capital flow controls international asset pricing and investors welfare a multi country framework this paper investigates the impact of capital flow restrictions on the pricing of securities on the optimal portfolio composition for investors of different nationalities and on their welfare under capital flow controls the equilibrium price of a security is determined jointly by its international and national risk premiums and investors acquire nationality specific portfolios along with a market wide proxy for the world market portfolio removal of investment barriers generally leads to an increase in the aggregate market value of the affected securities and all investors favor a move toward market integration introduction of different types of index funds in the world market generally increases world market integration and investor welfare in recent years the international capital markets have undergone numerous important changes that have increased the international linkage of national markets these changes include the creation of national index funds e g mexico korea taiwan india france and scandinavia and selective liberalization e g brazil india korea sweden and japan despite their potential impact on the national economies and global finance it is not clear what consequences these integrating changes entail for example is welfare increased by allowing cross border investment that is restricted to purchasing the entire national portfolio of which the national index fund is a class unfortunately with the exception of subrahmanyam 1975a who studies the pricing and welfare effects of fully integrating heretofore completely segmented markets other international asset pricing models that incorporate capital flow restrictions for instance black 1974 stulz 1981b lessard et al 1983 errunza and losq 1985 cooper and kaplanis 1986 and eun and janakiramanan 1986 analyze the pricing but not the welfare effects of investment barriers to analyze systematically the welfare implications of various structural changes in the current market environment this paper follows the lead of subrahmanyam and recasts the analysis in two important respects

on universal currency hedges this paper identifies five universal currency hedge ratio uhr definitions these are hedge positions in foreign bonds stated as a fraction of national or global equity portfolios that are the same for all investors regardless of nationality the first three involve the total demand for foreign bonds and depend on equities not being held for hedging purposes the last two are associated with variance minimizing regression hedges these hold in general but are designed exclusively for hedging other traded asset positions jensen s inequality makes the choice of measurement currency irrelevant and makes the hrs universal without affecting their values

a dynamic stochastic programming model for international portfolio management we develop a multi stage stochastic programming model for international portfolio management in a dynamic setting we model uncertainty in asset prices and exchange rates in terms of scenario trees that reflect the empirical distributions implied by market data the model takes a holistic view of the problem it considers portfolio rebalancing decisions over multiple periods in accordance with the contingencies of the scenario tree the solution jointly determines capital allocations to international markets the selection of assets within each market and appropriate currency hedging levels we investigate the performance of alternative hedging strategies through extensive numerical tests with real market data we show that appropriate selection of currency forward contracts materially reduces risk in international portfolios we further find that multi stage models consistently outperform single stage models our results demonstrate that the stochastic programming framework provides a flexible and effective decision support tool for international portfolio management

asymmetric information and options in an extension of the kyle 1985 model of continuous insider trading it is shown that asymmetric information can make it impossible to price options by arbitrage even when an option would appear to be redundant its introduction into the market can cause the volatility of the underlying asset to become stochastic this eliminates the potential for dynamically replicating the option the change in the price process of the asset reflects a change in the information transmitted by volume and prices when the option is traded article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

exchange rate shocks currency options and the siegel paradox abstract this note explores the relationship between risk and premium in foreign exchange rates we show that investors in different countries demand different premiums for the same source of risk the difference in the premiums is related only to the volatility of the source of risk and not to investor risk attitudes we show how this difference is consistent with arbitrage pricing and that any contingent claim on the exchange rate has a unique price even when the exchange rate can jump in particular we resolve the seeming inconsistency reported by dumas et al 1993a for jump models of exchange rates

incentives and uncertainty an empirical analysis of the impact of demand on innovation we study the impact of demand on innovation by focusing on a sample of small and medium sized enterprises in several industries and european countries we analyse how demand stimulates innovation by providing economic incentives and reducing uncertainty considering the size of the market as a proxy for the presence of demand we find support for the idea that the presence of incentives stimulates innovation this is particularly true for process innovation in considering interaction with customers as a way to reduce uncertainty we find that firms that see customers as the most important sources of information for both innovation ideas and completion tend to introduce product innovations firm size r d expenditure and sectoral effects also matter

how effective are fiscal incentives for r d a review of the evidence this paper surveys the econometric evidence on the effectiveness of fiscal incentives for r d we describe the effects of tax systems in oecd countries on the user cost of r d the current position changes over time and across different firms in different countries we describe and criticize the methodologies used to evaluate the effect of the tax system on

international diversification of investment portfolios u s and japanese perspectives in this paper we analyze the gains from international diversification of investment portfolios from the japanese as well as the u s perspectives the major findings of this paper include first the potential gains from international as opposed to purely domestic diversification are much greater for u s investors than for japanese investors for u s investors the gains accrue not so much in terms of lower risk as in terms of higher return and the opposite holds for japanese investors second using various ex ante international investment strategies designed to control parameter uncertainty u s investors can realize substantial gains from international diversification in out of sample periods japanese investors however can gain relatively little third hedging exchange risk generally allows the u s but not japanese investors to benefit more from international diversification for u s investors the international bond diversification with exchange risk hedging offers a superior risk return trade off than the international stock diversification with or without hedging

public procurement and innovation resurrecting the demand side abstract demand is a major potential source of innovation yet the critical role of demand as a key driver of innovation has still to be recognised in government policy this article discusses public procurement as one of the key elements of a demand oriented innovation policy the paper starts by signaling the new significance of public procurement for innovation policy strategies at the eu level and in a range of european countries it then defines the concept of public procurement and embeds this concept within a taxonomy of innovation policies the rationales and justifications of public procurement policies to spur innovation are discussed followed by a consideration of the challenges and potential pitfalls as well as appropriate institutional arrangements and strategies including some recent empirical examples of good practice it concludes by confronting the public procurement approach with two of the most common objections to it and by considering future prospects

