Insider employee stock option trading and stock prices

The question of which factors determine corporate bonds pricing is investigated by analysing the spreads of eurobonds issued by major G-10 companies during the 1991–2001 period. Three main results emerge from the analysis. First, bond ratings appear as the most important determinant of yield spreads, with investors’ reliance on rating agencies judgments increasing over time. Second, the primary market efficiency and the expected secondary market liquidity are not relevant explanatory factors of spreads cross-sectional variability. Finally, rating agencies adopt a different, ‘through the cycle’, evaluation criteria of default risk with respect to the forward looking one adopted by bond investors.     

Identification of technological structures using patent statistics

This paper studies the use of patent statistics in identifying four aspects of technological structure, namely, the potential knowledge pool, cumulativeness, inter-firm homogeneity in technology levels, and the scope of innovations. The firms are sampled from the chemical (CHEM), the computer (COM) and the electrical and electronic (EE) industries worldwide. Using the proxies defined, we find that (i) the contributions of intra-industry spillover are low, at 12%, 10%, and 9% for the three industries respectively; (ii) they can internalize 15%, 19% and 13% of their previous research efforts respectively; and (iii) a positive relationship between knowledge spillover and technology overlap, and between scope of innovation and number of patents being cited in future.     

Growth,Industrialization, and the Intergenerational Correlation of Advantage

The shift from feudalism to industrial capitalism was generally accompanied by an increase in social mobility. We ask whether such an increase has occurred in a developing nation currently undergoing rapid industrialization, Indonesia. It has, at least as measured by a declining intergenerational correlation of education. To highlight the effects of economic growth on intergenerational mobility, we contrast Indonesia's experience with that of Bangladesh, where industrialization has proceeded more slowly and the correlation between parents’ and children's education has been roughly stable. We also examine potential causal channels for the rising educational mobility we find in Indonesia, but cannot identify specific pathways related to above‐average school building or rapid industrialization in a region.     

Legitimating Inequality: Fooling Most of the People All of the Time

Over the three decades leading up to the crisis of 2008, inequality dramatically increased in the United States and Great Britain. What stands out, but is seldom noted, is that this occurred within democracies where the relative losers—the overwhelming majority—could in principle have used the political system to block or reverse rising inequality. Why did they not do so? A glance at history reveals that peoples have only very infrequently contested inequality because they were led to believe that their inferior status in terms of income, wealth, and privilege was just, that it was not really so bad, or that it was necessary for their future well‐being. Ideological systems legitimated a status quo of inequality, or in more modern times even increasing inequality. This article surveys the manner in which inequality has been historically legitimated, first predominantly by religion, then predominately by economic thought. Attention is then focused on the manner in which contemporary economic science and its popular interpretations in the media have served to legitimate inequality in the U.S. since the mid‐1970s. The article concludes with a reflection on the unique conditions that enable the legitimation of inequality to be delegitimated.     

United We Vote

This paper studies the advantages that a coalition of agents obtain by forming a voting bloc to pool their votes and cast them all together. We identify the necessary and sufficient conditions for an agent to benefit from the formation of the voting bloc, both if the agent is a member of the bloc and if the agent is not part of the bloc. We also determine whether individual agents prefer to participate in or step out of the bloc, and we find the different optimal internal voting rules that aggregate preferences within the coalition.     

Can We Prove a Bank Guilty of Creating Systemic Risk? A Minority Report

Because increasing a bank's capital requirement to improve the stability of the financial system imposes costs upon the bank, a regulator should ideally be able to prove beyond a reasonable doubt that banks classified as systemically risky really do create systemic risk before subjecting them to this capital punishment. Evaluating the performance of two leading systemic risk models, we show that estimation error alone prevents the reliable identification of the most systemically risky banks. We conclude that it will be a considerable challenge to develop a riskometer that is sound and reliable enough to provide an adequate foundation for macroprudential policy.     

The Early Careers Of Engineers And The Accumulation Of Skills In The Canadian Economy

In this paper we use world cycling records to study the pattern of technological development of the track bicycle. We find that there is a strong evidence of ‘contagious’ effects among cycling records which in turn provides indirect evidence of ‘contagious’ effects among technological innovations. Interestingly, the ‘contagiousness’ of records is not a salient characteristic of track and field competitions where, arguably, technology plays a smaller role.     

Does the digital divide matter? The role of information and communication technology in cross-country level and growth estimates

The bulk of information and communication technology is made of weightless, implementable, and infinitely reproducible knowledge products (such as software and databases). These products are transferred by telephone lines, accessed through internet hosts, and processed through personal computers. In this work, the coefficient of the labour augmenting factor in the aggregate production function has been estimated using proxies of variables crucially affecting the diffusion of (non-rival and almost non-excludable) knowledge products. This specification provides interesting answers to some of the open issues in the existing growth literature. The most recent information, though available for a limited period, shows that telephone lines, personal computers, mobile phones, and internet hosts significantly affect levels and growth of income per worker across countries. The result is robust to changes in sample composition, econometric specification, and estimation approach.     

Volatility forecasts and at-the-money implied volatility: a multi-component ARCH approach and its relation to market models

This article explores the relationships between several forecasts for the volatility built from multi-scale linear ARCH processes, and linear market models for the forward variance. This shows that the structures of the forecast equations are identical, but with different dependencies on the forecast horizon. The process equations for the forward variance are induced by the process equations for an ARCH model, but postulated in a market model. In the ARCH case, they are different from the usual diffusive type. The conceptual differences between both approaches and their implication for volatility forecasts are analysed. The volatility forecast is compared with the realized volatility (the volatility that will occur between date t and t + ΔT), and the implied volatility (corresponding to an at-the-money option with expiry at t + ΔT). For the ARCH forecasts, the parameters are set a priori. An empirical analysis across multiple time horizons ΔT shows that a forecast provided by an I-GARCH(1) process (one time scale) does not capture correctly the dynamics of the realized volatility. An I-GARCH(2) process (two time scales, similar to GARCH(1,1)) is better, while a long-memory LM-ARCH process (multiple time scales) replicates correctly the dynamics of the implied and realized volatilities and delivers consistently good forecasts for the realized volatility.     

GENERIC AND MANUFACTURERS' BRAND GROCERY PRODUCTS: THE ISSUE OF QUALITY*

This paper reports the results of an investigation of taste perceptions and preferences for three generic and three manufacturers' brand grocery products: dry roasted peanuts, apple sauce and powdered orange drink mix. Blind taste tests of a generic and of a manufacturer's brand in each of these product categories were conducted. Respondents evaluated each item in terms of several physical attributes associated with each of the products. In addition, measures of the perceived similarity and of the preference for the items within each of the three product categories were collected. A multi-attribute model was employed to predict respondent's preferences, and the predictive accuracy was found to be quite high. Implications of the findings for consumers and home economists are discussed.