Cost Structure and Sticky Costs

2014 ◽  
Vol 26 (2) ◽  
pp. 91-116 ◽  
Author(s):  
Ramji Balakrishnan ◽  
Eva Labro ◽  
Naomi S. Soderstrom
Keyword(s):  
Cost Structure ◽  
Future Research ◽  
Fixed Costs ◽  
Short Term ◽  
Administrative Costs ◽  
Long Run ◽  
Short Run ◽  
Asymmetric Cost ◽  
Empirical Tests ◽  
Cost Stickiness

ABSTRACT Beginning with Anderson, Banker, and Janakiraman (2003), a rapidly growing body of literature attributes the short-run asymmetric cost response to activity changes (i.e., sticky costs) resulting from short-run managerial choices. In this paper, we are agnostic on the theory of sticky costs. Rather, we focus on empirical tests of cost stickiness. We show that past decisions on cost structure, which determine the magnitude of costs controllable in the short-term, induce non-stationarity in the elasticity of Sales, General, and Administrative costs, affecting the interpretation of estimates from the standard specification used in the literature. We develop suggestions for how future research might control for the effects of cost structure. Empirically, we find that cost structure confounds results usually interpreted as cost stickiness reflecting short-run managerial actions. After adjusting for the effects of fixed costs, we find that the results are unstable across alternate subsamples. Our results provide evidence that long-run cost structure decisions impact our ability to detect short-term cost management decisions. JEL Classifications: M41; L42

Determinants of Treasury-LIBOR Swap Spreads

2005 ◽  
Vol 08 (04) ◽  
pp. 687-705 ◽  
Author(s):  
D. K. Malhotra ◽  
Vivek Bhargava ◽  
Mukesh Chaudhry
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Default Risk ◽  
Yield Curve ◽  
Short Term ◽  
Long Run ◽  
Interest Rate Volatility ◽  
Short Run ◽  
Using Data ◽  
Swap Spreads

Using data from the Treasury versus London Interbank Offer Swap Rates (LIBOR) for October 1987 to June 1998, this paper examines the determinants of swap spreads in the Treasury-LIBOR interest rate swap market. This study hypothesizes Treasury-LIBOR swap spreads as a function of the Treasury rate of comparable maturity, the slope of the yield curve, the volatility of short-term interest rates, a proxy for default risk, and liquidity in the swap market. The study finds that, in the long-run, swap spreads are negatively related to the yield curve slope and liquidity in the swap market. We also find that swap spreads are positively related to the short-term interest rate volatility. In the short-run, swap market's response to higher default risk seems to be higher spread between the bid and offer rates.

Shopping for Lower Sales Tax Rates

2021 ◽  
Vol 13 (3) ◽  
pp. 209-250
Author(s):  
Scott R. Baker ◽  
Stephanie Johnson ◽  
Lorenz Kueng
Keyword(s):  
Shopping Behavior ◽  
Sales Tax ◽  
Fixed Costs ◽  
Tax Rates ◽  
Inventory Problem ◽  
Sales Taxes ◽  
Long Run ◽  
Wide Range ◽  
Short Run ◽  
State And Local

Using comprehensive high-frequency state and local sales tax data, we show that shopping behavior responds strongly to changes in sales tax rates. Even though sales taxes are not observed in posted prices and have a wide range of rates and exemptions, consumers adjust in many dimensions. They stock up on storable goods before taxes rise and increase online and cross-border shopping in both the short and long run. The difference between short- and long-run spending responses has important implications for the efficacy of using sales taxes for countercyclical policy and for the design of an optimal tax framework. Interestingly, households adjust spending similarly for both taxable and tax-exempt goods. We embed an inventory problem into a continuous-time consumption-savings model and demonstrate that this behavior is optimal in the presence of shopping trip fixed costs. The model successfully matches estimated short-run and long-run tax elasticities. We provide additional evidence in favor of this new shopping complementarity mechanism. (JEL E21, E32, G51, H21, H25, H71)

scholarly journals Exploring the Road to Agricultural Sustainability by Assessing the EU Debt Influencing Factors

2018 ◽  
Vol 10 (7) ◽  
pp. 2465
Author(s):  
Laura Brad ◽  
Gabriel Popescu ◽  
Alina Zaharia ◽  
Maria Claudia Diaconeasa ◽  
Daniela Mihai
Keyword(s):  
Poverty Reduction ◽  
Fixed Costs ◽  
The European Union ◽  
Labor Costs ◽  
Short Term ◽  
Total Debt ◽  
Long Run ◽  
Periodic Analysis ◽  
The Impact

