is there private information in the fx market the tokyo experiment it is a common view that private information in the foreign exchange market does not exist we provide evidence against this view the evidence comes from the introduction of trading in tokyo over the lunch hour lunch re turn variance doubles with the introduction of trading which cannot be due to public information since the flow of public information did not change with the trading rules having eliminated public information as the cause we exploit the volatility pattern over the whole day to discriminate between the two alternatives private information and pricing errors three key re sults support the predictions of private information models first the vola tility u shape flattens greater revelation over lunch leaves a smaller share for the morning and afternoon second the u shape tilts upward an impli cation of information whose private value is transitory finally the morning exhibits a clear u shape when tokyo closes over lunch and it disappears when trading is introduced

nominal income targeting in an open economy optimizing model abstract this paper presents simulation results regarding the performance of nominal income targeting a monetary policy rule that sets interest rates in response to deviations of nominal gdp growth from a target path the macroeconomic model is one in which agents solve dynamic optimization problems with rational expectations but in an environment with slow price adjustments in the present version consumption choices reflect habit formation and the economy is open to international flows of goods and securities when calibrated to quarterly us data the model s results suggest that nominal income targeting performs well in relation to inflation targeting and taylor rules

innovations and issues in monetary policy panel discussion martin feldstein 1 chairman alan greenspan s remarks today give us an opportunity to understand his thinking about monetary policy and about the federal reserve s actions during the past 15 years it was a period of substantial accomplishment that no doubt reflects in considerable measure the views of the chairman himself the fed s primary goal price stability has been achieved with inflation down from 4 percent at the end of the 1980 s to about 1 5 percent now the 2 percentage point difference between the interest rate on conventional treasury bonds and on inflation indexed bonds tips shows that financial markets expect inflation will remain at about 2 percent for at least the next decade

a case for comparative entrepreneurship assessing the relevance of culture as international entrepreneurship gains momentum as a significant and relevant field of research scholars need to address methodological issues that can facilitate the triangulation of research results in this paper we examine the relationship between culture and four personality characteristics commonly associated with entrepreneurial motivation by demonstrating systematic variation in entrepreneurial characteristics across cultures we raise important questions about the boundaries of international entrepreneurship research and the challenges of transcending them

responding to public disclosure of corporate social irresponsibility in host countries information control and ownership control we extend the internalization literature by theorizing on how public disclosure of corporate social irresponsibility csi can damage reputation based firm specific advantages of multinational companies mncs and how foreign subsidiary governance can subsequently be used as strategic responses specifically we distinguish between two foreign subsidiary governance mechanisms information control and ownership control that the prior literature has often assumed operate in parallel and posit that they function in divergent directions in this context furthermore we explain how two host country characteristics press freedom and regulatory quality amplify the need for mncs to utilize different governance mechanisms as responses to csi disclosure

conceptualizing and measuring cultures and their consequences a comparative review of globe s and hofstede s approaches this paper explains why globe used a set of cultural values and practices to measure national cultures we show why there is no theoretical or empirical basis for hofstede s criticism that globe measures of values are too abstract or for his contention that national and organizational cultures are phenomena of different order we also show why hofstede has a limited understanding of the relationship between national wealth and culture furthermore we explain why hofstede s reanalysis of the globe data is inappropriate and produces incomprehensible results we also show the validity of managerial samples in studying leadership finally we explain why hofstede s claim that globe instruments reflect researchers psycho logic reveals ignorance of psychometric methodologies designed to ensure scale reliability and construct validity

transaction costs order placement strategy and existence of the bid ask spread by considering investor order placement strategy this paper demonstrates that transaction costs cause bid ask spreads to be an equilibrium property of asset markets with transaction costs the probability of a limit order executing does not go to unity as the order is placed infinitesimally close to a counterpart market quote thus with certainty of execution at the counterpart market quote a gravitational pull is generated that keeps counterpart quotes from being placed infinitesimally close to each other an equilibrium spread is defined and its size linked to market thinness implications are noted for the design of a trading system

price formation and liquidity in the u s treasury market the response to public information the arrival of public information in the u s treasury market sets off a two stage adjustment process for prices trading volume and bid ask spreads in a brief first stage the release of a major macroeconomic announcement induces a sharp and nearly instantaneous price change with a reduction in trading volume demonstrating that price reactions to public information do not require trading the spread widens dramatically at announcement evidently driven by inventory control concerns in a prolonged second stage trading volume surges price volatility persists and spreads remain moderately wide as investors trade to reconcile residual differences in their private views how do financial markets form prices and provide liquidity when information arrives efforts to address this issue have led to an extensive microstructure literature on equity markets and to a lesser extent on the foreign exchange fx market relatively little work has focused on the u s treasury market however in spite of its importance in its own right and the advantages it offers as an alternative testing ground for microstructure hypotheses

