The Impact of Political Risk on the Volatility of Stock Returns: the Case of Canada

This paper examines the impact of political risk in Canada on the volatility of stock returns. Our results suggest that political news associated with a possible separation of Quebec from Canada plays an important role in the volatility of stock returns. We also show that the volatility of stock returns varies with the degree of a firm’s exposure to political risk, namely, the structure of assets and the extent of foreign involvement.

Testing mean-variance efficiency in CAPM with possibly non-gaussian errors: an exact simulation-based approach

In this paper we propose exact likelihood-based mean-variance efficiency tests of the market portfolio in the context of Capital Asset Pricing Model (CAPM), allowing for a wide class of error distributions which include normality as a special case. These tests are developed in the framework of multivariate linear regressions (MLR). It is well known however that despite their simple statistical structure, standard asymptotically justified MLR-based tests are unreliable. In financial econometrics, exact tests have been proposed for a few specific hypotheses [Jobson and Korkie (Journal of Financial Economics, 1982), MacKinlay (Journal of Financial Economics, 1987), Gibbons, Ross and Shanken (Econometrica, 1989), Zhou (Journal of Finance 1993)] most of which depend on normality. For the gaussian model, our tests correspond to Gibbons, Ross and Shanken's mean-variance efficiency tests. In non-gaussian contexts, we reconsider mean-variance efficiency tests allowing for multivariate Student-t and gaussian mixture errors. Our framework allows to cast more evidence on whether the normality assumption is too restrictive when testing the CAPM. We also propose exact multivariate diagnostic checks (including tests for multivariate GARCH and multivariate generalization of the well known variance ratio tests) and goodness of fit tests as well as a set estimate for the intervening nuisance parameters. Our results [over five-year subperiods] show the following: (i) multivariate normality is rejected in most subperiods, (ii) residual checks reveal no significant departures from the multivariate i.i.d. assumption, and (iii) mean-variance efficiency tests of the market portfolio is not rejected as frequently once it is allowed for the possibility of non-normal errors. -- In diesem Papier schlagen wir exakte likelihood-basierte Tests auf Mittelwert-Varianz- Effizienz im Rahmen des CAPM vor. Dabei wird eine breite Klasse von Verteilungen für den stochastischen Term zugelassen. Normalverteilung ist ein Spezialfall. Die Tests werden im Rahmen von multivariablen linearen Regressionen (MLR) entwickelt. Bekanntlich sind Standardtests, die auf MLR basieren und asymptotisch gerechtfertigt werden, nicht zuverlässig. In der Finanzökonometrie sind exakte Tests für einige wenige Hypothesen vorgeschlagen worden. Die meisten hängen von der Annahme der Normalverteilung ab (Jobson und Korkie (1982), Mac Kinley (1987), Gibbons, Ross und Shanken (1989), Zhou (1993)). Für das gaussianische Modell entsprechen unsere Tests denen von Gibbons, Ross und Shanken. Im nichtgaussianischen Modell betrachten wir Mittelwert-Varianz-Effizienz-Tests, wobei multivariate-Student-t und ?gemischte? Normalverteilungen zugelassen werden. Unser Ansatz gibt mehr Aufschluß darüber, ob die Annahme der Normalverteilung zu restriktiv ist, wenn das CAPM gestestet wird. Wir schlagen auch exakte multivariate Diagnosen (einschließlich Tests für multivariate GARCH-Modelle und multivariate Verallgemeinerungen der bekannten Varianz- Relationen-Tests) sowie Tests auf die Anpassungsgüte und eine Schätzung für die störenden Verschmutzungsparameter vor. Unsere Ergebnisse (für 5-Jahres-Perioden) zeigen das Folgende: (i) multivariate Normalität wird für die meisten Perioden verworfen (ii) die Überprüfung der Residuen zeigt keine signifikante Abweichung von der Annahme einer multivariaten i.i.d. Verteilung (iii), wenn man nichtnormalverteilte Fehler zulässt, werden Mittelwert-Varianz-Effizienz Tests des Marktportfolios seltener verworfen.capital assed pricing model,CAPM,mean-variance efficiency,nonnormality,multivariate linear regression,uniform linear hypothesis,exact test

Some effects of color incongruity in a visual Ad

While the effects of an ad's colour on attitudes towards it have already been investigated, far less work has been done on the influence of incongruous colours. This paper examines the effects of an ad using an incongruous colour on several variables of the advertising persuasion process. Analyses of variance have been conducted for an experimental study involving 407 respondents. The results show that a colour that is incongruous with the ad or with the product advertised affects the elements of surprise, perceived provocation, attitudes towards the ad and the positive beliefs about it.Incongruity, Surprise, Provocation, Attitude towards an advertisement, Beliefs about an advertisement.

