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We present a theoretical methodology for the pricing of catastrophe (CAT) derivatives with event‐dependent and non‐convex payoffs given the price of a CAT indexed futures contract. We do not assume a fully diversifiable CAT event risk, nor do we assume knowledge of the martingale probability measure beyond the futures price. We derive tight bounds on the contract value and present trading strategies exploiting the mispricing whenever the bounds are violated. We estimate the bounds of the reinsurance contract with data from hurricane landings in Florida. Our method is also applicable when there is no futures market but the price of a CAT‐indexed bond is available.

U.S. firms recorded an unprecedented number of asset impairments during the recent financial crisis. We investigate the timing of these losses in the context of two competing views on how firms use discretion over asset impairments. The first view posits that firms record impairments to convey private information as part of their commitment to a conditionally conservative reporting strategy. The second view argues that firms use their discretion to report opportunistically by delaying the recording of bad news. Consistent with the first view, we find that firms recorded timelier asset impairments during the financial crisis if they reported more conservatively in the five years preceding the crisis. Further tests show this relation is greater for firms with strong corporate governance, industry‐specialist auditors, and high leverage, indicating the importance of monitoring mechanisms in determining how firms handle the discretion involved in impairment decisions. We also test for the consequences of timely asset impairments during the financial crisis and find that firms reporting conservatively both before and during the crisis were able to acquire more debt financing, and their publicly traded bonds suffered smaller increases in illiquidity. Collectively, our study highlights the role of asset impairments in firms’ accounting choices over time. This article is protected by copyright. All rights reserved

This study examines whether directors’ and officers’ insurers and lenders effectively monitor securities litigation and respond through pricing before case outcomes are known. By “monitoring,” we refer to tracking case progress and obtaining information from the insured (defendant) firm and its counsel prior to case resolution. We find that insurers and lenders increase rates, and that this effect is almost completely isolated to firms with cases that eventually settle. We confirm that this response is reasonable as settled cases are associated with lower future earnings, while there is generally no relation between future earnings and dismissed cases. As direct costs appear low, our results suggest that most costs are indirect in the form of reputational damage. Overall, our results suggest that researchers and policymakers interested in litigation should focus on settled cases, which are the only cases with material long‐term costs.

We used Medicare administrative data (2002–2009) and an instrumental variables design that exploits the natural experiment created by the implementation of Medicare Part D to estimate the effect of prescription drug coverage insurance on the use and costs of inpatient services. We find that gaining prescription drug insurance through Part D caused approximately a 4 percent decrease in hospital admission rate, a 2–5 percent decrease in Medicare inpatient payments per person, and a 10–15 percent decrease in inpatient charges. Among specific types of admissions, gaining insurance was associated with significant decreases in admissions for CHF and COPD.

The paper examines the value‐generating strategies used in some of New Zealand's primary activities in a rapidly changing trading context in which the countries of East Asia increasingly figure. These strategies range from scaling up volume, with a consequent conspicuous impact on rural landscapes, to innovative value‐enhancing relationships linking producers, processors and consumers in processes which value landscapes for the contribution they make to provenance stories. Our argument is that higher‐value strategies are necessarily more intensely collaborative and involve a pursuit of engaged relationships, especially between onshore producers and manufacturers and consumers at a distance. We term this collaborative form of strategising as ‘the relationships economy’. We illustrate our argument using two case studies, dairying and merino. While there are great differences in scale between them, and dairying focuses significantly on volume‐generating capacity, there are players in dairying who are adopting higher‐value relationships‐based approaches similar to those developed in the merino industry. The common thread connecting the case studies is that of intentional enactment, which echoes earlier periods in New Zealand's trading history when considerable work was undertaken by industry participants to create new markets for primary products.

Manuscript Type Conceptual and empirical. Research Question/Issue Many studies of firm‐level corporate governance rely on aggregate “indices” to measure underlying, unobserved governance. But we are not confident that we know how to build these indices. Often we are unsure both as to what is “good” governance, and how one can proxy for this vague concept using observable measures. We conduct an exploratory analysis of how researchers can address the “construct validity” of firm‐level governance indices, which poses a major challenge to all studies that rely on these indices. Research Findings/Insights We assess the construct validity of governance indices for four major emerging markets (Brazil, India, Korea, and Turkey), developed in prior work. In that work, we built country‐specific indices, using country‐specific governance elements that reflect local norms, institutions, and data availability, and showed that these indices predict firm market value in each country. The use of country‐specific indices puts great stress on the construct validity challenge of assessing how well a governance measure matches the underlying concept. We address here how well these four country‐specific indices, and subindices for aspects of governance such as board structure or disclosure, coherently measure unobserved, underlying actual governance. Theoretical/Academic Implications We provide guidance on how researchers can address the construct validity of corporate governance indices. Practitioner/Policy Implications The uncertain construct validity of most corporate governance indices suggests caution in relying on research using these indices as a basis for firm‐level governance changes, or country‐level legal reforms.

