The Effects of Terrorism on Turkish Financial Markets

Abstract

In this research, we analyzed how Turkish financial markets and foreign investors in the stock market reacted to the terror attacks in Turkey. Our analysis, which was performed using the terror index for the stock market and the foreign exchange market, revealed that returns, abnormal returns, and cumulative abnormal returns were not affected by the terror attacks; however, foreign investors in the stock market were affected. When the geographic regions of the terror attacks were analyzed, the findings showed that foreign investors were negatively affected mainly by the terror attacks that occurred in southeast Anatolia. Attack type and target type were important only for foreign investors. An evaluation of the interaction between the terror attacks and the markets with the involvement of the terrorist organizations indicated that only the foreign investors in the stock market were affected by Al-Qaeda and PKK-linked terror attacks. An evaluation of the effect of terror attacks in foreign countries on Turkish financial markets revealed no effect on the domestic stock market and foreign exchange markets. We also examined the volatility spillovers from the terror index to the stock market and found that terrorist attacks increased the volatility of the stock market.     

THE EFFECTS OF THE WORLD DEFENSE INDUSTRY AND US MILITARY AID TO ISRAEL ON THE ISRAELI DEFENSE INDUSTRY: A DIFFERENTIATED PRODUCTS MODEL

This paper models the interactions between the defense industry market structure and the defense needs of Israel, the USA and Western Europe, which produce several heterogeneous defense goods. The model specifies that the defense industries of the US and Europe are ‘large’ while that of Israel is ‘small’. The US military aid to Israel is also an integral part of the model. The results show that net defense costs of Israel are minimal when the number of its defense firms is one. The model predicts that an increase in US military aid reduces Israel’s government expenditure, its defense industry’s profits and its net defense costs.     

Market entry strategy in the presence of market spillovers and efficiency differentiation

Firms form various alliances or use brand extensions to enter new markets in order to improve their operational efficiency and create a positive spillover. However, they do not always know the implications of these strategies for market entry and multimarket competition because the sale of products in one market can have negative spillover effects on product sales in other markets. We present an analytical framework to examine whether and how (i.e., by choosing alliance entry or independent entry) competing firms should enter a market in a situation where market spillovers occur when a firm enters a spillover-producing market to sell products that may increase or decrease the consumers' willingness to pay for products in the primary market. Our analysis shows that the operational efficiency (or quality differentiation ability) of firms in a spillover-producing market varies, and hence, the impact of market spillovers differs for firms. We identify the key factors, such as bargaining power, brand value difference in the primary market, and the extent of efficiencies and spillovers, that determine the firms benefitting from the different entry strategies. Specifically, we show that firms would be more willing to choose an alliance strategy to enter a spillover-producing market if the negative spillover is small and alliance efficiency is high. In contrast, if an alliance entry is not favored, the firms' relative operational efficiency is crucial for them to decide whether to enter the market independently under moderate spillover conditions. Finally, we show the implications of market entry strategies for managers.     

A note on the financial condition of defense contractors

In recent years, there have been several changes in the weapon‐system acquisition market which have the potential to negatively impact the financial condition of defense contractors. This study evaluates the financial health of defense firms vis‐a‐vis nondefense firms using a fiscal distress identification model developed by E.I. Altman. We conclude that the financial condition of defense firms has deteriorated but the deterioration is the same as experienced by nondefense firms.     

国防知识产权运营市场化研究

提高国防知识产权转化应用水平,关键是解决制约国防知识产权转化应用的体制机制问题。可借鉴普通知识产权运营经验,以市场化方式促进国防知识产权运营工作。针对当前运营中出现的市场失灵现象,从创新政府治理模式、引入市场机制、增强法律法规建设、搭建公共服务平台等途径入手,逐步理顺政府与市场的关系,进行国防知识产权运营市场化改革。     

The structure of the defense industry and the security needs of the country: a differentiated products model

This paper models the interactions between the defense needs of the USA and Western Europe, which produce several heterogeneous defense goods, and the defense industry market structure. The results show that net defense costs of the USA and Europe are lower when the number of defense firms in each arms‐producing country is small and when the world prices of the defense goods are high. The model predicts that the increase in world prices will crowd‐out countries in the developing world from the market for modern weapon systems and may force them to develop and use ‘cheap and dirty’ weapon systems.     

