Anthony F. Herbst

Marketing Concept and Customer Orientation

Examines the marketing concept (MC) and its foundation of customer orientation. Proposes that the General Electric Company promulgated MC and that this followed the Second World War, before being accepted formally by academics. States that the two major concepts are: that consumers know what they want; and that consumer sovereignty prevails. Believes marketers cannot take consumers as a given nor take them for granted and neither can manufacturers or they will also suffer. Questions whether consumers are always informed about products and what exactly they require and whether firms see themselves as merely responding to the market flow. States, in conclusion, that marketing communications can help shape wants and beliefs and that marketers should aim their best efforts at this area to enable better contacts.

Some Empirical Evidence on the Determinants of Trade Credit at the Industry Level of Aggregation

The results obtained for accounts payable contrast with those for accounts receivable. With receivables, it appears that the level is determined more or less automatically by sales, linear trend, and season of the year. In the case of payables, it seems that trend and season are unimportant, and that the level of payables is determined instead by not only the level of purchases, but by capital requirements. Further, the current obligation on bank term-loans plays an important role in determining the response of payables to the need for working capital.However, it was shown that fairly simple models are sufficient to account for most of the variance in accounts payable. Although it was anticipated that monetary variables would be significant for accounts payable, this was not borne out. As for accounts receivable, most of the variance in accounts payable for the Lumber and Wood Products Industry can be associated with microeconomic (i.e., industry variables) and time variables alone.Several tentative conclusions concerning trade credit in the Lumber and Wood Products Industry may be listed:1. Receivables can be accounted for almost entirely by sales, trend, or season.2. Payables are not directly influenced by trend or season.3. The direct influences of money supply and interest rates on accounts payable are not significant.4. The effect of working capital on payables is adequately captured by treating current assets and current liabilities as separate independent variables.5. The current obligation on long-term bank loans is more important in determining the level of payables than are short-term bank loans or the level of long-term debt.

E-finance: Promises kept, promises unfulfilled, and implications for policy and research

Abstract Growth of electronic, Internet-based commerce, or e-commerce, has been truly explosive. However, innovations and growth of e-finance have lagged those of e-commerce in general. E-cash has stumbled along but not lived up to its early promise or its current potential. This paper discusses the current status of e-finance, some of the problems that have stood in the way of its growth and development, and implications for government policy and research. Lengthy, detailed discussion of such ancillary issues as encryption technology, e-cash algorithms, and other technical detail at the microlevel of implementation is avoided.

The Unique, Real Internal Rate of Return: Caveat Emptor!

The purpose of this paper is to show that the internal rate of return (IRR) even when unique and real may nevertheless be an incorrect measure of the return on investment, and to prove that all projects characterized by negative flows occurring only at the beginning and end will be mixed investments for which the IRR, whether unique and real or not, is not a correct measure of investment return.

Optimal currency forward market hedge ratios: Hedging or concealed speculation?

Finance literature in recent years has contained numerous papers dealing with the issue of optimal hedging ratios. The traditional approach to hedging with futures contracts had been to use a 1:l ratio of futures to spot positions. The more recent portfolio methodology determines the optimal hedge ratio by regressing the cash price, cash price change, or logarithm of cash price relative on the corresponding futures price, change, or logarithm. This procedure, following Johnson [7], Stein [lo], and Ederington [2], finds the minimum variance hedge ratio, which is the regression slope term, generally to be other than l:l, depending on whether the spot:futures/forward relationship is one of positive or negative carrying costs. Swanson and Caples [ll] and Herbst, Kare, and Caples [5] extend the portfolio methodology by using a Box-Jenkins autoregressive, integrated moving average procedure (ARIMA) to explicitly incorporate the effects of serial correlation. This extension yields optimal hedge ratios for major currencies which are lower than those found in the earlier portfolio studies, enlarging the difference in magnitude between traditional and portfolio determined optimal hedging ratios. Most of the studies have focused on risk reduction relating to interest rates and physical commodities. For example, Ederington [2] and Franckle (31 analyzed T-Bill futures while French [4] studied spot copper and silver prices in the United States and forward prices in England. More recently, Toevs and Jacob [13] reevaluated estimation techniques for calculating hedge ratios for interest rate risk and concluded that simple duration-based hedges can dominate regressionbased hedges. Their work thus questions the validity of the portfolio methodology. Less work has been done on foreign currency futures. Cornell and Reinganum [l] compared hedging in the forward and futures market for foreign currencies, and Hill and Schneeweis [6] attempted to measure hedging effectiveness for five major currencies using the foreign currency futures market. Park

Determination of the maximum investment in a capital project

The sensitivity of investment NPV (net present value) to the discount rate is widely known. However, no current finance or real estate textbook investigates the sensitivity of NPV to the net investment outlay, or the installed purchase price of the asset. Such information can be critical, particularly in situations in which the investment is to be acquired by bidding against other interested parties. The maximum investment, even assuming certainty in the estimates of cash flows, and so on, is complicated by a dependence of the depreciation on the investment in the project and the applicable tax laws. This paper offers a solution to the problem of calculating an estimate for the maximum price that can be paid for a capital investment and still achieve a positive NPV.

Speculative efficiency and foreign currency futures: A focus on selected countries in North America, Western Europe, and the Pacific

Abstract This study extends the investigation of speculative efficiency and unbiasedness in the forward foreign exchange market to the foreign currency futures market. Consistent with the normal backwardation/contango hypothesis, results show that futures rates are not unbiased forecasts of future spot rates. A trading rule based on these results reveals attractive speculative opportunities which appear too large to be cccounted for by risk aversion of investors.