Comparing different explanations of the volatility trend

We analyze the puzzling behavior of the volatility of individual stock returns over the past few decades. The literature has provided many different explanations to the trend in volatility and this paper tests the viability of the different explanations. Virtually all current theoretical arguments that are provided for the trend in the average level of volatility over time lend themselves to explanations about the difference in volatility levels between firms in the cross-section. We therefore focus separately on the cross-sectional and time-series explanatory power of the different proxies. We fail to find a proxy that is able to explain both dimensions well. In particular, we find that Cao et al. [Cao, C., Simin, T.T., Zhao, J., 2008. Can growth options explain the trend in idiosyncratic risk? Review of Financial Studies 21, 2599–2633] market-to-book ratio tracks average volatility levels well, but has no cross-sectional explanatory power. On the other hand, the low-price proxy suggested by Brandt et al. [Brandt, M.W., Brav, A., Graham, J.R., Kumar, A., 2010. The idiosyncratic volatility puzzle: time trend or speculative episodes. Review of Financial Studies 23, 863–899] has much cross-sectional explanatory power, but has virtually no time-series explanatory power. We also find that the different proxies do not explain the trend in volatility in the period prior to 1995 (R-squared of virtually zero), but explain rather well the trend in volatility at the turn of the Millennium (1995–2005).

Corporate governance, accounting and finance: a review

We review accounting and finance research on corporate governance (CG). In the course of our review, we focus on a particularly vexing issue, namely endogeneity in the relationships between CG and other matters of concern to accounting and finance scholars, and suggest ways to deal with it. Given the advent of large commercial CG databases, we also stress the importance of how CG is measured and in particular, the construction of CG indices, which should be sensitive to local institutional arrangements, and the need to capture both internal and external aspects of governance. The ‘stickiness’ of CG characteristics provides an additional challenge to CG scholars. Better theory is required, for example, to explain whether various CG practices substitute for each other or are complements. While a multidisciplinary approach to developing better theory is never without its difficulties, it could enrich the current body of knowledge in CG. Despite the vastness of the existing CG literature, these issues do suggest a number of avenues for future research.

Identity management : strengthening one-time password authentication through usability

Usability in HCI (Human-Computer Interaction) is normally understood as the simplicity and clarity with which the interaction with a computer program or a web site is designed. Identity management systems need to provide adequate usability and should have a simple and intuitive interface. The system should not only be designed to satisfy service provider requirements but it has to consider user requirements, otherwise it will lead to inconvenience and poor usability for users when managing their identities. With poor usability and a poor user interface with regard to security, it is highly likely that the system will have poor security. The rapid growth in the number of online services leads to an increasing number of different digital identities each user needs to manage. As a result, many people feel overloaded with credentials, which in turn negatively impacts their ability to manage them securely. Passwords are perhaps the most common type of credential used today. To avoid the tedious task of remembering difficult passwords, users often behave less securely by using low entropy and weak passwords. Weak passwords and bad password habits represent security threats to online services. Some solutions have been developed to eliminate the need for users to create and manage passwords. A typical solution is based on generating one-time passwords, i.e. passwords for single session or transaction usage. Unfortunately, most of these solutions do not satisfy scalability and/or usability requirements, or they are simply insecure. In this thesis, the security and usability aspects of contemporary methods for authentication based on one-time passwords (OTP) are examined and analyzed. In addition, more scalable solutions that provide a good user experience while at the same time preserving strong security are proposed.

