Cointegration and control: Assessing the impact of events using time series data

Control groups can provide counterfactual evidence for assessing the impact of an event or policy change on a target variable. We argue that fitting a multivariate time series model offers potential gains over a direct comparison between the target and a weighted average of controls. More importantly, it highlights the assumptions underlying methods such as difference in differences and synthetic control, suggesting ways to test these assumptions. Gains from simple and transparent time series models are analysed using examples from the literature, including the California smoking law of 1989 and German reunification. We argue that selecting controls using a time series strategy is preferable to existing data‐driven regression methods.     

Understanding the trend to mobile-only internet connections:A decomposition analysis

A growing portion of internet users rely solely on mobile devices such as smartphones for their online access. The percentage of “mobile-only” households increased from 9% in 2011 to 20% in 2015, more than doubling in only four years. As this shift continues, it leads to the question of what factors are driving the rise in mobile-only adoption. Using nationally representative data, this study uses logistic regressions and a decomposition technique to understand the trend. The decomposition reveals that a significant portion (65%) of the growth was due to an increase in the download speeds of mobile networks. An increased acceptance of mobile-only access by households aged 55 and older was also partly responsible. Understanding (and developing a response to) the trend towards mobile-only adoption will be important as organizations and governments continue to work to close the digital divide.     

Reconciling Alternative Theories for the Safety of Owner–Operators

Motor carrier safety is an important concern of shippers, carriers, policy makers, consignees, insurance providers, and the motoring public. One aspect of carrier safety that has garnered substantial attention is whether carriers making greater use of owner–operators are more or less safe vis‐à‐vis carriers making greater use of employee drivers. Currently, conflicting theoretical predictions exist regarding the direction of this relationship. In this article, we offer a reconciliation of the alternative theoretical predictions by developing a coherent theory that merges sociological rational choice theory and theory regarding motor carrier safety. We subject our theory to empirical testing by fitting a series of seemingly unrelated regression models to a vector of safety measures tracked as part of the Federal Motor Carrier Safety Administration's Compliance, Safety, and Accountability program. Our results are consistent with our proposed theory of owner—operator safety and provide meaningful theoretical and managerial implications and directions for future research.     

Institutional Investors' Preferences for REIT Stocks

This article investigates the determinants of real estate investment trusts (REIT) portfolio investment and institutional REIT ownership using multivariate Tobit regressions. We contend that many institutional investors take larger positions in more liquid assets like REIT stocks, as compared with private real estate equities, because of liquidity considerations. Consistent with this contention, we find that liquidity constraints are significantly related to REIT portfolio investment by institutional investors. We also find that institutional investors have different preferences for REIT stocks than do other investors; they generally prefer larger, more liquid REIT stocks.     

Consumer Demand For Butter, Margarine and Blends: The Role of Purchase and Household Characteristics

A U.S. household panel is used to estimate a model of household purchases of butter, margarine and butter/margarine blends. The econometric model accounts for the discrete purchase decisions process and the censored nature of disaggregated commodity demand. Observed market prices are "quality" adjusted for the three commodities investigated based on household and purchase characteristics. Over 90% of the reaction to a price change is found to occur with respect to the decision whether or not to consume.     

Part–Time Work During Post–Compulsory Education And Examination Performance: Help Or Hindrance?

This paper examines the effects on examination performance of having a part–time job whilst in full–time post–sixteen education, using new data on young people in Northern Ireland. Around 35% engaged in part time employment during their education spell, compared to over 60% found by recent GB studies. This may be related to Northern Ireland's comparatively slack youth labour market and might reflect part–time employment levels in other peripheral regions. Our estimations suggest working part–time per se is not detrimental to examination performance, although working long hours is. Policy makers might improve educational performance by reducing incentives to work long hours.     

Exchange rate exposure and foreign exchange derivatives: do ineffective hedgers modify future derivatives use?

Recent studies examining the relationship between stock returns and exchange rate changes have provided evidence that the exchange rate exposure of non-financial companies is reduced by the use of foreign exchange derivatives. Building on such research, this study investigates whether past ineffective derivative hedging contributes to explaining future derivatives use. To the extent that companies monitor the effectiveness of their currency risk management practices, past ineffective hedgers can be expected to modify their future use of foreign exchange derivatives accordingly. In our study of 94 non-financial US multinationals, we provide evidence that the change in derivatives use from 1996–1998 to 1998–2000 can be explained in part by the ineffective hedging of currency risk in 1996–1998, controlling for variables associated with theories of optimal hedging. Additional analyses confirm that such primary results are robust to firm size, the level of foreign operations, and the use of derivatives to partially hedge currency risk. Our results imply that as exchange markets and risk management practices change, the use of derivatives to manage exchange rate risk also changes. Our contribution to this field of study is that we find evidence that past ineffective hedgers tend to increase their future use of FXDs.     

TRANSFERABLE STOCK OPTIONS (TSOS) AND THE COMING REVOLUTION IN EQUITY-BASED PAY

The dominant form of equity pay in the U.S. will change dramatically when accounting rules are changed (most likely in 2005) to require companies to charge the cost of their stock option plans on their income statements. Many companies are already switching from stock options to other forms of equity pay, especially restricted stock. The most notable switcher was Microsoft, the world's largest user of stock option pay. In July 2003, partnering with J.P. Morgan, Microsoft created a onetime transferable stock option (TSO) program that allowed holders of underwater Microsoft options to sell their options to J.P. Morgan in return for restricted shares.
But the most important consequence of this transaction may not be a widespread shift by corporate America to restricted shares, but rather the creation of a more costeffective kind of stock option. By clearing the potentially messy hurdles involving taxes, accounting, SEC rules, and "transaction mechanics," Microsoft has opened the door for TSOs to be considered as an ongoing equitypay instrument, perhaps replacing standard stock options (which are not transferable). TSOs share the key advantages of restricted stock in terms of providing robust retention and ownership incentives and higher valuecost efficiency, while maintaining the key "leverage" advantage of options. In so doing, they create significant upside (and downside) while largely avoiding the "pay for pulse" problem of restricted stock. They also introduce the discipline of competitive pricing by third-party bidders. The bid prices of investment banks create nearly all of the information required for accurate estimates of option cost, which should foster greater board accountability and improved corporate governance.     

Price Commitment versus Flexibility: the Role of Exchange Rate Uncertainty and its Implications for Exchange Rate Passthrough

The paper investigates the incentives to commit price or retain price flexibility in a model in which exporting firms face different degrees of exchange rate uncertainty. The result shows that introducing exchange rate uncertainty can lead to the endogenous emergence of a unique leader–follower equilibrium; which firm emerges as price leader depends on the substitutability of products, the magnitude of exchange rate uncertainty, and the cost structure. This study may provide one explanation as to why some exporters set price before the realization of the nominal exchange rates (“sticky price”). The results imply exchange rate variability affects exchange rate passthrough.     

Building Small City and Town Sams and CGE Models

In this paper we attempt to describe both the data sources and organizational methods that allow for effective and easily created SAMs and regional computable general equilibrium (CGE) models. Small cities of around 100,000 people will face very different constraints than a town of 2000 people. Unfortunately, most CGE models typically describe relatively large geographical areas and are therefore not able to capture the uniqueness of individual cities within the region. An illustrative example using these methods demonstrates that the economic impacts vary substantially over different municipalities to the same economic shock.