The impact of news on measures of undiversifiable risk: evidence from the UK stock market

Using UK equity index data, this paper considers the impact of news on time varying measures of beta, the usual measure of undiversifiable risk. The empirical model implies that beta depends on news about the market and news about the sector. The asymmetric response of beta to news about the market is consistent across all sectors considered. Recent research is divided as to whether abnormalities in equity returns arise from changes in expected returns in an efficient market or over-reactions to new information. The evidence suggests that such abnormalities may be due to changes in expected returns caused by time-variation and asymmetry in beta.

Modelling the implied volatility of options on long gilt futures

This paper investigates the properties of implied volatility series calculated from options on Treasury bond futures, traded on LIFFE. We demonstrate that the use of near-maturity at the money options to calculate implied volatilities causes less mis-pricing and is therefore superior to, a weighted average measure encompassing all relevant options. We demonstrate that, whilst a set of macroeconomic variables has some predictive power for implied volatilities, we are not able to earn excess returns by trading on the basis of these predictions once we allow for typical investor transactions costs.

Last charge of the knights? Iraq, Afghanistan and the special relationship

At the heart of the ‘special relationship’ ideology, there is supposed to be a grand bargain. In exchange for paying the ‘blood price’ as America's ally, Britain will be rewarded with exceptional influence over American foreign policy and its strategic behaviour. Soldiers and statesman continue to articulate this idea. Since 9/11, the notion of Britain playing ‘Greece’ to America's ‘Rome’ gained new life thanks to Anglophiles on both sides of the Atlantic. One potent version of this ideology was that the more seasoned British would teach Americans how to fight ‘small wars’ in Iraq and Afghanistan, thereby bolstering their role as tutor to the superpower. Britain does derive benefits from the Anglo-American alliance and has made momentous contributions to the wars in Afghanistan and Iraq. Yet British solidarity and sacrifices have not purchased special influence in Washington. This is partly due to Atlanticist ideology, which sets Britain unrealistic standards by which it is judged, and partly because the notion of ‘special influence’ is misleading as it loses sight of the complexities of American policy-making. The overall result of expeditionary wars has been to strain British credibility in American eyes and to display its lack of consistent influence both over high policy and the design and execution of US military campaigns. While there may be good arguments in favour of the UK continuing its efforts in Afghanistan, the notion that the war fortifies Britain's vicarious world status is a dangerous illusion that leads to repeated overstretch and disappointment. Now that Britain is in the foothills of a strategic defence review, it is important that the British abandon this false consciousness.

Executive pay and performance: did bankers’ bonuses cause the crisis?

This paper examines the pay-performance relationship between executive cash compensation (including bonuses) and company performance for a sample of large UK companies, focusing particularly on the financial services industry, since incentive misalignment has been blamed as one of the factors causing the global financial crisis of 2007–2008. Although we find that pay in the financial services sector is high, the cash-plus-bonus pay-performance sensitivity of financial firms is not significantly higher than in other sectors. Consequently, we conclude that it unlikely that incentive structures could be held responsible for inducing bank executives to focus on short-term results.

Effect of drying methods on the phenolic constituents of meadowsweet (Filipendula ulmaria) and willow (Salix alba)

The objective of this study was to investigate the effect of drying conditions on the phenolic constituents and colour of extracts of organically grown white willow and meadowsweet for incorporation into a functional beverage with potential anti-inflammatory properties. The herbs were freeze-dried, air-dried, oven or tray-dried at 30 or 70 °C. The drying kinetics of the herbs was first determined. Both drying temperature and method had a significant effect (p ≤ 0.05) on the drying rate, the samples tray-dried had a faster drying rate than those oven-dried. Results show that for meadowsweet and willow, freeze-drying and oven or tray drying at 30 °C had no significant effect on the phenolic constituents (e.g. total phenols, salicylates, quercetin) or the colour of the extracts in comparison to traditional air-drying. Although increasing the drying temperature to 70 °C resulted in an increase in the drying rate of both herbs it also led to the loss of some phenolic compounds. Also, the extracts from both herbs dried at 70 °C were significantly (p ≤ 0.05) redder than the other drying methods. Therefore, tray drying these herbs at low temperatures may reduce drying time without having a significant effect on the phenolic content and colour of the extracts.