Many people believe that the abortion debate will end when at some point in the future it will be possible for fetuses to develop outside the womb. Ectogenesis, as this technology is called, would make possible to reconcile pro‐life and pro‐choice positions. That is because it is commonly believed that there is no right to the death of the fetus if it can be detached alive and gestated in an artificial womb. Recently Eric Mathison and Jeremy Davis defended this position, by arguing against three common arguments for a right to the death of the fetus. I claim that their arguments are mistaken. I argue that there is a right to the death of the fetus because gestating a fetus in an artificial womb when genetic parents refuse it violates their rights not to become a biological parent, their rights to genetic privacy and their property rights. The right to the death of the fetus, however, is not a woman's right but genetic parents’ collective right which only can be used together.

Literature examining WTO+ commitments in services trade agreements (STAs) has not considered the role of services regulation. We bridge this gap using a sample of 15 South/South‐East Asian countries, given the burgeoning trend of Asian economies towards services preferentialism and the largely WTO+ nature of their preferential services commitments. Our empirical findings suggest that Asian trading dyads with regulatory frameworks that are more similar and more trade restrictive tend to undertake higher levels of WTO+ commitments in their STAs. There is also evidence in our results, including by modes of supply, for WTO+ commitments in Asian STAs being driven by goods trade complementarities, alluding to supply chain dynamics in the region. Such results support the hypothesis that the heightened “servicification” of production generates a demand to lower services input costs arising from regulatory incidence and heterogeneity.

Are blind spots of public debt spikes sizable? And how do they affect financial stress indicators? This paper tackles these questions empirically, using information from 179 episodes of public debt spikes between 1945 and 2014. We find that large public debt spikes are neither driven by high primary deficits nor by output declines but instead by stock‐flow adjustments. These blind spots in debt dynamics are sizable in both advanced economies and emerging markets and could amount to more than 20% of gross domestic product in the median episode. These public debt spikes increase financial stress indicators significantly, in particular when a large share of public debt is held by domestic commercial banks. Enhanced transparency and better debt forecasting tools could help address financial market tensions resulting from blind spots in debt dynamics.

In this paper, we show theoretically and empirically that the US quantitative easing (QE) policy results in lower exchange rate pass‐through into the destination prices of Chinese exporters. In addition, the more the exchange rate in the export destination appreciates than the Chinese yuan, the stronger this effect becomes. Our model combines various marginal effects of QE policy on the destinations of Chinese exporters and variable markups of export firms due to strategic complementarities. The model predicts that the impact of US QE policy on the pass‐through of Chinese exporters depends on its spillover on the exchange rate between China and the export destination of different firms. We provide strong support for the model predictions using Chinese firm‐product‐level data with information on export destinations. The baseline result and the heterogeneity we find in the response of exchange rate pass‐through of Chinese exporters to US QE policy remain robust to alternative measures of samples and controls.

Banking groups exploit double leverage when “debt is issued by the parent company and the proceeds are invested in subsidiaries as equity” (Board of Governors of the Federal Reserve System (2016)). Financial authorities have frequently raised concerns about the issue of double leverage because this type of intra‐firm financing appears to allow for both the arbitrage of capital and the assumption of risk. This article focuses on the relationship between double leverage and risk‐taking within banking groups. First, we discuss this relationship based on an examination of balance sheet figures. Second, we analyse a large sample of United States Bank Holding Companies (BHCs) from 1990–2014. The results show that BHCs are more prone to risk when they increase their double leverage, namely, when the stake of the parent within subsidiaries is larger than the stand‐alone capital of the parent. This paper's primary implication for policymakers is that the regulators of complex financial entities should more efficiently address the issue of double leverage, thereby limiting the potential negative consequences that arise from corporate instability. This article is protected by copyright. All rights reserved

The world capital asset‐pricing model is the benchmark model in international finance. However, recent research finds that the premium on the world market factor is insignificant. In this paper, we investigate if the world market risk premium is particularly significant on US macroeconomic announcement days. Empirically, we apply the methodology to daily country exchange‐traded funds. Our findings suggest that although the world market risk premium is insignificant on nonannouncement days, it is strongly significant on US macroeconomic announcement days. In addition, we find that US monetary policy announcements are the most important macroeconomic announcements to drive the world market risk premium. Our findings are consistent with the notion of monetary policy uncertainty and the empirical literature that connects policy uncertainty with systematic risk.

