Lagged foreign stock returns in excess of the U.S. stock market return are informative aboutnquarterly exchange rate movements. A past high foreign stock return relative to the U.S. signals a foreign currency depreciation and hence low returns on the foreign currency.nConditional on stock return differentials, the consumption-based CAPM (CCAPM) explains the cross-sectional dispersion in U.S. dollar exchange rates. The CCAPM captures more than 40 percent of the variation in foreign currency returns scaled with the respective stock returnndifferential on a country-by-country basis.
The decomposition of national CAPM market betas of European countries’ value and growthnportfolio returns into cashflow and discount rate news driven components reveals that i) highnaverage returns on value portfolios are associated with disproportionately high sensitivity to national cashflow news which corroborates recent evidence for the U.S. and ii) two-beta variants of national CAPMs capture the cross-sectional dispersion in European stock returns. The latter finding is suggestive of relatively well integrated stock markets among the core European countries and reflects basic asset pricing theory. One (national) discount factornshould price any (international) asset.
Temporary fluctuations of the U.S. consumption-wealth ratio, cay, predict excess returns onninternational stock markets at the business cycle frequency. This finding is the reflection of a common, temporary component in national stock markets. Exposure to this common component explains up to 60 percent of the covariation among long-horizon returns on the G7nstock markets for the time period from 1973 to 2005. The impact of the common componentnon stock market comovement is particularly pronounced in the period from 1990 to 2005.
Non-monetary incentives in the form of awards have so far escaped the attention ofneconomists despite their widespread use. This paper presents an experiment conductednonline at IBM to assess the impact of these kinds of extrinsic incentives. Introducing a hypothetical award has statistically significant effects on stated contributions to a publicngood. Our design allows the estimation of the impact of different award characteristicsnrelated to, for example, how public or how valuable the award is. We illustrate thesenfindings by providing predictions about the behavior induced by a new award at IBM.
Strongly periodic series occur frequently in many disciplines. This paper reviews one specific approach to analyzing such series viz. the harmonic regression approach.In this paper the five major methodsnsuggested under this approach are critically reviewed and compared, and their empirical potential highlighted via two applications. The out-of-sample forecast comparisons are made using the Superior Predictive Ability test, which specifically guards against the perils of data snooping. Certain tentative conclusions are drawn regarding the relative forecasting ability of the different methods.
Wir untersuchen die Struktur der Verwaltungs- und Verfahrenskosten der öffentlichen Unfallkassen in Deutschland. Als Datengrundlage dienen die Zahlen aus den Geschäfts- undnRechnungsergebnissen der Unfallträger der öffentlichen Hand für die Jahre 1998 bis 2005. Die Ergebnisse einer Regressionsanalyse liefern Aufschlüsse über Kostentreibernund Skaleneffekte. Die Verwaltungs- und Verfahrenskosten konnten durchnmeldepflichtige Unfälle in der Allgemeinen und Schülerunfallversicherung sowie die Präventionsintensität der Unfallkassen sehr gut erklärt werden.nDie Arbeit hat drei Hauptergebnisse. Erstens sind die Unfallkassen sehr heterogennbezüglich ihrer Verwaltungs- und Verfahrenskosten. Zweitens haben diese Kostenunterschiede nichts mit der Größe der Unfallkassen zu tun: es kann keinerlei Evidenz für Kostenvorteile größerer Unfallkassen (Skaleneffekte) gefunden werden. Drittens ziehen Schülerunfälle erheblich geringere Kosten in der Verwaltung nach sich als Unfälle in der Allgemeinen Unfallversicherung. Ferner gibt es Hinweise, dass eine höhere Präventionsintensität einer Unfallkasse auch höhere Kosten in der Verwaltung nach sich zieht.
Idiosyncratic consumption risk explains more than 60 percent of the cross-sectional variation in quarterly exchange rate changes and currency returns. Our results are obtained from data of 13 industrialized countries and arenbased on an international version of the consumption capital asset pricing model (CCAPM) in which we account for international consumption heterogeneity. We use this framework to dissect the consumption-exchange rate anomaly, the empirical fact that international variation in purchasing power alone does not appear to account for differences in consumption growth rates across countries. As an explanation for this phenomenon, we explore the presence of currency risk premia that also lead to departures from uncovered interest parity (UIP). We decompose the cross-sectional variation in consumption into one component that is due to cross-country differences in inflation rates and a second component that is due to international variation in nominal interest rates. We interpret these factors as indicators of goods and financial market segmentation respectively. We find that bothnhelp account to virtually equal parts for the cross-section of exchange rate changes. Interestingly, the price of aggregate consumption risk has declined over the 1990s, in line with a growing literature that documents a growingninternationalisation of country portfolios over this period.
A large experimental and empirical literature on asymmetric dominance and attraction effects shows that the probability that an alternative is chosen can increase if additional alternatives become available. Hence context matters and choices and, therefore, market shares can not be accurately described by standard choice models where individuals choose the alternative that yields the highest utility. This paper analyzes a simple procedural choice model. Individuals determine their choice by a sequence of binary comparisons. The model offers an intuitive explanation for violations of regularity such as the attraction and the asymmetric dominance effect and shows their relation to the similarity effect. The model analyzes a new rationale why context matters. The model is applied to explain primacy and recency effects and to derive implications with respect to product design.
Deterrence has been a crucial element in fighting terrorism, both in politics and in rational choice analyses of terrorism. However, there are two strategies that are superior to deterrence. The first one is to make terrorist attacks less devastating and less attractive to terrorists through decentralization. The second one is to raise the opportunity cost – rather than the material cost – for terrorists. These alternative strategies will effectively dissuade potential terrorists. It is here argued that they not only apply to society as a whole but can also usefully be applied by business enterprises.
Teamwork and cooperation between workers can be of substantial value to a firm, yet the level of worker cooperation often varies between individual firms. We show that these differences can be the result of labor market competition if workers have heterogeneous preferences and preferences are private information. In our model there are two types of workers: selfish workers who only respond to monetary incentives, and conditionally cooperative workers who might voluntarily provide team work if their co-workers do the same. We show that there is no pooling in equilibrium, and that workers self-select into firms that differ in their incentives as well as their resulting level of team work. Our model can explain why firms develop different corporate cultures in an ex-ante symmetric environment. Moreover, the results show that, contrary to first intuition, labor market competition does not destroy but may indeed foster within-firm cooperation.