The Political Economy of International Migration in a Ricardo-Viner Model

Determinants of national policies towards immigration are analysed in the context of an economy open to international trade. Arguments for the existence of an "immigration surplus" are reviewed and followed by an interpretation of the principal contributions of the political economy literature in a Ricardo-Viner model in a direct democracy framework. A median voter model is grafted on several variants of the specific-factor open-economy model to discuss several recent changes in attitudes towards immigration (a stiffened stance, especially towards the unskilled) and in national policies ("melting-pot" vs. guest-worker programs, coexistence of legal and illegal immigrants, lax enforcement towards illegals).

Does Team-Based Compensation Give Rise to Problems when Agents Vary in their Ability ?

This paper reports the results of an experiment on how team composition influences both the contract offer of employers and employee performance when a revenue-sharing scheme is introduced. Experimental evidence shows that the principal ceases trying to monitor her team through a contract offer when agents vary in their ability. In this case, agents focus more heavily on their teammate's behaviour than on the principal's offer and therefore, regardless of the level of team-based compensation, a large amount of free-riding occurs within the team. In contrast, when the team is homogeneous, agents are better able to use the contract offer as a coordination device among themselves and therefore achieve higher efficiency.compensation; experimental economics; free-riding; peer pressure; teamwork

The Rise of Environmental, Social and Corporate Governance Disclosures in the United States and Mandatory Human Rights Due Diligence in Europe: Implications for U.S. Lawyers

Over the past decade, due in part to the devastating impact of the global financial crisis of 2008 and growing awareness of climate change, the world witnessed increasing interest on the part of society in general, and investors in particular, for responsible business. “Responsible business” is the concept that business should be conducted in a way that 1) does not violate fundamental rights of the people affected by the business activity; 2) does not exacerbate environmental harm; and 3) complies with basic principles of good governance. Society’s interest in responsible business has been reflected in growing pressure on businesses to disclose information regarding their impact on the environment and human rights and to take steps to address them. In the United States, given the limited engagement of the legal profession with the UNGP (United Nations Guiding Principles on Business and Human Rights), more needs to be done to educate the legal community on the importance of the UNGP and BHR (Business and Human Rights) more generally. Given their role in either formally regulating the legal profession or providing advocacy and a unified voice as well as enforcing ethical standards, bar associations have a major role to play in educating and mobilizing the legal profession around BHR. At a minimum, bar associations should actively encourage understanding and implementation of the UNGP through conferences, regional initiatives, and training programs. In such cases, it is recommended that bar associations look to engage directly with their members by way of working groups or training programs, in order to encourage a deeper understanding and adherence to the standards established by the UNGP. Given their positions of influence in legal and business communities, bar associations should consider endorsing the UNGP

A framework to reconcile frequency scaling measurements, from intracellular recordings, local-field potentials, up to EEG and MEG signals

In this viewpoint article, we discuss the electric properties of the medium around neurons, which are important to correctly interpret extracellular potentials or electric field effects in neural tissue. We focus on how these electric properties shape the frequency scaling of brain signals at different scales, such as intracellular recordings, the local field potential (LFP), the electroencephalogram (EEG) or the magnetoencephalogram (MEG). These signals display frequency-scaling properties which are not consistent with resistive media. The medium appears to exert a frequency filtering scaling as $1/\sqrt{f}$, which is the typical frequency scaling of ionic diffusion. Such a scaling was also found recently by impedance measurements in physiological conditions. Ionic diffusion appears to be the only possible explanation to reconcile these measurements and the frequency-scaling properties found in different brain signals. However, other measurements suggest that the extracellular medium is essentially resistive. To resolve this discrepancy, we show new evidence that metal-electrode measurements can be perturbed by shunt currents going through the surface of the brain. Such a shunt may explain the contradictory measurements, and together with ionic diffusion, provides a framework where all observations can be reconciled. Finally, we propose a method to perform measurements avoiding shunting effects, thus enabling to test the predictions of this framework.Comment: (in press