Long-term equity anticipation securities and stock market volatility dynamics

Recent empirical findings suggest that the long-run dependence in U.S. stock market volatility is best described by a slowly mean-reverting fractionally integrated process. The present study complements this existing time-series-based evidence by comparing the risk-neutralized option pricing distributions from various ARCH-type formulations. Utilizing a panel data set consisting of newly created exchange traded long-term equity anticipation securities, or leaps, on the Standard and Poor's 500 stock market index with maturity times ranging up to three years, we find that the degree of mean reversion in the volatility process implicit in these prices is best described by a Fractionally Integrated EGARCH (FIEGARCH) model. © 1999 Elsevier Science S.A. All rights reserved.

Operational monitoring and forecasting of bathing water quality through exploiting satellite Earth observation and models: The AlgaRisk demonstration service

Coastal zones and shelf-seas are important for tourism, commercial fishing and aquaculture. As a result the importance of good water quality within these regions to support life is recognised worldwide and a number of international directives for monitoring them now exist. This paper describes the AlgaRisk water quality monitoring demonstration service that was developed and operated for the UK Environment Agency in response to the microbiological monitoring needs within the revised European Union Bathing Waters Directive. The AlgaRisk approach used satellite Earth observation to provide a near-real time monitoring of microbiological water quality and a series of nested operational models (atmospheric and hydrodynamic-ecosystem) provided a forecast capability. For the period of the demonstration service (2008–2013) all monitoring and forecast datasets were processed in near-real time on a daily basis and disseminated through a dedicated web portal, with extracted data automatically emailed to agency staff. Near-real time data processing was achieved using a series of supercomputers and an Open Grid approach. The novel web portal and java-based viewer enabled users to visualise and interrogate current and historical data. The system description, the algorithms employed and example results focussing on a case study of an incidence of the harmful algal bloom Karenia mikimotoi are presented. Recommendations and the potential exploitation of web services for future water quality monitoring services are discussed.

Evaluating machine-learning techniques for recruitment forecasting of seven North East Atlantic fish species

The effect of different factors (spawning biomass, environmental conditions) on recruitment is a subject of great importance in the management of fisheries, recovery plans and scenario exploration. In this study, recently proposed supervised classification techniques, tested by the machine-learning community, are applied to forecast the recruitment of seven fish species of North East Atlantic (anchovy, sardine, mackerel, horse mackerel, hake, blue whiting and albacore), using spawning, environmental and climatic data. In addition, the use of the probabilistic flexible naive Bayes classifier (FNBC) is proposed as modelling approach in order to reduce uncertainty for fisheries management purposes. Those improvements aim is to improve probability estimations of each possible outcome (low, medium and high recruitment) based in kernel density estimation, which is crucial for informed management decision making with high uncertainty. Finally, a comparison between goodness-of-fit and generalization power is provided, in order to assess the reliability of the final forecasting models. It is found that in most cases the proposed methodology provides useful information for management whereas the case of horse mackerel is an example of the limitations of the approach. The proposed improvements allow for a better probabilistic estimation of the different scenarios, i.e. to reduce the uncertainty in the provided forecasts.

Technology and the architecture of markets: re-configuring the Canadian equity market

This paper examines the relation between technical possibilities, liberal logics, and the concrete reconfiguration of markets. It focuses on the enrolling of innovations in communication and information technologies into the markets traditionally dominated by stock exchanges. With the development of capacities to trade on-screen, the power of incumbent market makers has been challenged as a less stable array of competing quasi-public and private marketplaces emerges. Developing a case study of the Toronto Stock Exchange, I argue that narrative emphasis on the performative power of sociotechnical innovations, the deterritorialisation of financial relations, and the erosion of state capacities needs qualification. A case is made for the importance of developing an understanding of: the spaces of encounter between emerging social technologies and property rights, rules of exchange, and structures of governance; and the interplay of orderings of different institutional composition and spatial reach in the reconfiguration of market architectures. Only then can a better grasp be gained of the evolving dynamics between making markets, the regulatory powers of the state, and their delimitations.

De la cooperativa agroalimentaria a la "learning netchain". Hacia un planteamiento teorico interorganizativo e interpersonal

Se propone un planteamiento teórico/conceptual para determinar si las relaciones interorganizativas e interpersonales de la netchain de las cooperativas agroalimentarias evolucionan hacia una learning netchain. Las propuestas del trabajo muestran que el mayor grado de asociacionismo y la mayor cooperación/colaboración vertical a lo largo de la cadena están positivamente relacionados con la posición horizontal de la empresa focal más cercana del consumidor final. Esto requiere una planificación y una resolución de problemas de manera conjunta, lo que está positivamente relacionado con el mayor flujo y diversidad de la información/conocimiento obtenido y diseminado a lo largo de la netchain. Al mismo tiempo se necesita desarrollar un contexto social en el que fluya la información/conocimiento y las nuevas ideas de manera informal y esto se logra con redes personales y, principalmente, profesionales y con redes internas y, principalmente, externas. Todo esto permitirá una mayor satisfacción de los socios de la cooperativa agroalimentaria y de sus distribuidores y una mayor intensidad en I+D, convirtiéndose la netchain de la cooperativa agroalimentaria, así, en una learning netchain.