The importance of agricultural financing in ensuring food security and safety, jobs, poverty reduction, economic growth and more recently, climate change mitigation, natural resource conservation and sustainable development imposes periodic analysis of the factors which might influence the farmers’ financial situation, in order to improve it. One way of assessing this is to analyze the agricultural debt. In this context, based on previous models, the paper aims to assess the impact of specific factors on the agricultural debt level in the European Union during 2008–2015, as these should be considered in future common agriculture policies as well as in achieving sustainable agriculture. The research was conducted based on econometric techniques, by applying panel models in the Eviews 7.0 software-64 bit version. More than 20 variables were considered in the analysis. Some of the findings suggest that an increase in subsidies as well as the share of cash flow in the total existing capital would determine considerable reductions of the total debt. Decoupled subsidies seem to have a higher impact than coupled subsidies on short term debt, while its value is between the one found for coupled subsidies in the case of long term debt. Large farms/companies, to which decoupled payments are granted, have higher debts on long run and on total debt. The same units, to which coupled subsidies were granted, have smaller short-term debt. In contrast, the increases of labor costs, fixed costs, and crop/livestock costs lead to an increase in the total debt, since the farms require additional financial resources to cover the expanded costs. Also, the results suggest that short-term debts are mainly formed of long-term loans that reached maturity. In this case, the authors support the idea of differentiated financing programs for the agricultural activities because of their peculiarities and reinforced by the need to turn the intensive agriculture into a sustainable and plentiful one.

Do managers forecast asymmetric cost behaviour?

2018 ◽  
Vol 43 (4) ◽  
pp. 538-554 ◽  
Author(s):  
Michael E Bradbury ◽  
Tom Scott
Keyword(s):  
New Zealand ◽  
Local Government ◽  
Jel Classification ◽  
Cost Structure ◽  
Actual Behaviour ◽  
Asymmetric Relation ◽  
Cost Behaviour ◽  
Asymmetric Cost ◽  
Cost Stickiness

This article examines cost behaviour in a municipal (local government) setting and finds evidence of cost stickiness. We also find that costs are super-sticky as they increase even when revenues decrease. Municipals in New Zealand are required to produce forecasts, which allow us to investigate whether asymmetric cost behaviour is incorporated into forecasts. Forecast cost behaviour is found to be statistically indistinguishable from actual behaviour. In our tests, we control for asset intensity, employee intensity, expected demand, operating slack and past cost structure. The finding that the asymmetric relation between costs and revenues is incorporated into managerial forecasts suggests that cost stickiness is understood by managers rather than being merely a mechanistic outcome of cost structure. JEL Classification: M41, D24, H72

scholarly journals After Market Pricing Performance of Initial Public Offerings (IPOs): Indian IPO Market 2002–2006

2010 ◽  
Vol 35 (4) ◽  
pp. 27-44 ◽  
Author(s):  
Seshadev Sahoo ◽  
Prabina Rajib
Keyword(s):  
Initial Public Offerings ◽  
Future Research ◽  
Book Value ◽  
Subsequent Performance ◽  
Explanatory Variables ◽  
Market Index ◽  
Price Performance ◽  
Long Run ◽  
Ex Ante ◽  
Short Run

