The social scientific turn in UK financial accounting research: A philosophical and sociological analysis

The demise of the classical programme of financial accounting research is generally represented as a progressive development. This paper argues that the academy's abandonment of classical methods was justified neither by the fruitfulness of post‐classical programmes nor by their incontestable epistemological superiority. Rather, what occurred was a turn to mainstream social science, reflecting sociological characteristics of the UK financial accounting research community. The paper concludes with a call for a revival of the classical programme.     

经典波动模型下的最优债券投资组合

文章认为,由于利率和股价兼有相同的趋势性和波动性属性,股价经典波动模型对利率建模具有研究价值。通过引入经典的波动模型,结合极大似然估计的方法,本文探讨了无风险债券的最优投资方案,并将该成果运用于全球主要国债市场进行实证模拟投资,结果表明,该模型在全球主要国债市场均能取得较好的超额收益。     

无套利定价理论及未来研究方向

本文首先对以无套利假设作为理论基础的经典金融资产定价理论进行了梳理。然后,基于经典理论的预测结果与实际金融市场数据不能很好吻合的事实,以及行为金融学所指出的无套利定价理论的局限性,提出以一价定律作为金融资产定价的理论出发点具有重要的理论和现实意义。     

Arbitrage and deflators in illiquid markets

This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash account/numeraire. In addition to classical frictionless markets and markets with transaction costs or bid–ask spreads, our framework covers markets with nonlinear illiquidity effects for large instantaneous trades. In the presence of nonlinearities, the classical notion of arbitrage turns out to have two equally meaningful generalizations, a marginal and a scalable one. We study their relations to state price deflators by analyzing two auxiliary market models describing the local and global behavior of the cost functions and constraints.     

A Pragmatist Defence of Classical Financial Accounting Research

One reason for the disdain in which classical financial accounting research has come to held by many in the scholarly community is its allegedly insufficiently scientific nature. While many have defended classical research or provided critiques of post‐classical paradigms, the motivation for this paper is different. It offers an epistemologically robust underpinning for the approaches and methods of classical financial accounting research that restores its claim to legitimacy as a rigorous, systematic and empirically grounded means of acquiring knowledge. This underpinning is derived from classical philosophical pragmatism and, principally, from the writings of John Dewey. The objective is to show that classical approaches are capable of yielding serviceable, theoretically based solutions to problems in accounting practice.     

Asymptotic results for the risk process based on marked point processes

Abstract

In this paper asymptotic properties for the risk process will be studied when the number of risk units tends to infinity. The paper extends asymptotic properties for the classical risk process to more general processes. In the classical risk process the claim amounts are assumed independent and identically distributed, and the claim number process is a homogeneous Poisson process.

The key tool is point process theory with associated martingale theory. The results are illustrated by examples.     

No-arbitrage conditions for storable commodities and the modeling of futures term structures

One distinguishable feature of storable commodities is that they relate to two markets: cash market and storage market. This paper proves that, if no arbitrage exists in the storage-cash dual markets, the commodity convenience yield has to be non-negative. However, classical reduced-form models for futures term structures could allow serious arbitrages due to the high volatility of the convenience yield. To avoid negative convenience yield, this paper proposes a semi-affine arbitrage-free model, which prices futures analytically and fits futures term structures reasonably well. Importantly, our model prices commodity-related contingent claims (such as calendar spread options) quite differently with classical models.     

Modelling Accounting Populations for Ratio Estimation in Audit Sampling

The classical ratio estimator is one of the auxiliary information estimators frequently discussed in the audit sampling literature. The major weakness of this estimator is its unreliability when accounting populations have only one-sided errors or when the error rate is low. Efforts have been made to improve the classical estimator by using techniques such as the Jackknifed ratio discussed by Frost and Tamura (1982). This paper proposes a new method to estimate the population total error based on the ratio of error over book value, i.e., taintings.