This paper presents new evidence on the impact of the preferential treatment of owner‐occupied housing in Europe. We find that tax benefits to homeowners reduce the user cost of housing capital by almost 40 percent compared to the efficient level under neutral taxation. On average, the tax subsidy translates into an excess consumption of housing services equivalent to 7.8 percent of the value of owner‐occupied housing, or about 30 percent of financial asset holdings in household portfolios. The bulk of the subsidies stems from under‐taxation of the return to home equity, while the average contribution of the tax rebate for mortgage interest payments is driven down by relatively low loan‐to‐value ratios in the data. However, at the margin, the tax–induced incentive to use mortgage debt to finance the purchase of the main residence is sizable. This article is protected by copyright. All rights reserved

This paper discusses some limitations of discretionary accruals measures. While discretionary accruals are acknowledged to be noisy proxies for earnings management, they are still widely used in the literature. This paper attempts to explain from basic econometrics how discretionary accruals are estimated, and in doing so why they are inappropriate measures for earnings management. It is shown that decisions of peer firms will influence the regression coefficients, and hence residuals, in accruals models, which may lead to false conclusions about earnings management in other firms. This point is emphasized using an artificially constructed firm with no changes in its fundamental performance, and hence no discretion in its accruals. I also note concerns about the inferences, which are commonly not acknowledged in research. Finally, using Accounting and Auditing Enforcement Releases and Enron as examples, I demonstrate how discretionary accruals do not capture what literature often claims.

There is no abstract available for this paper.

In this paper, a panel analysis is employed to investigate the effects of fiscal policies on stock market indexes in 11 members of the Eurozone. Many studies have focused on the effects of monetary policy on the stock market, whereas the number of contributions studying the effects of fiscal policy on the stock market is surprisingly limited. Therefore, we know little, if any, on the sign and stability of the stock market reaction to fiscal policies. Our results show that fiscal policies influence the stock market and that, following an increase (decrease) in public deficit, stock market indexes go down (up). Nevertheless, further analysis shows that the signs of the estimated stock market reactions are not constant over time and that they change according to the surrounding macroeconomic scenario.

This study assesses the performance of the quantitative easing policy implemented by the United States (US) on the stock markets with a framework of structure break. The empirical results show that the business cycle or the value of gross domestic production has a negative impact on the stock markets for most of the countries even if both gross domestic production and many stock prices are procyclical. Moreover, the purchases of US Treasury securities and mortgage‐backed securities respectively affect the stock markets synchronously and laggardly. Notably, they both have a positive impact on the stock markets during the study period. Finally, during the after structure break period, the volatility can be easily affected by bad news, and the investors have the lower profit or even the greater loss and bear the greater risk and variation of risk owing to the global financial crisis caused by the US. On the basis of the above findings, some policy implications are offered in this study.

This paper studies the impact of modelling time‐varying variances of stock returns in terms of risk measurement and extreme risk spillover. Using a general class of regime‐dependent models, we find that volatility can be disaggregated into distinct components: a persistent stable process with low sensitivity to shocks and a high volatility process capturing rather short‐lived rare events. Out‐of‐sample forecasts show that, once regime shifts are accounted for, accuracy is improved compared to the standard generalized autoregressive conditional heteroscedasticity or the historical volatility model. Volatility plays an important role in controlling and monitoring financial risks. Therefore, by means of a risk management application, we illustrate the economic value and the practical implications of risk control ability of the models in terms of value at risk. Finally, tests for predictability in co‐movements in the tails of stock index returns suggest that large losses are strongly correlated, supporting asymmetric transmission processes for financial contagion in the left tail of return distributions, whereas contagion in reverse direction (gains) is weak.

We propose a bargaining model of tax evasion with a seller that offers a price discount to a buyer in exchange for a cash payment without a receipt, which allows tax evasion. We study the effect on evasion and government revenue of two policy instruments: a tax on cash withdrawals (TCW), that imposes a cost on the buyers who pay cash, and a tax rebate conditional on the receipt. The tax rebate reduces evasion but it is costly if tax evasion is low. The TCW reduces evasion only if it is set at a sufficiently high rate, that must be higher the larger is the mass of cash users. We also show that the implementation of the TCW, which poses several challenges, is easier if the cost of cash hoarding is high.

