Applying Regret Theory to Investment Choices: Currency Hedging Decisions

S. Michenaud, B. SOLNIK

Journal of International Money and Finance

septembre 2008, vol. 27, n°5

Départements : Finance

Mots clés : Regret aversion, Loss aversion, Hedging, Portfolio choices

We apply regret theory, an axiomatic behavioral theory, to derive closed-form solutions to optimal currency hedging choices. Investors experience regret of not having chosen the ex post optimal hedging decision. Hence, investors anticipate their future experience of regret and incorporate it in their objective function. We derive a model of financial decision-making with two components of risk: traditional risk (volatility) and regret risk. We find results that are in sharp contrast with traditional expected utility, loss aversion, or disappointment aversion theories. We discuss the empirical implications of our model and its ability to explain observed hedging behavior.

At the end of the tunnel there is ... darkness: The ECJ denies EC liability for WTO non-compliance

M. Schmauch, A. ALEMANNO

European Law Reporter


Départements : Droit et fiscalité, GREGHEC (CNRS)

Aux sources de la théorie positive : Contribution à une analyse institutionnelle des changements de paradigmes dans la recherche comptable [Back to the Sources of Positive Accounting theory: an institutitional analysis of paradigm changes in Accounting R


Comptabilité Contrôle Audit

décembre 2008, n°2/2008 (Tome 14), pp.5-26

Départements : Comptabilité et Contrôle de Gestion

Mots clés : Théorie comptable, Histoire de la recherche comptable, Théories normatives, Théories positives

Cet article a pour but de contribuer à l'histoire de la recherche comptable en analysant les facteurs qui permettent d'expliquer le succès de l'approche dite « positive ». En moins de dix ans, entre 1960 et 1967-68, la recherche « positive » a pris le pas dans les grandes revues de recherche comptable sur les travaux se rattachant à la tradition « normative ». Les raisons de ce succès ne semblent pas clairement établies. Les propagateurs de la nouvelle approche (Watts et Zimmerman, 1986) mettent bien entendu en avant la fécondité de celle-ci. Leurs critiques soulignent la volonté de puissance, faite d'ostracisme et de dénigrement systématique des approches concurrentes, qui caractériserait les tenants de la nouvelle approche (Whittington, 1987 ; Mouck, 1988 ; Williams, 1990 ; Mattessich, 1995). Alors que les explications fournies par les uns et les autres font plutôt état d'un « basculement » de la recherche dans la théorie positive, associant un savoir nouveau à des acteurs nouveaux, nous nous proposons de montrer que l'évolution entre la théorie normative et cette dernière s'est davantage opérée par un « glissement ». En effet, s'ils ont su tirer parti de la réforme de l'enseignement de la gestion aux Etats-Unis initiée dès la décennie 1950, les tenants de l'approche positive sont également redevables à leurs prédécesseurs d'avoir amorcé un découplage entre le monde académique et la pratique comptable dans lequel ils se sont engouffrés.ACCOUNTING HISTORYACCOUNTING THEORYNORMATIVE THEORIESPOSITIVE THEORIESHISTOIRE DE LA RECHERCHE COMPTABLETHÉORIE COMPTABLETHÉORIES NORMATIVESTHÉORIES POSITIVESLanguage of Keywords: English; French

Axiomatization of an exponential similarity function

A. Billot, I. GILBOA, D. Schmeidler

Mathematical Social Sciences

mars 2008, vol. 55, n°2, pp.107-115

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

An individual is asked to assess a real-valued variable y based on certain characteristics x = (x1,', xm), and on a database consisting of n observations of (x1,', xm, y). A possible approach to combine past observations of x and y with the current values of x to generate an assessment of y is similarity-weighted averaging. It suggests that the predicted value of y, yn+1s, be the weighted average of all previously observed values yi, where the weight of yi is the similarity between the vector xn+11,', xn+1m, associated with yn+1, and the previously observed vector, xi1,', xim. This paper axiomatizes, in terms of the prediction yn+1, a similarity function that is a (decreasing) exponential in a norm of the difference between the two vectors compared. Keywords: Similarity function; Axiom; Exponential decay

Business Related Determinants of Offshoring Intensity

S. C. SRIVASTAVA, T. S. H. Teo, P. S. Mohapatra

Information Resources Management Journal

2008, vol. 21, n°1, pp.44-58

Départements : Informations Systems and Operations Management, GREGHEC (CNRS)