The special features of the proposed procedure are that (1) it specifically models the special characteristics of the typical accounting populations, and (2) it is the first study we know of in the audit sampling literature that uses simulation to capture the characteristics of the specific distribution of the estimator each time a confidence interval is constructed. This new approach became possible because of the recent publication of several studies on the empirical characteristics of accounting errors. Results of empirical tests indicate that the proposed method can significantly improve the reliability of the classical ratio under circumstances where the classical ratio needs improvements. Empirical comparisons are also made with a third ratio estimator under dollar-unit sampling. Again, the proposed method provides better reliability.     

The “out-of-sample” performance of long run risk models

This paper studies the ability of long-run risk models to explain out-of-sample asset returns during 1931–2009. The long-run risk models perform relatively well on the momentum effect.A cointegrated version of the model outperforms the classical, stationary version. Both the long-run and the short-run consumption shocks in the models are empirically important for the models' performance. The models' average pricing errors are especially small in the decades from the 1950s to the 1990s. When we restrict the risk premiums to identify structural parameters, this results in larger average pricing errors but often smaller error variances. The mean squared errors are not substantially better than those of the classical CAPM, except for Momentum.     

Impact of Underwriting Cycles on the Solvency of an Insurance Company

Abstract

This paper studies the solvency of an insurance firm in the presence of underwriting cycles. A small or medium-size insurance company with a price-taker position in the market is considered. Its premium income is assumed to obey an autoregressive process with cycles. Specifically, the premium income for a specific calendar year is influenced by the market experience for the last couple years. Under this classical AR(2) dynamics governing the premium income, an explicit expression for the ultimate ruin probability is derived, using a martingale approach, in the lighttailed claims case. Furthermore, the logarithmic asymptotic behavior of the ultimate ruin probability as well as the typical path to ruin are investigated. Then a comparison is made with the classical case where the same company operates on a market without such cycles. Asymptotically, the presence of market cycles is shown to increase the risk for the company. Numerical illustrations are performed on Canadian motor insurance market data and support the theoretical analysis.     

Accounting's Latent Classicism: Revisiting Classical Management Origins

The historical classical management roots of contemporary accounting are still embedded in theory and practice, but invariably unacknowledged. This paper revisits the discourses and philosophies of three leading management writers generally regarded as proponents of scientific and classical management: Frederick Taylor, Henri Fayol, and the longest standing advocate, Lyndall Urwick. The paper argues that traditionally Taylor has been regarded as the dominant influential figure on early management and later accounting theory, but that this reflects an inaccurate stereotyping that ignores the greater reflections in contemporary accounting of Fayol and Urwick. Their approaches to planning, control, and coordination, as well as their accounting and financial management philosophies are revisited. This examination aims to better recognize their contributions to the latent classicism that still pervades accounting thought and practice.     

Översikt av utländska aktuarietidskrifter

Abstract

In this paper a continuous-time model of a reinsurance market is presented, which contains the principal components of uncertainty transparent in such a market: Uncertainty about the time instants at which accidents take place, and uncertainty about claim sizes given that accidents have occurred.

Due to random jumps at random time points of the underlying claims processes, the absence of arbitrage opportunities is not sufficient to give unique premium functionals in general. Market preferences are derived under a necessary condition for a general exchange equilibrium. Information constraints are found under which premiums of risks are determined. It is demonstrated how general reinsurance treaties can be uniquely split into proportional contracts and nonproportional ones.

Several applications to reinsurance markets are given, and the results are compared to the corresponding theory of the classical one-period model of a reinsurance syndicate.

This paper attempts to reach a synthesis between the classical actuarial risk theory of insurance, in which virtually no economic reasoning takes place but where the net reserve is represented by a stochastic process, and the theory of partial equilibrium price formation at the heart of the economics of uncertainty.     