Markets for surplus components with a strategic supplier

We study markets for surplus components, which allow manufacturers with excess component inventory to sell to firms with a shortage. Recent developments in internet commerce have the potential to greatly increase the efficiency of such markets. We develop a one‐period model in which a monopolist supplier sells to a number of independent manufacturers who are uncertain about demand for final goods. After uncertainty is resolved, the manufacturers have the opportunity to trade. Because uncertainty is over demand functions, the model allows us to endogenize both the price of final goods and the price of components in wholesale and surplus markets. We derive conditions on demand uncertainty that determine whether a surplus market will increase or decrease supplier profits. Increased costs of transacting on the surplus market may benefit manufacturers, because of the impact of these costs on the supplier's pricing power. The surplus market can decrease overall efficiency of the supply chain, since the benefit of better allocation of components may be outweighed by an increased double‐marginalization effect. © 2005 Wiley Periodicals, Inc. Naval Research Logistics, 2005.     

The defence firm of the future

This paper offers the personal view of a senior executive in the Defence Procurement Agency about the future requirements of the defence industry’s principal UK customer. The focus here is on trying to identify the type of corporate behaviour and range of skill sets that the UK Government will need from defence suppliers, both primes and supply chain companies in the future. The concluding message from this ‘Customer View’ is that there is likely to be a continuing market for the company that specializes in delivering defence capability. It will be a company that will be looking for a long‐term relationship, with a specialist knowledge of its various national customers and a willingness to work openly and closely with them. It will be agile in its ability to bring together diverse technologies, to package them as a system and to deliver them either as hardware or as a service. Such suppliers will also need to innovate and to adapt at least as rapidly as the threats that they seek to counter.     

Challenges of institutional coordination in complex defense acquisition programs: the case of the Republic of Korea’s F-X program

Decision-making in defense acquisition programs in the Republic of Korea (ROK) has been problematic, especially in highly advanced complex systems. The highly disputed force modernization program for the ROK Air Force’s fifth-generation fighter, dubbed the Fighter eXperiment, went through extreme turbulence during the type selection phase. The gist of the turbulence became evident through poor institutional coordination within the defense acquisition authorities that eventually forced them to rescind the decision generated from their own yearlong efforts, thus basically shooting themselves on the foot. The paper highlights the background of the program and reviews the institutional elements that influenced the decision-making process, and conclude that the absence of an effective coordination mechanism has made decision-making in complex defense programs even more troublesome.     

Impacts of sequential acquisition,market competition mode,and confidentiality on information flow

We investigate information flow in a setting in which 2 retailers order from a supplier and sell to a market with uncertain demand. Each retailer has access to a signal. The retailers can disclose signals to each other (horizontal information sharing), while the supplier can solicit signals by offering retailers differential payments as incentives for signal disclosure (vertical information acquisition). In the base setting, market competition is in quantity, and a retailer can fully infer the signal that the other retailer discloses to the supplier. We show that the supplier prefers to sequentialize the procedure for information acquisition. Moreover, vertical information acquisition by the supplier is a strategic complement to horizontal information sharing between the retailers to establish information flow. In the equilibrium, the retailers have no incentive to exchange signals, but system wide information transparency can be realized through a combination of information acquisition and inference. We further study the signaling effect, whereby the supplier utilizes wholesale pricing as an instrument to affect the retailers' inference of the shared signals, and price competition to explore their impacts on the supplier's preference for sequential acquisition and the sustainability of information flow.     