the effects of public r d subsidies on firms innovation activities the case of eastern germany this study analyzes the effects of public r d policy schemes on the innovation activities of firms in eastern germany the main question in this context is whether public funds stimulate r d activities or simply crowd out privately financed r d empirically we investigate the average causal effects of all public r d schemes in eastern germany using a nonparametric matching approach compared to the case in which no public financial means are provided it turns out that firms increase their innovation activities by about four percentage points

investor attention overconfidence and category learning abstract motivated by psychological evidence that attention is a scarce cognitive resource we model investors attention allocation in learning and study the effects of this on asset price dynamics we show that limited investor attention leads to category learning behavior i e investors tend to process more market and sector wide information than firm specific information this endogenous structure of information when combined with investor overconfidence generates important features observed in return comovement that are otherwise difficult to explain with standard rational expectations models our model also demonstrates new cross sectional implications for return predictability

the chinese warrants bubble in 2005 2008 over a dozen put warrants traded in china went so deep out of the money that they were almost certain to expire worthless nonetheless each warrant was traded more than three times each day at substantially inflated prices this bubble is unique in that the underlying stock prices make warrant fundamentals publicly observable and that warrants have predetermined finite maturities this sample allows us to examine a set of bubble theories in particular our analysis highlights the joint effects of short sales constraints and heterogeneous beliefs in driving bubbles and confirms several key findings of the experimental bubble literature jel g12 g13 o16 p34

is public r d a complement or substitute for private r d a review of the econometric evidence is public r d spending complementary and thus additional to private r d spending or does it substitute for and tend to crowd out private r d conflicting answers are given to this question we survey the body of available econometric evidence accumulated over the past 35 years a framework for analysis of the problem is developed to help organize and summarize the findings of econometric studies based on time series and cross section data from various levels of aggregation laboratory firm industry country the findings overall are ambivalent and the existing literature as a whole is subject to the criticism that the nature of the experiment s that the investigators envisage is not adequately specified we conclude by offering suggestions for improving future empirical research on this issue

university industry collaboration and firms r d effort abstract this paper investigates the impact of publicly funded university industry collaboration on uk firms r d effort we test the hypotheses that project participation has a positive effect on firms r d expenditure per employee and on their share of r d employment the paper exploits a novel source of data made up of a set of u i projects funded by the uk engineering and physical sciences research council between 1997 and 2007 and firm level data available through the uk office for national statistics we employ propensity score matching to select an appropriate control group of untreated firms on the basis of the probability that they participate to u i partnerships we then estimate the impact of participation on firms r d effort in two points in time via ordinary least squares regression the results show a positive and significant impact on the share of r d employment two years after the end of projects this is also confirmed by a robustness check a positive effect on r d expenditure per employee is found both at the end of the project and two years later these findings are highly relevant for policy given that u i collaboration is among the most frequent policy instruments put in place by local and national policy makers to foster pre competitive research and firms r d activities

innovation expenditures and the role of government in belgium abstract unlike suggestions from earlier research on the schumpeterian hypothesis it is argued and shown that sales and employment are not simply substitute size measures to test the r d behaviour of foreign and domestic companies operating in belgium further suggests that government sponsored r d has not substituted for privately funded r d foreign companies are found to behave differently and to do less r d the more they pay for externally supplied technology

r d and subsidies at the firm level an application of parametric and semi parametric two step selection models this paper analyzes the effects of public r d subsidies on r d expenditure in the german manufacturing sector the focus is on the question whether public r d funding stimulates or crowds out private investment cross sectional data at the firm level is used by apllying parametric and semiparametric selection models it turns out that public funding increases firms r d expenditure altough the magnitude of the treatment effect depends on the assumpions imposed by the particular selection model

how auctions work for wine and art interview auctioneers and even to buy a little wine in the meantime i have also had the opportunity with john abowd 1988 to observe and collect data on the auction sale of impressionist and contemporary paintings this paper reports on some of the empirical regularities that i and others have observed in the actual operation of the auction markets for these items in view of the rich and diverse array of theoretical literature on auctions it seems high time economists began to spell out precisely what facts it is meant to explain 2

on the effects of barriers to international investment a simple model is presented in which it is costly for domestic investors to hold foreign assets the implications of the model for the composition of optimal portfolios at home and abroad are derived it is shown that all foreign assets with a beta larger than some beta plot on either one of two security market lines some foreign assets with a beta smaller than are not held by domestic investors even if their expected return is increased slightly while it is obviously not true that asset markets are completely segmented between countries there is evidence of barriers to international investment although reality seems to lie in that grey area between complete segmentation and no segmentation at all most international asset pricing models are concerned with the extreme case of no barriers to international investment no effort seems to have been made to study the effect on portfolio choice of such barriers which make it costly to hold foreign securities as opposed to domestic securities but which do not in general render international diversification so onerous that investors avoid foreign securities completely casual empiricism suggests that models without barriers to international investment should be suspect those models cannot explain why it appears that in every country investors on average hold more domestic securities than would be required if they held the world market portfolio 2 this paper constructs a model of international asset pricing in which there is a cost associated with holding either long or short risky foreign securities for the sake of simplicity in most of the paper we assume that while domestic investors face barriers to international investment foreign investors face no such barriers it turns out that nothing significant is lost with such an assumption the main conclusions of this paper for the case in which foreign investors face no barriers to international investment are 1 in the presence of barriers to international investment some risky foreign

the co evolution of policy mixes and socio technical systems towards a conceptual framework of policy mix feedback in sustainability transitions abstract understanding how policymaking processes can influence the rate and direction of socio technical change towards sustainability is an important yet underexplored research agenda in the field of sustainability transitions some studies have sought to explain how individual policy instruments can influence transitions and the politics surrounding this process we argue that such individual policy instruments can cause wider feedback mechanisms that influence not only their own future development but also other instruments in the same area consequently by extending the scope of analysis to that of a policy mix allows us to account for multiple policy effects on socio technical change and resultant feedback mechanisms influencing the policy processes that underpin further policy mix change this paper takes a first step in this regard by combining policy studies and innovation studies literatures to conceptualise the co evolutionary dynamics of policy mixes and socio technical systems we focus on policy processes to help explain how policy mixes influence socio technical change and how changes in the socio technical system also shape the evolution of the policy mix to do so we draw on insights from the policy feedback literature and propose a novel conceptual framework the framework highlights that policy mixes aiming to foster sustainability transitions need to be designed to create incentives for beneficiaries to mobilise further support while overcoming a number of prevailing challenges which may undermine political support over time in the paper we illustrate the framework using the example of the zero carbon homes policy mix in the uk we conclude with deriving research and policy implications for analysing and designing dynamic policy mixes for sustainability transitions