This study investigates the sourcing patterns of Japanese export‐platform foreign affiliates in Mexico, which mainly export to the United States and Canada. We propose a novel approach to estimate intermediate input elasticities of exports by sourcing country. We find that, on average, Japanese export‐platform foreign affiliates in Mexico source intermediate inputs from third countries, including the United States and Canada, rather than from Japan and Mexico, suggesting that Japanese export‐platform foreign affiliates in Mexico are mainly integrated into the vertical production networks back and forth between Mexico, the United States and Canada. In turn, Japanese foreign affiliates selling domestically in Mexico source intermediate inputs not only within the North American Free Trade Agreement countries but also from Japan. In addition, we find that export‐platform foreign affiliates in Mexico use more labour‐intensive production than do foreign affiliates selling domestically in Mexico. This suggests that saving labour costs is one of the motives for export‐platform foreign direct investment in Mexico.

We conduct the most comprehensive empirical analysis that exists to date of the effect multinationality has on the explanatory power of country and industry factors in international diversification. We investigate the impact the size, scope, and location of a company's international sales has on country versus industry factors, analysing 1,276 firms from Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Spain, the UK, and the US over the 15‐year period, 1998–2012. We find that the magnitude of the country factor is greater than the magnitude of the industry factor for the period as a whole but that a company's level of international sales has a greater impact on the magnitude of its industry factor than the magnitude of its country factor. Counter‐intuitively, we find stocks with lower sales exposure to their country of origin have a higher country factor, and we show the existence of both a strong local and international industry factor. Our results suggest country‐of‐origin diversification may no longer be sufficient to exploit country‐specific risk and the country factor has become a “country classification” factor.

Survey under‐coverage of top incomes leads to bias in survey‐based estimates of overall income inequality. Using income tax record data in combination with survey data is a potential approach to address the problem; we consider here the UK's pioneering ‘SPI adjustment’ method that implements this idea. Since 1992, the principal income distribution series (reported annually in Households Below Average Income) has been based on household survey data in which the incomes of a small number of ‘very rich’ individuals are adjusted using information from ‘very rich’ individuals in personal income tax return data. We explain what the procedure involves, reveal the extent to which it addresses survey under‐coverage of top incomes, and show how it affects estimates of overall income inequality. More generally, we assess whether the SPI adjustment is fit for purpose and consider whether variants of it could be employed by other countries. This article is protected by copyright. All rights reserved

A significant part of the global carbon externality stems from the real estate sector. Environmental certification is often hailed as an effective means to resolve the information asymmetry that may prevent markets from effectively pricing the energy performance of buildings. This study analyzes the adoption and financial outcomes of environmentally certified commercial real estate over time. We document that nearly 40 percent of space in the 30 largest U.S. commercial real estate markets holds some kind of environmental certification in 2014, as compared to less than 5 percent in 2005. Tracking the rental growth of 26,212 office buildings, we measure the performance of environmentally certified real estate over time. We document that certified office buildings, on average, have slightly higher rental, occupancy and pricing levels, but do not outperform non‐certified buildings in rental growth over the 2004‐2013 period. Further performance attribution analysis indicates that local climate conditions, local energy prices and the extent of certification lead to significant heterogeneity in market pricing. On aggregate, these findings provide some evidence on the efficiency of the market in the adoption and capitalization of environmental characteristics in the commercial real estate market. This article is protected by copyright. All rights reserved

We study the use of U.S. dollar central bank swap lines as a tool for addressing dislocations in the foreign currency swap market against the USD since the global financial crisis. We find that the use of the Federal Reserve's USD central bank swap lines was mainly related to tensions in U.S. money markets during times of financial crisis, and less to tensions that were confined to foreign exchange swap markets. In particular, we find that the use of USD central bank swap lines did not react significantly to the recent period of persistent deviations of covered interest parity since 2014. These results are consistent with the view that the Federal Reserve was guided by enlightened self‐interest when providing swap lines to foreign central banks, in order to reduce dislocations in U.S. financial markets and support financial stability. In recent years, foreign exchange swap markets have not functioned properly, but it appears that now that the crisis is over, the Federal Reserve and other central banks have decided against trying permanently to fill the gap left by the dysfunction in the commercial foreign exchange swap market.

The asylum system faces problems on two fronts. States undermine it with populist politics, and migrants use it to satisfy their migration preferences. To address these problems, asylum services should be commodified. States should be able to pay other states to provide determination and protection‐elsewhere. In this article, I aim to identify a way of implementing this idea that is both feasible and desirable. First, I sketch a policy proposal for a commodification of asylum services. Then, I argue that this policy proposal is not only compatible with the right to asylum, but also supported by moral considerations. Despite some undesirable moral features, a market in asylum facilitates the provision of asylum to those who need it.

