Performance Analysis on Process Level: Benchmarking of Transactions in
Banking, by Andreas Burger and Jürgen Moormann

Abstract

Banks are looking for ways to close their operational performance gap. This paper proposes a new approach for the detection and analysis of process inefficiency. The Benchmarking of Transactions reveals insights concerning the performance of a business process and offers new opportunities for process improvement. The article delivers an overview of the concept as well as the results of an application in a large organization. The benchmarking approach is based on Data Envelopment Analysis. The approach is applied to a typical banking process using actual operational data. This real life application documents the large variance in performance found on transaction level and the existence of inefficiency. Furthermore, the pattern of inefficiency differs across the three proposed views of performance. This research raises issues in relation to the process execution performance. The analysis provides deep insights that can be helpful for understanding and improving business processes.

Why use Internet Banking? An Irrational Imitation Model, by Weihua Shi and
Kenneth Zantow

Abstract

Technology adoptions are not always rational. Adoption herding, the adoption that occurs because many others have made the adoption, often occurs due to various reasons (Li, 2004). Traditional rational choice theories cannot accommodate herding and other irrational behaviors associated with technology adoption. Based on imitation theory, this study proposes a model to examine irrational imitation factors underlying the adoption of Internet Banking (IB). Three imitation factors (frequency-based, outcome-based and trait-based) are incorporated into the model which is tested using survey data from 173 IB users. The results reveal that outcome-based and frequency-based imitations are significant determinants of IB adoption. This study pioneers an analysis of irrational imitations for technology acceptance, in particular the IB adoption, and provides valuable insights for bank managers. The findings suggest that IB adoption is subject to frequency-based and outcome-based imitation.

Stock-bond co-movements and cross-country linkages, by Dirk Baur

Abstract

This study analyzes the correlation of stock and bond indices for eight developed countries. We compare a country's stock-bond linkages with cross-country linkages and find that the former exhibit a negative trend in contrast to the positive trend observed for cross-country stock market and bond market linkages. We show that the decline of the stock-bond correlation in recent years can be explained with a more frequent portfolio rebalancing of investors due to the globalization of securities markets and implied lower international diversification benefits across similar asset classes. A test for temporal commonalities of changes in cross-country and stock-bond linkages indicates that flight-to-quality from stocks to bonds and cross-country stock market contagion occurs simultaneously.

Momentum and Monthly Effect: An Anomaly within an Anomaly! by Nusret Cakici and Sris Chatterjee

Abstract

This paper evaluates the relation between two well-known anomalies in stock returns, viz, momentum and monthly effect. The monthly effect anomaly refers to the fact that stocks earn positive average returns only during the first half of the month and zero average returns during the second half. In this paper we show that although the monthly effect anomaly continues to hold for stocks in general (as well as for stocks grouped by size or book-to-market or other criteria), the monthly effect seems to break down for momentum portfolios. This result has implications for implementing a portfolio trading strategy based upon the momentum effect and the monthly effect. We further show that the profitability of momentum portfolios arises from the second half of the month because the monthly effect for winner and loser portfolios is asymmetric. We also examine the risk characteristics of the momentum returns. The risk-adjusted excess return (or alpha) for momentum portfolio was previously reported by other researchers as significant, but is statistically insignificant in recent years.

What's different about loans? An analysis of the risk structure of credit spreads, by Andrea Resti and Andrea Sironi

Abstract: While extensive research on the relationship between credit risk and spreads has been produced for bonds and loans separately, few studies have analyzed them jointly. We derive a simple structural model where a stochastic default barrier accounts for informational noise, and differences between bond and loan spreads are explained through the different screening ability of bankers and bond-holders. We then test the model on a sample of 7,926 Eurobonds and 5,469 syndicated loans. Empirical results confirm the key finding of the model: while spreads increase as ratings worsen for both bonds and loans, the former show a steeper spread/rating relationship.