Rami Yosef

Estimating stock market volatility using asymmetric GARCH models

A comprehensive empirical analysis of the mean return and conditional variance of Tel Aviv Stock Exchange (TASE) indices is performed using various GARCH models. The prediction performance of these conditional changing variance models is compared to newer asymmetric GJR and APARCH models. We also quantify the day-of-the-week effect and the leverage effect and test for asymmetric volatility. Our results show that the asymmetric GARCH model with fat-tailed densities improves overall estimation for measuring conditional variance. The EGARCH model using a skewed Student-t distribution is the most successful for forecasting TASE indices.

Female directors and earnings management in high‐technology firms

Purpose – This study, based on a merger of gender and accounting theories, aims to explore whether and how earnings management is affected by the presence of female directors on the board of directors and on the audit committee.Design/methodology/approach – The study employs both a univariate and multivariate analysis approach to explore the relation between female directors and earnings management in high‐technology firms. In the analysis, two contemporary ex‐post measures of earnings management, discretionary accruals and nonoperating accruals, as well as two ex‐ante measures of earnings management, Big4 auditor and financial leverage are applied.Findings – The paper finds evidence for a negative relation between the presence of female directors and earnings management. The findings indicate that accounting aggressiveness is affected by the proportion of women on the board of directors as well as on the audit committee. Furthermore, the paper find evidences indicating that earnings management is lower w...

The Relationship Between the Management of Book Income and Taxable Income Under a Moderate Level of Book-Tax Conformity

We find evidence suggesting that taxable income management is not related to book income management in firms operating under a moderate level of book-tax conformity. For a sample of Israeli firms that the tax authorities determined had understated their earnings to avoid taxes, we do not find evidence of an overstatement of book earnings. Notably, public firms do not differ from private firms in this regard. Using a control sample of firms that were not subject to tax audits, we validate that self-selection does not affect our inferences. Given Israel’s unique “intermediate” level of book-tax conformity, an important practical contribution of the findings is in shedding more light on the question of the need for a substantial transition from nonconformity to full alignment in countries with large book-tax gaps (such as the United States). Our results showing that tax-avoiding firms in Israel, public and private alike, avoid book income management even if areas of book-tax nonconformity allow them to do so imply that a reduction in the divergence between the tax and the accounting rules may suffice to reduce managers’ opportunistic (reporting) behavior.

Annuities with controlled random interest rates

Abstract We derive the expected values of annuities with random interest rates modeled by a reflected Brownian motion with a switchover at some positive level at which the drift and variance parameters change. The lifetime of the annuity is assumed to be exponentially distributed. The approach can be extended to the case of several switchover levels. We also consider other related models.

Options as a Marketing Tool: Pricing a Promotional Scheme for a Product with a Secondary Market

Adding options to durable products allows new opportunities for manufacturers and retailers in markets with a secondary market to create better segmentation schemes, provide creative means to differentiate their products and services, and increase the value they offer consumers. This raises the need for sellers to properly price such options. This work presents a few examples of incentive programs for the car industry, develops models and calculates their cost to the seller, demonstrating the applicability of the proposed methodology. Our numerical results indicate that such options are surprisingly inexpensive for car manufacturers and dealers. Copyright