a survey of recent empirical work concerning auctions in this paper the authors survey some recent empirical work concerning auctions first outlining two complementary approaches to the empirical analysis of auctions and then discussing several recent developments in the econometric analysis of field data concerning auctions

contagious speculation and a cure for cancer a nonevent that made stock prices soar a sunday new york times article on a potential development of new cancer curing drugs caused entremed s stock price to rise from 12 063 at the friday close to open at 85 and close near 52 on monday it closed above 30 in the three following weeks the enthusiasm spilled over to other biotechnology stocks the potential breakthrough in cancer research already had been reported however in the journal nature and in various popular newspapers including the times more than five months earlier thus enthusiastic public attention induced a permanent rise in share prices even though no genuinely new information had been presented a central tenet of f inancial economics is that an asset should trade at the risk adjusted present value of its expected future cash f lows these expected future cash f lows exist in people s minds and do not normally lend themselves to direct observation an equilibrium price in a frictionless market does not tolerate disagreements among market participants if some people deem the price too low they will buy the asset if others think it is too high they will sell it short if necessary although the efficient markets hypothesis predicts that price changes are unpredictable it associates them with changes in traders beliefs about future cash f lows or the appropriate discount rate beliefs change with the arrival of new information thus in hindsight at least we should be able to ascribe price changes to the arrival of specific new information we examine this view in the context of a series of news reports in the media pertaining to entremed enmd a biotechnology company and other members of its sector the sunday may 3 1998 edition of the new york times reports on a recent breakthrough in cancer research and mentions enmd a company with licensing rights to the breakthrough kolata 1998 the story s impact on the stock prices was immediate huge and to a large extent permanent the new news content of the times story was nil though the substance of the story had been published as a scientific piece in nature boehm et al 1997 and in the popular press including the times itself wade 1997 more than five months earlier in november 1997

the time variation of risk and return in the foreign exchange and stock markets this paper attempts to determine whether the fluctuations of conditional first and second moments which are observed for many assets are consistent with the sharpelintner mossin capital asset pricing model we test the mean variance model under several different assumptions about the time variation of conditional second moments of returns using weekly data from july 1974 to december 1986 that include returns on a portfolio composed of dollar deutsche mark sterling and swiss franc assets together with the u s stock market the results indicate that estimated conditional variances cannot explain the observed time variation of risk premia rates of return on international financial assets are characterized by statistical properties that are quite common to all financial markets they are highly volatile and largely unpredictable these properties make it very difficult to extract statistically reliable estimates of systematic exchange rate and assetprice movements and are at the root of the generally poor empirical performance of international asset pricing models nevertheless two important results have been uncovered by empirical researchers and can be considered a fair characterization of the data a expected returns on foreign assets vary over time cumby and obstfeld 1981 and the numerous articles that followed recently surveyed by frankel and meese 1987 b the volatility of returns of foreign assets also changes over time cumby and obstfeld 1984 hodrick and srivastava 1984 and hsieh 1988 among others as giovannini and jorion 1987 suggest the

a failure inducement model of research and development expenditure abstract empirical evidence for the schumpeterian suggestion of a positive relationship between profitability and innovative effort is slim in fact the opposite is often suggested an alternative failure inducement hypothesis argues that firms make innovative efforts when performance falls below a minimum threshold resulting in a negative relationship between profitability and r d expenditures data on r d expenditures in italian industry in the early 1980s a period of severe economic crisis show that both hypotheses are relevant for firms whose profits are well above or well below average respectively

the role of dutch auctions and lotteries in shaping the art market s of 17th century holland abstract this article examines institution formation in the nascent art markets of 17th century amsterdam and haarlem in response to external and internal pressures on artists guilds in amsterdam poor quality imports often copies were touted as originals and sold in clandestine dutch auctions the deliberate confusion about quality imparted to the market features similar to those of akerlof s lemons model and a need for quality guarantees gave occasion to dealers in haarlem and other towns demand was viewed as fixed and guilds toughened restrictions on the supply side dissenters successfully used lotteries to show that demand can be engendered promotion was to become a key feature of later art markets

futures markets and commodity options hedging and optimality in incomplete markets abstract this paper examines the allocational roles of futures markets and commodity options in multi good and multi period economies in a continuous time model with time additive utilities and homogeneous beliefs trading in unconditional futures contracts the market portfolio and a riskless asset gives any pareto optimal allocation individuals optimal holdings of futures contracts in the continuous time model are related to their consumption bundles and to their risk tolerances it is shown that both hedging and reverse hedging behavior are possible in the general model with discrete trading options on portfolios of commodity options are shown to permit any unconstrained pareto optimal allocation

the influence of market demand upon innovation a critical review of some recent empirical studies abstract a number of recent empirical studies of technical change at the level of the individual firm have concluded that market demand is the dominant influence upon the innovation process calling forth innovations in market economies the pace of innovation in the private sector heavily influences the growth of national output and productivity and these studies and their conclusions have therefore received much attention having been extensively quoted in discussions of appropriate government policy for the encouragement of innovation this paper reviews a number of these studies and concludes that their findings and the interpretations of their findings in the secondary literature are seriously flawed and in many cases invalid the proposition that market demand governs the innovation process is by no means conclusively demonstrated in these studies and they are therefore inadequate and inappropriate guides for the formulation of policy most of the studies examined employ a working definition of demand factors which is so broad as to embrace a range of possible influences upon innovation which should more properly be classified elsewhere the concept of demand utilized in these studies bears little resemblance to the more restrictive and precise definition of market demand found in economics in addition the phenomena analyzed in these studies are a very heterogeneous lot the studies do not address identical empirical questions and their findings are as a result neither uniform nor unambiguous both demand and supply side influences are crucial to understanding the innovation process and it is the exclusive preoccupation with only one set of these forces which is criticized in this paper some implications of the criticism for government policy toward innovation are discussed in the conclusion

