inefficient credit booms this paper studies the welfare properties of competitive equilibria in an economy with financial frictions hit by aggregate shocks in particular it shows that competitive financial contracts can result in excessive borrowing ex ante and excessive volatility ex post even though from a first best perspective the equilibrium always displays under borrowing from a second best point of view excessive borrowing can arise the inefficiency is due to the combination of limited commitment in financial contracts and the fact that asset prices are determined in a spot market this generates a pecuniary externality that is not internalized in private contracts the model provides a framework to evaluate preventive policies which can be used during a credit boom to reduce the expected costs of a financial crisis copyright 2008 wiley blackwell

uncertainties and extreme risk spillover in the energy markets a time varying copula based covar approach abstract in this paper we explore the impact of uncertainties on energy prices by measuring four types of delta conditional value at risk covar using six time varying copulas three different measures of uncertainty economic policy financial markets and energy markets are considered and the magnitude and asymmetric effects of their influence are investigated our results suggest that there generally exists negative dependence between energy returns and changes in uncertainty the risks of clean energy and crude oil returns are more sensitive to uncertainties in the financial and energy markets while the impact of economic policy uncertainty is relatively weak the upside and downside covars and covars demonstrate significant asymmetric effects in response to extreme uncertainty movement our findings therefore have important implications for energy portfolio investment

a simplified jump process for common stock returns the specification of a statistical distribution which accurately models the behavior of stock returns continues to be a salient issue in financial economics with the introduction of arithmetic and geometric brownian motion models much attention has recently focused on a poisson mixture of distributions as an appropriate specification of stock returns for example see 12 3 8 10 5 and 1 consistent with empirical evidence these models yield leptokurtic security return distributions and furthermore the specification has much economic intuition in particular one may always decompose the total change in stock price into normal and abnormal components the normal change may be due to variation in capitalization rates a temporary imbalance between supply and demand or the receipt of any other information which causes marginal price changes this component is modelled as a lognormal diffusion process the abnormal change is due to the receipt of any information which causes a more than marginal change in the price of the stock and is usually modeled as a poisson process

oil and foreign exchange market tail dependence and risk spillovers for mena emerging and developed countries vmd decomposition based copulas abstract this paper examines the short and medium run dependence structures between oil and currency markets for mena other developing and developed countries using a novel multiresolution decomposition method namely the variational mode decomposition vmd along with a battery of time invariant and time varying symmetric and asymmetric copula functions further we assess the downside and upside short and medium run risk spillovers from oil to u s exchange rate returns and vice versa by computing the conditional value at risk covar risk measures before the copula estimations we apply the spillover index of diebold and yilmaz 2012 and network diagrams to identify and select the currencies that are the most significant net contributors or net receivers of returns from to the oil currency markets the copula results show strong evidence of time varying and high average tail dependence between oil returns and the fx markets which are net transmitters to oil for the short and medium time horizons on the other hand we find average and relatively low dynamic dependence between oil and the net receiver currencies regardless of the time horizons moreover there is evidence of up and down risk asymmetric systemic risks from oil to currencies and vice versa for some countries in the short and medium run horizons finally the risk spillovers are asymmetric over time and investment horizons these results have several important implications for hedging strategies and diversification benefits for oil and fx traders and institutional investors

entry its deterrence and its accommodation a study of the u s photographic film industry this work set in the new empirical industrial organization framework bresnahan 1987 examines firm level demand based and cost based explanations for entry and accommodation strategies in the u s photographic film industry i first estimate preentry and postentry market structures then using the estimated demand cost and market conduct parameters i show how entry by fuji photo or lack thereof by others is a function of two market structures i also show how market structure and conduct and changes in them over the pre and postentry periods are in turn functions of entry its deterrence and it accommodation

models of stock returns a comparison in this paper a discrete mixture of normal distributions is proposed to explain the observed significant kurtosis fat tails and significant positive skewness in the distribution of daily rates of returns for a sample of common stocks and indexes stationarity tests on the parameter estimates of this discrete mixture of normal distributions model revealed significant differences in the mean estimates that can explain the observed skewness and significant differences in the variance estimates that can explain the observed kurtosis an alternative explanation for the observed fat tails is the symmetric student model the result of a comparison between the models is that the discrete mixture of normal distributions model has substantially more descriptive validity than the student model for many years both financial economists and statisticians have been concerned with the description of stock market returns the form of the distribution of stock returns is a crucial assumption for mean variance portfolio theory theoretical models of capital asset prices and the prices of contingent claims for example understanding the behavior of the variance is essential to option pricing models empirical tests of asset pricing models and the efficient markets hypothesis draw statistical inferences that are also conditional on distributional assumptions the most convenient assumption for financial theory and empirical methods is that the distribution of security rates of return be multivariate normal with parameters that are stationary over time since the normal distribution is stable under addition any arbitrary portfolio of stocks will also be normally distributed with the additional assumption of risk aversion mean variance theory follows furthermore the assumptions of normality and parameter stationarity are required for most of the econometric techniques typically used in empirical research tests of the normality hypothesis on the daily returns of the dow jones industrial stocks by fama 121 revealed more kurtosis fatter tails than that predicted from a sample of independent and identically distributed normal variates fama concluded from this evidence that the distribution of price changes conforms better to the stable paretian distribution with characteristic exponent

volume and skewness in international equity markets abstract we examine the relation between trading volume and skewness in 11 international stock markets using daily and monthly data from january 1980 to august 2004 we construct single equation and var models of the relation between the first three moments of market returns and trading volumes our results show hitherto unrecognised channels of influence and support the investor heterogeneity approach to explaining return asymmetries

evaluating interval forecasts a complete theory for evaluating interval forecasts has not been worked out to date most of the literature implicitly assumes homoskedastic errors even when this is clearly violated and proceed by merely testing for correct unconditional coverage consequently i set out to build a consistent framework for conditional interval forecast evaluation which is crucial when higher order moment dynamics are present the new methodology is demonstrated in an application to the exchange rate forecasting procedures advocated in risk management

