Ethical differentiation and market behavior: An experimental approach

Does ethical differentiation of products affect market behavior? We examined this issue in triopolistic experimental markets where producers set prices. One producer s costs were higher than the others. In two treatments, the additional costs were attributed tocompliance with ethical guidelines. In the third, no justification was provided. Manyparticipants playing the role of consumers reduced their experimental gains by purchasing the ethically differentiated product at a higher price whether or not they knew the amount of extra cost. Individual differences were important (students of business/economics paid smaller premia than others). Finally, we speculate about the observed demand function for ethics and emphasize the use of experimental methodology to complement empirical studies designed to assess the potential market for ethically differentiated products.

Employment risk, unemployment insurance and search strategies: a disaggregated equilibrium approach with application to the Swiss labour market in the 1990-ies

The Organization of the Thesis The remainder of the thesis comprises five chapters and a conclusion. The next chapter formalizes the envisioned theory into a tractable model. Section 2.2 presents a formal description of the model economy: the individual heterogeneity, the individual objective, the UI setting, the population dynamics and the equilibrium. The welfare and efficiency criteria for qualifying various equilibrium outcomes are proposed in section 2.3. The fourth section shows how the model-generated information can be computed. Chapter 3 transposes the model from chapter 2 in conditions that enable its use in the analysis of individual labor market strategies and their implications for the labor market equilibrium. In section 3.2 the Swiss labor market data sets, stylized facts, and the UI system are presented. The third section outlines and motivates the parameterization method. In section 3.4 the model's replication ability is evaluated and some aspects of the parameter choice are discussed. Numerical solution issues can be found in the appendix. Chapter 4 examines the determinants of search-strategic behavior in the model economy and its implications for the labor market aggregates. In section 4.2, the unemployment duration distribution is examined and related to search strategies. Section 4.3 shows how the search- strategic behavior is influenced by the UI eligibility and section 4.4 how it is determined by individual heterogeneity. The composition effects generated by search strategies in labor market aggregates are examined in section 4.5. The last section evaluates the model's replication of empirical unemployment escape frequencies reported in Sheldon [67]. Chapter 5 applies the model economy to examine the effects on the labor market equilibrium of shocks to the labor market risk structure, to the deep underlying labor market structure and to the UI setting. Section 5.2 examines the effects of the labor market risk structure on the labor market equilibrium and the labor market strategic behavior. The effects of alterations in the labor market deep economic structural parameters, i.e. individual preferences and production technology, are shown in Section 5.3. Finally, the UI setting impacts on the labor market are studied in Section 5.4. This section also evaluates the role of the UI authority monitoring and the differences in the Way changes in the replacement rate and the UI benefit duration affect the labor market. In chapter 6 the model economy is applied in counterfactual experiments to assess several aspects of the Swiss labor market movements in the nineties. Section 6.2 examines the two equilibria characterizing the Swiss labor market in the nineties, the " growth" equilibrium with a "moderate" UI regime and the "recession" equilibrium with a more "generous" UI. Section 6.3 evaluates the isolated effects of the structural shocks, while the isolated effects of the UI reforms are analyzed in section 6.4. Particular dimensions of the UI reforms, the duration, replacement rate and the tax rate effects, are studied in section 6.5, while labor market equilibria without benefits are evaluated in section 6.6. In section 6.7 the structural and institutional interactions that may act as unemployment amplifiers are discussed in view of the obtained results. A welfare analysis based on individual welfare in different structural and UI settings is presented in the eighth section. Finally, the results are related to more favorable unemployment trends after 1997. The conclusion evaluates the features embodied in the model economy with respect to the resulting model dynamics to derive lessons from the model design." The thesis ends by proposing guidelines for future improvements of the model and directions for further research.

