Financial prediction with constrained tail risk

A new class of asymmetric loss functions derived from the least absolute deviations or least squares loss with a constraint on the mean of one tail of the residual error distribution, is introduced for analyzing financial data. Motivated by risk management principles, the primary intent is to provide “cautious” forecasts under uncertainty. The net effect on fitted models is to shape the residuals so that on average only a prespecified proportion of predictions tend to fall above or below a desired threshold. The loss functions are reformulated as objective functions in the context of parameter estimation for linear regression models, and it is demonstrated how optimization can be implemented via linear programming. The method is a competitor of quantile regression, but is more flexible and broader in scope. An application is illustrated on prediction of NDX and SPX index returns data, while controlling the magnitude of a fraction of worst losses.     

Agent-Based Facilitation of Water Allocation: Case Study in the Drome River Valley

The purpose of the 1992 French Water Act is to encourage negotiation and dialogue among local stakeholders within a framework which is very similar to a patrimonial approach. Potential use of models in such post-normal approaches is analyzed. Two kinds of models are compared: one is agent-based, the other follows a more classical approach. They are compared according to their contributions as negotiation support tools. This comparison is based on a specific collective decision process dealing with water allocation at the sub-basin scale, in which authors are involved. Both are used to support collective decision processes through simulation of resource use dynamics. Agent-Based Models entail the broadening of spatial information of actors in the process, revealing inter-connected topics not taken into consideration earlier. This makes it possible to remain relevant, despite the sometimes rapidly evolving stakes. The central point of this paper is the implementation, within a practical application, of theories advocating the use of ABM as a collective decision support system. This application promotes a better understanding of the kind of support ABM provides and the way it does so. This is brought about more by re-framing the discussion and modifying the representation of the system on the part of the stakeholders than by providing specific agreements.     

Modeling Ethical Business Culture: Development of the Ethical Business Culture Survey and Its Use to Validate the CEBC Model of Ethical Business Culture

This article reports the results of research to develop a survey instrument and its use to validate an ethical business culture construct (CEBC Model). The reported three-stage quantitative study builds on our previous qualitative work, aimed at identifying dimensions of ethical business cultures. The research resulted in a parsimonious construct, covering five dimensions of ethical business cultures, and a ten-question instrument, measuring this construct. In this article, we report results of exploratory and confirmatory factor analyses and convergent construct validity testing, discuss the potential applications of the construct and instrument in assessment and development of ethical business cultures, and provide recommendations for industry practitioners and for further research.     

Illicit Drug Use,Employment, and Labor Force Participation

Illicit drug use has declined among the U.S. adult population, but national surveys show the majority of illicit drug users are employed. Concern about workplace productivity, absenteeism, and safety has led many employers to establish employee assistance and drug testing programs. Given the sharp interest in workplace interventions, more information is needed about the relationships between drug use and labor market status. This study estimated the probability of employment and labor force participation for different types of drug users using nationally representative data from the 1997 National Household Survey on Drug Abuse. Results strongly indicated that chronic drug use was significantly related (negative) to employment for both genders and labor force participation for males. Furthermore, nonchronic drug use was not significantly related to employment or labor force participation. These findings suggest that workplace policies for illicit drug use should consider chronic or problem drug users apart from light or casual users.     

Marketing aspects of environmental practices of multinational enterprises in host countries: A Brazilian case study

This article investigates both the marketing and the production activities of a multinational enterprise (MNE) operating in the Brazilian chemical industry. The case chosen illustrates how the MNE has managed to adapt or to upgrade some of its main policies, programs, production activities, and products in conformity with both its long-term strategic positioning and the host country's environmental regulatory policy. The company established two effective environmental programs that deserve mention. One of the programs has been set up to generate receipts through the provision of environmental services for a price. The other one pursued systematic procedures to better serve clients through customized applications of waste reduction practices. The latter reveals how proactive companies may profit from effectively envisaging the whole product cycle along their value chain. © 1995 John Wiley & Sons, Inc.     

Signaling Power of Open Market Share Repurchases in Germany

This paper shows that abnormal stock price returns around the date of open market repurchase announcements are four times higher in Germany than in the USA (12 ver. 3%). We hypothesize that this observation can be explained by national differences in repurchase regulations. Our empirical evidence indicates that German managers primarily buy back shares to signal an undervaluation of their firm. We demonstrate that the stringent repurchase process prescribed by German law attributes a higher credibility to undervaluation signals than do the lax US regulations, and thereby corroborates our hypothesis.Financial support from the E-Finance Lab, Frankfurt am Main, and from Freitag & Co., Frankfurt am Main, is gratefully acknowledged. We would like to thank two anonymous referees for their helpful comments