technology as a complex adaptive system evidence from patent data this paper develops a theory of invention by drawing on complex adaptive systems theory we see invention as a process of recombinant search over technology landscapes this framing suggests that inventors might face a complexity catastrophe when they attempt to combine highly interdependent technologies our empirical analysis of patent citation rates supports this expectation our results also suggest however that the process of invention differs in important ways from biological evolution we discuss the implications of these findings for research on technological evolution industrial change and technology strategy 2001 elsevier science b v all rights reserved

foreign entry cultural barriers and learning this paper examines the longevity of foreign entries hypotheses are developed on the mode start ups vs acquisitions and ownership structure wholly owned vs joint ventures in relation to cultural distance the hypotheses are tested within a framework of organizational learning using data on 225 entries that 13 dutch firms carried out from 1966 onwards results show that the presence of cultural barriers punctuates an organization s learning cultural distance is a prominent factor in foreign entry whenever this involves another firm requiring the firm to engage in double layered acculturation we also identify locational paths of learning the longevity of acquisitions is positively influenced by prior entries of the firm in the same country similarly the longevity of foreign entries in which the firm has a majority stake improves whenever the expanding firm engaged in prior entries in the same country and in other countries in the same cultural block

the distribution of foreign exchange price changes trading day effects and risk measurement a comment in their 1982 study mcfarland pettit and sung 16 mps found that consecutive daily foreign exchange rates conform to neither a normal nor a nonnormal stable process and that day of the week data could be adequately described by a series of different stable distributions the authors have also documented a weekday effect in the foreign exchange market mondays and wednesdays offered higher average price changes than did thursdays and fridays in a more recent study jaffe and westerfield 9 documented negative monday returns for the currencies of the u k canada and australia in estimating the parameters of the distribution mps have utilized the fama and roll 5 6 method which assumes a symmetric distribution jaffe and westerfield 9 report only estimates of the sample moments the sample moments reported in mps s table ii part of which is reproduced in table i here reveal that most currencies especially the minor currencies the australian dollar the spanish peseta and the swedish krona have significant skewness the results indicate that the asymmetric stable paretian distribution may be more appropriate for the overall daily returns this hypothesis is consistent with

modeling systemic risk and dependence structure between oil and stock markets using a variational mode decomposition based copula method abstract this study combines the variational mode decomposition vmd method and static and time varying symmetric and asymmetric copula functions to examine the dependence structure between crude oil prices and major regional developed stock markets s p500 stoxx600 djpi and tsx indexes during bear normal and bull markets under different investment horizons furthermore it analyzes the upside and downside short and long run risk spillovers between oil and stock markets by quantifying three market risk measures namely the value at risk var conditional var covar and the delta covar covar the results show that there is a tail dependence between oil and all stock markets for the raw return series by considering time horizons we show that there is an average dependence between the considered markets for the short run horizons however the tail dependence is also found for the long run horizons between the oil and stock markets with the exception of the s p500 index which exhibits average dependence with the oil market moreover we find strong evidence of up and down risk asymmetric spillovers from oil to stock markets and vice versa in the short and long run horizons finally the market risk spillovers are asymmetric over the time and investment horizons

customer led and market oriented let s not confuse the two christensen and bower 1996 report the results of a study of how customer power contributes to the failure of leading firms during a period of industry discontinuity they conclude that developing a customer orientation appears not to be wise advice under these conditions however this conclusion is contradicted by long standing theory and recent research in marketing in this commentary we distinguish between two forms of customer orientation that are frequently confused the first a customer led philosophy is primarily concerned with satisfying customers expressed needs and is typically short term in focus and reactive in nature the second a market oriented philosophy goes beyond satisfying expressed needs to understanding and satisfying customers latent needs and thus is longer term in focus and proactive in nature based on theory and substantial evidence the advice to become market oriented appears sound regardless of the market conditions a business faces 1998 john wiley sons ltd

sources procedures and microeconomic effects of innovation fabio arcangeli paul david frank engelman christopher freeman massimo moggi richard nelson luigi orsenigo nathan rosenberg michele salvati g n von tunzelman two anonymous referees and the participants at the meeting of the committee on distribution growth and technical progress of the italian national research council cnr rome november 16 1985 have helped with various redraftings a particularly grateful acknowledgment is for the insightful and patient help of moses abramovitz this work has been undertaken at the science policy research unit spru university of sussex as part of the research program of the designated research centre sponsored by the economic and social research council esrc earlier support to the research that led to this paper by the italian national research council cnr is also gratefully acknowledged the statistical research has been undertaken with the assistance of stephano brioschi ilaria fornari and giovannu prennushi

balancing search and stability interdependencies among elements of organizational design we examine how and why elements of organizational design depend on one another an agent based simulation allows us to model three design elements and two contextual variables that have rarely been analyzed jointly a vertical hierarchy that reviews proposals from subordinates an incentive system that rewards subordinates for departmental or firm wide performance the decomposition of an organization s many decisions into departments the underlying pattern of interactions among decisions and limits on the ability of managers to process information interdependencies arise among these features because of a basic general tension to be successful an organization must broadly search for good sets of decisions but it must also stabilize around good decisions once discovered an effective organization balances search and stability we identify sets of design elements that encourage broad search and others that promote stability the adoption of elements that encourage broad search typically raises the marginal benefit of other elements that provide offsetting stability hence the need to balance search and stability generates interdependencies among the design elements we pay special attention to interdependencies that involve the vertical hierarchy our findings confirm many aspects of conventional wisdom about vertical hierarchies but challenge or put boundary conditions on others we place limits for instance on the received wisdom that firm wide incentives and capable subordinates make top level oversight less valuable we also identify circumstances in which vertical hierarchies can lead to inferior long term performance

should investors include commodities in their portfolios after all new evidence abstract this paper investigates whether an investor is made better off by including commodities in a portfolio that consists of traditional asset classes first we revisit the posed question within an in sample setting by employing mean variance and non mean variance spanning tests then we form optimal portfolios by taking into account the higher order moments of the portfolio returns distribution and evaluate their out of sample performance under the in sample setting we find that commodities are beneficial only to non mean variance investors however these benefits are not preserved out of sample our findings challenge the alleged diversification benefits of commodities and are robust across a number of performance evaluation measures utility functions and datasets the results hold even when transaction costs are considered and across various sub periods not surprisingly the only exception appears over the 2005 2008 unprecedented commodity boom period

