrant, however, Tunisia's welfare can drop up to 0.25%. Our results thus call for Tunisia among other developing countries to step up its pro-competitive regulatory reforms while liberalizing its telecom sector.