optimal currency hedge ratios and interest rate risk abstract the objective of this article is to provide a framework for the interpretation of the optimal currency hedge ratios on foreign investments taking into account interest rate risk this is made possible by using a continuous time setting in the spirit of merton 1969 we focus on the importance of the interest rate differential forward basis in setting the optimal currency hedge because of the influence of interest rates on exchange rates more specifically we consider two discount bonds a domestic and a foreign one which follow stochastic processes possibly correlated with the other state variables of the model it is shown that the optimal hedge ratio can be split into five components a a macro economic component which is a function of the volatility of the interest rate differential and its covariance with currency movements this term depends on the currency considered but not on the asset being hedged b an asset specific term which is directly related to the covariance of the foreign currency asset return with exchange and interest rate movements c a speculative term function of the investor s risk preference and of the conditional risk premium on the exchange rate and d two stochastic opportunity set hedging terms the analysis of the optimal hedge ratio is illustrated on the period december 1970 1989 for stock and bond investments in seven countries jel g15 f31

evaluation of swedish youth labor market programs this paper evaluates two swedish active labour market programmes for youth namely youth practice and labour market training a non parametric matching approach is applied to estimate the average p

the relationship between r d collaboration subsidies and r d performance empirical evidence from finland and germany this study focuses on the impact of innovation policies and r d collaboration in germany and finland we consider collaboration and subsidies as heterogeneous treatments and perform an econometric matching to analyze r d and patent activity at the firm level in general we find that collaboration has positive effects in germany subsidies for individual research do neither exhibit a significant impact on r d nor on patenting but the innovative performance could be improved by additional incentives for collaboration for finnish companies public funding is an important source of finance for r d without subsidies recipients would show less r d and patenting activity whilst those firms not receiving subsidies would perform significantly better if they were publicly funded copyright 2007 john wiley sons ltd

the private r d investment response to federal design and technical competitions it is the federal government s role to promote investment in research and development rd and 2 contracting with private firms and nonprofit organizations such as universities to perform rd the winning firm recovered its development costs in the form of profits on the sale of the airplanes and the losing firms did not recoup their r d investment mansfield 1971 p 122

an evaluation of the swedish system of active labour market programmes in the 1990s we investigate the presence of short and long term effects from joining a swedish labor market program vis a vis more intense job search in open unemployment overall the impact of the program system is found to have been mixed joining a program has increased employment rates among participants a result robust to a misclassification problem in the data on the other hand it has also allowed participants to remain significantly longer on unemployment benefits and more generally in the unemployment system this being particularly the case for those entitled individuals entering a program around the time of their unemployment benefits exhaustion

the impact of carbon emissions trading on the directed technical change in china abstract this paper focuses on whether carbon emissions trading cet has different impacts on the heterogeneous low carbon innovation and how cet affects the direction of technical change taking six cet pilot regions in china as research objectives we set two types of technology as the clean and the gray with cpc y02 patent codes and use the synthetic control method scm in quasi natural experiment moreover this paper analyzes how cet moderates the effects of other three factors that is control and command environment regulation foreign capital inflow and industry structure with different innovations the results show that the effects of cet on the direction of technical change are different across regions cet successfully induces technical change to the clean direction and restrains the gray direction in beijing and shanghai while promoting both innovations in tianjin and hubei only intensifying the gray in guangdong and chongqing these results indicate cet has a significant impact on both innovations but its impact on the direction of technical change seems to be neutral depending more on the balance between the new regulation and existing dependence on technological path in each region further research finds that cet amplifies the positive effect of industry structure upgrading on both kinds of innovations but the response of the clean is more sensitive than that of the gray moreover foreign capital inflow can promote the clean in the current period and inhibit the gray with lags and the significant interaction between cet and foreign capital inflow can not be found however the policy mixed cet with control and command regulation leads to more gray innovation the further analyses imply that cet can be a useful instrument leading to the right direction of technical change under certain backgrounds where industry structure is upgrading more open for foreign investment with less control and command regulations

assessing the policy mix of public support to business r d abstract this paper investigates whether the effectiveness of public support to business r d increases or decreases when firms benefit from different support schemes data on the amount received by individual firms in the available support schemes in belgium over the period 2003 2011 are matched with other firm level data estimations of this panel of firms permit to account for the time dimension and selection mechanism in public support as well as for observed and unobserved firm heterogeneity results on the impact of public support appear to depend on the econometric specification and estimation procedure that is considered robust results indicate that the effectiveness of r d support decreases when firms benefit from different schemes at the same time especially when firms combine subsidies with several tax benefits

characterizing the policy mix and its impact on eco innovation a patent analysis of energy efficient technologies abstract this paper provides an empirical investigation of the role played by selected characteristics of the policy mix in inducing innovation in energy efficiency technologies an original dataset covering 23 oecd countries over the period 1990 2010 combines the full set of policies in the energy efficiency domain for the residential sector with data on patents applied over the same period in this specific technological sector the econometric results suggest that when the policy mix is characterised by a more balanced use in demand pull and technology push instruments its positive effects on eco innovation tend to be greater moreover a more comprehensive policy mix is shown to be able to enhance innovation activities for the generation of new energy efficient technologies however the simple addition of an indiscriminate number of simultaneous policy instruments may reduce policy mix effectiveness finally the empirical findings confirm previous evidence on the importance of policy spillover effects and suggest that policy similarity between countries may represent an important aspect to be accounted for in policy mix design