the interaction between the frequency of market quotations spread and volatility in the foreign exchange market there is an empirical relationship between volatility average spread and number of quotations in the foreign exchange spot market the estimation procedure involves two steps in the first one the optimal functional form between these variables is determined through a maximization procedure of the unrestricted var involving the box cox transformation the second step uses the two stage least squares method to estimate the transformed variables in a simultaneous equation system framework the results indicate that the number of quotations successfully approximates activity in the spot market furthermore the number of quotations and temporal dummies reduce significantly the conditional heteroskedasticity e ect we also discuss information aspects of the model as well as its implications for financial informational theories inter and intra day patterns of the three variables are also revealed

managerial metric use in marketing decisions across 16 countries a cultural perspective research on metrics is consistently designated a priority by academics and practitioners however less is known about how culture and cross national differences can potentially impact metric use which is theoretically and managerially limiting this work develops a model that examines national and organizational cultural antecedents while controlling for the decision setting testing the model on data collected from 4384 managerial decisions from 1637 firms in 16 countries reveals that both levels of culture are associated with metric use but each has varying effects our results enable multinational executives to better understand and increase managerial metric use across different cultures and settings

a bayesian approach to optimal monetary policy with parameter and model uncertainty abstract this paper undertakes a bayesian analysis of optimal monetary policy for the u k we estimate a suite of monetary policy models that include both forward and backward looking representations as well as large and small scale models we find an optimal simple taylor type rule that accounts for both model and parameter uncertainty for the most part backward looking models are highly fault tolerant with respect to policies optimized for forward looking representations while forward looking models have low fault tolerance with respect to policies optimized for backward looking representations in addition backward looking models often have lower posterior probabilities than forward looking models bayesian policies therefore have characteristics suitable for inflation and output stabilization in forward looking models

stigma and business failure implications for entrepreneurs career choices we use data from global entrepreneurship monitor to examine the act of entrepreneurial reentry by entrepreneurs who exit a failed business we study reentry by mode of entry and by form of organizing we find that in countries where the levels of stigma and regulatory conveyance of stigma markings were at their highest entrepreneurs who exited failed businesses were less likely to reenter into entrepreneurial activity our finding suggests that negative social and economic sanctions that are associated with stigma markings speak only to one side of the entrepreneurship phenomenon on the other side stigma can function as a stimulus for entrepreneurs to defy the illegitimacy of the failed business and to actively seek out and engage in innovative behaviors that contribute to the overall diversity of entrepreneurial activities in their country

market mediating behavior an economic analysis of the security exchange specialists abstract optimal pricing strategies have been proposed by many authors for security exchange specialists successful application of these algorithms requires specialists to behave as if they knew the equilibrium strategy for a complicated dynamic game real life security exchange specialists actually use relatively simpler price adjustment rules the current paper carries out an economic analysis of one of these rules the analysis suggests that to make a viable market the specialist has to churn the market and to behave optimally he may have to sacrifice his affirmative obligation to maintain a fair and orderly market the analysis also suggests that the direct tick test is not an adequate test of the specialist s affirmative obligation a more comprehensive test should include the test of price adjustment speed

inflation targeting as a monetary policy rule the purpose of the paper is to survey and discuss in ation targeting in the context of monetary policy rules the paper provides a general conceptual discussion of monetary policy rules attempts to clarify the essential characteristics of in ation targeting compares in ation targeting to other monetary policy rules and draws some conclusions for the monetary policy of the european system of central banks jel classi cation e42 e52

habit formation in consumption and its implications for monetary policy models this paper explores a monetary policy model with habit formation for consumers in which consumers utility depends in part on current consumption relative to past consumption the empirical tests developed in the paper show that one can reject the hypothesis of no habit formation with tremendous condence largely because the habit formation model captures the gradual hump shaped response of real spending to various shocks the paper then embeds the habit consumption specication in a monetary policy model and nds that the responses of both spending and inflation to monetary policy actions are signicantly improved by this modication jel d12 e52 e43

liquidity costs and stock price response to convertible security calls firms announcements to call in the money convertible securities for redemption essentially force their conversion into common stock and such announcements are generally met with significant reductions in the calling firms equity values an explanation based on liquidity costs is advanced and tested the explanation implies that investors who choose to sell their shares early in the conversion period bear liquidity costs by selling at reduced prices consistent with the explanation the average share price decline is short lived lasting most of the conversion period thus a component of the call announcement effect appears to be due to liquidity costs copyright 1992 by university of chicago press

habitual entrepreneurs in the making how labour market rigidity and employment affects entrepreneurial re entry we investigate the impact of country level labour market regulations on the re entry decision of experienced entrepreneurs whereby they become habitual entrepreneurs multilevel logit models on entry decisions among 15 709 individuals in 29 european countries show that labour market regulations have a positive influence on the decision to re enter into entrepreneurship this positive impact is stronger among individuals holding wage jobs at the time of re entry compared to those that do not our results indicate that novice and habitual entrepreneurs may respond very differently to labour market rigidity we discuss and provide tentative explanations for these differences and outline potential policy implications