The Development of Credit Unions and their Role in Tackling Financial Exclusion

The government has been actively encouraging the development of credit unions to help the financially excluded. However, rather than stimulating credit union development, government grants can erode the community self-help ethos on which credit unions are founded. Policies should be formulated which encourage credit union development based on a membership drawn from a cross-section of the population.

International order flows: Explaining equity and exchange rate returns

Macroeconomic models of equity and exchange rate returns perform poorly at high frequencies. The proportion of daily returns that these models explain is essentially zero. Instead of relying on macroeconomic determinants, we model equity price and exchange rate behavior based on a concept from microstructure – order flow. The international order flows are derived from belief changes of different investor groups in a two-country setting. We obtain a structural relationship between equity returns, exchange rate returns and their relationship to home and foreign equity market order flow. To test the model we construct daily aggregate order flow data from 800 million equity trades in the U.S. and France from 1999 to 2003. Almost 60% of the daily returns in the S&P100 index are explained jointly by exchange rate returns and aggregate order flows in both markets. As predicted by the model, daily exchange rate returns and order flow into the French market have significant incremental explanatory power for the daily S&P returns. The model implications are also validated for intraday returns.

Do benchmark African equity indices exhibit the stylized facts?

This paper investigates if benchmark African equity indices exhibit the stylized facts reported for financial time-series returns. The returns distributions of the Africa All-Share, Large, Medium and Small Company Indices were found to be leptokurtotic, had fat-tails, over time experienced volatility clustering and exhibited long memory in volatility. Both the All-Share and Large Company Indices were found to exhibit leverage effects. In contrast, positive shocks had a greater impact on future volatility for the Small Company Index which implies a reverse leverage effect. This finding could reflect a bull/bubble market for small capitalisation stocks in Africa.

Information Disclosure, Market Discipline and the Management of Bank Capital: Evidence from the Chinese Financial Sector

Is there evidence that market forces effectively discipline risk management behaviour within Chinese financial institutions? This study analyses information from a comprehensive sample of Chinese banks over the 1998-2008 period. Market discipline is captured through the impact of four sets of factors namely, market concentration, interbank deposits, information disclosure, and ownership structure. We find some evidence of a market disciplining effect in that: (i) higher (lower) levels of market concentration lead banks to operate with a lower (higher) capital buffer; (ii) joint-equity banks that disclose more information to the public maintain larger capital ratios; (iii) full state ownership reduces the sensitivity of changes in a bank's capital buffer to its level of risk;(iv) banks that release more transparent financial information hold more capital against their non-performing loans. © 2010 Springer Science+Business Media, LLC.

The rate of return on equity across industrial sectors on the British stock market, 1825-70

This article assesses the contribution of the various industrial sectors to the growth of the British equity market in the 1825–70 period. It also provides estimates of the rates of return on these industrial sectors in this period. The article then proceeds to examine whether differences in rates of return across the various sectors can be explained by risk or other financial factors. One of the main findings is that the relatively high rates of return in the banking, insurance, and miscellaneous sectors appear to be in some measure explained by the presence of extended liability and uncalled capital.

New Financial Elites, or Financial Dualism in Historical perspective? An Extended Reply to Folkman, Froud, Johal and Williams

This paper challenges the recent suggestion that a new financial elite has evolved which is able to capture substantial profit shares for itself. Specifically, it questions the assumption that new groups of financial intermediaries have increased in significance primarily because there is evidence that various types of financial speculators have played a similarly extensive role at several junctures of economic development. The paper then develops the alternative hypothesis that, rather than being a recent development, the rise of these financial intermediaries is a cyclical phenomenon which is linked to specific regimes of capital accumulation. The hypothesis is underpinned by historical data from the US National Income and Product Accounts for the period from 1930 to 2000, which suggest that the activities of `mainstream' financial intermediaries have been accompanied by the frequently countercyclical activities of a `speculative' sector of security and commodity brokers. Based on the combination of this qualitative and quantitative evidence, the paper concludes that the rise of a speculative financial sector is a potentially recurrent phenomenon which is linked to periods of economic restructuring and turmoil.

