Global equity fund performance, portfolio concentration, and the fundamental law of active management

This paper investigates the relation between portfolio concentration and the performance of global equity funds. Concentrated funds with higher levels of tracking error display better performance than their more broadly diversified counterparts. We show that the observed relation between portfolio concentration and performance is mostly driven by the breadth of the underlying fund strategies; not just by fund managers’ willingness to take big bets. Our results indicate that when investors strive to select the best-performing funds, they should not only consider fund managers’ tracking-error levels. More important is that they take into account the extent to which fund managers carefully allocate their risk budget across multiple investment strategies and have concentrated holdings in multiple market segments simultaneously.     

Modeling Energy and Development: An Evaluation of Models and Concepts

Most global energy models are developed by institutes from developed countries, focusing primarily on issues that are important in industrialized countries. Evaluation of the results for Asia of the IPCC/SRES models shows that broad concepts of energy and development, the energy ladder and the environmental Kuznets curve, can be observed in the results of the models. However, improvements can be made in modeling the issues that underlie these concepts, like traditional fuels, electrification, economic structural change, income distribution, and informal economies. Given the rapidly growing importance of energy trajectories of developing countries for global sustainability, the challenge for the future is to develop energy models that include all these aspects of energy and development.     

Choices Within Collective Labour Agreements à la Carte in the Netherlands

In recent years European employers, unions and governments have developed initiatives that offer employees the right to exchange certain items within an agreed package of employment conditions. So far, the available evidence on the use of such ‘cafeteria systems’ is largely based on survey data rather than on actual choices. We analyse the actual choices made by the employees of Radboud University Nijmegen in the years 2002–2004. The results cast doubt on the efficiency and the effectiveness of employee choices within collective agreements, contradict the unions’ push for working time reduction and question wage moderation and policies on work–life balance.     

Multivariate option pricing with time varying volatility and correlations

In this paper we consider option pricing using multivariate models for asset returns. Specifically, we demonstrate the existence of an equivalent martingale measure, we characterize the risk neutral dynamics, and we provide a feasible way for pricing options in this framework. Our application confirms the importance of allowing for dynamic correlation, and it shows that accommodating correlation risk and modeling non-Gaussian features with multivariate mixtures of normals substantially changes the estimated option prices.     

Visitor Emotions and Behavioral Intentions: The Case of Concentration Camp Memorial Neuengamme

Visits to sites associated with death and suffering are considered emotionally laden. Few studies empirically investigated visitor emotions at such sites. This study examines emotional responses of 241 visitors to concentration camp memorial Neuengamme and assesses how emotions are associated with long‐term consequences of revisit intentions and positive word of mouth. Tourists experience negative emotions more intensely compared with positive emotions. Negative emotions predict long‐term behavioral intentions more than positive emotions do. Shock and sadness are of particular importance. This study suggests that certain negative emotions also have the power to broaden‐and‐build and may have long‐term behavioral consequences. Copyright © 2013 John Wiley & Sons, Ltd.     

Testing log-linear models with inequality constraints: a comparison of asymptotic, bootstrap, and posterior predictive p-values

An important aspect of applied research is the assessment of the goodness-of-fit of an estimated statistical model. In the analysis of contingency tables, this usually involves determining the discrepancy between observed and estimated frequencies using the likelihood-ratio statistic. In models with inequality constraints, however, the asymptotic distribution of this statistic depends on the unknown model parameters and, as a result, there no longer exists an unique p -value. Bootstrap p -values obtained by replacing the unknown parameters by their maximum likelihood estimates may also be inaccurate, especially if many of the imposed inequality constraints are violated in the available sample. We describe the various problems associated with the use of asymptotic and bootstrap p -values and propose the use of Bayesian posterior predictive checks as a better alternative for assessing the fit of log-linear models with inequality constraints.     

Board Composition in Small and Medium‐Sized Family Firms*

This study focuses on the determinants of board composition in Belgian small and medium‐sized family firms. It extends the empirical literature on board composition in private small and medium‐sized family enterprises by integrating several dimensions of the “family component” in the research model. Furthermore, using a multinomial logit model, we examine in which circumstances family firms opt for (1) a family board, (2) an inside board, or (3) an outside board. Results suggest that family‐related contingency variables are far more important than CEO‐related or control variables, giving support to the argument that board composition in family firms is a reflection of the family characteristics and objectives. Moreover, the results suggest that a resource dependence and added value perspective explain more of the variation in board composition than agency considerations.     

Disconnecting graphs by removing vertices: a polyhedral approach

In this paper, we consider the problem of disconnecting a graph by removing as few vertices as possible, such that no component of the disconnected graph has more than a given number of vertices. We give applications of this problem, present a formulation for it, and describe some polyhedral results. Furthermore, we establish ties with other polytopes and show how these relations can be used to obtain facets of our polytope. Finally, we give some computational results.     

Order Independence for Iterated Weak Dominance

In general, the result of the elimination of weakly dominated strategies depends on order. We definenice weak dominance. Under nice weak dominance, order does not matter. We identify an important class of games under which nice weak dominance and weak dominance are equivalent, and so the order under weak dominance does not matter. For all games, the result of iterative nice weak dominance is an upper bound on the result from any order of weak dominance. The results strengthen the intuitive relationship between backward induction and weak dominance and shed light on some computational problems relating to weak dominance.Journal of Economic LiteratureClassification Number: C72.     

Contrarian Investment Strategies in a European Context

In this paper we study value strategies for four European countries (France, Germany, the Netherlands and the United Kingdom). We find an outperformance for all four value variables which are investigated: the earnings-to-price (E/P) ratio, the cash-flow-to-price (CF/P) ratio, the book-to-market (B/M) ratio and the dividend yield. This outperformance is especially remarkable for the CF/P ratio, which amounts to 20.8% between the top and bottom quintiles in a univariate model. In a regression analysis, in which all four value variables as well as a correction for the size effect are taken into account, we find a difference of 11.8% for the CF/P ratio. We demonstrate that this result cannot be explained by risk differences alone. Our findings confirm the outperformance of value strategies as found earlier by Chan, Hamao and Lakonishok (1991) and Lakonishok, Shleifer and Vishny (1994) for Japan and the United States respectively.