The mobile phone : the new communication drum of Papua New Guinea

This thesis examines the role of mobile telephony in rural communities in Papua New Guinea (PNG). It is a threshold study which reports on research conducted in the earliest stages of mobile phone adoption in these areas. It explores the ways in which this new technology changes people’s lives, social structures and relationships. The research focuses on non-urban communities, which previously had little or no access to modern communication technologies, but which are in some cases still using traditional forms of communication such as drums. It has found that the introduction of mobile telecommunications has generally been viewed positively, although several negative concerns have been strongly felt. Specific benefits related to enhanced communication with relatives and friends living away from home villages, and use of the technology in time-critical emergencies or crises. Difficulties have arisen with respect to the cost of owning and operating a handset, as well as financial and logistical challenges when recharging handset batteries, particularly in areas with no mains electricity supply. Perceived damaging effects of mobile phone access related to sex, crime and pornography. The changes taking place are described through a social lens, by foregrounding the perceptions of villagers. The perspectives of key informants, such as telecommunication company managers, are also discussed. Employing the technique of triangulation (using different methods and sources) has helped to validate the findings of the research project. The sources constantly overlap and agree on the main themes, such as those outlined above. PNG is a developing country which performs poorly on a wide range of development indicators. A large majority of the people live outside of the major towns and cities. It is therefore worthwhile investigating the introduction of mobile phone technology in rural areas. These areas often have poor access to services, including transport, health, education and banking. Until 2007, communities in such regions fell outside of mobile phone coverage areas. In the case of all ten villages discussed in this thesis, there has never been any landline telephone infrastructure available. Therefore, this research on mobile phones is in effect documenting the first ever access to any kind of phone in these communities. This research makes a unique contribution to knowledge about the role of communication in PNG, and has implications for policy, practice and theory. In the policy arena, the thesis aids understanding of the impact which communication sector competition and regulation can have on rural and relatively isolated communities. There are three practical problems which have emerged from the research: cost, battery recharging difficulties and breakage are all major obstacles to uptake and use of mobile telephony in rural communities. Efforts to reduce usage costs, enable easier recharging, and design more robust handsets would allow for increased utilisation of mobile phones for a range of purposes. With respect to the realm of theory, this research sits amongst the most recent scholarship in the mobile phone field, located within the broader communication theory area. It recommends cautionary reading of any literature which suggests that mobile phones will reduce poverty and increase incomes in poor, rural communities in developing countries. Nonetheless, the present research adds weight to mobile phone studies which suggest that the primary advantages of mobile phones in such settings are for the satisfactions of communication of itself, and for social interaction among loved ones.

An analysis of the qualitative characteristics of management commentary reporting by New Zealand companies

The narrative section of annual reports has considerable value to its user groups, such as financial analysts and investors (Tiexiera, 2004; Barlett and Chandler, 1997, IASB, 2006). This narrative section including chairpersons’/presidents’ statement contains twice the quantity of information than the financial statements section (Smith and Taffler, 2000). However, the abundance of information does not necessarily enhance the quality of such information (IASB, 2006). This issue of qualitative characteristics has been long foregone by researchers. This issue has attracted the attention of IASB (2006). Following the dearth in research in regard to qualitative characteristics of reporting this paper explores whether investors’ required qualitative characteristics as outlined by the IASB (2006) have been satisfied in management commentary section of New Zealand companies’ annual reports. Our result suggests that the principal stakeholders’, that is, investors’ qualitative characteristics requirements have been partially met in this section of annual reports. The qualitative characteristic of ‘relevance’ and ‘supportability’ have been satisfied in more annual reports compared to that of ‘balance’ and ‘comparability.’

The taxation of multinational banks : alternative apportionment through a unitary taxation regime aligning with economic reality