the distribution of foreign exchange price changes trading day effects and risk measurement this study investigates the nature of price changes in a variety of major and minor foreign exchange markets the results suggest that the log of price changes over one trading day intervals seems to follow a non normal stable distribution function different measures of location and to lesser extent scale are present for different days of the week dollar denominated price changes are high on mondays and wednesdays and low on thursdays and fridays for all currencies the wednesday thursday result is consistent with the settlement procedures used in foreign exchange transactions in the dollar the friday monday result is consistent with an increase in demand for the dollar prior to the weekend this study offers some previously unavailable results on the nature of price changes in a certain set of speculative markets in particular this is a study of the distributional characteristics of daily and weekly price changes for a number of major and minor foreign exchange markets the results document the existence of non normal stable distributions for price changes in foreign exchange markets these price change distributions differ by day of the week in ways that are only partly attributable to the institutional structure of the market the results of the study are interpreted within the context of understanding how foreign exchange markets operate and within the context of prior studies of stock market data concerned with summarizing the probability distribution of price changes for different intervals including days of the week since bachelier s 1 original treatise that contained the proposition that speculative market prices follow a process that could be described by a normal distribution there have been numerous alternative attempts to describe the stochastic processes which characterize speculative market prices these studies have not resulted in any generalized description of the probability distribution of price changes in such markets indeed the evidence suggests substantial differences in the process among various types of financial instruments the failure to achieve consensus can be traced to the lack of robustness in the statistical procedures employed to estimate processes and to differences in the underlying institutional or economic arrangements which are unique to that market the possibility of differences in the information set used to assess value or differences in technology for transmitting information makes it important to secure additional

skewness in financial returns abstract in this paper the symmetry of daily returns is addressed in eight international stock markets and three spot exchange rates tests of symmetry with the sample skewness seem of little value due to the non normality of the returns under alternative non normal distributions the symmetry of the returns cannot be rejected for most markets distribution free procedures do not detect strong asymmetries in most of the series either however some differences between returns below the mean and returns over the mean are observed in several markets

on diversification given asymmetry in returns complete diversification is the rational investment strategy for a risk averse individual in a homogeneous securities market who considers only the first two moments of return observed behavior of market participants however demonstrates that the majority of individual investors hold imperfectly diversified portfolios the purpose of the present study is to examine one potential cause for this behavior which does not rely on imperfection in the capital market specifically we show that given the existence of and investor preference for positive skewness a rational investor may hold an optimal limited number of homogeneous risk assets the relationship between the number of risk assets in a portfolio and the total risk of the portfolio has been examined extensively both theoretically and empirically 7 8 16 the general conclusion from these analyses which are set in a mean variance framework is that adding randomly selected and equally weighted risk assets to a portfolio will reduce total risk without affecting return the implication for risk averse investors in a perfect market is that complete diversification is optimal observed behavior of market participants however demonstrates that the majority of individual investors hold imperfectly diversified portfolios in the wharton survey of 1975 in 4 the median number of stocks held was found to be fewer than 4 with 34 percent of the investors holding no more than 2 stocks the two primary studies providing evidence of the undiversified portfolios of individual investors are blume and friend 3 and blume friend and crockett 5 the former analysis was based on a sample of individual income tax returns from 1971 and indicated that considering only dividend paying stocks 34 15 percent of investors sampled held only one stock 50 51 percent held no more than 2 stocks and only 10 72 percent held 10 or more stocks the latter study which included nondividend paying stocks was based on the federal reserve board s 1962 survey of the financial characteristics of consumers the median number of holdings per household was 2 while the average was 3 41 in both 3 and 5 numerous other measures of diversification were employed with the results confirming the conclusion that individual investors are on average highly undiversified the principal theoretical reasons advanced by the authors of these studies relate to the relaxation of assumptions of the standard capital asset

market and regulatory barriers to electrical energy storage innovation abstract energy storage has been identified as a priority technology for innovation however the rapidly developing family of storage technologies will find it difficult under the current regulatory regimes to compete with conventional generators for the provision of electricity system services and this is likely to impede innovation this paper analyses and categorizes 16 investment barriers hindering the near term deployment of energy storage technologies in electricity markets which are related to four regulatory and public attitudes barriers the most important regulatory barrier is the current classification of storage as a generation asset despite it being unable to provide a positive net flow of electricity which is used to justify double network usage charges the merit order design of balancing and ancillary markets hampers the ability of storage technologies to recoup their relatively high capital cost while capacity markets penalize their limited discharge duration network companies are in the best position to realize the system value of storage but their ownership may only be acceptable if system operation is made independent of network operation current initiatives to address these issues include flexible connection agreements and the development of enhanced frequency response and aggregate fast reserve services however to remove the identified barriers a market structure that valued the flexibility offered by storage viewing it as complementing rather than competing with network and generation assets would be required

the statistical distribution of exchange rates empirical evidence and economic implications the abundant evidence that changes in exchange rates have distributions with fatter tails than the normal distribution has led researchers to consider non normal distributions including the student the stable paretian and mixtures of distributions this paper compares the empirical fits of three non normal candidates and the normal distribution for daily changes in the logarithms of exchange rates using maximum likelihood estimation of the parameters and chi square goodness of fit tests the student and mixture of two normals provide the best fits but there is evidence that the distribution parameters may vary over time

industry technical committees technological distance and innovation performance abstract in most technology based markets industry technical committees tcs that establish new technical standards and specifications have assumed importance for companies as a critical source of information on existing and emerging technologies in this study we investigate how the technological distance of a tc from the firm will shape the impact of tc participation on the firm s innovation performance specifically we posit that participation in tcs that are central low technological distance to the company s existing product technologies and offerings will contribute to its competence enhancing innovation whereas participation in tcs that are peripheral high technological distance to current technologies and offerings will contribute to its new competence innovation given the need to interpret and apply the information internally we also consider the moderating effects of the firm s absorptive capacity and knowledge integration mechanisms the study hypotheses are validated by combining survey based and archival data related to a sample of 168 us based wireless telecommunication firms the findings provide broad support for the study theses and imply the need for companies to carefully plan the nature of their tc participation so as to advance the desired type of innovation broader implications for future research on external knowledge sourcing and competence based innovation are discussed

