Market microstructure effects on volatility at the TAIFEX

This study examines whether changes in the frequency of market clearing or changes in trading hours on competing exchanges that use different auction systems affect the volatility of futures prices. In particular, this study exploits a natural experiment in the frequency of market clearing of stock index futures contracts traded on the Taiwan Futures Exchange (TAIFEX) to assess whether successive increases in the frequency of market clearing are associated with changes in the volatility of futures prices. The impact of changes in the trading hours on the TAIFEX and on the competing Singapore Exchange (SGX) where a similar Taiwanese stock index futures contract trades under a continuous auction market regime is also examined. The evidence for the impact of an increase in the frequency of market clearing on volatility is mixed. However, the introduction of simultaneous opening times for the TAIFEX (which batches orders at the open) and the SGX (which does not) is associated with a significant reduction in the volatility in SGX Taiwanese stock index futures prices. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:1219–1243, 2007     

The Ability to Minimize the Timing of New Product Development and Introduction: An Examination of Antecedent Factors in the North American Automobile Supplier Industry

The importance of overall timing in the new product development and the new product commercialization processes has been widely recognized in the literature. We examined 14 firm-level practices, later reduced to four factors, that influence the ability to minimize new product development and introduction times overall relative to competitors. The factors are (1) human resource management, (2) synergistic integration, (3) supplier closeness, and (4) the design-manufacturing interface. An empirical study of the North American automobile supplier industry found some support for the four-factor model of antecedents to timing ability: synergistic integration and supplier closeness were both significantly related to development and introduction time minimization ability. The implications of these findings for product development managers and academic researchers are discussed.     

A bias in the volatility smile

We show that even if options traded with Black–Scholes–Merton pricing under a known and constant volatility, meaning essentially in perfect markets, one would still obtain smiles, skews, and smirks. We detect this problem by pricing options with a known volatility and reverse engineering to back into the implied volatility from the model price that was derived from the assumed volatility. The returned volatilities follow distinctive patterns resulting from algorithmic choices of the user and the quotation unit of the option. In particular, the common practice of penny pricing on option exchanges results in a significant loss of accuracy in implied volatility. For the most common scenarios faced in practice, the problem primarily exists in short-term options, but it manifests for virtually all cases of moneyness of at least 10 % and often 5 %. While it is theoretically possible to almost eliminate the problem, practical limitations in trading prevent any realistic chance of avoiding this error. It is even more difficult to identify and control the problem when smiles also arise from market imperfections, as is widely accepted. We empirically estimate a very conservative lower bound of the effect at about 16 % of the observed smile for 30-day options. Thus, we document a previously unknown phenomenon that a portion of the volatility smile is not of an economic nature. We provide some best-practice recommendations, including the explicit specification of the algorithmic choices and a warning against using off-the-shelf routines.     

Contingency relationships of firm size,TQM duration,unionization, and industry context on TQM implementation—A focus on total effects

Past TQM literature has been inconclusive in resolving the validity of the universalistic approach versus the contingency approach of TQM implementation. In this paper we contribute to the resolution of this debate by using a total effects approach within the contingency perspective. We propose a culture-quality system design-outcomes framework for TQM implementation. We then use this framework to study the differences in total effects relationships among TQM constructs across four contingencies, firm size, TQM duration, unionization, and industry type. Data from a sample of 394 plants (SIC codes 20 through 39) are used to test the validity of our contingency model. Our results revealed that firm size, TQM duration, and industry type moderate the influence of total effects of culture (top management commitment, customer focus, and trust) on final outcomes (process quality, product quality, and customer satisfaction). These contingencies also moderate the influence of total effects of quality system design (design management, training, empowerment, quality information usage, supplier quality management, and process quality management) on final outcomes. The strongest contributor to variation in total effects across groups was industry type, followed by size and then TQM duration. To a lesser extent, unionization was a moderator in total effects relationships. These findings uniquely contribute to the emerging contingency theory of TQM implementation.     

Burden,pattern and outcomes of road traffic injuries in a rural district of India

Road traffic injuries (RTIs) are a leading public health problem and the understanding of RTIs in rural India is limited. The present report documents the burden, pattern, characteristics and outcomes of RTIs in a rural district of India using combined data sources: police and hospital. RTIs contributed for 38% of fatal and 39% of non-fatal injuries with an annual mortality rate of 18.1/100,000 population/year. Young males were affected most and two-wheeler users and pedestrians were involved in 45% and 20% of fatal crashes, respectively. Nearly half (51%) of fatal RTIs occurred on national highways of the district; 46% died immediately at the site. Among those hospitalised, 20% were under the influence of alcohol while use of helmets and seat belts was <5%. Trauma care was deficient in the district leading to greater number of referrals. Road safety should be given high importance in rural India with a focus on safe roads, safe vehicles and safe people along with trauma care.     

