Worker separations in a nonstationary corporate environment

Assessing ten years of unique personnel data from a large firm, this paper investigates how determinants of worker turnover differ between periods of corporate expansion and decline. Performance and career progress considerably reduce the hazard of job separation during downsizing for blue-collar workers, but are less important for white-collar workers. Effects of firm-tenure, occupation, education, training, part-time status, and gender are largely in accordance with the implications from existing models. But no model generates all patterns observed in the data. Age effects are sensitive to retirement options and discontinuous, dropping in response to the anticipation of becoming eligible for early retirement during downsizing and jumping at the actual retirement age.     

Cities under stress

This paper studies the effect of terrorist attacks on the internal structure of cities. We develop an urban framework with capital structures suitable for the study of this question and analyze the long and short term implications of this type of events. In the long run, the analysis shows that a terrorist attack will affect urban structure only modestly, relative to the potentially large decrease in the level of economic activity in the city. Land rents will not decline at all locations. In the short run, agglomeration forces will amplify the effect of the original destruction and will reduce urban economic activity temporarily.     

LIQUIDITY AND ASSET PRICING UNDER THE THREE‐MOMENT CAPM PARADIGM

We examine whether the use of the three‐moment capital asset pricing model can account for liquidity risk. We also make a comparative analysis of a four‐factor model based on Fama–French and Pástor–Stambaugh factors versus a model based solely on stock characteristics. Our findings suggest that neither of the models captures the liquidity premium nor do stock characteristics serve as proxies for liquidity. We also find that sensitivities of stock return to fluctuations in market liquidity do not subsume the effect of characteristic liquidity. Furthermore, our empirical findings are robust to differences in market microstructure or trading protocols between NYSE/AMEX and NASDAQ.     

Technical Efficiency Estimates of Scottish Agriculture: A Note

Within the UK there has been a lack of studies of technical efficiency at the Scottish level. This note compares the results obtained using Scottish data with a recent study by Hadley [Journal of Agricultural Economics (2006) Vol. 57, pp. 81–100] for English and Welsh farms. Four major sectors are investigated, namely: (i) cereals, (ii) dairy, (iii) sheep and (iv) beef over the period 1989 to 2004. Some distinct differences in efficiencies, returns to scale and causes of efficiency are found.     

Separating microstructure noise from volatility

There are two variance components embedded in the returns constructed using high frequency asset prices: the time-varying variance of the unobservable efficient returns that would prevail in a frictionless economy and the variance of the equally unobservable microstructure noise. Using sample moments of high frequency return data recorded at different frequencies, we provide a simple and robust technique to identify both variance components.     

GLAMOUR VERSUS VALUE: TRADING BEHAVIOR OF INSTITUTIONS AND INDIVIDUAL INVESTORS

We design a new metric to measure the net buying and selling by institutions and individual investors and find that from 1980 to 2004 institutional investors were net buyers of growth stocks and net sellers of value stocks, implying that individual investors were net buyers of value stocks and net sellers of glamour stocks. The institutional preference for glamour and value stocks seems to be related to sell‐side analysts' recommendations and recent favorable stock price performances, especially during the post‐1994 period. Finally, the institutional buying of growth stocks and sale of value stocks was not based on superior information.     

Time Series Concepts for Conditional Distributions*

The paper asks the question – as time series analysis moves from consideration of conditional mean values and variances to unconditional distributions, do some of the familiar concepts devised for the first two moments continue to be helpful in the more general area? Most seem to generalize fairly easy, such as the concepts of breaks, seasonality, trends and regime switching. Forecasting is more difficult, as forecasts become distributions, as do forecast errors. Persistence can be defined and also common factors by using the idea of a copula. Aggregation is more difficult but causality and controllability can be defined. The study of the time series of quantiles becomes more relevant.     

Non‐linear Predictability of UK Stock Market Returns*

Linear predictability of stock market returns has been widely reported. However, recently developed theoretical research has suggested that due to the interaction of noise and arbitrage traders, stock returns are inherently non‐linear, whereby market dynamics differ between small and large returns. This paper examines whether an exponential smooth transition threshold model, which is capable of capturing this non‐linear behaviour, can provide a better characterization of UK stock market returns than either a linear model or an alternate non‐linear model. The results of both in‐sample and out‐of‐sample specification tests support the exponential smooth transition threshold model and hence the belief that investor behaviour does differ between large and small returns.     

Endogenous timing in trade policy games: Should governments use countervailing duties?

Endogenous Timing in Trade Policy Games: Should Governments Use Countervailing Duties? - Trade policy under oligopoly is analysed in two multistage games with endogenous timing of trade policy. At the beginning of the games, the domestic and foreign governments choose whether to set trade policy at stage one or two. It is shown that in the subgame perfect equilibrium of both games, the domestic government will set its tariff (and production subsidy) at stage one and the foreign government its export subsidy at stage two. The domestic country commits not to use a countervailing duty in both games, and both countries are better off than when they set trade policy simultaneously.     

Nonlinear Drift And Stochastic Volatility: An Empirical Investigation Of Short-Term Interest Rate Models

In this article I provide new evidence on the role of nonlinear drift and stochastic volatility in interest rate modeling. I compare various model specifications for the short‐term interest rate using the data from five countries. I find that modeling the stochastic volatility in the short rate is far more important than specifying the shape of the drift function. The empirical support for nonlinear drift is weak with or without the stochastic volatility factor. Although a linear drift stochastic volatility model fits the international data well, I find that the level effect differs across countries.