Defense Firms Adapting to Major Changes in the French R&D Funding System

The structural changes inside the French innovation system have impacted the role of defense firms since the late 1980s. Major changes have affected the defense budget and public R&D funding system in particular. The aim of this article is to understand French defense firms’ repositioning within the National Innovation System (NIS) based on an analysis of their R&D behavior over a long period of time (1987–2010). We show that French defense firms remain major players in the NIS and faced up to these major changes by adapting the funding of their R&D and their research priorities and rolling out new innovation capabilities. Additionally, they developed new innovation models to take advantage of new collaborative partnerships developed for civil and military markets.     

人工神经网络在管理信息系统中的应用

在传统管理信息系统的基础上,增加专家系统模块,即基于人工神经网络技术的预测分析模块,完成复杂的非线性预测以提高MIS智能化、自动化水平。该模块选用反向传输(BP:BackPropagation)神经网络模型来实现,通过网络的自适应学习和训练,找出输入和输出之间的内在联系,从而求得问题的解答。利用该专家系统对出版社图书市场销量进行预测。结果表明:该方法性能好,可作为预测图书售量的一种有效手段。     

Defence Enterprise Surveys On Market Outlets: The Case Of Slovenia

This article presents the results of an empirical survey of Slovenian defence enterprises focusing on three segmented geographic market outlets: the domestic market, the other European Union (EU-26) markets and the global markets. In the enterprise surveys are included around two-thirds of the domestic defence enterprises of different sizes and activities. The Slovenian defence enterprises by production, supply-in-return, subcontracting, middleman and trader activities in the defence marketing chains are mostly specializing towards the businesses on the domestic market. Rare enterprises are specialized exclusively for activities on the EU-26 markets and the global markets.     

The industrial structure of National Defence and transaction costs

A recent paper in Defence Economics suggests that “a single variable, the public opinion balance, ... when accompanied by a control variable measuring the proportion of responses in the ‘residuum’ (no opinion or keep the status quo), permits an accurate prediction of subsequent changes in the rate of change of U.S. defense outlays from the mid‐1960s through the 1980s” (Higgs and Kilduff, 1993, p. 227). In contrast, this comment provides evidence that since 1986 the Higgs‐Kilduff model frequently mispredicts the direction of U.S. defense spending. In addition, the average prediction error, and its variance, since 1986 consistently exceeds the average prediction error, and its variance, for the years prior to 1986.     

Optimal operating policies in a commodity trading market with the manufacturer's presence

With the help of the Internet and express delivery at relatively low costs, trading markets have become increasingly popular as a venue to sell excess inventory and a source to obtain products at lower prices. In this article, we study the operational decisions in the presence of a trading market in a periodic‐review, finite‐horizon setting. Prices in the trading market change periodically and are determined endogenously by the demand and supply in the market. We characterize the retailers'optimal ordering and trading policies when the original manufacturer and the trading market co‐exist and retailers face fees to participate in the trading market. Comparing with the case with no trading fees, we obtain insights into the impact of trading fees and the fee structure on the retailers and the manufacturer. Further, we find that by continually staying in the market, the manufacturer may use her pricing strategies to counter‐balance the negative impact of the trading market on her profit. Finally, we extend the model to the case when retailers dynamically update their demand distribution based on demand observations in previous periods. A numerical study provides additional insights into the impact of demand updating in a trading market with the manufacturer's competition. © 2009 Wiley Periodicals, Inc. Naval Research Logistics, 2010     

Country Survey XIII: Japan's security posture and defense industry prospects

Defense budgets in Japan have been complicated compromises from numerous inputs ‐ including threat perceptions, domestic industrial/technological base development, support for the bilateral security treaty with the United States and internal bureaucratic politics ‐ but with the fall of the former Soviet Union, the clearest justification for higher spending disappeared. Double‐digit defense spending increases that were common in the 1980s have been replaced by annual increases lower than present inflation rates, resulting in negative real growth in the country's defense budget. Domestic economic problems and consistent government pressures for smaller budgets have further slowed annual growth in total spending and have contributed to lower procurement budgets. As a result, the domestic Japanese defense industry is facing far more constrained conditions from the growth years of a decade before.