the idiosyncratic volatility puzzle time trend or speculative episodes campbell lettau malkiel and xu 2001 document a positive trend in idiosyncratic volatility during the 1962 1997 period we show that by 2003 volatility falls back to pre 1990s levels furthermore we show that the increase and subsequent reversal is concentrated among firms with low stock prices and high retail ownership this evidence suggests that the increase in idiosyncratic volatility through the 1990s was not a time trend but rather an episodic phenomenon at least partially associated with retail investors results from cross sectional regressions conditional trend estimation stock split events and attention grabbing events are consistent with a retail trading effect the author 2009 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please email journals permissions oxfordjournals org oxford university press

evaluating the impact of r d tax credits on innovation a microeconometric study on canadian firms this study examines the effect of r d tax credits on innovation activities of canadian manufacturing firms over the 1997 1999 period the federal and provincial r d tax credit programs were used by more than one third of all manufacturing firms and by close to two thirds of firms in high technology sectors we investigate the average effect of r d tax credits on a series of innovation indicators such as number of new products sales with new products originality of innovation etc using a non parametric matching approach compared to a hypothetical situation in the absence of r d tax credits recipients of tax credits show significantly better scores on most but not all performance indicators we therefore conclude that tax credits increase the r d engagement at the firm level and that the r d activities induced by fiscal incentives lead to additional innovation output

differential interpretation of public signals and trade in speculative markets most models of trade in speculative markets assume that agents interpret public information identically we provide empirical evidence on the relation between the volume of trade and stock returns around public announcements and we argue that the evidence is inconsistent with this assumption we then develop a model of trade around public announcements that incorporates differential interpretations and is consistent with the observed volume return relation then we test the standard model of belief revision underlying most models of trade using stock brokerage research analysts earnings forecasts the hypthesis of identical interpretations seems inconsistent with the forecast revisions in these data

currency hedging for international portfolios this paper examines the benefits from currency hedging both for speculative and risk minimization motives in international bond and equity portfolios the riskreturn performances of globally diversified portfolios are compared with and without forward contracts over the period 1974 to 1990 inclusion of forward contracts results in statistically significant improvements in the performance of unconditional portfolios containing bonds conditional strategies are also implemented both in sample and out of sample and are shown to both significantly improve the risk return tradeoff of global portfolios and to outperform unconditional hedging strategies whether international portfolios should be hedged against currency risks is the subject of an active debate the theoretical side of the debate has been closely associated with two strands in the academic literature international asset pricing and optimal hedging in the futures markets in the international asset pricing model iapm of solnik 1974 optimal portfolios contain positions in forward contracts or equivalently foreign currency denominated bills these positions which can differ from the positions in foreign stocks have since been termed hedges black 1990 shows that under additional assumptions the hedge ratios should be identical for all investors regardless of their nationality universality and that investors should never fully hedge their foreign currency exposures similarly theoretical models from the futures literature produce demands for hedging instruments that contain both speculative and hedging components the empirical issue unanswered so far is whether adding forward contracts to international portfolios significantly improves the risk return profile of global investments empirical research has barely begun to respond to the challenges of theoretical models there exists little empirical evidence on either the relevance of black s universal hedge ratios or the optimality of hedge ratios less than one instead researchers have concentrated on the benefits of fully hedging exchange risk for example eun and resnick 1988 indicate that stock portfolios perform better when fully hedged but offer no statistical tests

do liquidity measures measure liquidity abstract given the key role of liquidity in finance research identifying high quality proxies based on daily as opposed to intraday data would permit liquidity to be studied over relatively long timeframes and across many countries using new measures and widely employed measures in the literature we run horseraces of annual and monthly estimates of each measure against liquidity benchmarks our benchmarks are effective spread realized spread and price impact based on both trade and quote taq and rule 605 data we find that the new effective realized spread measures win the majority of horseraces while the amihud 2002 illiquidity and stock returns cross section and time series effects journal of financial markets 5 31 56 measure does well measuring price impact

adverse selection in the market for slaves new orleans 1830 1860 this paper seeks to cast some light on the importance of adverse selection in competitive markets by examining the market for the sale of slaves in pre civil war new orleans estimates of the degree of adverse selection in the new orleans market are obtained by examining the relative prices of slaves from different regions of origin these estimates indicate that slaves brought to market may on average have been of 20 percent to 40 percent lower quality than the slave population in general and that good slaves were perhaps three times less likely to be sold than low quality ones

the currency hedging decision a search for synthesis in asset allocation many asset allocation and liability management decisions are controversial but the decision that frequently generates the most debate is the currency hedging decision strong feelings on currency exposure policy are usually based on the conviction that currency exposures should be determined by a simple mechanical process but not everyone advocates the same process a survey of the leading proposals to simplify the currency management process suggests that a baseline currency policy may lend itself to some mechanical rules but the rules are more complex than any of the widely advocated currency hedging policies suggest equity and fixed income managers as well as asset allocators will find currency issues easier to understand if they view currencies as they would view any other financial instrument the importance of currency management is clearer if a manager and client start from a 50 50 hedged unhedged currency benchmark and if currency and money market returns are combined the combination of currency and money market returns strips primary currency movements from stock and bond returns clarifying intermarket correlations and creating synthetic stock and bond futures portfolios no one can harbor illusions that this study or any similar effort can completely eliminate currency hedging controversies the argument has gone on too long and too many positions are ossified nonetheless most practitioners can understand the strengths and weaknesses of the various currency hedging viewpoints and the assumptions behind them can be evaluated dispassionately this dispassionate evaluation leads to a baseline currency policy but not to a rigid prescription for currency hedging designed to satisfy the demand for a simple rule the policy suggests an approach that can help a manager measure the cost or risk of a specific currency com

