Estimation of physical intensity models for default risk

The estimation of physical intensity processes in the context of default risk is investigated here. Using data from Moody's Corporate Bond Default Database, a term structure of default probabilities for different rating classes is constructed each year from 1970 to 2001. Two specifications used for modeling the dynamics of the (risk‐neutral) intensity process in the bond‐pricing literature are then examined empirically: the Ornstein–Uhlenbeck and square‐root cases. The results reveal that the Ornstein–Uhlenbeck case is not an adequate modeling alternative with a rejection of this specification in five out of seven credit classes and nonsignificant mean reverting behavior for all credit classes. The square‐root case obtains better results with four credit classes out of seven for which this specification cannot be rejected and significant mean reversion parameters in many cases. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 29:95–113, 2009     

CEO Pay,Shareholder Returns,and Accounting Profits

We assess the impact on CEO pay (including salary, cash bonus, and benefits in kind) of changes in both accounting and shareholder returns in 99 British companies in the years 1972-89. After correcting for heterogeneity biases inherent in the standard specifications of the problem, we find a strong positive relationship between CEO pay and within-company changes in shareholder returns, and no statistically significant relationship between CEO pay and within-company changes in accounting returns. Differences between firms in long-term average profitability do appear to have a substantial effect on CEO pay, while differences between firms in shareholder returns add nothing to the within-firm pay dynamics.These findings call into question the rationale for explicitly share-based incentive schemes.     

Financing constraints and US cross‐listing

This study investigates whether relaxation of firms' financial constraints is an important outcome of the US cross‐listing mechanism. We use the association between investment spending and cash flow to test for the presence and importance of firms' financing constraints. Consistent with the bonding hypothesis, the results suggest that US exchange and private placement cross‐listings significantly alleviate firms' financing constraints. In addition, the financial benefits associated with exchange listings are larger than those associated with private listings, while on the other hand, over‐the‐counter programs do not improve capital allocation. The study also shows that US exchange cross‐listing benefits have not been eroded by the enactment of the Sarbanes‐Oxley (SOX) Act in 2002. Copyright © 2014 ASAC. Published by John Wiley & Sons, Ltd.     

The Effect of Subsidized Housing on Values of Adjacent Housing

This is a case study of the effect of subsidized housing on the value of adjacent non-subsidized housing. Four townhouse clusters in Fairfax County, Virginia, were selected for study because of the high degree of homogeneity between clusters. The clusters are all in the same community but vary in distance from subsidized housing. Sale prices were analyzed using a regression model which included distance from subsidized housing as an independent variable. Based on the results of the regression analysis, the authors conclude that the subsidized housing had a negative impact on the values of adjacent properties.     

Critical Situations for Decision Making: A Support Based on a Modelling Tool

This paper proposes to give a toll to help decision makers in critical situations. The principle of our research is based on a modelling approach for Cooperative Knowledge Based Systems. This approach is based on a Task/Method paradigm that we describe. We then propose to take into account collateral effects of tasks in order to support decision makers in a critical context. The proposed tool can then generate a degraded solution for which, collateral effects of previous tasks have been taken as new goals to reach. This study is possible thanks to the definition of several kinds of models: a Good Functioning Model and a Degraded Tasks Library.     

Fellow’s opinion corner: Econometric information recovery

The purpose of this paper is to initiate a discussion on the incorrect nature of our economic–econometric models and methods, and to make a plea for information theoretic recovery methods consistent with the data that we must use and with the questions that we need to ask.     

Backtesting Stochastic Mortality Models

Abstract

This study sets out a backtesting framework applicable to the multiperiod-ahead forecasts from stochastic mortality models and uses it to evaluate the forecasting performance of six different stochastic mortality models applied to English & Welsh male mortality data. The models considered are the following: Lee-Carter’s 1992 one-factor model; a version of Renshaw-Haberman’s 2006 extension of the Lee-Carter model to allow for a cohort effect; the age-period-cohort model, which is a simplified version of Renshaw-Haberman; Cairns, Blake, and Dowd’s 2006 two-factor model; and two generalized versions of the last named with an added cohort effect. For the data set used herein, the results from applying this methodology suggest that the models perform adequately by most backtests and that prediction intervals that incorporate parameter uncertainty are wider than those that do not. We also find little difference between the performances of five of the models, but the remaining model shows considerable forecast instability.     

Union Density in Israel 1995–2010: The Hybridization of Industrial Relations

In the past the Israeli industrial relations system was corporatist, characterized by high levels of membership in trade unions and employers' associations, as well as broad coverage of collective agreements. The corporatist system gradually eroded from the mid‐1980s, but its major transformation came with the removal of the Ghent‐like system in 1995. The article observes data collected since the transformation, distinguishing between membership and coverage trends. These distinctions aid in revealing that a hybrid of two distinct industrial relations subsystems has developed. The notion of hybridization suggests that unlike past accounts, which described the substitution of the corporatist industrial relations system by a liberal‐pluralist system, what actually emerges is their coexistence. Despite the path‐determined nature of the Israeli hybrid, the interaction between coverage and membership is instructive for understanding strategic choices made in other European countries in which a similar gap emerged. The article notes the potential for synergy between the two subsystems and notes the actual development of rivalry and friction.