Government policymakers are examining Japan's regional security environment as well as its alliance with the United States to determine the appropriate course for the country to take in the coming years. The formal security treaty with the United States is likely to remain a major element of government positions, but other aspects of the country's overall security posture are open to debate. Perceptions of a reduced threat environment are fueling additional pressures for defense budget cuts.

The domestic defense industry seeks means to assure its survival in domestic defense markets in this constrained environment. Expansion into overseas markets to offset declining domestic markets is an option that currently is constrained by policy restrictions on arms exports. Industry is advocating re‐examination of those policies and unlike earlier years, government appears willing to respond positively but cautiously to this lobbying.     

ON THE CHOICE OF MULTI-TASK R&D DEFENSE PROJECTS: A CASE STUDY OF The ISRAELI MISSILE DEFENSE SYSTEM

Investments in R&D constitute a major share of the expenditures of the hi-tech industry since, generally, they enable firms to successfully compete in the rapidly and constantly changing markets for hi-tech products and services. The role of R&D projects is particularly important in the areas of defense and homeland security due to the nature of warfare and the continuous threats posed by arms races and by terror organizations. This study analyzes the choice of the R&D projects designed to counter multiple related military threats. It develops the methodology required to assess whether it is preferable to develop one project to thwart several related threats, or several distinct projects, each of which provides an answer to one specific threat or a partial set of the threats. An analytic solution is provided and assessed for two simple models with two related threats. A solution of the model is then provided for any number of related threats, using a dynamic programming methodology. Finally, we demonstrate the usefulness of our model and methodology to Israel’s missile defense problem; that is, we show how to optimally develop systems aimed at thwarting the multiple threats of short-, medium-, and long-range missiles.     

IMM-EKF的弹道导弹轨道实时动态预测

快速准确的导弹轨道预测是有效进行导弹防御的前提。提出一种基于IMM-EKF的弹道导弹轨道实时动态预测方法,对导弹发射点和落点分别进行动态预测研究。首先,构建不包含导弹先验信息的IMM-EKF弹道估计器;其次,定义一种模型概率累积因子,用于估计导弹的关机时刻及相应的运动状态;最后,基于导弹运动状态的实时估计,动态预测落点和发射点。仿真实验结果表明:该方法能实时动态预测导弹发射点和落点;发射点预测应利用主动段状态估计,而落点预测则在导弹自由段早期进行为宜。     

Dynamic pricing in a dual‐market environment

This article is concerned with the determination of pricing strategies for a firm that in each period of a finite horizon receives replenishment quantities of a single product which it sells in two markets, for example, a long‐distance market and an on‐site market. The key difference between the two markets is that the long‐distance market provides for a one period delay in demand fulfillment. In contrast, on‐site orders must be filled immediately as the customer is at the physical on‐site location. We model the demands in consecutive periods as independent random variables and their distributions depend on the item's price in accordance with two general stochastic demand functions: additive or multiplicative. The firm uses a single pool of inventory to fulfill demands from both markets. We investigate properties of the structure of the dynamic pricing strategy that maximizes the total expected discounted profit over the finite time horizon, under fixed or controlled replenishment conditions. Further, we provide conditions under which one market may be the preferred outlet to sale over the other. © 2015 Wiley Periodicals, Inc. Naval Research Logistics 62: 531–549, 2015     

A neural network measurement of relative military security ‐ the case of Greece and Cyprus

I demonstrate the existence of two sources of contestability in the military aerospace market, within producing and export countries, through the State’s triple role as unique buyer, regulator and seller. For the producing countries, I introduce the new concept, ‘sovereignty price’; that is, the profit a State agrees to grant to its defence firms to perpetuate their domestic activities. This subjective, evolutionary concept provides a dynamic character to the theory of contestable markets. Moreover, I show that contestability is more effective than antitrust policies and a solution of the cost disease. Empirical cases are shown to confirm the theoretical analysis.