In this article, I ask whether a principle analogous to the principle of clinical equipoise should govern the design and conduct of RCTs evaluating the effectiveness of policy interventions. I answer this question affirmatively, and introduce and defend the principle of policy equipoise. According to this principle, all arms of a policy RCT must be, at minimum, in a state of equipoise with the best proven policy that is also morally and practically attainable and sustainable. For all arms of a policy RCT, policy experts must either (1) reasonably disagree about whether the trial arms are more effective than this policy, or (2) know that they are.

This paper investigates whether the mandatory IFRS adoption has affected the informativeness of analyst recommendation revisions in Europe. Although prior studies document that IFRS adoption improved analyst forecast attributes, the impact of IFRS can't be completely assessed without examining how the market reacts to information‐rich events in an environment with enhanced disclosure. To examine this question we utilize a difference‐in‐differences design using as main control sample firms that had voluntarily adopted IFRS before the EU's mandated switch. Overall, our evidence suggests that after the mandatory adoption of IFRS both analyst upgrades and downgrades are more informative. These results hold after controlling for a number of variables that capture analyst, firm and information environment characteristics and are robust to a number of sensitivity analyses including the use of a US control sample. Finally, we examine whether our results are sensitive to the level of accounting enforcement. We find that analyst downgrades are more informative in the post‐IFRS period for firms in both high and low enforcement environments. Analyst upgrades, however, are more informative only if they are issued for firms in high enforcement countries. This article is protected by copyright. All rights reserved

One of the most important research streams in finance is to understand the determinants of stock market dynamics. Using a large amount of linguistic data regarding 960,808 posts during a 5‐year time period (from March 1, 2008, to August 31, 2013), we develop an economics blogs pessimism indicator (considered as a proxy for either investor sentiment or risk aversion), and we show its validity to build performing trading strategies.

How to discipline managers of cooperative structured financial institutions (co‐ops) is considered a critical issue by the Japanese financial regulatory authorities because co‐ops play a significant role in the domestic banking market, especially for small and medium‐sized enterprises. This paper seeks to clarify whether the effect of the governance‐related variables on firm performance varies across stock and cooperative banks in Japan. We consider regional banks as a proxy of stock banks and Shinkin banks, one of the representative co‐ops, as a proxy of cooperative banks. We use cost and profit efficiency scores obtained from stochastic frontier analysis as performance measures. The results in this paper confirmed that having a large number of board members has negative effects on efficiency measures for both stock and cooperative banks. On the other hand, the presence of outside directors has a significant effect on efficiency measures for cooperative banks, whereas such variables have no significant effect for stock banks. These results suggest that outside directors' discipline is more necessary for cooperative banks than for stock banks, which are under strong pressure from shareholders. For cooperative banks, a high ratio of representative council members, which is the most important decision‐making body for Shinkin banks, has negative effects on efficiency measures. Our findings support the current proposals of the financial regulatory authorities' council to appoint outside directors to the board as a means for strengthening governance of the co‐ops.

Crowdsourcing has attracted increasing attention as a means to enlist online participants in organisational activities. In this paper, we examine crowdsourcing from the perspective of its ethical use in the support of open innovation taking a broader system view of its use. Crowdsourcing has the potential to improve access to knowledge, skills, and creativity in a cost‐effective manner but raises a number of ethical dilemmas. The paper discusses the ethical issues related to knowledge exchange, economics, and relational aspects of crowdsourcing. A guiding framework drawn from the ethics literature is proposed to guide the ethical use of crowdsourcing. A major problem is that crowdsourcing is viewed in a piecemeal fashion and separate from other organisational processes. The trend for organisations to be more digitally collaborative is explored in relation to the need for greater awareness of crowdsourcing implications.

Given the comprehensive influence of mindfulness on human thought and behavior, and the importance of moral reasoning in business decisions, we examine the role of mindfulness as an antecedent to moral reasoning through two studies. In Study 1, we propose and test a theoretically derived model that links mindfulness and moral reasoning, mediated by compassion and egocentric bias using a survey design. In Study 2, we examine whether mindfulness training enhances moral reasoning using an experimental design with graduate students of business management. The findings of Study 1 substantiate the positive association of mindfulness with moral reasoning. We found that this relationship is fully mediated by compassion and egocentric bias. The results of Study 2 suggest that mindfulness meditation training has a positive impact on individuals' states of mindfulness, compassion, and moral reasoning, and decreases egocentric bias. We relate the findings of the study with contemporary neurological research and discuss the theoretical, pedagogical, and managerial implications.