keep searching and you ll find what do we know about variety creation through firms search activities for innovation this article critically reviews and synthesizes the contributions found in theoretical and empirical studies of firm level innovation search processes it explores the advantages and disadvantages of local and non local search discusses organizational responses and identifies potential exogenous triggers for different kinds of search it argues that the initial focus on local search was a consequence in part of the attention in evolutionary economics to path dependent behavior but that as localized behavior was increasingly accepted as the standard mode studies began to question whether local search was the best solution in all cases more recently the literature has focused on the trade offs being created by firms having to balance local and non local search we account also for the apparent variety paradox in the stylized fact that organizations within the same industry tend to follow different search strategies but end up with very similar technological profiles in fast growing technologies the article concludes by highlighting what we have learnt from the literature and suggesting some new avenues for research

innovation orientation environment and performance a comparison of u s and european markets much attention has been paid to the importance of innovation in ensuring the survival and growth of companies for u s companies a key issue is to what extent findings for the u s market can be extrapolated to non u s markets to provide a basis for designing innovation strategy similar innovation orientation types were identified in both markets using a sample of consumer businesses from the pims database a number of similarities and differences in associated environments and performance levels were also identified a major finding was that a high degree of product innovativeness leads to generally poor financial and market share performance in both markets but high rates of market share growth another major finding was that having pioneered in a market leads to effective performance results for the associated environments were more mixed in the sense that there was not a perfect correlation in the environments associated with the types in both markets

systemic risk spillovers between crude oil and stock index returns of g7 economies conditional value at risk and marginal expected shortfall approaches abstract in this study we examine systemic risk and dependence between oil and stock market indices of g7 economies between january 2003 and november 2017 coincidentally this timeframe covers different distress periods in financial and energy markets we use several time constant time varying and time varying markov copula models to examine the dependence further we use the delta conditional value at risk covar of adrian and brunnermeier 2016 and marginal expected shortfall mes of acharya et al 2012 to captures the risk spillover effects and give evidence of systemic risk from the copula analysis we find dissimilar dependence structure between returns series of oil and the g7 stock markets for france germany and japan the dependence is markov switching time varying while it is time varying for the united states and canada constant for the united kingdom and around zero for italy our empirical evidence on systemic risk indicates that oil price dynamics contributes significantly more to the g7 stock market returns during volatile times than during tranquil times in particular the canada stock market appears more sensitive and vulnerable to negative external shocks emerging from the crude oil market than the other markets further the country risk rankings identified using mes and covar may not be identical in addition the analysis results suggest that the crude oil market can be a good diversifier for investors in japan and france and that the investors in the rest of g7 countries must act more carefully

dynamic return volatility dependence and risk measure of covar in the oil market a time varying mixed copula model abstract this study investigates the risk level in the oil market measured by value at risk var and conditional var covar as well as the dynamic and asymmetric dependence between wti returns and crude oil volatility index ovx by constructing six time varying mixed copula models results show that mixed copula between t copula and the 270 degree rotated clayton copula is the optimal fitting copula to measure dynamic dependence the estimated time varying kendall coefficients indicate that wti returns and ovx present negative dependence most of the time there exists a structural change point of dependence between wti returns and ovx changes on april 17 2009 while the dependence characteristics within the subsamples are similar to that in the whole sample indicating the rationality of our time varying mixed copula models finally the tests show significant risk spillover from ovx to wti returns and also asymmetric effects for covars in response to different upside and downside extreme ovx movements

a review of pumped hydro energy storage development in significant international electricity markets the global effort to decarbonise electricity systems has led to widespread deployments of variable renewable energy generation technologies which in turn has boosted research and development interest in bulk electrical energy storage ees however despite large increases in research funding many electricity markets with increasingly large proportions of variable renewable generation have seen little actual bulk ees deployment while this can be partly attributed to the need for technological developments it is also due to the challenge of fairly rewarding storage operators for the range of services that storage provides to the wider network especially in markets that have undergone significant restructuring and liberalisation pumped hydroelectric energy storage phes is the overwhelmingly established bulk ees technology with a global installed capacity around 130 gw and has been an integral part of many markets since the 1960s this review provides an historical overview of the development of phes in several significant electrical markets and compares a number of mechanisms that can reward phes in different international market frameworks as well as providing up to date information about phes a primary motivation for this work is to provide an overview about the types of rewards available to bulk ees for the wider storage community including investors technology developers and policy makers observing that bulk ees projects seem to be unattractive investments for the private sector the paper also includes a brief discussion in terms of public sector investment

conditional extremes in asymmetric financial markets abstractthe global financial crisis of 2007 2009 revealed the great extent to which systemic risk can jeopardize the stability of the entire financial system an effective methodology to quantify s

internationalising in small incremental or larger steps we argue that companies may enter foreign environments either incrementally as suggested by long established theory or by taking larger steps that may result in lower initial performance but through learning and experience lead to increased performance in future expansions this idea is corroborated by the experience of dutch companies entering into central and eastern europe we also find that expansion steps may be too large thereby limiting the exploration of foreign environments our study suggests that sequential internationalisation strategies do still matter and that companies have to balance exploitation and exploration in internationalisation

the multifaceted nature of exploration and exploitation value of supply demand and spatial search for innovation in this paper exploration and exploitation are conceptualized in terms of a nonlocal local search continuum in three dimensional supply demand and geographic space using cross sectional data from a wide range of manufacturing industries we develop and validate an operational measure of the exploration exploitation concept in line with theory based arguments our analysis suggests that the value of supply side demand side and spatial exploration and exploitation is contingent on the environment while boundary spanning supply side search is found to be positively associated with innovation in more dynamic environments typical of the entrepreneurial regime phase of technology evolution such exploration appears to hurt innovation in less dynamic environments in a reverse fashion while boundary spanning demand side search is found to be favorably associated with innovation in less dynamic environments it appears to harm innovation in a more dynamic context interestingly spatial boundary spanning search seems to contribute to innovation in more as well as less dynamic environments with the caveat that the substantive findings of this study are based on cross sectional data we discuss the implications of our work and future research directions

