a framework for exploring the macroeconomic determinants of systematic risk we selectively survey unify and extend the literature on realized volatility of financial asset returns rather than focusing exclusively on characterizing the properties of realized volatility we progress by examining economically interesting functions of realized volatility namely realized betas for equity portfolios relating them both to their underlying realized variance and covariance parts and to underlying macroeconomic fundamentals

marriage and managers attitudes to risk marital status can both reflect and affect individual preferences we explore the impact of marriage on corporate chief executive officers ceos and find that firms run by single ceos exhibit higher stock return volatility pursue more aggressive investment policies and do not respond to changes in idiosyncratic risk these effects are weaker for older ceos our findings continue to hold when we use variation in divorce laws across states to instrument for ceo marital status which supports the hypothesis that marriage itself drives choices rather than it just reflecting innate heterogeneity in preferences we explore various potential explanations for why single ceos may be less risk averse data as supplemental material are available at http dx doi org 10 1287 mnsc 2014 1926 this paper was accepted by wei jiang finance

golden parachutes shark repellents and hostile tender offers a common view of golden parachutes and shark repellents is that they are designed by management to insulate itself from the discipline imposed by the market for corporate control and so are harmful to shareholders this paper offers an alternative view that these devicesare beneficial to shareholders because they allow better contracting between manager and shareholders evidence on the incidence of goldenparachutes and on the compensation tenure relationship for managers of golden parachute firms supports the alternative view copyright 1986 by american economic association

the impact of macroeconomic news on quote adjustments noise and informational volatility we study the impact of the arrival of macroeconomic news on the informational and noise driven components in high frequency quote processes and their conditional variances bid and ask returns are decomposed into a common efficient return factor and two market side specific components capturing market microstructure effects the corresponding variance components reflect information driven and noise induced volatilities we find that all volatility components reveal distinct dynamics and are positively influenced by news the proportion of noise induced variances is highest before announcements and significantly declines thereafter moreover news affected responses in all volatility components are influenced by order flow imbalances

consumer price sensitivity in the retail industry latitude of acceptance with heterogeneous demand abstract estimating the effect of price changes on demand is an essential task for retailers this study proposes a methodology based on consumer utility for modeling the price thresholds phenomenon that allows for threshold asymmetry incorporates consumer heterogeneity and uses weekly aggregated brand level data unlike other studies based on consumer utility models which generate results only for the price elasticity of market share a methodology for estimating price elasticity of demand is also included data on fast moving goods detergents toilet paper soft drinks meats liquid juices and yogurts supplied by a major retail chain are used to demonstrate the existence of price thresholds and their effects on price elasticity in every case it was found that within the thresholds or latitude of acceptance consumers are relatively less sensitive to price variations while beyond them a higher sensitivity was observed in some cases a product brand was classified as inelastic within the latitude of acceptance and elastic outside of it

price induced patterns of competition this research focuses on how price changes influence the observed pattern of brand competition the paper begins with a basic utility model formulation and examines the implications of three major classes of preference distributions on the expected patterns of competition a price tier model is proposed to operationalize the theory and to allow predictive testing the price tier model is estimated on 28 brands across four product categories the results show a specific asymmetric pattern of price competition higher price higher quality brands steal share from other brands in the same price quality tier as well as from brands in the tier below however lower price lower quality brands take sales from their own tier and the tier below brands but do not steal significant share from the tiers above the results are consistent with a bimodal preference distribution with the regular price indifference point being located toward the lower quality end of the preference distribution for the categories analyzed

the relationship between market characteristics and promotional price elasticities many empirical studies in marketing and economics have estimated brand price elasticities for specific products in markets their results indicate that price elasticities seem to differ across brands product categories retail outlets and regions however there has been very little research which examines the factors associated with these observed differences this paper focuses on the promotional price elasticities of established major brands in stable categories it identifies some characteristics of markets which may be associated with differences in price elasticities for frequently purchased nondurables a cross sectional model of the effect of these market characteristics on price elasticities is developed and estimated utilizing own price elasticity estimates for brands at twelve stores the results indicate market characteristics such as brand market share couponing activity display activity and feature activity explain a substantial amount of the variation in promotional price elasticities

optimal selection for direct mail direct marketing mail is a growing area of marketing practice yet the academic journals contain very little research on this topic the most important issue for direct marketers is how to sample targets from a population for a direct mail campaign although some selection methods are described in the literature there seems to be not a single paper discussing the analytical and statistical aspects involved the objective of this paper is to introduce a comprehensive methodology for the selection of targets from a mailing list for direct mail at least theoretically this methodology leads to more efficient selection procedures than the existing ones the latter are not based on an optimal selection strategy whereas we explicitly take the profit function into account by equating marginal costs and marginal returns we determine which households should receive a mailing in order to maximize expected profit in the empirical part we show that our methodology has great predictive accuracy and generates higher net returns than traditional approaches