Pricing anomalies in the Finnish stock market

The aim of this thesis is to examine whether the pricing anomalies exists in the Finnish stock markets by comparing the performance of quantile portfolios that are formed on the basis of either individual valuation ratios, composite value measures or combined value and momentum indicators. All the research papers included in the thesis show evidence of value anomalies in the Finnish stock markets. In the first paper, the sample of stocks over the 1991-2006 period is divided into quintile portfolios based on four individual valuation ratios (i.e., E/P, EBITDA/EV, B/P, and S/P) and three hybrids of them (i.e. composite value measures). The results show the superiority of composite value measures as selection criterion for value stocks, particularly when EBITDA/EV is employed as earnings multiple. The main focus of the second paper is on the impact of the holding period length on performance of value strategies. As an extension to the first paper, two more individual ratios (i.e. CF/P and D/P) are included in the comparative analysis. The sample of stocks over 1993- 2008 period is divided into tercile portfolios based on six individual valuation ratios and three hybrids of them. The use of either dividend yield criterion or one of three composite value measures being examined results in best value portfolio performance according to all performance metrics used. Parallel to the findings of many international studies, our results from performance comparisons indicate that for the sample data employed, the yearly reformation of portfolios is not necessarily optimal in order to maximally gain from the value premium. Instead, the value investor may extend his holding period up to 5 years without any decrease in long-term portfolio performance. The same holds also for the results of the third paper that examines the applicability of data envelopment analysis (DEA) method in discriminating the undervalued stocks from overvalued ones. The fourth paper examines the added value of combining price momentum with various value strategies. Taking account of the price momentum improves the performance of value portfolios in most cases. The performance improvement is greatest for value portfolios that are formed on the basis of the 3-composite value measure which consists of D/P, B/P and EBITDA/EV ratios. The risk-adjusted performance can be enhanced further by following 130/30 long-short strategy in which the long position of value winner stocks is leveraged by 30 percentages while simultaneously selling short glamour loser stocks by the same amount. Average return of the long-short position proved to be more than double stock market average coupled with the volatility decrease. The fifth paper offers a new approach to combine value and momentum indicators into a single portfolio-formation criterion using different variants of DEA models. The results throughout the 1994-2010 sample period shows that the top-tercile portfolios outperform both the market portfolio and the corresponding bottom-tercile portfolios. In addition, the middle-tercile portfolios also outperform the comparable bottom-tercile portfolios when DEA models are used as a basis for stock classification criteria. To my knowledge, such strong performance differences have not been reported in earlier peer-reviewed studies that have employed the comparable quantile approach of dividing stocks into portfolios. Consistently with the previous literature, the division of the full sample period into bullish and bearish periods reveals that the top-quantile DEA portfolios lose far less of their value during the bearish conditions than do the corresponding bottom portfolios. The sixth paper extends the sample period employed in the fourth paper by one year (i.e. 1993- 2009) covering also the first years of the recent financial crisis. It contributes to the fourth paper by examining the impact of the stock market conditions on the main results. Consistently with the fifth paper, value portfolios lose much less of their value during bearish conditions than do stocks on average. The inclusion of a momentum criterion somewhat adds value to an investor during bullish conditions, but this added value turns to negative during bearish conditions. During bear market periods some of the value loser portfolios perform even better than their value winner counterparts. Furthermore, the results show that the recent financial crisis has reduced the added value of using combinations of momentum and value indicators as portfolio formation criteria. However, since the stock markets have historically been bullish more often than bearish, the combination of the value and momentum criteria has paid off to the investor despite the fact that its added value during bearish periods is negative, on an average.

The Anchoring Bias of Investors and the 52-Week High Momentum Strategy in the OMX Helsinki Stock Exchange: Psychological Approach to Market Efficiency

The behavioural finance literature expects systematic and significant deviations from efficiency to persist in securities markets due to behavioural and cognitive biases of investors. These behavioural models attempt to explain the coexistence of intermediate-term momentum and long-term reversals in stock returns based on the systematic violations of rational behaviour of investors. The study investigates the anchoring bias of investors and the profitability of the 52-week momentum strategy (GH henceforward). The relatively highly volatile OMX Helsinki stock exchange is a suitable market for examining the momentum effect, since international investors tend to realise their positions first from the furthest security markets by the time of market turbulence. Empirical data is collected from Thomson Reuters Datastream and the OMX Nordic website. The objective of the study is to provide a throughout research by formulating a self-financing GH momentum portfolio. First, the seasonality of the strategy is examined by taking the January effect into account and researching abnormal returns in long-term. The results indicate that the GH strategy is subject to significantly negative revenues in January, but the strategy is not prone to reversals in long-term. Then the predictive proxies of momentum returns are investigated in terms of acquisition prices and 52-week high statistics as anchors. The results show that the acquisition prices do not have explanatory power over the GH strategy’s abnormal returns. Finally, the efficacy of the GH strategy is examined after taking transaction costs into account, finding that the robust abnormal returns remain statistically significant despite the transaction costs. As a conclusion, the relative distance between a stock’s current price and its 52-week high statistic explains the profits of momentum investing to a high degree. The results indicate that intermediateterm momentum and long-term reversals are separate phenomena. This presents a challenge to current behavioural theories, which model these aspects of stock returns as subsequent components of how securities markets respond to relevant information.