an analysis of the composition of r d spending research and development encompasses a myriad of activities generally research is the primary search for technical or scientific advancement and development is the translation of such advancement into product of process innovations the national science foundation has fostered an even finer breakdown basic research applied research and development in practice however r d is more heterogeneous than these labels imply the research fields associated with basic research include areas in both the physical and biological sciences applied research and development projects relate to product groups as diverse as all the activities in the industrial sector nevertheless most previous empirical studies of the microeconomic aspects of r d have treated r d spending as a single homogeneous activity consequently a generally acceptable set of variables has developed for explaining inter firm levels of r d spending but virtually nothing is known about the determinants of the inter firm composition of r d

market structure and incomplete information price formation in a real world repeated english auction abstract this paper examines the effect of buyer size on price formation in an english auction of used state police cars while open auctions generally favor competitive pricing bikhchandani 1988 develops a model of a second price common value auction in which bidders can use strategic behavior based on repeated sales to develop an aggressive reputation and as a result pay lower prices in equilibrium the paper tests this hypothesis by examining sales of 340 used automobiles sold at 13 public auctions conditional on the volume of purchases made by the three largest buyers at the auctions the empirical results show that the number of buyers plays a stronger role in price formation than does buyer size

reconceptualising the policy mix for innovation abstract recent years have seen the emergence take up and use of the term policy mix by innovation policy makers and by policy analysts and scholars alike imported from economic policy debates the term implies a focus on the interactions and interdependencies between different policies as they affect the extent to which intended policy outcomes are achieved however the meaning of the term remains ambiguous nonetheless we argue that the emergence of the policy mix concept into common use in the field of innovation policy studies provides us with a window of opportunity to reconsider some basic and often hidden assumptions in order to better deal with a messy and complex multi level multi actor reality we draw upon a range of literatures to re conceptualise the basic building blocks of innovation policy studies in order to arrive at a useful definition of policy mix tensions and interactions of different kinds across a series of dimensions we suggest that this reconceptualisation has important implications for the future scope and focus of prescriptive and analytical innovation policy studies

elements of a schumpeterian catalytic research and innovation policy in this article we take a fresh look at research and innovation r i hereinafter policy and define a new notion schumpeterian catalytic r i policy such policy style amends and enriches the new mission oriented framework for innovation policy by assigning more weight to the microeconomic dimension of private actors actions and by being more concerned with the temporary nature of interventions we relate our argument to recent empirical trends in productivity dynamics and innovative activities these suggest that an innovation slowdown is taking place and consequently that a renewed interest in the re direction rather than on the intensity of innovative activities is key to the design of r i policy capable to tackle current challenges we use the evidence to build a schematic theoretical framework to inform policy design and we outlined the defining features of our proposed policy style

do policy mix characteristics matter for low carbon innovation a survey based exploration of renewable power generation technologies in germany abstract policy mixes may play a crucial role in redirecting and accelerating innovation towards low carbon solutions thus addressing a key societal challenge towards this end some argue that the characteristics of such policy mixes matter greatly yet with little empirical evidence backing up such claims in this paper we explore this link between policy mix characteristics and low carbon innovation using the research case of the transition of the german electricity system towards renewable energy our empirical insights are based on an innovation survey administered to german manufacturers of renewable power generation technologies which builds on the community innovation survey for our purposes we adjusted the survey to better capture companies perceptions of policy mixes employing a bivariate tobit model we find evidence that companies perceptions regarding the consistency and credibility of the policy mix are positively associated with their innovation expenditures for renewable energies and this positive link intensifies when considering the mutual interdependence of these policy mix characteristics in contrast neither the comprehensiveness of the instrument mix nor the coherence of policy processes were found to be related to innovation expenditures overall these findings suggest that future research on low carbon and eco innovation should pay greater attention to the characteristics of policy mixes rather than focusing on policy instruments only finally our findings indicate a need to consider how policy may be measured in innovation surveys to generate better informed policy advice regarding the greening of innovation

auctions and bidding a primer maybe the contractor was right to think bid jobs are different but it is more likely that he suffered from too simple a view of what is involved in preparing a competitive bid our analysis will show that even an experienced estimator working in familiar terrain can lose money if he doesn t understand the subtleties of competitive bidding the phenomenon experienced by the painting contractor known as the winner s curse is just one of the surprising and puzzling conclusions that have been turned up by modern research into auctions another is the theoretical proposition supported also by some experimental evidence that for example a sealed bid treasury bill auction in which each buyer pays a price equal to the highest rejected bid would yield more revenue to the treasury than the current procedure in which the winning bidder pays the seemingly higher amount equal to his own bid there are also subtle results that demonstrate the equivalence of such apparently different institutions as the standard sealed bid auction in which the auctioneer seller sells the goods to the highest bidder for a price equal to his bid and the dutch auction in which the auctioneer seller begins by asking a high price and gradually lowers the price until

policy mixes for sustainability transitions an extended concept and framework for analysis reaching a better understanding of the policies and politics of transitions presents a main agenda item in the emerging field of sustainability transitions one important requirement for these transitions such as the move towards a decarbonized energy system is the redirection and acceleration of technological change for which policies play a key role in this regard several studies have argued for the need to combine different policy instruments in so called policy mixes however existing policy mix studies often fall short of reflecting the complexity and dynamics of actual policy mixes the underlying politics and the evaluation of their impacts in this paper we take a first step towards an extended interdisciplinary policy mix concept based on a review of the bodies of literature on innovation studies environmental economics and policy analysis the concept introduces a clear terminology and consists of the three building blocks elements policy processes and characteristics which can be delineated by several dimensions based on this we discuss its application as analytical framework for empirical studies analyzing the impact of the policy mix on technological change throughout the paper we illustrate the proposed concept by using the example of the policy mix for fostering the transition of the german energy system to renewable power generation technologies finally we derive policy implications and suggest avenues for future research

a microeconometric evaluation of the active labour market policy in switzerland in the second part of the 1990 s switzerland conducted an ambitious active labour market policy almp encompassing a wide variety of programmes we evaluate the effects of these programmes on the individual employment probability of potential participants our econometric analysis uses unusually informative data origi nating from administrative unemployment and social security records we apply a matching es timator adapted for the case of multiple programmes we find substantial positive effects for one particular programme that is a unique feature of the swiss almp it consists of a wage subsidy for temporary jobs in the regular labour market that would otherwise not be taken up by the unemployed we also find large negative effects for traditional employment programmes oper ated in sheltered labour markets for training courses the results are mixed doi 10 1111 1468 0297 00072 download internet appendix pdf 2 590 kb