disentangling the role of the exchange rate in oil related scenarios for the european stock market abstract the literature has been analysing so far the response of the stock market to a distress scenario for oil prices considering prices in domestic currency this assumption implies merging commodity risk and exchange rate risk this article proposes to generate oil related scenario depending on the source of risk the same distress oil related scenario in euros could generate an opposite impact on the european stock market depending on the source of risk results show higher losses for eurostoxx when oil prices in euros experience a downward movement due to a decrease of oil price in us dollars and when oil prices in euros experience an upward movement due to a depreciation of the euro against the us dollar this framework can improve our understanding of how the exchange rate interacts in global markets also it contributes to the design of tailor made international scenarios for stress testing

an analytical approximation formula for european option pricing under a new stochastic volatility model with regime switching abstract in this paper an analytical approximation formula for pricing european options is obtained under a newly proposed hybrid model with the volatility of volatility in the heston model following a markov chain the adoption of which is motivated by the empirical evidence of the existence of regime switching in real markets we first derive the coupled pde partial differential equation system that governs the european option price which is solved with the perturbation method it should be noted that the newly derived formula is fast and easy to implement with only normal distribution function involved and numerical experiments confirm that our formula could provide quite accurate option prices especially for relatively short tenor ones finally empirical studies are carried out to show the superiority of our model based on s p 500 returns and options with the time to expiry less than one month

systemic risk and bank business models textabstractin this paper we decompose banks systemic risk into two dimensions the risk of a bank bank tail risk and the link of the bank to the system in financial distress systemic linkage based on extreme value theory we estimate a systemic risk measure that can be decomposed into two subcomponents reflecting these dimensions empirically we assess the relationships of bank business models to the two dimensions of systemic risk the observed differences in these relationships partly explain why micro and macroprudential perspectives sometimes have different implications for banking regulation

conditionally heteroskedastic factor models with skewness and leverage effects conditional heteroskedasticity skewness and leverage effects are well known features of financial returns the literature on factor models has often made assumptions that preclude the three effects to occur simultaneously in this paper i propose a conditionally heteroskedastic factor model that takes into account the presence of both the conditional skewness and leverage effects this model is specified in terms of conditional moment restrictions and unconditional moment conditions are proposed allowing inference by the generalized method of moments gmm the model is also shown to be closed under temporal aggregation an application to daily excess returns on sectorial indices from the u k stock market provides a strong evidence for dynamic conditional skewness and leverage with a sharp efficiency gain resulting from accounting for both effects the estimated volatility persistence from the proposed model is lower than that estimated from models that rule out such effects i also find that the longer the returns horizon the fewer conditionally heteroskedastic factors may be required for suitable modeling and the less strong is the evidence for dynamic leverage some of these results are in line with the main findings of harvey and siddique 1999 and jondeau and rockinger 2003 namely that accounting for conditional skewness impacts the persistence in the conditional variance of the return process

on equilibrium asset price processes in this article we derive necessary and sufficient conditions that must be satisfied by equilibrium asset price processes in apure exchange economy we examine a world in which asset prices follow a diffusion process asset markets are dynamically complete all investors maximize their state independent expected utility of consumption at some future date and investors have nonrandom exogenous income we show that it is necessary and suffcient that the coefficients of an equilibrium diffusion price process satisfy a partial differential equation and a boundary condition we also examine how the dynamics of asset prices are related to the shape of the representative investor s utility function through the boundary condition for example in a constant volatility economy the expected instantaneous return of the market portfolio is mean reverting if and only if the relative risk aversion of the representative investor is decreasing in terminal wealth

the dependence and risk spillover between crude oil market and china stock market new evidence from a variational mode decomposition based copula method abstract this paper examines the dependence structure between crude oil market and china stock market over different investment horizons before and after the recent financial crisis by combining the variational mode decomposition vmd method with various static and time varying copulas based on the decomposed time series and the copula dependence the value at risk var conditional var covar and delta covar covar are quantified to analyze the upside and downside risk spillovers from oil market to china stock market in raw short and long run investment horizons before and after the financial crisis the empirical results show that first the recent financial crisis enhances the dependences between the crude oil market and china stock market and the long run dependence increases more significantly than that of short run for the raw return series there are symmetric upper and lower tail dependencies in full sample and pre crisis subsample periods but an average dependence in post crisis subsample period second the var of china stock market increases heavily around the financial crisis but the average var after the crisis deceases compared to the risk before the crisis third the risk spillovers from crude oil price to china stock market are found in each sample periods before the crisis however it mainly exists in long run horizon while after the crisis it happens in both short and long run horizons finally the risk spillovers from oil price to china stock market display strong asymmetric features with larger long term downside risk spillovers in post crisis subsample

economic policy uncertainty and risk spillovers in the eurozone this paper focuses on the impact of economic policy uncertainty on risk spillovers within the eurozone and contributes to these two growing literatures to this end we adapt the two step procedure developed by adrian and brunnermeier forthcoming in the framework of financial systemic risk to the sovereign bond market accordingly we attempt i to measure the extent to which distress affecting one given country s sovereign spreads can affect the eurozone s bond market as a whole and then ii to identify the determinants of risk spillovers by estimating a panel data model with macroeconomic state variables and economic policy uncertainty epu indices introduced by baker et al 2013 as regressors epu indices considered concern the four largest eurozone countries i e germany france italy and spain as well as the united states the model is estimated with quarterly data for ten countries representing the bulk of debt issuances within the eurozone over a period ranging from q4 2008 to q2 2013 which is characterized by historically high dispersion of sovereign bond spreads either across time or across countries our results support the idea that economic policy uncertainty in the core economies of the eurozone i e germany and france as well as in the largest periphery countries i e italy and spain can create an environment likely to exacerbate the transmission of risk arising from abnormal developments of individual countries sovereign spreads to the eurozone bond market as a whole in this respect our results plead for larger effort of eurozone leaders to reduce the uncertainty surrounding their economic policy in periods of crisis not only to avoid adverse effects on their own economies but also to reduce the risk of a destabilization of the eurozone sovereign bond market as a whole