Co-creating value with customers as a new approach of entering new market

Global trends associated with development of information technology, globalization, industrial and economic changes are influencing on company and customer domains and thus transforming company-customer relationship. The company centric paradigm with a strong product focus shifts to a customer oriented one with a strong emphasis on customer collaboration. As a result, the customer role changes from a passive observer to an active player. Moreover, global trends contribute to transformation of competitive environment making it tougher and simplifying an access to resources previously considered as unique. All that factors push the companies towards cooperation with customers in order to identify unarticulated needs and finding the best possible solution to existing customer problems. The Master’s Thesis is done for Outotec (Lappeenranta) which considers extension of dewatering business in Russian coal market. Research aims to identify key features of coal preparation and dewatering of fine coal and tailings in Russian preparation plants; analyze the state of Russian coal market and evaluate market potential for Outotec dewatering solutions. The study has a qualitative nature and implements an action research methodology that involves both creation of knowledge and introduction of changes into the system. The base for taking actions is formed by theoretical framework that targets on describing company - customer interaction and has selected co-creation as the most appropriate method of customer involvement. The integration of co-creation approach into an action research cycle allows not only fulfilling the research objectives but also facilitates organizational learning and intraorganizational collaboration, assists in establishing customer contacts and making the first steps into the market, bringing new joint projects to the company and opening real business opportunities.

Characteristic Approach to Predicting Analysts’ Forecast Errors in the Finnish Market

Extensive literature shows that analysts’ forecasts and recommendations are often biased. Thus, it is important for the financial market to be able to recognize this bias to be able to correctly valuate public companies. This thesis uses characteristic approach, which was introduced by So (2013, pp. 615-640), to forecast analysts’ forecast errors and tests if predictable forecast error is fully incorporated into share prices. Data is collected of listed Finnish companies. Thesis’ timeframe spans over ten years from 2004 to 2013 consisting of 788 firm-years. Although there is earlier evidence that the characteristic approach is able to predict analysts’ forecast errors, no support for this is found in the Finnish market. This thesis contributes to the current knowledge by showing that the characteristic approach does not work universally as such but requires development to work especially in the smaller markets.

Évaluation environnementale de systèmes de construction de cloisons résidentielles : réflexions sur l'adaptabilité et la flexibilité

L’introduction du développement durable apporte de nouvelles préoccupations environnementales au niveau de la construction et de la rénovation résidentielles, une industrie qui représente un marché économique important au Canada. En plus d’engendrer plusieurs impacts sur l’environnement, la conception actuelle ne permet pas d’accommoder le changement initié par l’évolution des pratiques, les avancées technologiques, mais également par l’évolution des patrons de vie des occupants. Dans un premier temps, la revue de littérature dresse le portrait de l’industrie de la construction, rénovation et démolition (CRD) au Canada, ainsi que le profil de gestion des débris de CRD. Ensuite, une analyse documentaire traite de différents outils de conception développés pour améliorer la performance du secteur : 3RV-E, écoconception, écoconstruction et LEED®. De plus, la recension des écrits permet également de cerner les concepts d’adaptabilité et de flexibilité au niveau du bâtiment et dans les approches et mouvements émergents en architecture. Cette démarche nous amène à établir l’hypothèse que l’intégration des critères d’adaptabilité et de flexibilité au niveau du logement aurait pour effet d’améliorer l’adéquation entre les besoins évolutifs des occupants et les nouvelles considérations environnementales. Au niveau méthodologique, l’analyse du cycle de vie simplifiée par l’Eco-indicator99 encadre l’analyse environnementale de l’ossature de trois types de construction de cloison. De cette évaluation, on conclut que c’est la construction traditionnelle à ossature de bois qui produit le moins d’impacts. Dans l’ordre suivant la proposition de construction de cloison à ossature d’aluminium, plus adaptable et flexible, et finalement la construction à ossature d’acier qui est le système le plus dommageable. Par contre, en intégrant le facteur temporel, cette analyse démontre que l’intégration de l’adaptabilité et de la flexibilité procure plusieurs cycles de vie et de rénovation au produit et à ses composantes. Finalement, ces concepts offrent également le potentiel de diminuer les impacts générés par la construction et la rénovation, un constat qui mériterait d’être abordé dans une approche plus systémique.

