London School of Economics and Political Science

About: London School of Economics and Political Science is a education organization based out in London, United Kingdom. It is known for research contribution in the topics: Politics & Population. The organization has 8759 authors who have published 35017 publications receiving 1436302 citations.

An Introduction to Polyspectra

Abstract: The subject of this paper is the higher-order spectra or polyspectra of multivariate stationary time series. The intent is to derive (i) certain mathematical properties of polyspectra, (ii) estimates of polyspectra based on an observed stretch of time series, (iii) certain statistical properties of the proposed estimates and (iv) several applications of the results obtained.

Flight to Quality, Flight to Liquidity, and the Pricing of Risk

Abstract: We propose a dynamic equilibrium model of a multi-asset market with stochastic volatility and transaction costs. Our key assumption is that investors are fund managers, subject to withdrawals when fund performance falls below a threshold. This generates a preference for liquidity that is time-varying and increasing with volatility. We show that during volatile times, assets’ liquidity premia increase, investors become more risk averse, assets become more negatively correlated with volatility, assets’ pairwise correlations can increase, and illiquid assets’ market betas increase. Moreover, an unconditional CAPM understates the risk of illiquid assets because these assets become riskier when investors are the most risk averse.

Identifying Technology Spillovers and Product Market Rivalry

Abstract: Government policies to support R&D are predicated on empirical evidence of R&D "spillovers" between firms. But there are two countervailing R&D spillovers: positive effects from technology spillovers and negative effects from business stealing by product market rivals. We develop a general framework showing that technology and product market spillovers have testable implications for a range of performance indicators, and exploit these using distinct measures of a firm’s position in technology space and product market space. We show using panel data on U.S. firms between 1981 and 2001 that both technology and product market spillovers operate, but that net social returns are several times larger than private returns. The spillover effects are also revealed when we analyze three high-tech sectors in detail - pharmaceuticals, computer hardware and telecommunication equipment. Using the model we evaluate three R&D subsidy policies and show that the typical focus of support for small and medium firms may be misplaced.

On the Out-of-Sample Importance of Skewness and Asymmetric Dependence for Asset Allocation

Abstract: Recent studies in the empirical Þnance literature have reported evidence of two types of asymmetries in the joint distribution of stock returns. The Þrst is skewness in the distribution of individual stock returns, while the second is an asymmetry in the dependence between stocks: stock returns appear to be more highly correlated during market downturns than during market upturns. In this paper we examine the economic and statistical signiÞcance of these asymmetries for asset allocation decisions in an out-of-sample setting. We consider the problem of a CRRA investor allocating wealth between the risk-free asset, a small-cap and a large-cap portfolio, using monthly data. We use models that can capture time-varying means and variances of stock returns, and also the presence of time-varying skewness and kurtosis. Further, we use copula theory to construct models of the time-varying dependence structure that allow for greater dependence during bear markets than bull markets. The importance of these two asymmetries for asset allocation is assessed by comparing the performance of a portfolio based on a normal distribution model with a portfolio based on a more sexible distribution model. For a variety of performance measures and levels of risk aversion our results suggest that capturing skewness and asymmetric dependence leads to gains that are economically signiÞcant, and statistically signiÞcant in some cases.

Not all responses to breach are the same: the interconnection of social exchange and psychological contract processes in organizations

Abstract: We examined psychological contract breach and violation as they occur within social exchange relationships to account for employee outcomes. Results of a longitudinal study suggested that contract breach partially mediated the effects of perceived organizational support (POS) and leader-member exchange (LMX) (time 1 measures) on intentions to quit (time 2 measure). POS and LMX moderated the relationship between breach and violation (time 2 measure). Violation fully mediated the effects of breach on commitment and trust and partially mediated the effect of breach on turnover intentions. These findings highlight the interconnection of social exchange and psychological contract processes.