Stockholm School of Economics

About: Stockholm School of Economics is a education organization based out in Stockholm, Sweden. It is known for research contribution in the topics: Population & Cost effectiveness. The organization has 1186 authors who have published 4891 publications receiving 285543 citations. The organization is also known as: Stockholm Business School & Handelshögskolan i Stockholm.

Is Fixed Investment the Key to Economic Growth

Abstract: This paper examines shares of fixed capital formation in GOP and rates of economic growth for more than 100 countries over successive 5-year periods between 1965 and 1985 to determine the direction of causality between them. Simple regressions and multiple regressions including several standard determinants of growth, as well as a simple causality test, provide more evidence that increases in growth precede rises in rates of capital formation than that increases in capital formation precede increases in growth. High rates of fixed capital formation accompany rapid growth in per capita income, but we find no evidence that fixed investment is the only or main source of ignition for economic growth.

Mean–variance portfolio optimization with state‐dependent risk aversion

Abstract: The objective of this paper is to study the mean–variance portfolio optimization in continuous time. Since this problem is time inconsistent we attack it by placing the problem within a game theoretic framework and look for subgame perfect Nash equilibrium strategies. This particular problem has already been studied in [2] where the authors assumed a constant risk aversion parameter. This assumption leads to an equilibrium control where the dollar amount invested in the risky asset is independent of current wealth, and we argue that this result is unrealistic from an economic point of view. In order to have a more realistic model we instead study the case when the risk aversion depends dynamically on current wealth. This is a substantially more complicated problem than the one with constant risk aversion but, using the general theory of time inconsistent control developed in [4], we provide a fairly detailed analysis on the general case. In particular, when the risk aversion is inversely proportional to wealth, we provide an analytical solution where the equilibrium dollar amount invested in the risky asset is proportional to current wealth. The equilibrium for this model thus appears more reasonable than the one for the model with constant risk aversion.

The Economics of Strategic Opportunity

Abstract: As emphasized by Barney (1986), any explanation of superior profitability must account for why the resources supporting such profitability could have been acquired for a price below their rent generating capacity. Building upon the literature in economics on coordination failures and incomplete markets, we suggest a framework for analyzing such strategic factor market inefficiencies. Our point of departure is that a strategic opportunity exists whenever prices fail to reflect the value of a resource's best use. This paper examines the challenges of imputing a resource's value in the absence of explicit price guidance and suggests the likely characteristics of strategic opportunities. Our framework also suggests that the discovery of strategic opportunity is often a matter of serendipity and access to relevant idiosyncratic resources. This latter observation provides prescriptive advice, although the analysis also explains why more detailed guidance has to be firm specific.

Hedging, familiarity and portfolio choice ∗ .

Abstract: We exploit the restrictions of intertemporal portfolio choice in the presence of nonÞnancial income risk to design and implement tests of hedging that use the information contained in the actual portfolio of the investor. We use a unique dataset of Swedish investors with information broken down at the investor level and into various components of wealth, investor income, tax positions and investor demographic characteristics. Portfolio holdings are identiÞed at the stock level. We show that investors do not engage in hedging, but invest in stocks closely related to their non-Þnancial income. We explain this with familiarity, that is the tendency to concentrate holdings in stocks with which the investor is familiar in terms of geographical or professional proximity or that he has held for a long period. We show that familiarity is not a behavioral bias, but is information-driven. Familiarity-based investment allows investors to earn higher returns than they would have otherwise earned if they had hedged.

What do they think and feel about growth? An expectancy-value approach to small business managers' attitudes toward growth

Abstract: This study focuses on small business managers’ motivation to expand their firms. More specifically, we examine the relationships between expected consequences of growth on the one hand, and overall attitude toward growth on the other. Data were collected in three separate studies over a ten–year period using the same measuring instrument. The results suggest that noneconomic concerns may be more important than expected financial outcomes in determining overall attitude toward growth. In particular, the concern for employee well–being comes out strongly. We interpret this as reflecting a concern that the positive atmosphere of the small organization may be lost in growth. We conclude that this concern may be a cause for recurrent conflict for small business managers when deciding about the future route for their firms.