consequences of cultural practices for entrepreneurial behaviors although national culture is an important regulator of entrepreneurship there is a dearth of studies that 1 explore the effects of national cultural practices on entrepreneurial behaviors by individuals 2 use appropriate multilevel research designs 3 consider the effects of culture on different entrepreneurial behaviors such as entry and post entry growth aspirations we combined global entrepreneurship monitor gem and global leadership and organizational behavior effectiveness globe data from 42 countries for 2005 2008 to address these gaps using a multilevel design we found societal institutional collectivism practices negatively associated with entrepreneurial entry but positively associated with entrepreneurial growth aspirations uncertainty avoidance practices were negatively associated with entry but not with growth aspirations and performance orientation practices were positively associated with entry our analysis highlights the differential effects of cultural practices on entrepreneurial entry and growth aspirations and demonstrates the value of multilevel techniques in analyzing the effect of culture on entrepreneurship

the un importance of forward looking behavior in price specifications the seminal work of edmund s phelps 1978 john b taylor 1980 and guillermo a calvo 1983 developed forward looking models of price determination that imparted inertia to the price level these models incorporate expectations of future prices and excess demand by imposing constraints typically lag lead symmetry constraints that force future variables to enter the specification in this paper the author tests the empirical significance of future prices in specifications like those of taylor he finds that expectations of future prices are empirically unimportant in explaining price and inflation behavior however the dynamics of a model that includes a purely backward looking inflation specification differ substantially and not altogether pleasingly from those with a forward looking specification copyright 1997 by ohio state university press

culture meaning and institutions executive rationale in germany and japan this paper contributes rare primary empirical evidence to one of the major research questions in the social sciences today namely the linkage between national cultures and institutional structures of national business systems drawing on the work of redding we explore the thinking or rationale of senior executives of leading german and japanese firms about the ideal structure of the economy we find considerable variation in rationale across the two countries and in comparison with the shape of the business system of the united states our study has implications for our understanding of the meaning of economic activity in different countries and of the evolutionary trajectories of national business systems

avoiding uncertainty in hofstede and globe this paper compares the uncertainty avoidance ua dimension of national culture across the hofstede and globe models looking at relationships in both data and analysis rather than mutual support we detail major differences and anomalies across the studies we show how these anomalies are resulting in contradictory explanations in research on national differences across a range of individual firm and country level phenomena we clarify the ua measurement in both hofstede and globe and find that the two models are measuring different components of the ua construct we propose a two component model of ua namely ua stress and ua rule orientation and confirm its validity with national culture data from the hofstede and globe studies and economic data from the world bank we also explain the negative globe ua practices values relationship using motivational theories a way forward in future ua related research is suggested the hofstede ua index the globe ua practices scores and the globe ua values scores should be used within the specific domains that they represent that is stress rule orientation practices and rule orientation aspirations respectively resolving the contradictions in ua between and within hofstede and globe will help cross cultural researchers develop more robust theories and more practical recommendations for international business management

changes in uk monetary policy rules and discretion in practice abstract in october 1992 following sterling s departure from the exchange rate mechanism britain adopted a new framework for monetary policy that comprised two components first an explicit target for inflation and second institutional changes designed to give greater influence to the bank of england by increasing the transparency and openness of the process by which interest rates are set this paper analyses those changes from the perspective of the debate on rules versus discretion and argues that an appropriate design of institutional arrangements can provide incentives for central bankers to pursue the first best state contingent monetary policy

making markets for structured mortgage derivatives abstract this paper distinguishes between securitization in which simple pass through instruments are created and structuring in which mortgages derivative claims are created the point is to explain how structuring a transaction brings value to a deal s underwriter briefly an underwriter must defeat arbitrage between pass throughs and derivatives the potential for market segmentation and price discrimination by the underwriter is used to analyze the structuring process in the course of the analysis the legal rules for trusts the algebraic rules for structuring and the limits on permissible price discrimination are discussed results for an actual transaction illustrate the important features of the analysis

policy regime changes judgment and taylor rules in the greenspan era this paper investigates policy deviations from linear taylor rules motivated by the risk management approach followed by the fed during the greenspan era we estimate a nonlinear monetary policy rule via a logistic smoothing transition regression model where policy makers judgment proxied by economically meaningful variables drives the transition across policy regimes we find that ignoring judgment induced nonlinearities while estimating taylor rules has remarkable costs in terms of fit above 250 bps in 10 quarters although linear taylor rules describe well the broad contours of monetary policy they fail to detect relevant policy decisions driven by policy makers judgment

monetary policy shifts and long term interest rates the pure expectations hypothesis peh serves as the benchmark model for the relationship between yields on bonds of different maturities when coupled with rational expectations however empirical renderings of the model fail miserably i explore the possibility that failure to account for changes in monetary policy regime explains much of the failure of the peh estimating changing monetary regimes in conjunction with the peh significantly improves its performance the predicted spread between the long and short rates is highly correlated with the actual spread the standard deviation of the theoretical spread is nearly identical to that of the actual spread

