The effect of mergers on implied volatility of equity options

This paper uses a sample of 25 large mergers from 1996 to 2004 to study the effect of mergers on the implied volatilities of equity options. The results indicate a statistically significant increase in volatility beyond the amount predicted if the transaction were effectively nothing more than a portfolio combination of the target and acquirer. The disparity suggests that, at least for the first 18 months after the transaction becomes effective, market participants expect mergers to increase risk. Integration risk and uncertainty about the extent to which efficiency gains and greater market power are realized are possible explanations for the discrepancy.     

Facing Adversity: Authentic Stories of Living and Working with Panic Attacks

This paper presents stories of adversity, as voiced by those that live and work with panic attacks. Respondents of this exploratory, phenomenological study, conducted in Sydney, Australia, shared their experiences of living and working with panic attacks. Two themes (and five sub-themes) of their reported lived experiences are presented here, including: A Changed Life (including sub-themes of: a seismic shift; a creeping change, and not knowing); and, Being Alone (with sub-themes of: withdrawing from the world; and professional non-support). Amidst their experiences of panic-related adversity, the 18 respondents reported trying to maintain—often without success—their working lives and selves. The often profound implications for employees working with panic are discussed, including the urgent need for further research.     

Internet versus bricks-and-mortar retailers: An investigation into intangibility and its consequences

Intangibility has long been studied as a unidimensional construct with the focus being placed upon the physical element. This paper explores the effects of three unique intangibility dimensions on a consumer's ability to evaluate goods and services, and the perceived risk (PR) associated with the transaction. The authors examine these relationships in purchase environments that include both traditional bricks-and-mortar retailers and the Internet. Their investigation further incorporates prior knowledge as a moderating factor into the proposed framework. This allows for a thorough comparison of the effects and relationships that exist between intangibility and its consequences in general, evaluation difficulty (ED) and perceived risk (PR) in particular. The authors develop hypotheses pertaining to the proposed model and test them with two experiments. The empirical results are broadly supportive of the hypotheses. Theoretical and managerial implications to the services marketing literature are discussed.     

The German model of employee relations on trial: negotiated and unilaterally imposed change in multi‐national companies

This article investigates the effects of negotiated and unilaterally imposed change on employee relations in the German subsidiaries of a Finnish and a German multi‐national company (MNC). We look at how the strategies affect the sustainability of the current German model of employee relations and highlight some of the disadvantages of this model for global MNCs.     

Factor price equalization: a cointegration approach

Factor Price Equalization: A Cointegration Approach. — Previous studies of factor price equalization have generated mixed results. It is argued that the limited success often results from the fact that labor cost time series are nonstationary, and hence traditional OLS models are misspecified. In this paper, the cointegration approach is utilized to test for the existence of a long-run relationship between factor prices. It is shown that indices of labor cost per unit of manufacturing output for six major industrialized nations are indeed cointegrated. These results support the hypothesis that factor prices possess a long-run equilibrium relationship.     

Deposit Insurance, Capital Adequacy Requirements and Interest Rate Dynamics

This paper examines the long run interaction among deposit insurance, bank deposit rates and capital adequacy requirements. Using analysis similar to the price discrimination model of Lott and Roberts (1991) we find that a competitive environment among banks would link the spread between insured and uninsured deposit rates to the size of the insurance premium. We also find that banks that choose to operate at the regulatory minimum capital level, would increase asset risk with increased capital requirements if (1) the implicit interest paid to insured and uninsured depositors is equally sensitive to changes in risk and capital adequacy and (2) the insurance premium is independent of the level of risk and capital adequacy. Under the present risk-based premium structure, asset risk has the potential to decline when the regulatory agency raises capital requirements. Finally, we examine the time series behavior of insured and uninsured interest rates to see if it is consistent with our theoretical model. We find that insured and uninsured rates, along with deposit insurance premiums, are cointegrated series as suggested by our model.     

Long-Run Diversification Potential in Emerging Stock Markets

In this paper we use cointegration tests to examine the long-run diversification potential of 13 emerging capital markets. The Johansen [18] and Johansen and Juselius [19] cointegration procedures are applied to the U.S. and 13 emerging capital markets in three geographical regions of the world. None of the three regions examined possesses cointegrated markets. The lack of cointegration indicates that the correlation between returns from each market is independent of the investment horizon Return correlations using weekly data correspond to the long-run investment horizon correlation. Correlations among the returns from these countries are low on average and occasionally negative. The apparent independence of markets within these three emerging regions suggests that diversification across these countries is effective.     

An analysis of the importance of S&;P 500 discretionary constituent changes

The main purpose of this paper is to investigate the impact of the S&P 500 index committee’s decisions to change the constituent firms in the index on benchmark risk measures. The index is managed and changed discretionally by the index committee to make it as representative of the market condition as possible. In addition, the index constantly changes due to important corporate events such as bankruptcies, mergers and acquisitions, and spin-offs. We reconstruct market portfolios by retaining all discretionally deleted firms in a 3 and 5 year periods. We estimate betas at every deletion date in terms of reconstructed market portfolios; we found that these estimate betas are significantly different from the betas obtained from the constantly updated S&P 500 portfolio. We also found that such portfolios are less representative of the business cycle than the actual S&P 500 portfolio. Finally, we found that the portfolio returns obtained by retaining all discretionally deleted firms deviate significantly from the returns of the actual S&P 500 index over the studied period, October 1989 to December 2007.     

The Effects of Competition on Variation in the Quality and Cost of Medical Care

We estimate the effects of hospital competition on the level of and the variation in quality of care and hospital expenditures for elderly Medicare beneficiaries with heart attack. We compare competition's effects on more-severely ill patients, whom we assume value quality more highly, to the effects on less-severely ill, low-valuation patients. We find that low-valuation patients in competitive markets receive less intensive treatment than in uncompetitive markets, but have statistically similar health outcomes. In contrast, high-valuation patients in competitive markets receive more intensive treatment than in uncompetitive markets, and have significantly better health outcomes. Because this competition-induced increase in variation in expenditures is, on net, expenditure-decreasing and outcome-beneficial, we conclude that it is welfare-enhancing. These findings are inconsistent with conventional models of vertical differentiation, although they can be accommodated by more recent models.