who participates in r d subsidy programs the case of spanish manufacturing firms abstract empirical evidence on the effectiveness of r d subsidies to firms has produced mixed results so far one possible explanation is that firms and project selection rules may be quite heterogeneous both across agencies and across industries leading to different outcomes in terms of the induced additional private effort here we focus on the participation stage using a sample of spanish firms we test for differences across agencies and industries our results suggest that firms in the same industry face different hurdles to participate in different agencies programs that participation patterns may reflect a combination of agency goals and that patterns differ across high tech and low tech industries

innovation in times of crisis national systems of innovation structure and demand this article addresses the impact of the current economic downturn on innovation across europe using micro and macro data we investigate to what extent some structural characteristics of national systems of innovation along with demand affect firms persistency in terms of innovation investment it emerges that the effects of the economic downturn in terms of firms innovation investment are not the same across european countries the competences and quality of the human resources the specialization in the high technology sector together with the development of the financial system seem to be the structural factors which are able to offset the effect of the economic downturn on innovation investments of firms across europe finally some considerations about policies during recessions are discussed

r d subsidies external collaborative breadth differential gains and the role of collaboration experience abstract external collaboration breadth is important for firms to acquire the knowledge needed to innovate in this paper we combine cross sectional and longitudinal data from the spanish panel of technological innovation survey pitec to examine the indirect impact of r d subsidies on firm external collaboration breadth we contribute to understanding of the indirect impacts of r d subsidies by first providing strong evidence of an economically significant average positive impact of r d subsidies on firm external collaboration breadth second our results advance understanding of the differential impacts of r d subsidies by revealing the vast heterogeneity of the impact at the firm level where approximately only half of treated firms experience a positive collaboration impact from r d subsidies while the remainder experience no impact or a negative effect finally we advance understanding of the characteristics explaining the differential impact of r d subsidies on external collaboration breadth by utilising the organisational learning literature to demonstrate the important role of firm collaboration experience

equilibrium exchange rate hedging we assume a world like the one that gives the capital asset pricing model but with many goods and many countries we assume that investors in a given country have homothetic utility functions with the same weights and a currency that has a sure endof period value using a price index with those weights siegel s paradox derived from jensen s inequality makes investors want a positive amount of exchange risk when average risk tolerance is the same across countries every investor will hold the same mix of market risk through the world market portfolio of all assets and exchange risk in a diversified basket of foreign currencies in fact the ratio of exchange risk to market risk is equal to the average investor s risk tolerance we can write the ratio of exchange risk to market risk and the fraction of the market s exchange risk that investors hedge as depending on an average of world market risk premia an average of world market volatilities and an average of exchange rate volatilities the weights in these averages are the same as the weights of the different countries in the currency basket given these averages the ratio and the fraction hedged will not depend directly on exchange rate means or covariances in equilibrium we can use the ratio of exchange risk to market risk to measure average risk tolerance in this model risk tolerance is observable

hedonic prices property values and measuring environmental benefits a survey of the issues this paper provides a review of the theoretical basis and the assumptions required in order to use hedonic price equations derived from property value data to obtain measures of the prices and the inverse demand functions for environmental amenities such as air quality it also includes a review and assessment of existing empirical applications of the technique to problems of air and water quality and urban noise

realizing innovative public waterworks aligning administrative capacities in collaborative innovation processes abstract the importance of government support for innovation is widely acknowledged but the way governments support innovation is changing we discern three trends local innovation policies are gaining importance governments increasingly choose a bottom up tailor made approach to support specific innovations and there is more collaboration between public and private actors we analyse these trends and investigate how modern governments employ their administrative capacities to support innovation we conduct a comparative case study of four attempts to realize integrated energy and waterworks combining water safety and sustainable energy generation despite broad support attempts to realize such innovative multifunctional works in the netherlands have had varying degrees of success we examine the governmental support for these attempts and assess how governments actions affect the innovation process we conclude that all governmental administrative capacities have to be employed and that public alignment is crucial for a synchronized endeavour we elucidate the growing importance and special role of local authorities in innovation and demonstrate how modern governments spur innovation with tailor made support in close collaboration with the private sector we further conclude that encouraging interaction is an insufficient public contribution to innovation and that expectations must be carefully managed to avoid role confusion in public private innovation

universal hedging optimizing currency risk and reward in international equity portfolios investors can increase their returns by holding foreign stocks in addition to domestic ones they can also gain by taking the appropriate amount of exchange risk but what amount is appropriate assume that investors see the world in light of their own consumption goods and count both risk and expected return when figuring their optimum hedges assume that they share common views on stocks and currencies and that markets are liquid and there are no barriers to international investing in this perfect world it is possible to derive a formula for the optimal hedge ratio this formula requires three basic inputs the average across countries of the expected returns on the world market portfolio the average across countries of the volatility of the world market portfolio and the average across all pairs of countries of exchange rate volatility these values can be estimated from historical data the formula in turn gives the circumstances for three rules 1 hedge foreign equity 2 hedge less than 100

demand side vs supply side technology policies hidden treatment and new empirical evidence on the policy mix this paper provides new empirical evidence about the impact of various technological policies upon firms innovative behaviour we take into consideration the role of policies for innovative activities and we focus on their interaction while supply side policies such as r d subsidies and tax credits have been both extensively discussed in the literature and empirically investigated the analysis of innovative public procurement is a growing trend in the literature which still lacks robust empirical evidence in this paper we replicate the existing results on supply side policies surmise fresh empirical evidence on the outcome of innovative public procurement and address the issue of possible interaction among the various tools when controlling for the interaction with other policies supply side subsidies cease to be as effective as reported in previous studies and innovative public procurement seems to be more effective than other tools the preliminary evidence suggests that technology policies exert the highest impact when different policies interact