attitudes toward cooperative strategies a cross cultural analysis of entrepreneurs because entrepreneurs mature within a societal context their attitudes toward cooperation are likely to be influenced by the underlying values of their society using a seven nation sample we find that entrepreneurs from feminine collective and uncertainty avoiding societies have a greater appreciation for the strategic importance of cooperative strategies than their counterparts moreover entrepreneurs from feminine societies place greater emphasis on partner commonality in terms of objectives and values to ensure cooperative success whereas those from individualistic societies emphasize contractual safeguards

covered interest arbitrage profits the role of liquidity and credit risk we study the profitability of covered interest parity cip arbitrage violations and their relationship with market liquidity and credit risk using a novel and unique dataset of tick by tick firm quotes for all financial instruments involved in the arbitrage strategy the empirical analysis shows that positive cip arbitrage deviations include a compensation for liquidity and credit risk once these risk premia are taken into account small arbitrage profits only accrue to traders who are able to negotiate low trading costs the results are robust to stale pricing and the nonsynchronous trading occurring in the markets involved in the arbitrage strategy

the socio cultural environment for entrepreneurship a comparison between east asian and anglo saxon countries this study uses a theory of face to identify predictors of interest in entrepreneurship in six east asian and four anglo saxon countries at the cultural level social status of entrepreneurship and shame from business failure predict interest in entrepreneurship better in east asian than anglo countries at the individual level social status predicts interest in entrepreneurship in the entire sample

inflation targeting some extensions previous analyses of the implementation of inflation targeting are extended to monetary policy responses to different shocks consequences of model uncertainty and effects of interest rate smoothing and stabilization model uncertainty output stabilization and interest rate stabilization or smoothing all call for a more gradual adjustment of the conditional inflation forecast toward the inflation target the conditional inflation forecast is the natural intermediate target during inflation targeting the optimal way of reacting to shocks is hence to check how they affect the inflation forecast and then take the appropriate action jel classification e42 e52 e58

changes in business cycles evidence and explanations this paper shows that the volatility of annual real macroeconomic indicators for the united states and the average severity of recessions have declined only slightly between the pre world war i and post world war ii eras recessions have however become somewhat less frequent and more uniform it argues that the advent of macroeconomic policy after world war ii can account for both the observed continuity and change countercyclical monetary policy and automatic stabilizers have prolonged postwar expansions and prevented severe depressions at the same time policy induced booms and recessions have led to continued volatility of the postwar economy

should central banks respond to movements in asset prices in recent decades asset booms and busts have been important factors in macroeconomic fluctuations in both industrial and developing countries in light of this experience how if at all should central bankers respond to asset price volatility we have addressed this issue in previous work bernanke and gertler 1999 the context of our earlier study was the relatively new but increasingly popular monetary policy framework known as inflation targeting see e g bernanke and frederic mishkin 1997 in an inflation targeting framework publicly announced medium term inflation targets provide a nominal anchor for monetary policy while allowing the central bank some flexibility to help stabilize the real economy in the short run the inflation targeting approach gives a specific answer to the question of how central bankers should respond to asset prices changes in asset prices should affect monetary policy only to the extent that they affect the central bank s forecast of inflation to a first approximation once the predictive content of asset prices for inflation has been accounted for there should be no additional response of monetary policy to assetprice fluctuations in use now for about a decade inflationtargeting has generally performed well in practice however so far this approach has not often been stress tested by large swings in asset prices our earlier research employed simulations of a small calibrated macroeconomic model to examine how an inflation targeting policy defined as one in which the central bank s instrument interest rate responds primarily to changes in expected inflation might fare in the face of a boom and bust cycle in asset prices we found that an aggressive inflationtargeting policy rule in our simulations one in which the coefficient relating the instrument interest rate to expected inflation is 2 0 substantially stabilizes both output and inflation in scenarios in which a bubble in stock prices develops and then collapses as well as in scenarios in which technology shocks drive stock prices intuitively inflation targeting central banks automatically accommodate productivity gains that lift stock prices while offsetting purely speculative increases or decreases in stock values whose primary effects are through aggregate demand conditional on a strong policy response to expected inflation we found little if any additional gains from allowing an independent response of central bank policy to the level of asset prices in our view there are good reasons outside of our formal model to worry about attempts by central banks to influence asset prices including the fact that as history has shown the effects of such attempts on market psychology are dangerously unpredictable hence we concluded that inflationtargeting central banks need not respond to asset prices except insofar as they affect the inflation forecast in the spirit of recent work on robust control the exercises in our earlier paper analyzed the performance of policy rules in worst case discussants robert shiller yale university glenn rudebusch federal reserve bank of san francisco kenneth rogoff harvard university