The Trans‐Pacific Partnership (TPP) trade agreement, if were it to be successfully implemented, would be one of the largest regional agreements ever seen. It is the only exemplar to date of a “mega‐regional” FTA for which negotiations have been successfully concluded, and a landmark in evolving approaches to Asia–Pacific integration. As such, quantitative assessments of its potential effects are of considerable interest. One of the most widely used techniques for evaluating the economic impact of regional trading agreements is numerical simulation with computable general equilibrium, or CGE, models. There have now been a large number of papers written that use CGE methods to analyse the potential economic impact of the TPP agreement under varying theoretical and policy assumptions. In this paper we provide a synthesis of the key results that have emerged from the literature, and introduce some new simulation results of our own to anchor the discussion.

In April 2005, Lucio Gutiérrez was removed from office in the context of a fast‐growing economy. With no economic hardship to fuel social outrage, the failure of Gutiérrez illustrates how political and institutional factors can be the most important forces determining presidential survival. In this article, we qualitatively analyse the path toward confrontation between Gutiérrez and the congressional opposition which led to his political demise. We find that Ecuador's weak democratic tradition working through more proximate causes – radicalism, normative preference for democratic institutions and a negative institutional equilibrium – coupled with other institutional and political variables accelerated Lucio Gutiérrez's fall from power.

We show that the weather premium, an anecdotal phenomenon in the U.S. corn futures market, can arise from a convex demand function. We further show that the magnitude of the weather premium depends on the carryout and expected yield at harvest. We use data from 1968 to 2015 to evaluate the accuracy of the December futures price as a forecast of the harvest price. A predictable component in the forecast error is consistent with the existence of a time‐varying weather premium. We demonstrate that a passive strategy of routinely shorting the corn December futures does not provide an attractive risk‐adjusted return.

The potential relationship between time deformation and generalized autoregressive conditional heteroscedasticity (GARCH) is examined. Despite time deformation and GARCH being mean and variance equation phenomena, respectively, they are argued herein to share a common motivation relating to the examination of changes in the temporal evolution of time‐series processes. Via extensive simulation analysis, a close connection between the two concepts is established. It is found that the presence of GARCH can result in the spurious detection of time deformation, particularly when examining the heavy‐tailed distributions and volatile data typically considered in empirical finance. It is shown that although the application of heteroskedasticity corrected covariance matrix estimators often increases, rather than corrects, the detected oversizing of the tests of time deformation, the application of GARCH filters does provide a solution to size distortion. The findings of the experimental analysis are drawn upon to provide a robust empirical examination of the London housing market where evidence of overwhelming and widespread nonlinearity is detected in the form of time deformation. The implications of these findings for the conduct of future, and the interpretation of previous, research are discussed.

There is a growing phenomenon of brand advocacy, where brands pressure a producer country government to take pro‐worker actions such as respecting the rights of activists and raising minimum wages. This article examines the potential and limits of brand advocacy by developing a conceptual framework and analysing three recent cases of brand advocacy in Cambodia's garment industry. The study shows that brands' action and influence are shaped by issue salience, mobilization structures, political opportunities/contexts, and resource dependency. This article makes both empirical and theoretical contributions. This is one of the first studies delving into the advocacy role of brands in promoting labour rights and conditions vis‐à‐vis government. Moreover, the article develops a testable framework specifying the conditions under which brands are likely to respond, act collectively, and influence government for pro‐worker change. It also offers novel insights by applying social movement lenses and casting brands as social movement actors.

The paper investigates the spatial interdependence of US MNE investments in the MENA region. Given the variations in resource endowments, governance structures and degree of infrastructure availability in MENA countries, one would expect these variables to affect an MNE's choice of FDI location. We do find that domestic non‐spatial factors such as own country inflation and governance measured by bureaucratic quality as well as infrastructure affect a host country's inward FDI. We also found that only one measure of natural resource endowment; that is, oil and gas exports were instrumental in attracting FDI. This non‐spatial result is generally robust and invariant to the two methodologies employed in this study, that is the spatially autoregressive (SAR) model and the spatial Durbin model (SDM). We found that neighbouring countries’ infrastructure availability measured either by “electricity used” or “energy used” affected FDI inflows in a host country. However, this spatial impact was found only in the SDM model. The spatial effects of neighbouring countries’ economic and political conditions and resource endowments were, however, not observed on a host country's inward FDI. The insignificance of both the surrounding market potential and the spatially weighted FDI suggests a purely horizontal motive of MNE investments in the MENA region.