The Diffusion of Risks in Public Private Partnership Contracts

Purpose The UK government argues that the benefits of public private partnership (PPP) in delivering public infrastructure stem from: transferring risks to the private sector within a structure in which financiers put their own capital at risk; and, the performance based payment mechanism, reinforced by the due diligence requirements imposed by the lenders financing the projects (HM Treasury, 2010). Prior studies of risk in PPPs have investigated ‘what’ risks are allocated and to ‘whom’, that is to the public or the private sector. The purpose of this study is to examine ‘how’ and ‘why’ PPP risks are diffused by their financiers. Design/methodology/approach This study focuses on the financial structure of PPPs and on their financiers. Empirical evidence comes from interviews conducted with equity and debt financiers. Findings The findings show that the financial structure of the deals generates risk aversion in both debt and equity financiers and that the need to attract affordable finance leads to risk diffusion through a network of companies using various means that include contractual mitigation through insurance, performance support guarantees, interest rate swaps and inflation hedges. Because of the complexity this process generates, both procurers and suppliers need expensive expert advice. The risk aversion and diffusion and the consequent need for advice add cost to the projects impacting on the government’s economic argument for risk transfer. Limitations and implications The empirical work covers the private finance initiative (PFI) type of PPP arrangements and therefore the risk diffusion mechanisms may not be generalisable to other forms of PPP, especially those that do not involve the use of high leverage or private finance. Moreover, the scope of this research is limited to exploring the diffusion of risk in the private sector. Further research is needed on how risk is diffused in other settings and on the value for money implication of risk diffusion in PPP contracts. Originality/value The expectation inherent in PPP is that the private sector will better manage those risks allocated to it and because private capital is at risk, financiers will perform due diligence with the ultimate outcome that only viable projects will proceed. This paper presents empirical evidence that raises questions about these expectations. Key words: public private partnership, risk management, diffusion, private finance initiative, financiers

Private equity and entrepreneurial management in management buy-outs

Critics claim that short-term profit orientation and high deal price strategies of private equity (PE) firms can negatively affect the ability of management buyouts to initiate and sustain entrepreneurial management. This study investigates this claim by comparing effects of majority PE backed and other buy-outs at different levels of financial leverage on post buy-out increases in entrepreneurial management. We propose that PE can be used as an organizational refocusing device that simultaneously increases entrepreneurial and administrative management. We find that majority PE-backed buy-outs significantly increase entrepreneurial management practices. Furthermore, the increased financial leverage positively affects administrative management in management buy-outs. However, the effect of high financial leverage is larger for majority PE-backed buy-outs. These results support the notion that PE firms help buy-out companies develop ambidextrous organizational change: i.e. simultaneously develop entrepreneurial and administrative management practices. The findings have important implications for practitioners and policy makers.

A constraints-based resource discovery model for multi-provider cloud environments

Increasingly infrastructure providers are supplying the cloud marketplace with storage and on-demand compute resources to host cloud applications. From an application user's point of view, it is desirable to identify the most appropriate set of available resources on which to execute an application. Resource choice can be complex and may involve comparing available hardware specifications, operating systems, value-added services, such as network configuration or data replication, and operating costs, such as hosting cost and data throughput. Providers' cost models often change and new commodity cost models, such as spot pricing, have been introduced to offer significant savings. In this paper, a software abstraction layer is used to discover infrastructure resources for a particular application, across multiple providers, by using a two-phase constraints-based approach. In the first phase, a set of possible infrastructure resources are identified for a given application. In the second phase, a heuristic is used to select the most appropriate resources from the initial set. For some applications a cost-based heuristic is most appropriate; for others a performance-based heuristic may be used. A financial services application and a high performance computing application are used to illustrate the execution of the proposed resource discovery mechanism. The experimental result shows the proposed model could dynamically select an appropriate set of resouces that match the application's requirements.

A lesson in business: cost-effectiveness analysis of a novel financial incentive intervention for increasing physical activity in the workplace

Background: Recently both the UK and US governments have advocated the use of financial incentives to encourage healthier lifestyle choices but evidence for the cost-effectiveness of such interventions is lacking. Our aim was to perform a cost-effectiveness analysis (CEA) of a quasi-experimental trial, exploring the use of financial incentives to increase employee physical activity levels, from a healthcare and employer’s perspective.

Methods: Employees used a ‘loyalty card’ to objectively monitor their physical activity at work over 12 weeks. The Incentive Group (n=199) collected points and received rewards for minutes of physical activity completed. The No Incentive Group (n=207) self-monitored their physical activity only. Quality of life (QOL) and absenteeism were assessed at baseline and 6 months follow-up. QOL scores were also converted into productivity estimates using a validated algorithm. The additional costs of the Incentive Group were divided by the additional quality adjusted life years (QALYs) or productivity gained to calculate incremental cost effectiveness ratios (ICERs). Cost-effectiveness acceptability curves (CEACs) and population expected value of perfect information (EVPI) was used to characterize and value the uncertainty in our estimates.

Results: The Incentive Group performed more physical activity over 12 weeks and by 6 months had achieved greater gains in QOL and productivity, although these mean differences were not statistically significant. The ICERs were £2,900/QALY and £2,700 per percentage increase in overall employee productivity. Whilst the confidence intervals surrounding these ICERs were wide, CEACs showed a high chance of the intervention being cost-effective at low willingness-to-pay (WTP) thresholds.

Conclusions: The Physical Activity Loyalty card (PAL) scheme is potentially cost-effective from both a healthcare and employer’s perspective but further research is warranted to reduce uncertainty in our results. It is based on a sustainable “business model” which should become more cost-effective as it is delivered to more participants and can be adapted to suit other health behaviors and settings. This comes at a time when both UK and US governments are encouraging business involvement in tackling public health challenges.