This paper is motivated by the apparent belief that IPOs are underpriced on the initial listing day and thereafter underperforms compared to the market benchmark. While evaluation of the listing day performance seems straightforward on surface, it actually invokes several complications for the subsequent performance measurement. This paper focuses on the evaluation of price performance of IPOs up to a period of 36 months including the listing day. It also examines the usefulness of IPO characteristics at the time of issue to seek an explanation for the post-issue price performance. The paper presents fresh evidence on IPO performance, i.e., short-run underpricing and long-run underperformance for 92 Indian IPOs issued during the period 2002–2006. It is reported that on an average the Indian IPOs are underpriced to the tune of 46.55 per cent on the listing day (listing day return vis-à-vis issue price) compared to the market index. Another contribution of this paper is the evaluation of the long-run post-issue price performance of Indian IPOs. The long-run performance of IPOs up to a period of 36 months are measured by using the two most promising evaluation techniques, i.e., wealth relative (WR) and buy-and-hold abnormal rate of return (BHAR), both being adjusted with market index, CNX-Nifty. Further, the results evidence that the underperformance is most pronounced during the initial year of trading, i.e., up to 12 months from the listing date followed by over�performance. To get possible explanations for long-run underperformance for Indian IPOs, factors like underpricing rate (listing day return), offer size, leverage at IPO date, ex-ante uncertainty, timing of issue, age of IPO firm, rate of subscription, promoter groups retention, and price-to-book value (as proxy for growth) are considered. Evidence is found, that initial day return, offer size, leverage at IPO date, ex-ante uncertainty, and timing of issue are statistically significant in influencing underperformance. However, there is no evidence favourable to the age of the IPO firm, rate of subscription, promoter group's retention, and price-to-book value impact on the long-run underperformance. The empirical results suggest that the investors who are investing in IPOs through direct subscription are earning a positive market-adjusted return throughout the period of study. But investors who have bought shares on the IPO listing day are earning negative returns up to 12 months from the listing date and expect to earn positive market-adjusted return thereafter. For future research, we suggest the extension of this analysis for additional explanatory variables including issue fundamental characteristics of IPO firms. The scope of the research study could even be improved by extending the time period of study prior to 2002.

scholarly journals Spot and Derivative Contract Prices: Articulation of Relationships of Cardamom through ARDL Method

2019 ◽  
Vol 8 (3S2) ◽  
pp. 73-77
Keyword(s):  
Spot Price ◽  
Short Term ◽  
Commodity Exchange ◽  
Speed Of Adjustment ◽  
Ardl Bounds Test ◽  
Long Run ◽  
Period Derivative ◽  
Short Run ◽  
Bounds Test ◽  
The Relationship

India is known as land of spices and boast of a long history in spices trading. Cardamom derivative contract is listed for trading on Multi commodity Exchange in India. This paper endeavors to find out relationship between spot and derivative contract of cardamom. The relationship is also tested between derivative price of cardamom and spot price. Two period derivative contracts, near month contract and next contract of cardamom are used for the study. Long run relationship is examined through ARDL Bounds test. ECM is applied to find out short term relationship and speed of adjustment towards long run. Long run relationship was found between spot and derivative as well as between derivative and spot. Long run relationship was established in both period contracts. Short run relationship was also established and speed of adjustment is higher in near month contract.

scholarly journals AN ANALYSIS OF STOCK MARKET INTEGRATION IN THE ASIAN DEVELOPED AND EMERGING MARKETS

2021 ◽  
Vol 9 (3) ◽  
pp. 1175-1190
Author(s):  
Sadiq Rehman ◽  
Asif Ali Abro ◽  
Ahmed Raza Ul Mustafa ◽  
Najeeb Ullah ◽  
Sanam Wagma Khattak
Keyword(s):  
Stock Market ◽  
Emerging Markets ◽  
Stock Markets ◽  
Impulse Response Function ◽  
Variance Decomposition ◽  
Short Term ◽  
Emerging Stock Markets ◽  
Long Run ◽  
Integration Test ◽  
Short Run

Purpose of the study: This study investigates Short-run, Long-run, and Casual relationships in the Asian Developed and Emerging stock market indices for the period of 19 years weekly data of stock market indices of Asian Developed and Emerging Markets which are Japan (Nikkei 225), South Korea (KOSPI), Pakistan (KSE 100), China (SSE Composite), Sri Lanka (ASPI), India (BSE 200) and Malaysia (KLSE composite) from January 2001 to December 2019. Methodology: To analyze long-run and short-run relationships among the Asian developed and emerging stock markets, this study practices Descriptive Statistics, Correlation Matrix, Unit Root Test, Johansen Co-Integration Test, Vector Error Correction Model, Granger Causality test, Variance Decomposition and Impulse Response Function (IRF). Main findings: By employing the ADF and P.P. tests, the results specify that the entire variables' data are non-stationary and stationary in exact order, which is 1st difference. The Johnson Co-integration test found one cointegration relationship, where the results are consistent with Granger causality, Variance Decomposition, and Impulse Response Function (IRF). Application of the study: As the current research has focused on finding out the comovements in the Asian developed and emerging markets. So, the applications are that the survey found short-run and long-run relationships in these countries' stock markets. The study's originality: The current study has selected seven Asian developed and emerging stock markets and weekly updated time series data to investigate short-term and long-term linkages. So, this study found long-run comovements in these stock indices, which contributes to the literature. In addition, these stock markets have limited diversification benefits for international investors, while short-term diversification benefits may exist.