the microeconomics of market making this paper examines the influence of risk aversion on the pricing policies of a market maker for securities it is shown that a market maker s bid ask spread can be decomposed into a portion for the known limit orders a risk neutral adjustment for expected market orders and a risk adjustment for market order and inventory value uncertainty it is dem onstrated that a risk averse market maker may set a smaller spread than a risk neutral specialist finally this paper demonstrates the pervasive role of inventory in affecting both the placement and size ofthe spread

failure or voluntary exit reassessing the female underperformance hypothesis abstract we reevaluate the female underperformance hypothesis by challenging the assumption that female owned ventures are more likely to fail instead of equating exit with failure we draw on exit literature and feminist theories to argue that female entrepreneurs are actually more likely than males to exit voluntarily we argue for further gender differences by using an even more fine grained conceptualization of entrepreneurial exit failure exit for personal reasons and exit for other professional financial opportunities post hoc analyses also point to within gender heterogeneity depending on family status a sample probe of 219 spanish entrepreneurs who had exited their business supports our overall reasoning

on intraday risk premia this article presents a framework for analyzing the dynamic effects of anticipated large demand pressures on asset risk premia we show that large institutions who can time their entry into the market will trade either at the open or during periods of unusual demand pressures we show that if these institutions do enter later in the day they trade in the same direction as institutions which provide liquidity continuously institutions therefore appear to exhibit herding behavior we also explore how changing the uncertainty of demand pressures late in the day affects trading costs throughout the day most financial market investors do not continuously monitor intraday fluctuations in stock prices other activities e g outside employment often take precedence over following the stock market and there are limitations to processing information for example a reader of this page is likely to be unaware of current financial market prices in fact for many investors entry into financial markets occurs once a day or even less frequently given these institutional realities it is of interest to explore how asset markets react when it is known that a set of very large predictable demands will arrive during the afternoon does their arrival affect prices only when they arrive or throughout the day if the price impact is spread out then how do trading costs behave during the day if some traders have the flexibility to time their entry into the market when will they arrive during the day and how will their entry decisions affect asset risk premia if market participants anticipate that demands in the afternoon will be unusually volatile how does this affect the intertemporal behavior of prices and expected returns earlier in the day the primary focus of this article is the development of tractable methodologies that can address these issues

new keynesian economics and the phillips curve models with sticky prices are an important part of new keynesian economics the author shows that several of the new keynesian models imply a formulation that is similar to the expectations augmented phillips curve of milton friedman and edmund phelps he then presents new estimates of the new keynesian phillips curve the author uses two proxies for price expectations survey based measures and an econometric based measure originally developed by bennett mccallum 1976 overall the results are consistent with the model but the survey based results are more precise suggesting that the surveys may be better measures of actual expectations copyright 1995 by ohio state university press

monetary policy trade offs and the correlation between nominal interest rates and real output the authors present a structural model of the u s economy that combines their price contracting specification with a term structure relationship an aggregate demand curve and a monetary policy reaction function the model matches important features of postwar data well and provides a structural explanation of the correlation between real output and the short term nominal rate of interest the authors perform a battery of monetary policy experiments that show that as viewed through the lens of this model monetary policy has struck a good balance recently among competing monetary policy objectives copyright 1995 by american economic association

econometric models of limit order executions we develop and estimate an econometric model of limit order execution times using survival analysis and actual limit order data we estimate versions for time to first fill and time to completion for both buy and sell limit orders and incorporate the effects of explanatory variables such as the limit price limit size bid offer spread and market volatility execution times are very sensitive to the limit price but are not sensitive to limit size hypothetical limit order executions constructed either theoretically from first passage times or empirically from transactions data are very poor proxies for actual limit order executions r 2002 elsevier science b v all rights reserved jel classification g23

continued entrepreneurship ability need and opportunity as determinants of small firm growth the purpose of this research was to enhance our understanding of the growth or non growth of individual small businesses growth here being regarded as an indication of continued entrepreneurship taken together earlier studies have suggested a very large number of determinants of entrepreneurship and growth yet no very strong explanatory factors emerge it is argued here that all of the specific lowlevel explanatory variables that have previously been used can be regarded as aspects of either of three major determinants ability need and opportunity a model based on these three major factors is developed and the results of previous studies are reviewed in the light of this more abstract model in the model objective factors are separated from their subjective counterparts and it is suggested that subjective factors or reality as perceived influence growth motivation and direct behavior although objective factors only partly determine subjective perceptions they can have important direct effects on outcomes i e actual growth using survey data from more than 400 swedish small firms and applying partial least squares analysis which is a technique for analyzing structural relations among indirectly measured concepts the parameters of the model are empirically estimated the results largely lend support for the usefulness of the model more specifically the analyses suggest that 1 objective measures of ability need and opportunity can explain a substantial share of the variation in actual historical growth rates 2 objective and subjective measures of these three factors can explain a substantial share of the variation in growth motivation 3 in both cases need related issues appear more important than ability and opportunity which would mean that satiation is the major reason why small firms stop growing 4 subjective factors contain growth relevant information that is not captured by objective measures 5 direct effects of objective variables on actual growth can be traced 6 some relations are consistent whereas others seem to vary considerably across industries and 7 while the model largely gains support the analyses also suggest some additional relations that are theoretically reasonable and may deserve consideration in future studies finally it is argued that for the advancement of entrepreneurship research conceptual models at a higher level of abstraction like the one developed in this article are needed such models can add meaning to empirical facts and have the virtue of reducing complexity without assuming away too many potential contingencies it is also suggested that entrepreneurship is a matter of degree and can show itself in different ways such as start up growth innovation etc in practice the sole measure of entrepreneurship has often been a person s current status as being or not being the founder or owner manager of a small firm in future studies the use of a composite measure of the degree of entrepreneurship may prove more fruitful than the comparison of characteristics approach has been