perspective absorbing the concept of absorptive capacity how to realize its potential in the organization field the purpose of this perspective paper is to advance understanding of absorptive capacity its underlying dimensions its multilevel antecedents its impact on firm performance and the contextual factors that affect absorptive capacity twenty years after the cohen and levinthal 1990 paper the field is characterized by a wide array of theoretical perspectives and a wealth of empirical evidence in this paper we first review these underlying theories and empirical studies of absorptive capacity given the size and diversity of the absorptive capacity literature we subsequently map the existing terrain of research through a bibliometric analysis the resulting bibliometric cartography shows the major discrepancies in the organization field namely that 1 most attention so far has been focused on the tangible outcomes of absorptive capacity 2 organizational design and individual level antecedents have been relatively neglected in the absorptive capacity literature and 3 the emergence of absorptive capacity from the actions and interactions of individual organizational and interorganizational antecedents remains unclear building on the bibliometric analysis we develop an integrative model that identifies the multilevel antecedents process dimensions and outcomes of absorptive capacity as well as the contextual factors that affect absorptive capacity we argue that realizing the potential of the absorptive capacity concept requires more research that shows how micro antecedents and macro antecedents influence future outcomes such as competitive advantage innovation and firm performance in particular we identify conceptual gaps that may guide future research to fully exploit the absorptive capacity concept in the organization field and to explore future fruitful extensions of the concept

systemic risk measurement multivariate garch estimation of covar abstract we modify adrian and brunnermeier s 2011 covar the var of the financial system conditional on an institution being in financial distress we change the definition of financial distress from an institution being exactly at its var to being at most at its var this change allows us to consider more severe distress events to backtest covar and to improve its consistency monotonicity with respect to the dependence parameter we define the systemic risk contribution of an institution as the change from its covar in its benchmark state defined as a one standard deviation event to its covar under financial distress we estimate the systemic risk contributions of four financial industry groups consisting of a large number of institutions for the sample period june 2000 to february 2008 and the 12 months prior to the beginning of the crisis we also investigate the link between institutions contributions to systemic risk and their characteristics

customer power strategic investment and the failure of leading firms why might firms be regarded as astutely managed at one point yet subsequently lose their positions of industry leadership when faced with technological change we present a model grounded in a study of the world disk drive industry that charts the process through which the demands of a firm s customers shape the allocation of resources in technological innovation a model that links theories of resource dependence and resource allocation we show that established firms led the industry in developing technologies of every sort even radical ones whenever the technologies addressed existing customers needs the same firms failed to develop simpler technologies that initially were only useful in emerging markets because impetus coalesces behind and resources are allocated to programs targeting powerful customers projects targeted at technologies for which no customers yet exist languish for lack of impetus and resources because the rate of technical progress can exceed the performance demanded in a market technologies which initially can only be used in emerging markets later can invade mainstream ones carrying entrant firms to victory over established companies

how performance incentives shape individual exploration and exploitation evidence from microdata the existing literature has highlighted the role of individuals in exploration and exploitation yet our understanding of what shapes those activities at the individual level remains limited we integrate the literatures on exploration exploitation and incentives to examine how incentives impact individual behavior to explore new ideas or exploit existing ideas using novel microdata on the commercial projects of sales employees at a south korean e commerce firm we find that individuals engage in relatively more exploration when performance based incentives are weakened yet interestingly this increase in exploration is driven mainly by high performing individuals in our setting weakening performance based incentives also lead to higher exploration performance via experiential learning especially for individuals who work in complex task environments overall this study contributes to the literature on exploration exploitation by examining how individual exploration and exploitation behavior and performance is shaped by incentives we also contribute to the incentives literature by investigating the implications of incentives in an important domain namely that of knowledge exploration behavior this study also provides insights into important individual level microfoundations of firm capabilities and performance by highlighting the important role of individuals in exploration exploitation activities and how this role is contextualized by the incentives a firm deploys

foreign direct investment in industrial research in the pharmaceutical and electronics industries results from a survey of multinational firms abstract this paper examines motives location characteristics inter temporal characteristics and modes of entry for foreign direct investment fdi in research and development r d the paper is based on a detailed empirical survey of laboratory sites established by 32 large multinational companies domiciled in 5 countries findings indicate that fdi in r d has risen considerably over the last 40 years and that firms invest in r d sites abroad in order to augment their knowledge base or in order to exploit it the former motive leads to establishment of facilities primarily close to universities while the latter type leads to establishment of facilities close to existing manufacturing facilities and markets the paper also finds that greenfield investments are the dominant mode of entry and that firms establish multiple r d sites in their home countries before investing in such sites abroad

systemic risk and bank size abstract in this paper we analyse firm level systemic risk for us and european banks from 2004 to 2012 we observe that common systemic risk indicators are primarily driven by firm size which implies an overriding concern for too big to fail institutions however smaller banks may still pose considerable systemic threats as exemplified by the northern rock debacle in 2007 by introducing a simple standardisation we obtain new risk measures that often prove to be superior predictors of financial distress during the 2007 2009 subprime crisis we conclude that the new measures could be a valuable addition to the existing indicators employed in basel iii to identify systemically important banks

the influence of local search and performance heuristics on new design introduction in a new product market abstract this study develops and tests three sets of predictions concerning new design introduction during the initial period of ferment in a new product market we root our predictions most directly in the evolutionary economic concepts of local search and performance heuristics first we argue that new entrants will introduce most designs that are new to a product market during an initial period of ferment second we argue that local search will lead most product market incumbents that introduce second or subsequent designs after their entry to introduce designs that are similar to those incorporated in their existing products third we argue that firms selling products based on designs that are losing aggregate share in the market will be likely to introduce products based on new designs while firms losing market share to firms that are selling the same design are unlikely to introduce new designs our empirical analysis examines the magnetic resonance imaging mri subfield of the diagnostic imaging equipment industry between 1980 and 1986 a period that begins with the introduction of the first mri design and ends with the emergence of widely accepted design characteristics the results support the argument that local search and performance heuristics along with other market factors and business characteristics influence design introduction during a period of ferment