scholarly journals Econometric Analysis of Residential Sector Gas Demand Elasticities in Gas Exporting Countries

2021 ◽  
Vol 11 (2) ◽  
pp. 1
Author(s):  
Eshagh Mansourkiaee ◽  
Hussein Moghaddam
Keyword(s):  
Price Elasticity ◽  
Income Elasticity ◽  
Bounds Testing ◽  
Short Term ◽  
Residential Sector ◽  
Price And Income Elasticities ◽  
Long Run ◽  
Short Run ◽  
Income And Price Elasticities ◽  
Price Policies

This paper examines how residential sector gas demand in gas exporting countries response to changes by taking into consideration the economic variables. For this purpose, the short and long-run price and income elasticities of residential sector gas demand in the GECF countries for 2000 and 2019 are measured. Using Cobb-Douglas functional form, this paper applies the bounds testing approach to co-integrate within the framework of ARDL (Autoregressive Distributed Lag). Findings of this research show that there is a significant long-run relationship in nine GECF countries, including Algeria, Egypt, Iran, Malaysia, Norway, Peru, Russia, Trinidad and Tobago and Venezuela, that use gas as a source of energy in their residential sector. On average, long-rung income elasticity for underlying countries is 2.65, while long-run price elasticity is negative and calculated at 0.79. This shows that in considered gas exporting countries, residential sector gas demand is very sensitive to income policies, while the price policies impact on demand is more limited. Furthermore, short-run income and price elasticities are estimated at 6.99 and -0.02 (near zero) respectively, which implies that natural gas is very inelastic to price, as a result,price policies are unable to make significant changes in demand over the short-term. Meanwhile, as expected short-run price elasticity is lower than long-run elasticities, indicating that gas exporting countries are more responsive to price in the long-term than in the short-term. Finally, it was found that most of the preferred models have empirical constancy over the sample period. 

scholarly journals Impact of Terrorism on Foreign Portfolio Investment in Pakistan

2015 ◽  
Vol 03 (02) ◽  
pp. 68-74
Author(s):  
Irfan Ullah ◽  
◽  
Muhammad Bilal Saeed
Keyword(s):  
Trade Openness ◽  
Unit Root Test ◽  
Annual Data ◽  
Portfolio Investment ◽  
Short Term ◽  
Foreign Portfolio Investment ◽  
Long Run ◽  
Negative Effect ◽  
Short Run ◽  
Push And Pull

This study explored the long and short run impact of Terrorism on Foreign Portfolio Investment (FPI) in Pakistan using annual data from 1995 to 2013. The stationarity of data is analyzed by using unit root test. The long run relationship is captured using Johansen and Juselius Cointegration test. The short term impact was tested through Vector Error Correction Model. The results reveal significant negative effect of Terrorism on FPI. The results best fit the concept of push and pull theory. The relation of FPI and market size is negative, and highly positive with Trade Openness and Real Interest Rate. There is also significant short term relationship between Terrorism and FPI. This study suggests that careful policies should be implemented for the purpose of minimizing terrorist activities in order to enhance FPI in Pakistan.

scholarly journals Impact of banking institutions on national economy an empirical study of time series analysis in Pakistan

2015 ◽  
Vol 4 (4) ◽  
pp. 327-333
Author(s):  
Nouman Badar ◽  
Munib Badar
Keyword(s):  
Economic Growth ◽  
Financial Sector ◽  
Study Data ◽  
Short Term ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
Banking Institutions ◽  
Relationship Of

This paper examines the long and short term relationship of financial sector development on economic growth of Pakistan where development of financial sector is detected by the variables truly depicts the efficiency of financial sector i.e. Money Supply, size of Advances, Private sector Credit growth and Bank’s equity with economic growth which is pronounced by Gross Domestic Product in this study. Data of almost 22 years ranges from 1992 to 2013 of overall banking industry is taken to obtain results by employing Johnson and Jusellious co integration technique to detect long run association while Granger Casualty test is used to determine cause and effect relationship and to measure short term dynamics Vector Error correction model is used. The result shows that both long and short run relationship exists between growth of financial sector and economy of Pakistan.

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