the impact of ceo turnover on equity volatility this study investigates the effect on stock price volatility of a significant event in the life of the firm a change in its ceo we find significant long lived increases in volatility following ceo turnover after controlling for firm characteristics and marketwide volatility these increases are larger after forced departures and outside successions following voluntary departures stock prices also respond more strongly to earnings announcements following turnovers these results are consistent with more informative signals of value driving the increased volatility helping resolve two sources of uncertainty possible changes in the firm s strategy and doubt about the successor ceo s ability

estimating the value of employee stock option portfolios and their sensitivities to price and volatility the costs associated with compiling data on employee stock option portfolios is a substantial obstacle in investigating the impact of stock options on managerial incentives accounting choice financing decisions and the valuation of equity we present an accurate method of estimating option portfolio value and the sensitivities of option portfolio value to stock price and stock return volatility that is easily implemented using data from only the current year s proxy statement or annual report this method can be applied to either executive stock option portfolios or to firm wide option plans in broad samples of actual and simulated ceo option portfolios we show that these proxies capture more than 99 of the variation in option portfolio value and sensitivities sensitivity analysis indicates that the degree of bias in these proxies varies with option portfolio characteristics and is most severe in samples of ceos with a large proportion of out of the money options however the proxies explanatory power remains above 95 in all subsamples

maximizing profit of a food retailing chain by targeting and promoting valuable customers using loyalty card and scanner data abstract in this paper we set up a house of profit model an approach of maximizing profit of a food retailing chain by targeting and promoting valuable customers our model combines segmentation analysis of households using loyalty card and scanner data price and promotion elasticity analysis simulation of effects of pricing and promotion price and promotion optimization to maximize profit these components are well known in the literature and each of them has received considerable independent study however in this study we combine each of these components into one consistent application orientated model we then demonstrate using panel data that the combination has a synergic effect on the efficiency of estimation and the maximization of profit e g price and promotion elasticity estimation is improved by conducting it within market segments rather than across an entire hetereogeneous population these estimates are further improved by incorporating pass through a functional relationship between a retailer s unit prices and unit costs

determinants of store level price elasticity using weekly scanner data representing 18 product categories the authors estimated store specific price elasticities for a chain of 83 supermarkets they related these price sensitivities to a com

factor loading uncertainty and expected returns firm specific information can affect expected returns if it affects investor uncertainty about risk factor loadings we show that a stock s expected return is decreasing in factor loading uncertainty controlling for the average level of its factor loading when loadings are persistent learning by investors can induce time series variation in price dividend ratios expected returns and idiosyncratic volatility even when the aggregate risk premium is constant and fundamental shocks are homoscedastic consistent with our predictions we estimate that average annual returns of a firm with the median level of factor loading uncertainty are 400 to 525 basis points lower than a comparable firm without factor loading uncertainty the author 2012 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oup com oxford university press

managerial incentives for short term results a comment in managerial incentives for short term results narayanan 4 examines the manager s incentive to make a suboptimal decision in particular an incentive to choose projects that yield short term profits even when the manager is compensated with a long term contract this incentive to act myopically at the expense of shareholders welfare is attributed to the manager s very concern for the long term impact of current actions that is the desire to enhance reputation earlier to boost wages although this type of myopic behavior is a cause for great concern and narayanan s approach is interesting the particular model he develops has a serious drawback we discuss briefly in this note how the shareholders can easily anticipate and prevent the manager from making a suboptimal decision by providing proper incentive contracts using the model by harris and holmstrom 1 as a benchmark narayanan sets up a multiperiod principal agent relationship in which the manager s ability is unknown and project choice is unobservable by the shareholders since the manager s ability is unknown compensation depends upon the observable output not being able to observe the project choice the shareholders update their prior on the manager s ability according to their conjecture of the manager s project choice the manager in turn chooses a project so as to maximize expected future wage which depends upon the shareholders perception of the manager s ability by choosing a quicker return project the manager may induce the shareholders to attribute the extra dollars to higher ability resulting in greater wages in the future thus we have a game theoretic situation the illustrated game in the paper deals with two alternative projects yielding a 2 x 2 bimatrix nonconstant sum game with payoffs determined by the strategies and cash flows from the project given this game structure narayanan is able to obtain a unique nash equilibrium where both players use dominant strategies the choices of strategies for both players depend upon the value of 5k the difference between the manager s expected total wage from projects a and b regardless of the shareholders strategy conjecture on the project choice if 4k is positive negative both players choose a b as their dominant strategy this equilibrium can be summarized by a usual 2 x 2 matrix as follows

assessing the competitive interaction between private labels and national brands in this article we employ the linear approximate almost ideal demand system la aids and specify price reaction equations derived under the la aids specification we perform intracategory analyses using data on six individual categories as well as a pooled analysis on a sample of 125 categories and 59 geographic markets we find that consumer response to price and promotion decisions demand and firm pricing behavior supply jointly determine observed market prices and market shares further estimates of residual demand elasticities suggest that examination of partial demand elasticities alone may provide an incomplete picture of the ability of brands to raise price copyright 2000 by university of chicago press