This paper examines the relationship between China's exports, export tax rebates and exchange rate policy. It offers an explanation for why China's exports continued to rise under RMB real appreciations during the Asian financial crisis. Based on a traditional export demand model, we test our hypothesis that the counteracting effects of China's export tax rebate policy have diminished the effectiveness of real exchange rates in facilitating the resolution of trade imbalances under the current pegged exchange rate regime. We find evidence that RMB real appreciations during the crisis negatively affected China's exports, but the negative effects were mitigated by the positive effects of export tax rebates. We also find evidence of a long‐run relationship between China's exports and the other explanatory variables. The empirical evidence suggests that under the pegged exchange rate regime with limited adjustments, real exchange rate movements alone cannot resolve China's external imbalances. The policy implication of this study is that China needs to redirect its decades‐long export‐oriented development strategy to one that emphasises domestic demand‐oriented development and to replace the current pegged exchange rate regime with a market‐oriented more flexible exchange rate regime.

The discrepancy between in‐sample and out‐of‐sample predictability of common predictors for asset returns has been widely discussed in the literature. We examine the out‐of‐sample predictability and its economic significance of Variance risk premium (VRP), which recently has shown empirical success in predicting asset returns in‐sample. Extensive analysis indicates strong out‐of‐sample predictability of the VRP for U.S. stock index, currencies, credit index, and equity portfolios. However, we do not find any evidence for predictability of bond and commodity markets. We demonstrate economic significance by providing profitable market timing strategies exploiting the out‐of‐sample forecasting power of the VRP in a real time setting.

The English education system has undergone large‐scale restructuring through the introduction of academy schools. The most salient feature of these schools is that, despite remaining part of the state sector, they operate with more autonomy than the predecessors they replaced. Two distinct periods of academy school introduction have taken place, under the auspices of different governments. The first batch was initiated in the 2002–03 school year by the Labour government of the time, and was a school improvement programme directly aimed at turning around badly performing schools. The second batch involved a mass academisation process following the change of government in May 2010 and the Academies Act of that year, which resulted in increased heterogeneity of new academies. This paper compares the two batches of introduction with the aim of getting a better understanding of their similarities and differences, and their importance for education policy. To do so, we study what types of schools were more likely to change to academy status in the two programmes, and the impact of this change on the quality of new pupil enrolments into the new types of school. Whilst we do point out some similarities, these are the exception rather than the norm. For the most part, our analysis reveals a number of marked dissimilarities between the two programmes, in terms of both the characteristics of schools that became academies and the changes in pupil intakes that occurred post‐conversion.

We examine how an increase in stock option grants affects CEO risk‐taking. The overall net effect of option grants is theoretically ambiguous for risk‐averse CEOs. To overcome the endogeneity of option grants, we exploit institutional features of multiyear compensation plans, which generate two distinct types of variation in the timing of when large increases in new at‐the‐money options are granted. We find that, given average grant levels during our sample period, a 10% increase in new options granted leads to a 2.8% to 4.2% increase in equity volatility. This increase in risk is driven largely by increased leverage.

Persistent interest rate differentials account for much of the currency carry trade profitability. “Commodity currencies” offer high interest rates on average, while countries that export finished goods tend to have low interest rates. We develop a general equilibrium model of international trade and currency pricing where countries have an advantage in producing either basic inputs or final goods. In the model, domestic production insulates commodity‐producing countries from global productivity shocks, forcing final‐good producers to absorb them. Commodity‐currency exchange rates and risk premia increase with productivity differentials and trade frictions. These predictions are strongly supported in the data.

This paper evaluates the performance of various measures of model‐free implied volatility in predicting returns and realized volatility. The critical role of the out‐of‐the money call options is highlighted through an investigation of the relevance of different components of the model‐free implied volatility. The Monte Carlo simulations show that: first, volatility forecasting performance of various measures can be enhanced by employing an interpolation‐extrapolation technique; second, for most measures considered, gains in their predictive power for future returns can be obtained by implementing an interpolation procedure. An empirical application using SPX options recorded from 2003 to 2013 further illustrates these claims.

This paper examines whether structural breaks contain incremental information for forecasting the volatility of copper futures. Considering structural breaks in volatility, we develop four heterogeneous autoregressive (HAR) models based on classical or latest HAR‐type models. Subsequently, we apply these models to forecast volatility in the copper futures market. The empirical results reveal that our models exhibit better in‐sample and out‐of‐sample performances than classical or latest HAR‐type models. This suggests that structural breaks contain incremental prediction information for the volatility of copper futures. More importantly, we argue that considering structural breaks can improve the performances of most of existing HAR‐type models. Highlights There are many structural break points in return volatility of the copper futures. We propose 12 new heterogeneous autoregressive models. Our models outperform the existing heterogeneous autoregressive models. Structural breaks contain additional ex ante information for volatility forecasting. The ex ante information is obvious in forecasting mid‐ and long‐term volatilities.