robustness and u s monetary policy experimentation we study how a concern for robustness modifies a policy maker s incentive to experiment a policy maker has a prior over two submodels of inflationunemployment dynamics one submodel implies an exploitable trade off the other does not bayes law gives the policy maker an incentive to experiment the policy maker fears that both submodels and his prior probability distribution over them are misspecified we compute decision rules that are robust to misspecifications of each submodel and of the prior distribution over submodels we compare robust rules to ones that cogley colacito and sargent 2007 computed assuming that the models and the prior distribution are correctly specified we explain how the policy maker s desires to protect against misspecifications of the submodels on the one hand and misspecifications of the prior over them on the other have different effects on the decision rule

volatility increases subsequent to nyse and amex stock splits the post split increase in daily returns volatility is less for amex stocks than for nyse stocks the exchange trading location is a significant factor in explaining the volatility shift even after stock price and firm size are considered furthermore when measured on a weekly basis there is no increase in amex stocks returns volatility these results suggest that measurement errors created by bid ask spreads and the 1 8 effect and also one or more of the elements that make the nyse different from the amex explain why the estimated volatility of daily stock returns increases after the ex split date ohlson and penman 1985 provide evidence that nyse stock returns variances increase subsequent to ex stock distribution days for splits of 100 or greater the increase in volatility is independent of the size of the split alnd the post split price seven potential problems that might affect their results are analyzed and rejected 1 ohlson and penman 1985 suggest that the greater post split volatility may be due to the activity of relatively ignorant noisy traders who prefer trading low priced stocks this clientele factor is attributed to black 1986 pg 534 and institutional factors a rather broad category that incorporates measurement problems created by the 1 8 effect and bid ask spreads as possible hypotheses for the post split volatility increase this paper extends ohlson and penman s 1985 analysis to amex stocks exchange listing can serve as a proxy for several real factors that may cause the increase in post split variance many of which are related to the clientele factor and institutional factors cited above if the increase in volatility differs between nyse and amex stocks it will suggest that one or more of the following contributes to the phenomenon

the behavior of interest rates implied by the term structure of eurodollar futures this paper considers an equilibrium model of the term structure that is determined by two stochastic factors a short term interest rate and a target level to which the short rate is expected to revert a kalman filter technique that uses a time series cross section of eurodollar futures prices is developed to estimate the parameters of the model the term structures of spot libor and eurodollar futures volatility are compared to that predicted by the model the empirical results indicate that the two factor specification represents a significant improvement over its one factor version copyright 1996 by ohio state university press

term structure evidence on interest rate smoothing and monetary policy inertia abstract numerous studies have used quarterly data to estimate monetary policy rules or reaction functions that appear to exhibit a very slow partial adjustment of the policy interest rate the conventional wisdom asserts that this gradual adjustment reflects a policy inertia or interest rate smoothing behavior by central banks however such quarterly monetary policy inertia would imply a large amount of forecastable variation in interest rates at horizons of more than 3 months which is contradicted by evidence from the term structure of interest rates the illusion of monetary policy inertia evident in the estimated policy rules likely reflects the persistent shocks that central banks face

what did globe really measure researchers minds versus respondents minds the globe research program expanded the hofstede model of five dimensions of national cultures to 18 a re analysis based on globe s 2004 summary book produced five meta factors one was significantly correlated with gnp capita and from the hofstede dimensions primarily with power distance three more correlated significantly with hofstede s individualism uncertainty avoidance and long term orientation the fifth included the few globe questions that related to hofstede s dimension of masculinity versus femininity globe s respondents minds classified the questions in a way that the researchers minds did not account for and which closely resembles the original hofstede model

the taylor rule and interest rates in the emu area abstract we demonstrate that average interest rates in the emu countries in 1990 98 with the exception of the period of exchange market turmoil in 1992 93 moved very closely with average output gaps and inflation as suggested by the taylor rule

