When age does not harm innovative behavior and perceptions of competence: Testing interdepartmental collaboration as a social buffer

Can older managers overcome stereotypes relating age to low competence? We integrate the literature on age and cognitive ability with research on innovation to explore whether—and if so, when—employees' age harms performance and promotability appraisals made by their supervisors. Multisource, time‐lag data from 305 project managers indicate that the negative stereotypes can be explained through decreased innovative behavior. However, older employees are not always seen as poorer performers with less potential to be promoted due to their reduced innovative behavior. Rather, interdepartmental collaboration moderates these effects. Specifically, older employees with low interdepartmental collaboration are less innovative and receive worse performance and promotability appraisals than younger employees, but the “age handicap” vanishes when older employees collaborate with members of other departments. Organizations should foster formal or informal collaboration among units to prevent negative consequences of an aging workforce.     

Do Foreign Firms Transfer Gender Norms in the Labour Market? Evidence from Sub-Saharan Africa

Closing the gender gaps in economic opportunities is crucial for boosting economic growth and the empowerment of women. In this paper, we study how foreign firms contribute in reducing gender disparities in the labour market by transferring the gender norms of their country of origin to the affiliates in the host countries. We use cross sectional data on foreign firms located in 19 Sub Saharan Africa countries in 2010 by UNIDO. We find that firms coming from more gender equal countries employ more female workers in their affiliates. This effect is more relevant for the highly skilled female workers.     

Determinants of Current Account Imbalances in 16 OECD Countries: An Out-Of-Sample Perspective

We employ panel data as well as country-specific models to uncover empirically the determinants of current account imbalances. We find evidence of slope heterogeneity likely rendering the fixed-effect estimator inconsistent. Mean group estimation is followed to overcome the latter difficulty. Both estimation techniques are evaluated by means of in- and out-of-sample criteria. The mean group estimator outperforms the fixed-effect approach and, moreover, only three economic variables are found to impact on the current account balance significantly. These are the government budget balance, the domestic output gap and the changes of the terms of trade. We finally propose a parsimonious dynamic model of the current account, including only these variables and illustrate that it has similar predictive accuracy as country-specific benchmark models. JEL no. F32, C23, C53     

The Price of Options Illiquidity

The purpose of this paper is to examine the effect of illiquidity on the value of currency options. We use a unique dataset that allows us to explore this issue in special circumstances where options are issued by a central bank and are not traded prior to maturity. The value of these options is compared to similar options traded on the exchange. We find that the nontradable options are priced about 21 percent less than the exchange-traded options. This gap cannot be arbitraged away due to transactions costs and the risk that the exchange rate will change during the bidding process.     

Semiparametric and nonparametric testing for long memory: A Monte Carlo study

The finite sample properties of three semiparametric estimators, several versions of the modified rescaled range, MRR, and three versions of the GHURST estimator are investigated. Their power and size for testing for long memory under short-run effects, joint short and long-run effects, heteroscedasticity andt-distributions are given using Monte Carlo methods. The MRR with the Bartlett window is generally robust with the disadvantage of a relatively small power. The trimmed Whittle likelihood has high power in general and is robust except for large short-run effects. The tests are applied to changes in exchange rate series (daily data) of 6 major countries. The hypothesis of no fractional integration is rejected for none of the series.     

Job Creation and Job Destruction in a Regulated Labor Market: The Case of Austria

We study Austrian job reallocation in the period of 1978 to 1998, using a large administrative dataset where we correct for spurious entries and exits of firms. We find that on average 9 out of 100 randomly selected jobs were created within the last year, and that about 9 out of randomly selected 100 jobs were destroyed within the next year. Hence, the magnitude of Austrian job flows seems to be comparable to other countries, similar to the well-known results of Davis et al. (1996) for the United States. Job reallocation appears to be driven primarily by idiosyncratic shocks. However, job creation increases significantly during cyclical upswings whereas job destruction rises in downturns. We also find substantial persistence of job creation and destruction. The pronounced pattern of job reallocation rates falling with firm size and age continues to hold when we use a set of controls. Finally, we show that – controlling for sector and firm size composition – Austrian job reallocation rates are only half the rates for the U.S. This result is not surprising given the impact of tighter regulation and labor law in Austria.     

How to invest over the life cycle: Insights from theory

We analyse the state of the art in the field of life cycle portfolio choice, a recent strand of the literature on intertemporal portfolio selection. Life cycle models are designed to identify optimal savings and portfolio policies over the lifetime of investors. They can help to improve pension schemes by showing how these could be specifically tailored to the individual employee’s circumstances to overcome the ‘one-size-fits-all’ philosophy still prevailing in parts of the mandatory retirement savings system. To facilitate comparison, we first describe set-up, solution method and characteristic results for a basic model and then derive a general framework to classify existing contributions. We highlight the models’ strengths and weaknesses and assess their ability to resolve existing portfolio puzzles. Lessons from the literature are summarized and promising areas for further research identified. JEL classifications G11, D14, D91, H55     

Pension Reform, Capital Markets and the Rate of Return

Abstract. This paper discusses the consequences of population aging and a fundamental pension reform – that is, a shift towards more pre‐funding – for capital markets in Germany. We use a stylized closed‐economy, overlapping‐generations model to compare the effects of the recent German pension reform with those of a more decisive reform that would freeze the current pay‐as‐you‐go contribution rate and thus result in a larger funded component of the pension system. We predict rates of return to capital under both reform scenarios over a long horizon, taking demographic projections as given. Our main finding is that the future decrease in the rate of return is much smaller than often claimed in the public debate. Our simulations show that the capital stock will decrease once the baby‐boom generations enter retirement, even if there were no fundamental pension reform. The corresponding decrease in the rate of return, the direct effect of population aging, is around 0.7 percentage points. While the capital market effects of the recent German pension reform are marginal, the rate of return to capital would decrease by an additional 0.5 percentage points under the more decisive reform proposal.     

Return and risk in initial public offerings of both shares and warrants

In the past few years there has been an increasing number of new issues of shares of common stock together with warrants intended to raise interest in initial public offerings of relatively young, growing firms. In this study we examine the pricing efficiency of stocks and warrants offered simultaneously to the public as a single unit. We present a model for evaluating the warrants in such offerings and test it empirically against data from the Tel-Aviv Stock Exchange, where such offerings have become standard. We find that the issued units are usually undervalued, allowing for significant abnormal positive returns. But, while the warrants are usually underpriced, the stocks are overpriced. Largely consistent with the evidence from other financial markets around the world, we also find abnormal negative rates of return in the long run.     

Measuring the effect of watch-preceded and direct rating changes: a note on credit markets

This paper analyzes the importance of distinguishing between watch-preceded and direct rating changes for the credit default swap (CDS) market by examining a total of 2991 rating change announcements, 1526 watchlist placement announcements, and 430 rating affirmations following watchlist placements. The results show that watch-preceded downgrades do not lead to significant CDS market reactions, while direct downgrades are associated with a significant increase in CDS spread levels. Likewise, we document that watchlist placements for downgrade lead to increases in firms’ CDS spreads. CDS markets do not react to rating upgrades but watchlist placements for upgrade result in an immediate decrease in CDS spreads. Rating affirmations following watchlist placements for downgrade lead to slight reductions in CDS spreads, while affirmations following watchlist placements for upgrade have no effect on CDS spreads. These findings demonstrate the importance for empirical research on the interaction between credit markets and rating announcements to differentiate between watch-preceded and direct rating changes, particularly for rating downgrades.