The Effect of Market Regimes on Style Allocation

We analyse time-varying risk premia and the implications for portfolio choice. Using Markov Chain Monte Carlo (MCMC) methods, we estimate a multivariate regime-switching model for the Carhart (1997) four-factor model. We find two clearly separable regimes with different mean returns, volatilities, and correlations. In the High-Variance Regime, only value stocks deliver a good performance, whereas in the Low-Variance Regime, the market portfolio and momentum stocks promise high returns. Regime-switching induces investors to change their portfolio style over time depending on the investment horizon, the risk aversion, and the prevailing regime. Value investing seems to be a rational strategy in the High-Variance Regime, momentum investing in the Low-Variance Regime. An empirical out-of-sample backtest indicates that this switching strategy can be profitable, but the overall forecasting ability for the regime-switching model seems to be weak compared to the iid model.     

Community supported agriculture membership: The benefits of spousal involvement

Fresh vegetables originating from alternative food networks (AFNs) are an increasingly popular choice all over the world. Being part of an AFN frequently redefines consumption and participation of family members in food‐related activities. Community Supported Agriculture (CSA) is a type of AFN, providing increased access to produce in a form of risk‐sharing model between farmers and consumers, which at the same time influences organization of household resources. Thus, not only the given member of a CSA, but also his/her spousal activities in household processes should be taken in account. It is clear that entering into CSA significantly affects lifestyles and frequently requires a great deal of adaptation, possibly leading to a crisis of whether to stay within the CSA or cease membership. The objective of this study was to reveal how spouses influence CSA membership. Using an explorative design, this study has identified three emerging patterns of spousal influence: coherent, integrative and neutral/antagonistic. The spousal influence on CSA membership may represent partner activities regarding food issues but also has an effect on food preparation and culinary choices at home. Our findings suggest that membership in CSA presents challenges and thus spousal support is crucial in the long term. As a consequence, spousal influence should be examined in relation to CSA participation. Inconveniences associated with CSA membership could be avoided by providing more information about the importance of spousal support.     

Simulation-based pricing of convertible bonds

We propose and empirically investigate a pricing model for convertible bonds based on Monte Carlo simulation. The method uses parametric representations of the early exercise decisions and consists of two stages. Pricing convertible bonds with the proposed Monte Carlo approach allows us to better capture both the dynamics of the underlying state variables and the rich set of real-world convertible bond specifications. Furthermore, using the simulation model proposed, we present an empirical pricing study of the US market, using 32 convertible bonds and 69 months of daily market prices. Our results do not confirm the evidence of previous studies that market prices of convertible bonds are on average lower than prices generated by a theoretical model. Similarly, our study is not supportive of a strong positive relationship between moneyness and mean pricing error, as argued in the literature.     

Injuries,inequalities and health in Europe

Injuries account for a significant burden of mortality, morbidity, disability and health care costs. They differentially affect age and sex groups and reveal massive inequalities in occurrence within and between countries in Europe. Within countries, the poor suffer most and have least ability to change their exposures to risk. Addressing inequalities in injury occurrence would play a valuable role in reducing the differential burden of ill-health between rich and poor. Despite the evidence for many effective injury-related interventions, limited attention has been devoted to addressing injuries as a public health priority. This paper questions why attention has been limited to date and suggests policy action to support injuries being addressed as a mainstream concern by national and international health policy-makers. The paper briefly highlights the public health burden of injuries and violence; illustrates the range of inequalities that characterise their occurrence; highlights the scope for public health action and considers the extent to which policies that reduce the overall burden of injuries may also reduce inequalities in their occurrence; and finally examines why there has been a limited policy response to date and suggests ways of advancing the agenda.     

Do Newspaper Articles Predict Aggregate Stock Returns?

We analyze whether newspaper content can predict aggregate future stock returns. Our study is based on articles published in the Handelsblatt, a leading German financial newspaper, from July 1989 to March 2011. We summarize newspaper content in a systematic way by constructing word-count indices for a large number of words. Word-count indices are instantly available and potentially valuable financial indicators. Our main finding is that newspaper articles have provided information valuable for predicting future DAX returns in and out of sample. We find evidence that the predictive power of newspaper content has increased over time, particularly since 2000. Our results suggest that a cluster analysis approach increases the predictive power of newspaper articles substantially.     

The Significance of the New Venture's First Sale: The Impact of Founders' Capabilities and Proactive Sales Orientation

Initial sale success in the market with a new product is a critical milestone for a new venture. Failure at the introduction stage of a new product could have lethal consequences for the venture. In the present study, the authors investigate the role of a new venture company's first successful sale in the venture's future commercial success. The authors develop and test a model of the impact of the founders' entrepreneurial and commercial capabilities and proactive sales orientation on the significance of the first sale and sales growth of a new venture. Using survey data and partial least squares estimation, the results reveal that the founders' commercial capabilities have a positive effect on proactive sales orientation, while their entrepreneurial capabilities positively moderate the effect of commercial capabilities. Further, the results reveal that a proactive sales orientation positively affects the significance of the first sale and that value‐based selling approach positively moderates the effect of proactive sales orientation. Finally, the results reveal that the significance of the first sale is positively related to sales growth. Thus, the authors conclude that combining the founders' commercial and entrepreneurial capabilities strengthens proactive sales orientation and that, in turn, a proactive sales orientation particularly increases the significance of the first sale when new venture companies practice value‐based selling. Research has convincingly demonstrated proactive selling behavior to be one of the most powerful predictors of sales performance. Value‐based selling is a sales approach to identify, quantify, communicate, and verify value of a new product to the customer. Our findings suggest that founders who possess both strong commercial and entrepreneurial capabilities engage considerably more in proactive sales practice as compared with founders that only possess strong commercial capabilities. Hence, rather than hiring specific sales expertise, founders should develop their proactive, value‐selling capabilities.     

Relating ultrasonic vocalizations from a pair of rats to individual behavior: A composite link model approach

Ultrasonic vocalizations (USVs) are crucial in the social behavior of rats. We aim to relate USV rates of pairs of rats to individual activity in an automated home cage (PhenoTyper®) where USVs are recorded per pair and not per individual. We propose a composite link model approach to parametrize a mechanistic “sum‐of‐rates” model in which the pair's USV rate is the sum of the USV rates of individuals depending on their own behavior. In generalized linear models (GLMs), the individual's USV rates are multiplied. We verified through simulation that composite link model gave lower Poisson deviance than GLM. We analyzed the data from an experiment in which half of the cages did allow the pairs to interact (Pair Housing) and the other half did not (Individual Housing). The “sum‐of‐rates” model fits best for Individual Housing and GLM for Pair Housing. An additional simulation study strongly suggests that interaction between rats changes the underlying mechanism for vocalization behavior.