Business Commons^™

Forecasting With A Real-Time Data Set For Macroeconomists, Tom Stark, Dean D. Croushore

Economics Faculty Publications

This paper discusses how forecasts are affected by the use of real-time data rather than latest-available data. The key issue is this: in the literature on developing forecasting models, new models are put together based on the results they yield using the data set available to the model’s developer. But those are not the data that were available to a forecaster in real time.

How much difference does the vintage of the data make for such forecasts? We explore this issue with a variety of exercises designed to answer this question. In particular, we find that the use of real-time …

Advanced Portfolio Theory: Why Understanding The Math Matters, Tom Arnold

Finance Faculty Publications

The goal of this paper is to motivate the use of efficient set mathematics for portfolio analysis [as seen in Roll, 1977] in the classroom. Many treatments stop at the two asset portfolio case (avoiding the use of matrix algebra) and an alarming number of treatments rely on illustration and templates to provide a heuristic sense of the material without really teaching how efficient portfolios are generated. This is problematic considering that the benefits of understanding efficient set mathematics go beyond portfolio analysis and into such topics as regression analysis (as demonstrated here).

Internationalization, Globalization, And Capability-Based Strategy, Stephen Tallman, Karin Fladmoe-Lindquist

Management Faculty Publications

Current trends appear to suggest that globally integrated strategies are the wave of the future for many industries, but no theoretically sound, firm-level model explains this situation. International business models explain industry trends from economic perspectives, and organizational theory is beginning to examine the organizing principles of multinational firms, but a gap exists in explaining the strategic motivations of multinational firms as they expand and integrate worldwide. This article develops a capability-driven, as opposed to market-driven, framework of multinational strategy. This contingent framework explains the organizational consequences of international expansion and global integration depending on the capability types, capability strategies, …

Appearances Are Important: Outsourced Internal Audit Services And The Perception Of Auditor Independence, Marshall A. Geiger, D. Jordan Lowe, Kurt J. Pany

Accounting Faculty Publications

The appearance of independence is an important facet of the regulation of auditor independence. The authors conducted a research study to gauge how some financial statement users—loan officers—view and make decisions based on loan proposals that present various types of relationships between the applicant, the auditor that performs the external audit, and the auditor that performs the internal audit function (whether performed in-house or outsourced to the hypothetical loan applicant's external auditor).

The results are insightful: The closer the relationship between the external auditor and the audit client, the higher the perception of inappropriateness, and the less likely the loan …

The Bite Could Be Out Of Noncompete Clauses, Porcher L. Taylor Iii

School of Professional and Continuing Studies Faculty Publications

While Virginia is generally a pro-business state, the courts do not favor employee noncompete agreements because they are restraints of trade.

Government Must Make Consequences Clear, Porcher L. Taylor Iii

School of Professional and Continuing Studies Faculty Publications

With false-profits mania reigning supreme on Wall Street, Congress needs to establish an academy of corporate responsibility and integrity under the Securities and Exchange Commission. This executive training center would have as students the chief executives and financial officers and boards of directors of the nation’s publicly held companies. Senior partners at accounting companies need to be included in this back-to-school group, too. The enforcement-savvy teachers for this two-week academy would be lawyers and accountants from the commission and Justice Department.

Diversification Benefits From Foreign Real Estate Investment, C. Mitchell Conover, H. Swint Friday, G. Stacy Sirmans

Finance Faculty Publications

Previous research has questioned the stability of international equity diversification. This study examines whether foreign real estate exists in a more segmented market and whether foreign real estate provides any diversification benefit beyond that obtainable from foreign stocks. Using data encompassing the stock market crash of 1987, foreign real estate was found to have a lower correlation with U.S. stocks than foreign stocks. This lower correlation is shown to be stable through time as foreign real estate has a lower correlation in nearly the entire time period. Foreign real estate was also found to have a significant weight in efficient …

Adr Risk Characteristics And Measurement, Tom Arnold, Lance Nail, Terry D. Nixon

Finance Faculty Publications

While a healthy empirical literature exists on international diversification and its benefits, surprisingly few studies have examined the risk characteristics and efficacy of asset pricing models for one avenue of international diversification – investments in American Depository Receipts (ADRs). Originating in approximately 1927, ADRs provide an opportunity for investors to indirectly purchase shares of foreign firms. ADRs represent a claim to a given number of shares of a foreign firm held by a U.S. financial institution (e.g., Bank of New York). With the increasingly significant presence of ADR trading in the American stock markets – increasing six-fold between 1990 and …