international entrepreneurship the pursuit of entrepreneurial opportunities across national borders in this editorial for the special issue on international entrepreneurship we inter relate key concepts about the pursuit of opportunities from the entrepreneurship and international business literatures in doing so we consider the assessment of opportunities as an individual level cognitive activity the construction of opportunity as a firm level innovative activity and the shaping of opportunity as an institutional level structuring activity we then extend the discussion to explore the notion of a distributed global ecosystem of opportunities and opportunity seekers which we believe may provide a platform for valuable future research

cultural influences on national rates of innovation abstract the purpose of this research was to examine the effect of the cultural values of individualism power distance uncertainty avoidance and masculinity on national rates of innovation in 33 countries in 1975 and 1980 the study found that rates of innovation are most closely associated with the cultural value of uncertainty acceptance but that lack of power distance and individualism also are related to high rates of innovation this research suggests that nations may differ in their rates of innovation because of the cultural values of their citizens these findings have important implications for managers and policy makers first culture matters countries may not be able to increase their rates of innovation simply by increasing the amount of money spent on research and development or industrial infrastructure they also may need to change the values of their citizens to those that encourage innovative activity this concept in turn suggests that national rates of innovation are driven by more fundamental forces than economic conditions and that societal change may be necessary to make less innovative societies more innovative second the values associated with high national rates of innovation are those that many scholars have long argued are important at the firm level an acceptance of uncertainty appears to be necessary probably because innovation requires a tolerance for risk and change individualism seems to be important perhaps because of its association with autonomy independence and freedom lack of power distance appears important perhaps reflecting the role that tolerance of change in the social order and distribution of power play in the innovation process third the study indicates that the strength of the relationship between innovation and two cultural values individualism and lack of power distance were stronger in 1975 than in 1980 suggesting perhaps that these values are becoming less important in spurring the innovation process this finding supports the anecdotal evidence that many collectivist and hierarchical asian nations are becoming more innovative fourth this study shows that per capita income is a more important economic variable than industrial structure in determining national rates of innovation this finding confirms previous work that has shown that as nations become wealthier they become more innovative the reason may be that wealthier countries have more demand for innovations both because innovations are often laborsaving and because wealthier nations have greater demand for new and differentiated consumer goods

performance based vs socially supportive culture a cross national study of descriptive norms and entrepreneurship this paper is a cross national study testing a framework relating cultural descriptive norms to entrepreneurship in a sample of 40 nations based on data from the global leadership and organizational behavior effectiveness project we identify two higher order dimensions of culture socially supportive culture ssc and performance based culture pbc and relate them to entrepreneurship rates and associated supply side and demand side variables available from the global entrepreneurship monitor findings provide strong support for a social capital ssc and supply side variable explanation of entrepreneurship rate pbc predicts demand side variables such as opportunity existence and the quality of formal institutions to support entrepreneurship

does the fed act gradually a var analysis abstract the tendency for changes in the federal funds rate to be implemented gradually has been considered evidence of an interest rate smoothing objective for the federal reserve this paper investigates whether gradual funds rate movements can be explained by the dynamic structure of the economy and the uncertainty surrounding that structure without recourse to including an ad hoc interest rate smoothing argument in the fed s objective function in the absence of parameter uncertainty the optimal policy involves more aggressive movements in the funds rate than observed parameter uncertainty however limits the responsiveness of the interest rate as a result the optimal policy under parameter uncertainty can account for a considerable portion of the gradualism observed

an empirical analysis of stock and bond market liquidity this article explores cross market liquidity dynamics by estimating a vector autoregressive model for liquidity bid ask spread and depth returns volatility and order flow in the stock and treasury bond markets innovations to stock and bond market liquidity and volatility are significantly correlated implying that common factors drive liquidity and volatility in these markets volatility shocks are informative in predicting shifts in liquidity during crisis periods monetary expansions are associated with increased liquidity moreover money flows to government bond funds forecast bond market liquidity the results establish a link between macro liquidity or money flows and micro or transactions liquidity a number of important theorems in finance rely on the ability of investors to trade any amount of a security without affecting the price however there exist several frictions 1 such as trading costs short sale restrictions and circuit breakers that impact price formation the influence of market imperfections on security pricing has long been recognized liquidity in particular has attracted a lot of attention from traders regulators

is the fed too timid monetary policy in an uncertain world estimates of the taylor rule using historical data from the past decade or two suggest that monetary policy in the u s can be characterized as having reacted in a moderate fashion to output and in

explaining the negative correlation between values and practices a note on the hofstede globe debate this note provides an explanation for the presumably counterintuitive negative correlations between values and practices reported by the global leadership and organizational behavior effectiveness project we argue that such results are compatible with basic microeconomic insights concerning diminishing marginal utility this explanation implies that values surveys as they are generally elicit marginal preferences rather than underlying values therefore they are a problematic instrument for the measurement of cultures and need to be improved so as to discriminate between the importance attached to an objective in general and that attached to it given current levels of satiation