buy n times get one free loyalty cards are they profitable for competing firms a game theoretic analysis abstract this paper evaluates whether firms offering loyalty programs lps should choose a restricted redemption policy by imposing a specific number of purchases before customers can redeem their points such restriction is commonly offered in form of buy n times get one free loyalty cards we develop a multinomial logit model where consumer s utility depends on the value of the product and of the rewards using an iterative algorithm we numerically solve a nash game for two firms offering loyalty programs optimal strategies and profits are obtained for three different scenarios games 1 both firms do not restrict redemption 2 both firms restrict redemption and 3 only one firm restricts redemption while the other firm does not our main findings indicate that each firm s optimal strategies are significantly affected by whether the competitor decides to restrict or not to restrict redemption in particular a firm that restricts reward redemption should offer a higher price if its competitor also restricts redemption further the dominant strategy of the game depends on customers valuations of time and rewards for example when customers highly value time but do not highly value rewards the dominant strategy for both firms is not to restrict redemption alternatively firms can face a prisoner dilemma situation leading to unrestricted redemption policy for intermediate levels of customer valuation of both time and rewards

enjoying the quiet life corporate governance and managerial preferences much of our understanding of corporations builds on the idea that managers when they are not closely monitored will pursue goals that are not in shareholders interests but what goals would managers pursue this paper uses variation in corporate governance generated by state adoption of antitakeover laws to empirically map out managerial preferences we use plant level data and exploit a unique feature of corporate law that allows us to deal with possible biases associated with the timing of the laws we find that when managers are insulated from takeovers worker wages especially those of white collar workers rise the destruction of old plants falls but the creation of new plants also falls finally overall productivity and profitability decline in response to these laws our results suggest that active empire building may not be the norm and that managers may instead prefer to enjoy the quiet life

explicit versus implicit contracts evidence from ceo employment agreements we report evidence on the determinants of whether the relationship between a firm and its chief executive officer ceo is governed by an explicit written or an im plicit agreement we find that fewer than half of the ceos of s p 500 firms have comprehensive explicit employment agreements consistent with contracting theory explicit agreements are more likely to be observed and are likely to have a longer du ration in situations in which the sustamabihty of the relationship is less certain and where the expected loss to the ceo is greater if the firm fails to honor the agreement when a firm hires a chief executive officer ceo it enters into a complex relationship that has significant long term implications for its stockholders establishing the terms of this relationship requires determining the ceo s responsibilities compensation perquisites and term of employment the con ditions under which either party can sever the relationship and restrictions on the ceo s outside activities among other considerations despite the com plexity of these arrangements many public companies including some of the largest choose not to put such terms in writing in 2000 less than half of the firms in the s p 500 had a comprehensive written or explicit employment agreement ea with their ceos the other firms had either no written agree ment at all or agreements that covered only limited aspects of their relationship with the ceo such as change of control nondisclosure noncompete or nonso licitation agreements these latter firms and their ceos relied on implicit eas through which the ceo was employed at will we report evidence on the determinants of whether the relationship between a firm and its ceo is contractually defined in an explicit agreement this

alternative mechanisms for corporate control we examine performance and management characteristics of fortune 500 firms experiencing one of three types of control change internally precipitated management turnover hostile takeover and friendly takeover we find that firms experiencing internally precipitated management turnover perform poorly relative to other firms in their industries but are not concentrated in poorly performing industries in contrast targets of hostile takeovers are concentrated in troubled industries there is also weaker evidence that hostile takeover targets underperform their industry peers we interpret this evidence as consistent with the idea that the board of directors is capable of firing managers whose leadership leads to poor performance relative to industry but that an external challenge in the form of a hostile takeover is often required when the whole industry is in decline the evidence also indicates that firms run by a member of the founding family are less likely to experience either internally precipitated top management turnover or a hostile takeover on the other hand firms whose top management team is dominated by a single relatively young top executive while lacking in internal discipline are more likely to experience a hostile takeover this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

managerial incentives and capital management the paper shows how career concerns rather than effort aversion can induce a natural incongruity in risk preferences between managers and superiors a model based on learning about managerial talent is developed to study second best contractual remedies we show that the optimal wage contract is an option of the value of the manager s human capital for insurance reasons and that consequently rationing of capital is often required to counterbalance the manager s resulting incentive to overinvest rationing is strictly superior to price decentralization offering one reason for the prevalence of centralized capital budgeting procedures

ceo turnover and volatility under long term employment contracts we study the role of the contractual time horizon of chief executive officers ceos for ceo turnover and corporate policies using hand collected data on 3 954 fixed term ceo contracts we show that remaining time under contract predicts ceo turnover when contracts are close to expiration turnover is more likely and is more sensitive to performance we also show a positive within ceo relation between remaining time under contract and firm risk our results are similar across short and long contracts and are driven neither by firm or ceo survival nor technological cycles they are consistent with incentives to take long term projects with interim volatility