Some researchers view information systems (IS) offshoring as extension of onshore IS outsourcing. However, others have the opinion that IS offshoring has its unique characteristics because of which, we cannot extend research made in onshore IS outsourcing without testing its applicability to the offshore context. This tension motivates our research to examine whether determinants of IS offshoring are indeed the same as determinants of onshore IS outsourcing? We examine the role of some firm level determinants of offshoring intensity. The four business related determinants that we analyze in this study are: business size, business cost, business financial leverage, and business performance. Results indicate a significant relationship between business size and offshoring intensity, and also between business financial leverage and offshoring intensity. Based on the results, we analyze similarities and differences between traditional onshore IS outsourcing and IS offshoring. Implications and contributions arising out of this study are also discussed

Can an angry women get ahead? Status conferral, gender, and workplace emotion expression.

V.L. Brescoll, E. L. UHLMANN

Psychological Science

mars 2008, vol. 19, n°3, pp.268-275

Départements : Management et Ressources Humaines

Three studies examined the relationships among anger, gender, and status conferral. As in prior research, men who expressed anger in a professional context were conferred higher status than men who expressed sadness. However, both male and female evaluators conferred lower status on angry female professionals than on angry male professionals. This was the case regardless of the actual occupational rank of the target, such that both a female trainee and a female CEO were given lower status if they expressed anger than if they did not. Whereas women's emotional reactions were attributed to internal characteristics (e.g., "she is an angry person,""she is out of control"), men's emotional reactions were attributed to external circumstances. Providing an external attribution for the target person's anger eliminated the gender bias. Theoretical implications and practical applications are discussed.

Competition for Order Flow Smart Order Routing Systems

T. FOUCAULT, A.J. Menkveld

The Journal of Finance

février 2008, vol. 63, n°1, pp.119-158

Départements : Finance, GREGHEC (CNRS)

We study changes in liquidity following the introduction of a new electronic limit order market when, prior to its introduction, trading is centralized in a single limit order market. We also study how automation of routing decisions and trading fees affect the relative liquidity of rival markets. The theoretical analysis yields three main predictions: (i) consolidated depth is larger in the multiple limit order markets environment, (ii) consolidated bid-ask spread is smaller in the multiple limit order markets environment and (iii) the liquidity of the entrant market relative to that of the incumbent market increases with the level of automation for routing decisions (the proportion of "smart routers"). We test these predictions by studying the rivalry between the London Stock Exchange (entrant) and Euronext (incumbent) in the Dutch stock market. The main predictions of the model are supportedMarket fragmentation, centralized limit order book, smart routers, trading fees, trade-throughs

Competitors' Resource-Oriented Strategies: Acting on Competitors' Resources through Interventions in Factor Markets and Political Markets


Academy of Management Review

janvier 2008, vol. 33, n°1, pp.97-121

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : Competition, Business Intelligence, Competitive advantage, Marketing strategy, Resource-based theory of the firm, Resource management

We argue that we can reach a better understanding of the relationships between firm resources and competitive advantage by considering actions that firms take against their rivals' resources in factor markets and political markets. We outline market and firm characteristics that facilitate the deployment of competitors' resource-oriented strategies. We then argue that the effectiveness of the firm's actions on its competitors' resources depends on the competitive responses of the rivals being attacked.

Component-based Structural Equation Modelling


Total Quality Management & Business Excellence

2008, vol. 19, n°7-8, pp.871-886

Départements : Economie et Sciences de la décision

Mots clés : Component-based SEM, Covariance-based SEM, GSCA, Path analysis, PLS path modelling, Structural Equation Modelling (SEM), Unweighted Least Squares (ULS)

Two complementary schools have come to the fore in the field of Structural Equation Modelling (SEM): covariance-based SEM and component-based SEM. The first approach has been developed around Karl Jöreskog and the second one around Herman Wold under the name ‘PLS’ (Partial Least Squares). Hwang and Takane have proposed a new component-based SEM method named Generalised Structured Component Analysis. Covariance-based SEM is usually used with an objective of model validation and needs a large sample. Component-based SEM is mainly used for score computation and can be carried out on very small samples. In this research, we will explore the use of ULS-SEM, PLS, GSCA, path analysis on block principal components and path analysis on block scales on customer satisfaction data. Our conclusion is that score computation and bootstrap validation are very insensitive to the choice of the method when the blocks are homogenous

Conjoncture allemande : dans la moyenne européenne


Allemagne d'Aujourd'hui

janvier-mars 2008, n°183, pp.134-145

Départements : Langues et Cultures