Two-step methods in VaR prediction and the importance of fat tails

This paper proposes a two-step methodology for Value-at-Risk prediction. The first step involves estimation of a GARCH model using quasi-maximum likelihood estimation and the second step uses model filtered returns with the skewed t distribution of Azzalini and Capitanio [J. R. Stat. Soc. B, 2003, 65, 367–389]. The predictive performance of this method is compared to the single-step joint estimation of the same data generating process, to the well-known GARCH-Evt model and to a comprehensive set of other market risk models. Backtesting results show that the proposed two-step method outperforms most benchmarks including the classical joint estimation method of same data generating process and it performs competitively with respect to the GARCH-Evt model. This paper recommends two robust models to risk managers of emerging market stock portfolios. Both models are estimated in two steps: the GJR-GARCH-Evt model and the two-step GARCH-St model proposed in this study.     

Extremes on the discounted aggregate claims in a time dependent risk model

This paper presents an extension of the classical compound Poisson risk model for which the inter-claim time and the forthcoming claim amount are no longer independent random variables (rv's). Asymptotic tail probabilities for the discounted aggregate claims are presented when the force of interest is constant and the claim amounts are heavy tail distributed rv's. Furthermore, we derive asymptotic finite time ruin probabilities, as well as asymptotic approximations for some common risk measures associated with the discounted aggregate claims. A simulation study is performed in order to validate the results obtained in the free interest risk model.     

Did gold-standard adherence reduce sovereign capital costs?

A commonly cited benefit of the classical gold standard is that it reduced borrowing costs by signaling a country's commitment to financial probity. Using a new dataset, this paper tests whether gold-standard adherence was negatively correlated with the cost of capital. Conditional on UK risk factors, there is no evidence that the bonds issued by countries off gold earned systematically higher excess returns than the bonds issued by countries on gold. This conclusion is robust to allowing betas to differ across exchange-rate regimes; to including other determinants of the country risk premium; and to controlling for the British Empire effect.     

Ben Bernanke and Bagehot's Rules

Former Federal Reserve Chairman Ben Bernanke has claimed that the Fed's bank bailouts during the 2008 financial crisis were consistent with Walter Bagehot's rules for a lender of last resort. This paper demonstrates Bernanke's claims to be mistaken. First, we outline Bagehot's doctrine for a classical lender of last resort. Next, we discuss Bernanke's theory of bank bailouts and his statements regarding the Fed's role in the 2008 bank bailouts. Finally, we examine the bailouts and demonstrate that, contrary to Bernanke's claims, the Fed's actions were not consistent with Bagehot's rules for a lender of last resort.     

Non-expected utility and the robustness of the classical insurance paradigm: Discussion

This paper discusses some aspects of the robustness of the classical insurance paradigm with respect to departures from the independence axiom of expected utility theory. The discussion focuses on the significance of the distinction between risk aversion and outcome convexity and the role of smoothness of the preferences in non-expected-utility analysis of insurance.     

DIVIDEND POLICY AND CAPITAL STRUCTURE UNDER THE IMPUTATION TAX SYSTEM: SOME CLARIFYING COMMENTS

This paper analyses the effects of the imputation and capital gains taxes on the dividend and financing decisions of Australian companies. We develop a framework, consistent with Miller's [1977] approach, in which interactions between dividend and financing decisions can be explored. The significance of these interactions depends on both corporate dividend policy and on the relationship between personal and corporate income tax rates. We conclude that under imputation, dividend decisions are more important relative to capital structure decisions, than under the classical tax system.     

Towards a political economy of accounting: An empirical illustration of the cambridge controversies

For over a century economics has been dominated by two theoretical positions: classical political economy and the neo-classical economics of marginalism. From these two paradigms have come the major theories of value: the labor theory and the marginalists theory of value. Until recently marginalism has held the center of the stage, however since the Cambridge Controversies and Piero Sraffa's critique of marginalism there has been a revival of interest in classical political economy. One outcome is clear from the Cambridge debates: in so far as accounting relies on marginalism for its theoretical foundations then those foundations are fallacious. This paper reviews some of the controversies and illustrates how accounting ideas are affected by the critique of marginalism. An alternative approach to accounting (based on ideas from political economy) is then explored using evidence from an empirical study of a multinational enterprise.