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.

Long-Run Risk Through Consumption Smoothing

Abstract: We examine how long-run consumption risk arises endogenously in a standard production economy model where the representative agent has Epstein-Zin preferences. Even when technology growth is i.i.d., optimal consumption smoothing induces highly persistent time-variation in expected consumption growth (long-run risk). This increases the price of risk when investors prefer early resolution of uncertainty, and the model can then account for the low volatility of consumption growth and the high price of risk with a low coefficient of relative risk aversion. The asset price implications of endogenous long-run risk depends crucially on the persistence of technology shocks and investors preference for the timing of resolution of uncertainty. We use the time-series of consumption growth and the cross-section of stock returns to evaluate different parameterizations of the model.

Testing the Survey Method: Continuity and Change in British Industrial Relations:

Abstract: Throughout much of the 1980s, a picture of institutional continuity was drawn by many industrial relations researchers from large-scale surveys, which appeared at odds with reports of substantial change that other accounts documented. This paper explores how differences in the research instruments used may contribute to discrepancies in the amount of change which has been recorded, by examining the results of interview material from managers in 15 firms which had also participated in a survey of industrial relations, the Warwick Enterprise Survey. Our findings were broadly similar in the mapping of institutional arrangements, management organization and the distribution of responsibilities at different levels, but certain differences were also noted. The paper discusses whether these differences are reconcilable and to what extent they were a function of the different research instruments. It is argued that the focus of our open-ended interviews tended to differ from that of surveys with scope for more exploration of how managers were innovating around institutions and had changed the way institutions worked, thereby suggesting that greater change was occurring than the survey could document. In researching industrial relations the risk of surveys is that they may bias the argument towards stability if they concentrate on institutional forms and the formal locus of decision-making.

Global Banks and Crisis Transmission

Abstract: We study the effect of financial integration on the transmission of international business cycles. In a sample of 20 developed countries between 1978 and 2009 we find that, in periods without financial crises, increases in bilateral financial linkages are associated with more divergent output cycles. This relation is significantly weaker during financial turmoil periods, suggesting that financial crises induce co-movement among more financially integrated countries. We also show that countries with stronger, direct and indirect, financial ties to the U.S. experienced more synchronized cycles with the U.S. during the recent 2007-2009 crisis. We then interpret these findings using a simple general equilibrium model of international business cycles with banks and shocks to banking activity. The model suggests that the change in the relation between integration and synchronization can be driven by changes in the nature of shocks hitting the world economy, and that shocks to global banks played an important role in triggering and spreading the 2007-2009 crisis.

The Locus of Choice: Personal Causality and Satisfaction with Hedonic and Utilitarian Decisions

Abstract: Consumers may consume the same products or services with different goals, for example, for their own pleasure—a hedonic goal—or to achieve some higher level purpose—a utilitarian goal. This article investigates whether this difference in goals influences satisfaction with an outcome that was either self-chosen or externally determined. In four experiments we manipulate consumption goals, controlling for the outcomes, the option valence, and whether the externally made choice was determined by an expert or at random. Results show that the outcome of a self-made choice is more satisfying than the outcome of an externally made choice when the goal is hedonic but not when it is utilitarian. We hypothesize that this effect results from the greater perceived personal causality associated with terminally motivated activities, such as hedonic choices, relative to instrumentally motivated activities, such as utilitarian choices, and provide evidence that supports this explanation over alternative accounts.