FORWARD RISK PREMIA AND THE MATURITY OF CONTRACTS: A NOTE

This paper examines the behavior of the risk premium component of currency forward rates. Analyzing forward rates of one, two and three-month maturity, we find that the power of forward rate as a predictor of future spot rate decreases with the length of contract maturity. Further, we find that the proportion of the variance of the forward premium which is due to the variation of the risk premium is larger than the proportion due to the expected spot rate change for all currencies except for the Canadian dollar. This proportion also increases with the length of maturity.     

Effect of public programs on family size,child education and health

"A bulk of public resources in developing countries is devoted to the subvention of population control and health investments. The effects of these programs have been evaluated in this study with household and community data from Bangladesh. The results suggest that subsidy on family planning and secondary school would be most effective in the achievement of harmonious goals of reducing fertility and mortality and fostering investments in child education."     

Continuous Stochastic Games of Capital Accumulation with Convex Transitions

We consider a discounted stochastic game of common-property capital accumulation with nonsymmetric players, bounded one-period extraction capacities, and a transition law satisfying a general strong convexity condition. We show that the infinite-horizon problem has a Markov-stationary (subgame-perfect) equilibrium and that every finite-horizon truncation has auniqueMarkovian equilibrium, both in consumption functions which arecontinuous and nondecreasingand have all slopes bounded above by 1. Unlike previous results in strategic dynamic models, these properties are reminiscent of the corresponding optimal growth model.Journal of Economic LiteratureClassification Codes: C73, O41, Q20.     

On strategic complementarity conditions in Bertrand oligopoly

Summary. For Bertrand duopoly with linear costs, we establish via a single (counter-)example that: (i) A new monotone transformation of the firms' profit functions may lead to the supermodularity of transformed profits when the standard log and identity transformations both fail to do so, and (ii) Topkis's notion of critical sufficient condition for monotonicity of a Bertrand firm's best-reply correspondence cannot be extended to rely only on positive unit costs. Received: January 16, 2001; revised version: March 20, 2002 RID="*" ID="*" This work was completed while the first author was visiting the Institute for Industrial Economics at the University of Copenhagen during Spring 2000. Their financial support and stimulating research environment are gratefully acknowledged. The views expressed here are those of the authors and should not be attributed to the European Commission. Correspondence to: R. Amir     

Human capital and earnings distribution dynamics

Earnings heterogeneity plays a crucial role in modern macroeconomics. We document that mean earnings and measures of earnings dispersion and skewness all increase in US data over most of the working life-cycle for a typical cohort as the cohort ages. We show that (i) a human capital model can replicate these properties from the right distribution of initial human capital and learning ability, (ii) differences in learning ability are essential to produce an increase in earnings dispersion over the life cycle and (iii) differences in learning ability account for the bulk of the variation in the present value of earnings across agents. These findings emphasize the need to further understand the role and origins of initial conditions.     

Destination image,on-site experience and behavioural intentions: path analytic validation of a marketing model on domestic tourists

Despite its contribution to the national economy, domestic tourism is one of the most neglected and under-researched forms of tourism in the literature. This study tested an integrated path model examining the interrelationships between destination image, perceived quality, satisfaction and behavioural intentions, using domestic tourists who visited Eilat, Israel. The findings support the hierarchical relationships between image, quality, satisfaction and behavioural intentions. In addition, the affective image component was found to exert a far greater impact on the overall destination image than the cognitive component. The study establishes a better understanding of domestic tourists’ destination image and behavioural intention formulation. It also provides a number of implications for destination managers targeting the voluminous domestic segment.     

Minimising emergency response time of ambulances through pre-positioning in Dhaka city,Bangladesh

This study conducted a large-scale survey in Dhaka, Bangladesh; the survey involved 95 major hospitals, more than 3000 emergency room patients, and 2 of the largest ambulance operators. Currently, most ambulances are parked within the vicinity of hospitals and are either dispatched or fetched by the acquaintances of the patient on demand, resulting in lengthy round trips. Reducing the response time of ambulances would certainly improve the emergency service, and pre-positioning of the ambulances could be a solution to reducing the response time. This study used two approaches to address the problem. First, the location-allocation problem was solved to find the optimal number of ambulance locations by maximising the demand coverage. Second, separate location-allocation for the peak and off-peaks, using K-means clustering, was applied to systematically optimise the ambulance positioning in small clusters near demand points. These approaches could substantially improve the existing emergency response time. Distributing ambulances near demand points yielded greater improvements in response time than when the ambulances are stationed near hospitals.     

Conditional Persistence of Earnings Components and Accounting Anomalies

We suggest that the failure of investors to distinguish between an earnings component's autocorrelation coefficient (unconditional persistence) and the marginal contribution of that component's persistence to the persistence of earnings (conditional persistence) provides a partial explanation of post‐earnings‐announcement drift, post‐revenue‐announcement drift, and the accrual anomaly. When the conditional persistence of revenue surprises is high (low) relative to its unconditional persistence, both the post‐earnings‐announcement drift and the post‐revenue‐announcement drift are high (low), because investors’ under‐reaction to revenues and earnings is stronger when the persistence of revenue surprises is more strongly associated with the persistence of earnings surprises. Also, the mispricing of accruals decreases substantially when the conditional persistence of accruals is high relative to its unconditional persistence, because investors’ over‐reaction to accruals is mitigated when the persistence of accruals is indeed more strongly associated with the persistence of earnings. Our findings also suggest that financial analysts’ failure to distinguish between unconditional and conditional persistence of revenues and accruals results in more biased revenue and earnings predictions.     

Free Trade versus Autarky under Asymmetric Cournot Oligopoly

The paper compares free trade with autarky in an asymmetric multi‐country world under Cournot competition with constant returns to scale and linear demand. We derive respective conditions under which free trade will hurt a country's consumers, benefit its firms, induce it to export, increase its output and raise its welfare. We show that these conditions are linked in a clear order, with one implying the next. We further demonstrate that free trade can reduce world total output and total consumer surplus as well as world welfare. Along the way, we correct several oversights in the literature.     

Market Risk Disclosures and Investment Efficiency: International Evidence from the Gulf Cooperation Council Financial Firms

This study examines the association between market risk disclosures (MRDs) and the investment efficiency of financial firms from six emerging markets in the Gulf Cooperation Council (GCC) region. Based on a sample of 553 firm‐year observations over the 2007–2011 period, we find that MRDs are significantly and negatively associated with both under‐investment and over‐investment and that this association is more pronounced for larger firms. We also find that the association between MRDs and under‐investment is moderated during periods of economic distress such as the Global Financial Crisis of 2008 and that the association between MRDs and over‐investment is magnified during periods of reduced financial distress. Our results are consistent with the idea that MRDs reduce information asymmetry, which ultimately improves investment efficiency. We contribute to the literature in an emerging market context by providing empirical evidence on the association between MRDs and investment efficiency across six emerging GCC capital markets. This study also fills a gap in the literature by providing evidence on the factors affecting the investment efficiency of financial firms.