On the Role of Futures Trading in Spot Market Fluctuations: Perpetrator of Volatility or Victim of Regret?

We examine the role of index futures trading in spot market volatility. We use the exponential generalized autoregressive conditional heteroskedasticity (EGARCH) approach to measure volatility, analyze causality and feedback relations between volatilities in the spot and futures markets, and test various hypotheses in the context of a multivariate model that incorporates other macrostate variables. Our empirical results suggest index futures trading may not be blamed for the observed volatility in the spot market. Rather, we find stronger and more consistent support for the alternative posture that volatility in the futures market is an outgrowth of a turbulent cash market. We use the regret (cognitive dissonance) theory to explain our results.     

Human capital,investment and growth: Some results from an endogenous growth model

Recent theoretical literature on the sources of economic growth has emphasized the role of human capital as an internal contributing force in the growth process. Empirical results reported in this paper provide support for this theoretical proposition. Cross-country data from 32 developing countries indicate that human capital (as alternatively measured by the primary school enrollment rate or the adult literacy rate) exerts a significant positive impact upon output growth.     

Intraday volume and volatility relations with and without public news

This paper reexamines the dynamic relation between intraday trading volume and return volatility of large and small NYSE stocks in two partitioned samples, with and without identifiable public news. We argue that the sequential information arrival hypothesis (SIAH) can be tested only in periods containing public news. After partitioning the sample into periods with and without public news, we find bi-directional Granger-causality between volume and volatility in the presence of public information as hypothesized by the SIAH. Our analysis further suggests that return volatility is higher in the periods with public news, while trading volume is significantly higher in the no-news period; perhaps owing to the importance of private information for trading stocks. Using the sample without public news, we find evidence that volume Granger-causes volatility without feedback. These results are broadly consistent with behavioral models like the overconfidence and biased self-attribution model of [Daniel, K., Hirshleifer, D., Subrahmanyam, A., 1998. Investor psychology and security market under- and over-reactions. Journal of Finance 53, 1839–1885]. It appears that overconfident investors overrate the precision of their private news signals and therefore trade too aggressively in the absence of public news; when public news arrives, investors’ biased self-attribution triggers excessive return volatility.     

The monetarist versus the neo-Keynesian views on inflation: Some Italian evidence

This empirical inquiry investigates the relative merits of the monetarist and the neo-Keynesian hypotheses regarding the behavior of inflation in the Italian economy over the 1955–1983 period. Based on testing three alternative dynamic models that have been proposed in the literature, the empirical results support the monetarist proposition that unemployment has an insignificant impact upon inflation, a finding that is at odds with the neo-Keynesian hypothesis. Indeed, consistent with the monetarist hypothesis, the results suggest that the rate of monetary expansion is a prime determinant of the rate of inflation and its acceleration in Italy.     

Consumption-based CAPM models: International evidence

We examine the performance of several types of the consumption-based CAPM (C-CAPM) models to explore if consumption factors matter for determining excess returns across 17 MSCI country indexes. While the classic world C-CAPM does exhibit some power in explaining cross-sectional variations of expected excess returns, the model seems to require an implausibly large coefficient of risk aversion. The more sophisticated models including the heterogeneous C-CAPM, the world surplus consumption and the habit-formation models provide more reasonable estimates and add substantial explanatory power for the variation in the cross section of excess stock returns. Our results suggest that country-specific consumption risk is not fully diversified thus implying that stock returns are related to idiosyncratic consumption risk.     

TESTING ALTERNATIVE VIEWS OF GOVERNMENT BUDGETING

We develop three competing models of government budgeting: (1) a rational model, in which government services are provided in accordance with consumer tastes, (2) a Friedman-type model, in which spending and borrowing decisions derive from the level of taxes, and (3) a Buchanan public-choice type model, in which the extent of deficit spending determines government spending plans. We use quarterly U.S. data over the period 1947 to 1987 to empirically test each of these models within a vector autoregressive framework, taking into account the potential role of other relevant macro variables. We first specify the testing framework utilizing data on the levels of government revenue, spending and deficit, and show that the resulting estimates are unrealistic. We then divide each of these variables into anticipated and unanticipated components. The results thus obtained reject the Buchanan-type models, but are unable to reject either a Friedman-type model or a “weak” form of the rational model. Our results suggest that future research should concentrate on developing appropriate tests capable of distinguishing between these two models of the government budgeting process.     

The Interplay of Emotion Regulation and Sales Experience in Salesperson Conflicts: Evidence from an Emerging Economy

ABSTRACT

It is human nature that personal interactions are often charged with emotions and laden with conflicts. Workplace encounters are not immune from this reality. Despite this, few studies have examined ways to reduce interpersonal conflict in the workplace. This study examines the interpersonal impact of emotion regulation on salesperson relationships with stakeholders. Using structural equation modeling, results of the analysis showed that salesperson's regulation of emotions was negatively related to interpersonal conflict with co-workers as well as with customers; and positively impacted customer-oriented sales behaviors. The results also support the moderating role of selling experience in the relationship between emotion regulation and interpersonal conflict with customers. That is, the negative relationship between regulation and conflict with customers is stronger for salespeople with lower sales experience. These findings put forward important managerial implications with regard to the recruitment and training of sales professionals.     

The monetary explanation of inflation: The experience of three major OPEC economies

The purpose of this paper is to analyze and to test empirically the monetary explanation of inflation in the case of the moderate inflationary experience of three major OPEC economies over the last two decades. The estimated model takes into account the underlying money demand relationship and pays careful attention to the model's lag specifications. The empirical results show that the monetary model of inflation adequately explains the inflationary process in each of the countries studied. These empirical results, furthermore, are econometrically valid insofar as they are not plagued with significant simultaneous-equation bias. In addition, the estimated equations are also found to exhibit structural stability over time.     

The impact of fiscal policy under rational expectations: Some tests

The purpose of this paper is to explore empirically for Canada the implication of the Macro Rational Expectations (MRE) hypothesis that only unanticipated fiscal policy matters for real economic activity. The empirical results generated over the quarterly period 19601 to 1982iv do not reject the MRE hypothesis for Canada. These results, therefore, cast doubts on the appropriateness of using systematic fiscal policy to stabilize the real economy in Canada.