London Business School

About: London Business School is a education organization based out in London, England, United Kingdom. It is known for research contribution in the topics: Portfolio & Equity (finance). The organization has 1138 authors who have published 5118 publications receiving 437980 citations. The organization is also known as: LBS.

Rational Momentum Effects

Abstract: Momentum effects in stock returns need not imply investor irrationality, heterogeneous information, or market frictions. A simple, single-firm model with a standard pricing kernel can produce such effects when expected dividend growth rates vary over time. An enhanced model, under which persistent growth rate shocks occur episodically, can match many of the features documented by the empirical research. The same basic mechanism could potentially account for underreaction anomalies in general.

PPP Strikes Back: Aggregation And the Real Exchange Rate

Abstract: We show the importance of a dynamic aggregation bias in accounting for the PPP puzzle. We prove that the aggregate real exchange rate is persistent because its components have heterogeneous dynamics. Established time series and panel methods fail to control for this. Using Eurostat data, we find that when heterogeneity is taken into account, the estimated persistence of real exchange rates falls dramatically. Its half-life, for instance, may fall to as low as eleven months, significantly below the "consensus view" of three to five years.

National Institutions and Subnational Development in Africa

Abstract: We investigate the role of national institutions on subnational African development in a novel framework that accounts both for local geography and cultural-genetic traits. We exploit the fact that the political boundaries in the eve of African independence partitioned more than two hundred ethnic groups across adjacent countries subjecting similar cultures, residing in homogeneous geographic areas, to different formal institutions. Using both a matching-type and a spatial regression discontinuity approach we show that differences in countrywide institutional structures across the national border do not explain within-ethnicity differences in economic performance, as captured by satellite images of light density. The average non-effect of national institutions on ethnic development masks considerable heterogeneity partially driven by the diminishing role of national institutions in areas further from the capital cities.

Renewal Through Reorganization: The Value of Inconsistencies Between Formal and Informal Organization

Abstract: We develop a theoretical perspective on how inconsistencies between formal and informal organization arising from reorganization can help create ambidextrous organizations. We argue that under some conditions, the informal organization can compensate for the formal organization by motivating a distinct but valuable form of employee behavior that the formal organization does not emphasize, and vice versa—an effect we label compensatory fit. We illustrate the concept of compensatory fit by drawing on qualitative data from a reorganization at Cisco Systems. We also derive formal boundary conditions for compensatory fit using a simple game theoretic representation. We show that compensatory fit can only work when there is a powerful informal organization already in existence, and when the gains from ambidexterity are substantial. Further, depending on the strength of the informal organization, breakdown in the conditions necessary for compensatory fit may lead to performance declines and further reorganizations.