Managing innovation in an emerging sector: the case of marine-based nutraceuticals

Biotechnology is turning a traditionally low-tech industry (food) into a high-tech industry (functional food/nutraceuticals). There is a real need to enhance managerial understanding by clarifying the nature of innovation processes in the functional food industry, including the role of research and development (R&D) and collaboration. The present investigation focuses on a particular segment of the functional food industry, viz. marine-based nutraceuticals. We find that various hurdles thwart the fullest realization of the business potential of marine bio-actives in the pharmaceutical space. However, the innovation of commercially viable marine-based nutraceuticals/cosmeceuticals is yet possible if the extraction route for supply is a feasible fallback option, should industrial-scale synthesis prove elusive. Effectiveness in innovation is facilitated by the collaboration of various disciplines including epidemiology, traditional/folkloric medicine, aquaculture/fermentation, natural products chemistry, toxicology, and relevant strands of medical, pharmacological, and clinical research. In this regard, the inter-disciplinary field of ethno-pharmacology rises to prominence. Universities and government research institutes may be well positioned to drive such collaboration and reap the benefits from problem definition in addition to problem solving. Toward this end, the findings from the present study are integrated into a phased approach toward the innovation of commercially viable marine-based nutraceuticals that is targeted at entrepreneurs in this field.     

Survival and Failure of Small Businesses Arising Through Government Privatization: Insights from Two New Zealand Firms*

Redundancies of personnel arising from the corporatization and even subsequent privatization/closure of several federal departments have contributed to the number of small businesses in New Zealand, a phenomenon that will likely be mirrored at least partially as other nations progressively liberalize their economies. Small businesses with such origins would appear to be especially prone to failure in a progressively liberalized trading environment; their precursors in the parent government departments or agencies would have been cocooned from immediate market conditions through budgetary allocations and a lack of competition. However, the scholarly literature on the behaviour of such small businesses is scant. Accordingly, we report the findings from a comparative investigation of two businesses that arose in the wake of the failure/closure of a corporatized federal service agency in New Zealand; one of the two businesses was much more successful than the other. Our major finding is that a small firm with such origins is likely to survive to the extent it avoids becoming complacent and being ‘stuck in the mud’ of the legacy of the failed federal parent. A predictor of such ability is the timing of small business formation: a small business that is formed by members who depart from the dying federal parent organization when the latter's closure is apparent, is more likely to survive than a business whose formation is precipitated by the demise of the federal parent and whose members remain in the parent organization until its formal closure.     

The effects of internal versus external integration practices on time-based performance and overall firm performance

This paper examines the effects of integration practices on time-based performance and on overall firm performance (financial and market share). Integration practices are grouped into two categories: (1) external strategic design integration, which reaches across firm boundaries to involve suppliers and customers and (2) internal design-process integration, which comprises more tactically oriented, integration practices that match design requirements and process capabilities. First, regression results show that both internal and external integration are related to time-based performance, which in turn is related to firm performance. Thus, two indirect routes to firm performance are identified. Second, hierarchical regression reveals that integration directly affects firm performance even after time-based performance is accounted for. Finally, we found that the interaction of internal and external integration is significantly related to both market share and financial performance (after controlling for all other effects). This latter result suggests that the joint use of external and internal integration practices has a synergistic effect on firm performance.     

Time variation in the correlation structure of exchange rates: high‐frequency analyses

The correlation structure of asset returns is a crucial parameter in risk management as well as in theoretical finance. In practice, however, the true correlation structure between the returns of assets can easily become obscured by time variation in the observed correlation structure and in the liquidity of the assets. We employed a time‐stamped high‐frequency data set of exchange rates, namely, the US$–deutsche mark and the US$–yen exchange rates, to calibrate the observed time variation in the correlation structure between their returns. We also documented time variation in the liquidity structure of these rates. We then attempted to link the observed correlations with the liquidity via an application of an illiquid trading model first developed by Scholes and Williams (1976). We show that the observed correlation structure is strongly biased by the liquidity and that it is possible to effect at least a partial rectification of the otherwise downward‐biased observed correlation. The rectified sample correlation is, therefore, more appropriate for input into models used for forecasting, option pricing, and other risk management applications. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:127–144, 2001