This paper empirically examines the determinants of credit at different maturities across countries of the European Union during the last decade. We document the lengthening of maturities since the early 2000s and whether these patterns were driven by similar factors in advanced and emerging market economies. Before the 2008 crisis, long‐term credit expanded faster than short‐term credit in most countries of our sample and contracted less than short‐term credit after 2008. We find that foreign liabilities were more important sources of funding in emerging market countries than in advanced economies. In addition, aggregate demand mattered less for credit extension to firms in emerging market countries than in advanced countries.

There is no abstract available for this paper.

Empirical studies have now established that many patients make clinical decisions based on models other than Anglo American model of truth‐telling and patient autonomy. Some scholars also add that current medical ethics frameworks and recent proposals for enhancing communication in health professional‐patient relationship have not adequately accommodated these models. In certain clinical contexts where health professional and patients are motivated by significant cultural and religious values, these current frameworks cannot prevent communication breakdown, which can, in turn, jeopardize patient care, cause undue distress to a patient in certain clinical contexts or negatively impact his/her relationship with the community. These empirical studies have now recommended that additional frameworks developed around other models of truth‐telling; and which take very seriously significant value‐differences which sometimes exist between health professional and patients, as well as patient's cultural/religious values or relational capacities, must be developed. This paper contributes towards the development of one. Specifically, this study proposes a framework for truth‐telling developed around African model of truth‐telling by drawing insights from the communitarian concept of ootọ́ amongst the Yoruba people of south west Nigeria. I am optimistic that if this model is incorporated into current medical ethics codes and curricula, it will significantly enhance health professional‐patient communication.

On the basis of development accounting techniques and a factor misallocation framework, we use panel data of 30 Chinese provinces from 2000 to 2013 to assess how factor allocation affects economic growth and unbalanced regional development in China. In particular, we decompose economic growth into three parts, namely sector productivity (SP), factor market efficiency (FME) and factor endowment (FE). We then conduct counterfactual analyses to investigate the short and long‐run roles of factor allocation in the income distribution across provinces. The results show that SP, FME and FE can explain 23%, 8.5% and 68.5% of economic growth, while labour, capital and energy reallocation account for aggregate productivity growth of about 47%, −4.8% and −0.1%. Furthermore, when the factors are efficiently allocated, transferring labour (capital, energy) from agriculture (service, industry) to the other sectors will increase the income per capita by 29.5% and 42.5% in the short and long term. Meanwhile, efficient factor allocation accounts for 32% and 29.7% of aggregate productivity and reduces the income variation across provinces by 25.5% and 23% in the short and long run, respectively.

The question of whether convertible bonds are issued to combat the risk‐shifting problem is a subject of debate in the literature, primarily because of the unavailability of clear measures regarding managerial risk‐shifting incentives. Taking advantage of recently developed inside debt‐holding measures for CEOs, we find strong evidence in support of the risk‐shifting hypothesis. When a CEO holds a large amount of inside debt, three distinct patterns emerge: (i) the firm exhibits a lower ratio of outstanding convertibles to total debt; (ii) the firm is less likely to issue convertibles than straight debt; and (iii) the firm devises contract terms to decrease the chance of conversion when it issues convertibles. This article is protected by copyright. All rights reserved

Based on a model of behavioural response to taxes, and using the Taxpayers Panel from the Instituto de Estudios Fiscales for the period 1999–2009, we analyse whether the dual nature of the Spanish personal income tax (PIT), reinforced by the 2007 reform, has influenced taxpayers’ behaviour, causing them to convert part of their ‘general income’ (from labour, real estate or economic activities) into ‘savings income’ (from movable capital or capital gains). We also extend the analysis of income shifting and study whether Spanish taxpayers also responded to the different tax treatments given to the two types of savings income (from movable capital and capital gains) until 2007, transforming savings income from one type to the other. The results of our study demonstrate three facts. First, Spanish taxpayers did respond to the different tax rates, shifting income from the general base to different forms of savings, especially capital gains. The highest‐income individuals and the self‐employed and business owners are the groups where this behaviour was most marked. Second, the self‐employed and business owners also turned income from movable assets into capital gains, guided by their different tax rates. And third, we find signs of ‘anticipation’ and ‘learning’ effects caused by the 2007 tax reform. We believe that the results obtained will enrich the growing literature on income shifting.