Évaluation économique des services écosystémiques dans la région de Montréal : analyse spatiale et préférences exprimées

Les services écosystémiques (SE) réfèrent aux bénéfices que produisent et soutiennent la biodiversité et les écosystèmes et qui profitent à l’être humain. Dans beaucoup de cas, ils ne sont pas pris en compte dans le système économique. Cette externalisation des SE engendre des décisions sur l’utilisation du territoire et des ressources naturelles qui ignorent leur contribution à la qualité de vie des communautés. Afin notamment de sensibiliser l’opinion publique à l’importance des SE et de mieux les intégrer dans les processus décisionnels, ont été développées des démarches d’évaluation économique des SE. Dans cette thèse, nous avons cherché à comprendre à la fois comment l’utilisation passée et actuelle des sols dans la région de Montréal affecte la valeur des SE et comment ces aménités naturelles sont perçues et valorisées par la population, dans une perspective d’aménagement futur du territoire. Pour ce faire, nous avons utilisé deux approches : l’analyse spatiale recourant aux systèmes d’information géographique et l’analyse des préférences exprimées par des techniques d’enquête. Pour l’analyse spatiale, nous avons combiné des analyses cartographiques à des valeurs monétaires associées aux SE publiées dans la littérature. Nous avons alors estimé la valeur des écosystèmes d’un territoire par le transfert de bénéfices, de prix de marchés directs et de coûts évités. Cette démarche nous a permis de comprendre la relation entre l’utilisation actuelle du territoire du Grand Montréal écologique et la valeur des services fournis par les écosystèmes, que nous avons estimée à 2,2 milliards de dollars par année. Elle nous a permis aussi de mesurer les effets sur la valeur des SE du changement d’utilisation des sols entre les années 1960 et 2010. Nous avons montré que malgré différentes politiques de contrôle et d’encadrement de l’étalement urbain au cours de cette période, les pertes économiques non marchandes liées aux SE s’élèvent à 236 millions de dollars par année. Pour l’analyse des préférences exprimées, nous avons utlilisé deux méthodes, l’évaluation contingente et le choix multi-attributs, avec l’objectif de mesurer le consentement à payer de répondants pour des variations dans l’aménagement du territoire. Nous avons montré d’une part que les répondants valorisent significativement l’incidence des pratiques agro-environnementales sur la qualité de l’environnement et des paysages en consentant à payer entre 159 et 333 dollars par ménage par année pour une amélioration de la diversité du paysage agricole. D’autre part, leur volonté à payer pour l’amélioration de l’état des milieux humides du Québec est estimée entre 389 et 455 dollars par ménage par année. L’utilisation conjointe des deux méthodes nous a permis d’en comparer les résultats. Nous avons en outre démontré que le choix du format de question de valorisation de l’évaluation contingente affecte la convergence des résultats. Enfin, nous avons proposé des pistes de recherches futures portant sur l’intégration des démarches d’analyse biophysique, économique et politique dans des outils de prise de décision mieux adaptés à la dynamique des écosystèmes, de la biodiversité et des communautés humaines.

Arbitrage Pricing Theory and Return Generating Process: A Macroeconomic Approach to Indian Stock Market

A study focusing on the identification of return generating factors and to the extent of their influence on share prices the outcome will be a tool for investment analysis in the hands of investors portfolio managers and mutual funds who are mostly concerned with changing share prices. Since the study takes into account the influence of macroeconomic variables on variations in share returns by using the outcome the government can frame out suitable policies on long term basis and that will help in nurturing a healthy economy and resultant stock market. As every company management tries to maximize the wealth of the share holders a clear idea about the return generating variables and their influence will help the management to frame various policies to maximize the wealth of the shareholders.

Competition between HMO and PPO: A Two-Sided Market Approach

We set-up a two-sided market framework to model competition between a Prefered Provider Organization (PPO) and a Health Maintenance Organization (HMO). Both health plans compete to attract policyholderson one side and providers on the other side. The PPO, which is characterized by a higher diversity of providers, attracts riskier policyholders. Our two-sided framework allows to examine the consequences of this risk segmentation on the providers’ side, especially in terms of remuneration. The outcome of competition mainly depends on two effects: a demand effect, influenced by the value put by policyholders on providers access and an adverse selection effect, captured by the characteristics of the health risk distribution. If the adverse selection effect is too strong, the HMO gets a higher profit in equilibrium. On the contrary, if the demand effect dominates, the PPO profit is higher in spite of the unfavorable risk segmentation. We believe that our model, by highlighting the two-sided market structure of the health plans’ competition, provides new insights to understand the increase in the PPOs’ market share observed during the last decade in the US.

Echoes of the crises in Spain and US in the Colombian labor market : a differences-in-differences approach

This paper presents evidence of the effect of the recent phases of the business cycle in Spain and United States, proxied by their respective unemployment rates, on the labor market of Colombian cities with high migration tradition. These countries are the main destination for labor Colombian migrants. Using information from the household survey between 2006 and 2011 for urban areas in Colombia and a differences-in-differences approach we find that unemployment rates of those countries negatively affect the probability and the amount of remittances received by Colombian households living in areas with high and moderate migration tradition. At a second stage we provide evidence that unemployment rates of those countries positively affect the labor force participation decisions in Colombian regions with the highest migration tradition.