redenomination risk spillovers in the eurozone abstract in this paper we use sovereign quanto cds spreads as proxy for redenomination risk in the eurozone i e the risk of a sovereign default obtained by the redenomination of debt in a different currency quanto cds spreads are the difference between the cds quotes in u s dollars and euros we capture spillovers with c o v a r a risk indicator proposed by adrian and brunnermeier 2016 that measures the difference between the value at risk of country i conditional on a state of distress in country j and the median state our sample starts on the onset of the great recession we find that belgium ireland italy and spain are the only eurozone countries exposed to redenomination risk spillovers however in the shorter post omt sample the only vulnerable countries are italy and spain

dynamic capabilities what are they this paper focuses on dynamic capabilities and more generally the resource based view of the firm we argue that dynamic capabilities are a set of specific and identifiable processes such as product development strategic decision making and alliancing they are neither vague nor tautological although dynamic capabilities are idiosyncratic in their details and path dependent in their emergence they have significant commonalities across firms popularly termed best practice this suggests that they are more homogeneous fungible equifinal and substitutable than is usually assumed in moderately dynamic markets dynamic capabilities resemble the traditional conception of routines they are detailed analytic stable processes with predictable outcomes in contrast in high velocity markets they are simple highly experiential and fragile processes with unpredictable outcomes finally well known learning mechanisms guide the evolution of dynamic capabilities in moderately dynamic markets the evolutionary emphasis is on variation in high velocity markets it is on selection at the level of rbv we conclude that traditional rbv misidentifies the locus of long term competitive advantage in dynamic markets overemphasizes the strategic logic of leverage and reaches a boundary condition in high velocity markets copyright 2000 john wiley sons ltd

technological platforms and diversification as the invention of fundamental new sciences spawns subsequent research discovery and commercialization core technologies branch into new applications and markets some of them evolve over time into many derived technologies whereas others are essentially dead ends the pattern of evolution and branching is called a technological trajectory an intriguing question is whether some firms can ride the trajectory by developing proprietary experience in a platform technology because the knowledge is proprietary firms that originate in industrial fields based on a platform technology acquire the technological skills to diversify and to mimic the branching of the underlying technological trajectory the ability to compete in hypercompetitive markets depends on the acquisition of know how that is applicable to a wide set of market opportunities such capabilities serve as platforms into quickly evolving markets to respond rapidly to market changes a firm must have already acquired fundamental compet

international expansion of telecommunication carriers the influence of market structure network characteristics and entry imperfections this paper examines the internationalization process of telecommunication carriers in this industry early entrants gain substantial first mover advantages due to the transient nature of the windows of market opportunity and the potential to influence the regulatory process as an incumbent to capture these strategic and economic advantages firms follow a strategy of preemption both of markets and partners the authors argue for the need to augment prevailing theory with contextual idiosyncrasies that characterize specific industries

risk dependence of covar and structural change between oil prices and exchange rates a time varying copula model abstract this paper analyses the dynamic dependence between wti crude oil and the exchange rates of the united states and china taking structural changes of dependence into account by using six time varying copula models upside and downside conditional values at risk covars are introduced specifically to measure the upward and downward risk dependences between oil prices and exchange rates the findings indicate a structural break point of dependence exists between daily or weekly crude oil and the us dollar index the dependence between crude oil and the rmb exchange rate is faintly positive with lower tail dependence while the dependence between crude oil and the us dollar index is significantly negative with lower upper and upper lower tail dependence finally the covars results show that there is significant risk spillover from crude oil to chinese and the us exchange rate markets furthermore the spillover effect is significantly asymmetry in chinese exchange rate market in response to rising and falling oil returns while the asymmetry of spillover effect for the us dollar index is not significant

an international review of the implications of regulatory and electricity market structures on the emergence of grid scale electricity storage abstract energy storage systems ess have the potential to make a significant contribution to planning and operation practises in power systems while ess can be used to provide multiple benefits in the power sector widespread use has been restricted by high technology costs lack of deployment experience and the barriers and uncertainties caused by the present electricity market and regulatory structures that were designed for conventional electricity systems this paper reviews countries with high renewable targets and with significant current or planned ess deployments to ascertain the common problems affecting the use of ess on the grid and to establish where changes have been made or proposed to the electricity market and regulatory frameworks three major problems were identified as the undetermined asset class for ess and unbundled electricity system limiting stakeholders from determining and realising multiple ess benefits low electricity market liquidity and changing market conditions and a lack of common standards and procedures for evaluating connecting operating and maintaining ess based on the established barriers recommendations to update or create policies regulation and market arrangements to increase the viability and wider use of grid level ess are discussed the three key regulatory and policy recommendations were identified as an alignment of renewable policies to that of ess creating a separate asset class for ess and associated rules for regulated and competitive operations and standardising assessment frameworks connection and operational procedures for the use of ess finally three main electricity market recommendations include updating rules to support simultaneous ess operation across wholesale ancillary services and capacity markets updating market rules to allow compensation for flexible and highly accurate responsive demand and generation technologies such as ess and updating market ancillary services energy requirements

risk spillover between energy and agricultural commodity markets a dependence switching covar copula model abstract unlike previous studies we employ a relatively newer modelling technique a time varying copula with a switching dependence to characterise the conditional dependence between energy and agricultural commodity markets in a more realistic way because the dependence may switch between positive and negative correlation regimes over time a dependence switching copula more appropriately and realistically captures a dependence structure than a single copula regime our findings indicate that the lower tail dependence is much stronger in a bearish regime than in a bullish regime highlighting the importance of systematic risk spillovers during extreme downward movements furthermore the significant risk spillovers from energy to agricultural commodities are verified by measuring the conditional value at risk covar and delta covar finally some useful implications are summarized for investors portfolios and risk avoidance