The taxation of multinational banks currently is governed by the general principles of international tax. However, it is arguable that there are characteristics exclusive to multinational banks that may warrant the consideration of a separate taxing regime. This article argues that because of the unique nature of multinational banks, the traditional international tax rules governing jurisdiction to tax and allocation of income do not produce a result which is optimal, as it does not reflect economic reality. That is, the current system does not produce a result that accurately reflects the economic source of the income or the location of the economic activity. The suggested alternative is unitary taxation using global formulary apportionment. Formulary apportionment is considered as an alternative that reflects economic reality by recognising the unique nature of multinational banks and allocating the income to the location of the economic activity. The unique nature of multinational banking is recognised in the fact that formulary apportionment does not attempt to undertake a transactional division of a highly integrated multinational entity. Rather, it allocates income to the jurisdictions based on an economically justifiable formula. Starting from this recognition, the purpose of this article is to demonstrate that formulary apportionment is a theoretically superior (or optimal) model for the taxation of multinational banks. An optimal regime, for the purposes of this article, is considered to be one that distributes the taxing rights in an equitable manner between the relevant jurisdictions, while, simultaneously allowing decisions of the international banks to be tax neutral. In this sense, neutrality is viewed as an economic concept and equity is regarded as a legal concept. A neutral tax system is one in which tax rules do not affect economic choices about commercial activities. Neutrality will ideally be across jurisdictions as well as across traditional and non-traditional industries. The primary focus of this article is jurisdictional neutrality. A system that distributes taxing rights in an equitable manner between the relevant jurisdictions ensures that each country receives its fair share of tax revenue. Given the increase in multinational banking, jurisdictions should be concerned that they are receiving their fair share. Inter-nation equity is concerned with re-determining the proper division of the tax base among countries. Richard and Peggy Musgrave argue that sharing of the tax base by countries of source should be seen as a matter of inter-nation equity requiring international cooperation. The rights of the jurisdiction of residency will also be at issue. To this extent, while it is agreed that inter-nation equity is an essential attribute to an international tax regime, there is no universal agreement as to how to achieve it. The current system attempts to achieve such equity through a combined residency and source regime, with the transfer pricing rules used to apportion income between the relevant jurisdictions. However, this article suggests, that as an alternative to the current regime, equity would be achieved through formulary apportionment. Opposition to formulary apportionment is generally based on the argument that it is not a theoretically superior (or optimal) model because of the implementation difficulties. Yet these are two separate issues. As such, this article is divided into two core parts. The first part examines the theoretical soundness of the formulary apportionment model concluding that it is theoretically superior to the arm’s length pricing requirement of the traditional transfer pricing regime. The second part examines the practical implications of accepting formulary apportionment as an optimal model with a view to disclosing the issues that arise when a formulary apportionment regime is adopted. Prior to an analysis of the theoretical and practical application of formulary apportionment to multinational banks, the unique nature of these banks is considered. The article concludes that, while there are significant implementation, compliance, and enforcement issues to overcome, the unitary taxation model may be theoretically superior to the current arm’s length model which applies to multinational banks. This conclusion is based on the unitary taxation model providing greater alignment with the unique features of these banks.

Taxation of multinational banks : using formulary apportionment to reflect economic reality (Part 2)

As stated in Part 1 of this article, formulary appointment does not attempt to undertake a transactional division of a highly integrated multinational entity; rather, it allocates income to the jurisdictions based on economically justifiable formula. This article argues that the unitary taxation model is superior to the current arms-lenght model for the taxation of multinational banks despite significant implementation, complicance and enforcement issues. Part one of the article gave some background on the taxation of multinational banks, followed by a discussion of their uniqueness, and the theoretical benefits of the unitary tax model for multinational banking. Part 2 below covers the practical implications of accepting formulary apportionment as an 'optimal' regime for taxing multinational banks.

SOA for business networks - service delivery framework

The next generation of SOA needs to scale for flexible service consumption, beyond organizational boundaries and current B2B applications, into communities, eco-systems, and business networks. In the wider and, ultimately, global settings, new capabilities are needed so that business partners can efficiently and reliably enable, adapt, and expose services where they can be discovered, ordered, consumed, metered, and paid for, through new applications and opportunities, driven by third parties in the global "village". This trend is already underway, in different ways, through various early adopter market segments. For the small medium enterprises segment, Google, Intuit-Microsoft, and others have launched appstores, through which an open-ended array of hosted applications are sourced from the development community and procured as maketplace commondities. In the corporate sector, the marketplace model and business network hubs are being put in place on top of connectivity and network orchestration investments for capitalizing services as tradable assets, seen in banking/finance (e.g. American Express Intelligent Marketplace), logistics (e.g., the E2open hub), and the public sector (e.g., UK DirectGov whole-of-government citizen services delivery).