asset float and speculative bubbles we model the relationship between asset float tradeable shares and speculative bubbles investors with heterogeneous beliefs and short sales constraints trade a stock with limited float because of insider lockups a bubble arises as price overweighs optimists beliefs and investors anticipate the option to resell to those with even higher valuations the bubble s size depends on float as investors anticipate an increase in float with lockup expirations and speculate over the degree of insider selling consistent with the internet experience the bubble turnover and volatility decrease with float and prices drop on the lockup expiration date

innovation procurement as capability building evaluating innovation policies in eight central and eastern european countries abstract after decades of impressive growth the new member states of the european union are once again in transition but this time from imitation to innovation driven competitiveness this paper evaluates the relationship between both public funding and public procurement for innovation ppi and firm level innovation output and outcome additionality in eight central and eastern european countries matching estimates on a sample of 41 623 firms suggest that ppi has a large effect on innovation and output and the highest additionality is sometimes achieved when firms receive both financial support and innovation oriented public procurement we argue that policy makers aiming to strengthen indigenous innovation capabilities should place stronger emphasis on ppi

the effects of mission oriented public r d spending on private industry this paper addresses the question of how government mission oriented r d spending affects private r d spending and thereby the total investment in technology the problem is approached within the context of the capital asset pricing model in which the firm views investment projects in terms of their risk and return characteristics the firm is assumed to produce jointly an established product and an r d intensive product where the latter generates an additional output of technology or spillover that is used as an input into the former by investing in r d the firm alters its risk and return characteristics in two ways through the expected profits from the sale of the r d intensive good and through the expected profits from the spillover in this model government mission oriented r d contracting affects the firm by enabling it to separate to some extent these two sources of risk and return the main implication of the analysis is that while some public crowding out of private r d is likely this is almost certain to be incomplete the empirical evidence from the u s transport industry supports the model and suggests that each dollar of government funding adds around 92 cents to total r d spending crowding out private investment by as little as eight percent private companies in the united states perform a great deal of publicly funded r d contract work notably in connection with defence space exploration energy and health this work is generally believed to make two contributions to society a direct effect of providing technology intensive public goods and an indirect or spillover effect into the technology content of the private goods produced by the firms which undertake the government contracts for example space technology has produced heart pacemakers alongside cryogenic insulation materials while automatic instrument landing systems benefit holidaymakers as well as air force pilots

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting

inventor networks in renewable energies the influence of the policy mix in germany technological change and gains in efficiency of renewable power generation technologies are to a large extent driven by governmental support various policy instruments that can broadly be categorized as technology push demand pull or systemic constitute part of the policy mix for renewable energies our goal is to gain insights into the influence of this policy mix on the intensity and organization of inventive activities for wind power and photovoltaics in germany since the 1980s we examine the effect of different instruments on the size and structure of co inventor networks based on patent data our results indicate notable differences between the technologies the network size for wind power is driven by technology push and systemic instruments while in photovoltaics demand pull is decisive for network growth by and large the instruments complement each other and form a consistent mix of policy instruments the structure of the networks is driven by demand pull for both technologies systemic instruments increase interaction especially in the wind power network and are complementary to demand pull in fostering collaboration

bidding behaviour in second price auctions rare stamp sales 1923 1937 we find significant asymmetries between bid functions of the low and high mail bidders in auctions of rare stamps over the extremes of the business cycle 1923 1937 we also find a strong negative relationship between the number of bidders and the bids suggesting that the common value characteristics of stamps outweigh their private value characteristics finally we show that stamp returns are positively related to inflation and to stock yields and negatively to interest rates these last results correspond to other studies of stamps over more stable sample periods

speculation spillovers this paper demonstrates that speculative activities can be contagious and spill over across markets specifically we test the hypothesis that during china s warrants bubble period speculative activities in the warrants market grabbed investors attention and caused them to trade more speculatively in the underlying stocks consistent with this hypothesis we find that turnover and return volatility of the underlying stocks are positively associated with the warrants unexpected turnover and price deviation from their fundamental values during the previous day controlling for information driven trading and hedging motives and that such a spillover effect is more pronounced when warrants attract more investor attention data as supplemental material are available at http dx doi org 10 1287 mnsc 2014 1914 this paper was accepted by wei xiong finance

modes of governance for municipal energy efficiency services the case of led street lighting in germany energy efficiency retrofits are often impeded by high perceived investment risks long payback periods and a lack of skills at the municipal level these issues are particularly pronounced as procuring implementing and managing retrofits can exceed existing municipal governance capacities the diffusion of municipal led street lighting as a replacement for conventional lighting serves as an example this paper argues that technological e g complexity and maturity economic e g selling services vs products and financing costs institutional e g property situation and contracts and competency barriers to retrofitting e g lack of measurement capacity and qualified facilitators translate into transaction costs we develop a taxonomy of appropriate modes of municipal retrofitting governance based on transaction costs economics the findings indicate that more market based solutions energy performance contracts in particular can facilitate the procurement of innovative energy efficiency retrofitting solutions and associated investments among municipalities if neutral tenders open book accounting municipal ownership and intermediary organisations allow municipalities to choose appropriate governance structures for particular technologies and retrofits

child auctions in nineteenth century sweden an analysis of price differences during the nineteenth century destitute and or orphan swedish children were boarded out as a part of that time s public assistance the families to which they were allocated were determined by means of english auctions this paper studies the price differences among such children using empirical data from 601 auctions price is regressed on variables related both to the buyer and to the child the results suggest that variables related to the children s characteristics were important and that the willingness to take a poor or orphan child was dependent on the foster parents uses for a child in the household children who were old enough to be used as shepherd boys or girls were easily placed it was worse with those who were feeble incapacitated blind sick mentally deranged or confined to their beds they were useless to farmers and others as a rule the most miserable were boarded out to the poorest of the non property owners julius ejdestam 1969 the poor s sweden my translation