learning patterns in venture capital investing in new industries using an organizational learning perspective we link the decision by venture capital vc firms to invest early in a new high technology industry to three experiential learning mechanisms the familiarity associated with accumulation of early funding decisions the shaping or imprinting effect of the firm s very first such decision and the decay or forgetting associated with the dormancy of prior such decisions we find support for these learning patterns using data on the investments made by us vc firms between 1962 and 2004

the socio technical transition of distributed electricity storage into future networks system value and stakeholder views whole system models for the gb electricity system suggest that distributed electricity storage has the potential to significantly reduce the system integration cost for future system scenarios from a policy perspective this poses the question why this value should not be realised within existing market structures opinion among stakeholders is divided some believe that storage deployment constitutes a special case in need of policy support others insist that markets can provide the necessary platform to negotiate contracts which reward storage operators for the range of services they could provide this paper seeks to inform this debate with a process of stakeholder engagement using a perspective informed by socio technical transition literatures this approach allows the identification of tensions among actors in the electricity system and of possibilities for co evolution in the deployment of storage technologies during a transition towards a low carbon electricity system it also draws attention to policy related challenges of technology lock in and path dependency resulting from poor alignment of incumbent regimes with the requirements for distributed electricity storage

distinguishing between related and unrelated international geographic diversification a comprehensive measure of global diversification this paper argues that it is important to distinguish between related and unrelated international geographic diversification when measuring impact of diversification on performance it then extends the jacquemin berry entropy measure to propose a comprehensive measure of global diversification that comprises related and unrelated product diversification and related and unrelated international geographi diversification it suggests a classification of firms based on diversification strategies and proposes hypotheses for future research

portfolio selection and skewness evidence from international stock markets abstract this paper finds that the returns of the world s 14 major stock markets are not normally distributed and that the correlation matrix of these stock markets was stable during the january 1988 december 1993 time period polynomial goal programming in which investor preferences for skewness can be incorporated is utilized to determine the optimal portfolio consisting of the choices of 14 international stock indexes the empirical findings suggest that the incorporation of skewness into an investor s portfolio decision causes a major change in the construction of the optimal portfolio the evidence also indicate that investors trade expected return of the portfolio for skewness

the dynamic black litterman approach to asset allocation abstract we generalize the black litterman bl portfolio management framework to incorporate time variation in the conditional distribution of returns in the asset allocation process we evaluate the performance of the dynamic bl model using both standard performance ratios as well as other measures that are designed to capture tail risk in the presence of non normally distributed asset returns we find that the dynamic bl model outperforms a range of different benchmarks moreover we show that the choice of volatility model has a considerable impact on the performance of the dynamic bl model

superstitious seasonality in precious metals markets evidence from garch models with time varying skewness and kurtosis in this article we analyse whether the friday the 13th effect documented by kolb and rodriguez 1987 can be observed in precious metals markets specifically we use dummy augmented garch models to investigate the impact of this specific calendar day on the conditional means of gold silver palladium and platinum returns the specification of the garch model follows a flexible class recently proposed by leon et al 2005 that incorporates time varying skewness and kurtosis by applying a gram charlier series expansion of the normal density function our results for the period from july 1996 to august 2013 provide three important insights first there is no evidence that human superstition regarding bad luck fridays affects precious metals markets in a negative way i e returns on fridays the 13th are not significantly lower than on regular fridays second besides showing robustness in a variety of settings we can confirm this main result in a sensitivity check where we replace the dummy variables

is bitcoin a hedge a safe haven or a diversifier for oil price movements a comparison with gold abstract this study assesses the roles of bitcoin as a hedge a safe haven and or a diversifier against extreme oil price movements in comparison to the corresponding roles of gold we use a quantile on quantile regression approach to capture the dependence structure between the considered market returns under different bitcoin market conditions while considering nuances of oil price movements compared to gold our findings show that both bitcoin and gold would serve the roles of a hedge a safe haven and a diversifier for oil price movements however this property seems to be sensitive to the bitcoin s and gold s different bear normal or bull market conditions and to whether the oil price is in a downside normal or upside regime by controlling for new and relevant u s and global uncertainty indicators we confirm that both bitcoin and gold but not oil are assets where investors may park their cash during times of political and economic turmoil the conditional value at risk covar approach to risk management is then conducted providing robust evidence of the usefulness of each of the bitcoin and gold in expanded oil portfolios in terms of diversification opportunities and downside risk reductions

asset market linkages in crisis periods we characterize asset return linkages during periods of stress by an extremal dependence measure contrary to correlation analysis this nonparametric measure is not predisposed toward the normal distribution and can allow for nonlinear relationships our estimates for the g 5 countries suggest that simultaneous crashes between stock markets are much more likely than between bond markets however for the assessment of financial system stability the widely disregarded cross asset perspective is particularly important for example our data show that stock bond contagion is approximately as frequent as flight to quality from stocks into bonds extreme cross border linkages are surprisingly similar to national linkages illustrating a potential downside to international financial integration

dynamics of energy technologies and global change technological choices largely determine the long term characteristics of industrial society including impacts on the natural environment however the treatment of technology in existing models that are used to project economic and environmental futures remains highly stylized based on work over two decades at iiasa we present a useful typology for technology analysis and discuss methods that can be used to analyze the impact of technological changes on the global environment especially global warming our focus is energy technologies the main source of many atmospheric environmental problems we show that much improved treatment of technology is possible with a combination of historical analysis and new modeling techniques in the historical record we identify characteristic l such network e ects yield high barriers to entry even for superior competitors these simple observations allow three improvements to modeling of technological change and its consequences for global environmental change one is that the replacement of long lived infrastructures over time has also replaced the fuels that power the economy to yield progressively more energy per unit of carbon pollution from coal to oil to gas such replacement has d they also include endogenous generation of s we show that doing so can yield projections with lessened environmental impacts without necessarily incurring negative e ect on the economy arriving on that path by the year 2100 depends on intervening actions such as incentives to promote greater diversity in technology and lower barriers to entry for new infrastructures that could accelerate historical trends of decarbonization 1999 elsevier science ltd all rights reserved