dealing with dealers sovereign cds comovements abstract we show that sovereign cds that have common dealers tend to be more correlated especially when the dealers display similar quoting activity in those contracts over time this commonality in dealers activity is a powerful driver of cds return comovements over and above fundamental similarities between countries including default liquidity and macro factors we posit that the mechanism causing the excess correlation is the buying pressure faced by cds dealers for credit enhancements and regulatory capital reliefs an instrumental variable analysis helps alleviate the endogeneity concerns in our analysis

the us monetary performance prior to the 2008 crisis this article uses a structural vector autoregressive svar approach to study the different shocks to the monetary performance in the two decades of the us economy prior to the 2008 financial crisis by using the federal fund rate as a measure of change in the monetary policy this study shows that interest rate expectation is informative about the future movement of federal fund rate and the anticipated monetary policy should be one of the crucial reasons in causing monetary and financial deterioration in the us economy this article discusses a possible conjecture of a low interest rate trap when a persistent and prolonged low interest rate regime led to financial instability

national culture and financial systems countries differ in the way their financial activities are organized in anglo saxon countries such as the us and the uk financial systems are dominated by stock markets whereas in continental europe and japan banks play a predominant role why do countries differ in the configuration of their financial systems we argue that national culture plays a significant role we find that countries characterized by higher uncertainty avoidance are more likely to have a bank based system

liquidity and the law of one price the case of the futures cash basis deviations from no arbitrage relations should be related to market liquidity because liquidity facilitates arbitrage at the same time a wide futures cash basis may trigger arbitrage trades and in turn affect liquidity we test these ideas by studying the dynamic relation between stock market liquidity and the index futures basis there is evidence of two way granger causality between the short term absolute basis and liquidity and liquidity granger causes longer term absolute bases shocks to the absolute basis predict future stock market liquidity the evidence suggests that liquidity enhances the efficiency of the futures cash pricing system copyright 2007 by the american finance association

leaning against the wind during financial disruptions market makers provide liquidity by absorbing external selling pressure they buy when the pressure is large accumulate inventories and sell when the pressure alleviates this paper studies optimal dynamic liquidity provision in a theoretical market setting with large and temporary selling pressure and order execution delays i show that competitive market makers offer the socially optimal amount of liquidity provided they have access to sufficient capital if raising capital is costly this suggests a policy role for lenient central bank lending during financial disruptions

conceptualizing and measuring culture in international business and management from challenges to potential solutions understanding the influence of culture on business operations has been one of the most enduring components of international business ib and international management im theorizing and empirical investigation while several critiques and debates questioned the significant progress made in this domain the special issue we introduce here is meant to demonstrate that further advancement on how we conceptualize and measure culture is not only needed but also possible we provide an overview of past and current approaches in the measurement of culture in ib im and the challenges associated with these approaches and emphasize the important yet insufficiently acknowledged link between the theoretical conceptualization of culture and its measurement we then introduce the four articles included in the special issue and highlight how they break away from the addiction to approaches that have been very useful in getting where we are today but that might not always be useful in advancing knowledge beyond what we already know last but not the least we offer our own perspective on promising directions in conceptually and methodologically rethinking the study of culture in ib and im

multilevel models in international business research multiple level or mixed linear modeling mlm can simultaneously test hypotheses at several levels of analysis usually two or three or control for confounding effects at one level while testing hypotheses at others advances in multi level modeling allow increased precision in quantitative international business ib research and open up new methodological and conceptual possibilities however they create new challenges and they are still not frequently used in ib research in this editorial we outline some key methodological issues for the uses of mlm in ib including criteria sample size and measure equivalence issues we then examine promising directions for future multilevel ib research considering comparative opportunities at nation multiple nation cluster and within nation region levels including large multilevel databases we also consider its promise for mne research about semi globalization interorganizational effects across nations clusters within nations and teams and subsidiaries within mnes

stock and bond market liquidity a long run empirical analysis this paper establishes liquidity linkage between stock and treasury bond markets there is a lead lag relationship between illiquidity of the two markets and bidirectional granger causality the effect of stock illiquidity on bond illiquidity is consistent with flight toquality or flight to liquidity episodes monetary policy impacts illiquidity the evidence indicates that bond illiquidity acts as a channel through which monetary policy shocks are transferred into the stock market these effects are observed across illiquidity of bonds of different maturities and are especially pronounced for illiquidity of short term maturities the paper provides evidence of illiquidity integration between stock and bond markets

earnings announcements and attention constraints the role of market design abstract we identify a new channel market makers attention constraints through which earnings announcements for one stock affect the liquidity of other stocks when some stocks handled by a designated market maker have earnings announcements liquidity is lower for non announcement stocks handled by the same market maker with the largest effects coming from earnings surprises and stocks with high earnings response coefficients half of the liquidity decline reflects attention constraints binding on the individual market maker and the other half is explained by the market maker s inventory we further find that a market design change that increases automation alleviates the liquidity effect of attention constraints despite an increase in the number of stocks allocated to each market maker