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Baltagi and Li (2001) derived Lagrangian multiplier tests to jointly test for functional form and spatial error correlation. This companion paper derives Lagrangian multiplier tests to jointly test for functional form and spatial lag dependence. In particular, this paper tests for linear or log-linear models with no spatial lag dependence against a more general Box-Cox model with spatial lag dependence. Conditional LM tests are also derived which test for (i) zero spatial lag dependence conditional on an unknown Box-Cox functional form, as well as, (ii) linear or log-linear functional form given spatial lag dependence. In addition, modified Rao-Score tests are also derived that guard against local misspecification. The performance of these tests are investigated using Monte Carlo experiments.

Hausman (1978) represented a tectonic shift in inference related to the specification of econometric models. The seminal insight that one could compare two models which were both consistent under the null spawned a test which was both simple and powerful. The so-called ‘Hausman test’ has been applied and extended theoretically in a variety of econometric domains. This paper discusses the basic Hausman test and its development within econometric panel data settings since its publication. We focus on the construction of the Hausman test in a variety of panel data settings, and in particular, the recent adaptation of the Hausman test to semiparametric and nonparametric panel data models. We present simulation experiments which show the value of the Hausman test in a nonparametric setting, focusing primarily on the consequences of parametric model misspecification for the Hausman test procedure. A formal application of the Hausman test is also given focusing on testing between fixed and random effects within a panel data model of gasoline demand.

The size effect that there exist return differences between small market-cap firms and large market-cap counterparts in the stock market has become one of the most controversial capital market anomalies. This paper aims to interpret this effect, including both the size premium and the size discount.

A dynamic capital mobility model (DCMM) is proposed, and the model’s explanatory ability is validated via simulation.

This study’s simulation results indicate that the observed size effect can be originated from the combination of the pure size effect and the investors’ herding behavior. Although the size premium, that average returns of small firms are higher than those of large firms, is more prevalent in the stock market, this study’s model implies that the size discount is also possible, which is largely an empirical issue. The pure size effect per se cannot reproduce the size premium. Only if the herding effect dominates the pure size effect would there exist the size premium.

Although the literature provides miscellaneous explanations for the size effect, they are still inconclusive. So far there has been no theory to directly investigate the size effect and to explicitly explore the impact of investors’ trading behavior on the size effect. To the best of the author’s knowledge, this paper fills in this gap and proposes a DCMM to interpret the size effect for the first time. In addition, while the literature focuses on the size premium only, this study covers not only the size premium but also the size discount.

A numerical study of a two‐dimensional turbulent flow in a partially open rectangular cavity such as a room is carried out. The turbulent flow is induced by the energy input due to a localized heat source positioned on the floor of the cavity. This flow is of interest in enclosure fires where the flow in the cavity interacts with the environment through the opening or vents. The focus is on the stable, thermal stratification that arises in the room and on the influence of the opening height. A finite‐difference method is employed for the solution of the problem, using a low Reynolds number k — ε turbulence model for the turbulent flow calculations. This model is particularly suitable for flows in which the possibility for relaminarization exists. It was found that, for high Grashof numbers and for relatively small opening heights, particularly for doorway openings, a strong stable thermal stratification is generated within the cavity, with a cooler, essentially uniform, layer underlying a warmer, linearly stratified, upper layer. As a consequence, turbulence is suppressed and the flow in the upper region of the cavity becomes laminar with turbulence confined to locations such as the fire plume above the source and the shear layer at the opening. The penetration distance and the height of the interface are both found to decrease with a reduction in the opening height. The Nusselt number for heat transfer from the source is seen to be affected to a small extent by the opening height. The basic trends are found to agree with those observed in typical compartment fires. Comparisons with results available in the literature on turbulent buoyancy‐driven enclosure flows indicate good agreement, lending support to this model and the numerical scheme.

The purpose of this paper is to study whether mergers and acquisitions (M&As) create value in Indian and Chinese markets.

The authors study abnormal returns (AR) created by the acquiring firms in Indian and Chinese markets relating to M&A announcements, using the following three different statistical methods: i.e. mean, market and ordinary least squares adjusted return models.

On average, M&A announcements do not create value for the firms in Chinese and Indian economies. For the mean model, M&As create value for Chinese firms, whereas for the Indian firms no such value is created for the same event windows. The regression results showed that debt has a positive impact on the AR and cumulative average abnormal returns at 1, 5 and 10 per cent significance levels, respectively.

This study suggests increasing the sample size and period and using the instrumental variables regression to ensure the estimator’s impartiality, consistency and efficiency. With the investigative period surrounding a financial crisis, the estimators may have omitted bias.

Multiple methods used in this paper made it possible to capture the level of method variance in the AR, which is unusual in the Chinese and Indian context. Hence, the current study provides local knowledge and further strengthens the literature about M&As. The authors also regress AR with firm-specific factors, the consideration of which is scarce in the previous literature. Furthermore, much of what the authors know about M&A is relevant to developed economies.

The last financial crisis opens the question of the level of debt sustainability in the developed countries. The majority of the EU member states faced the growing trend of public debt (while some countries are unable to service it on time, i.e. Greece) and some of the new members face the problem of external debt. Regarding there is no standard tool for measurement of public debt sustainability this analysis provides the statistical and econometric approach to find out bi-directional impact of public debt on GDP growth rate, unemployment, current account and interest rate spread. The research is performed on the five different groups of EU member states: EU28, Eurozone, new member states, GIIPS and EU-10-core countries. Results indicate the necessity to keep the public debt stable regarding the very slow post crisis recovery and low growth rates to avoid unintended consequences of debt burden on the EU economies.

Firms and individuals budget or account for dollars, not standardized dollars, squared dollars, squared deviations from mean dollars, or percentage of squared deviations from mean dollars – my checking account reports my balance in dollars. In contrast, we have all seen a model dismissed because it “only explained 9% of the variance.” However, the Brogden–Cronbach–Gleser (BCG) model clearly shows that rxy (or

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This article examines the determinants of salaries of heads of public procurement units. Specifically, it investigates the effect of gender, budget size, supervisory responsibilities, experience, authority level, education, certification, age, cost of living and labor market competition on the compensation of purchasing supervisors and heads of purchasing units. The article uses multiple linear regression and analysis of variance to conclude that drivers of compensation of public procurement executives and managers in the public sector are different than those in the private sector or in other industries.