Semi-parametric Bayesian tail risk forecasting incorporating realized measures of volatility

Realized measures employing intra-day sources of data have proven effective for dynamic volatility and tail-risk estimation and forecasting. Expected shortfall (ES) is a tail risk measure, now recommended by the Basel Committee, involving a conditional expectation that can be semi-parametrically estimated via an asymmetric sum of squares function. The conditional autoregressive expectile class of model, used to implicitly model ES, has been extended to allow the intra-day range, not just the daily return, as an input. This model class is here further extended to incorporate information on realized measures of volatility, including realized variance and realized range (RR), as well as scaled and smoothed versions of these. An asymmetric Gaussian density error formulation allows a likelihood that leads to direct estimation and one-step-ahead forecasts of quantiles and expectiles, and subsequently of ES. A Bayesian adaptive Markov chain Monte Carlo method is developed and employed for estimation and forecasting. In an empirical study forecasting daily tail risk measures in six financial market return series, over a seven-year period, models employing the RR generate the most accurate tail risk forecasts, compared to models employing other realized measures as well as to a range of well-known competitors.     

Gains and structural effects of exploiting scale-economies in Norwegian dairy production

In this paper, we present calculations of the economic gains in terms of reduced costs by exploiting scale‐economies in dairy production in Norway, and the effect this would have had on the number of farms. We also explore whether or not optimal scale and unexploited scale‐economies change over time due to scale‐augmenting technical change. The analysis is based on homothetic cost functions estimated by means of data for individual dairy farms for the period 1972–1996. For 1972, we find that, by full exploitation of scale‐economies, the costs could have been reduced by almost 40%, while the number of farms would have been reduced by more than 85%. The number of small farms has been substantially reduced in the period considered. This fact, combined with small scale‐augmenting technical change, implies that the gains and structural effects of exploiting scale‐economies have decreased over time. In 1996, costs could have been reduced by close to 30% by full exploitation of scale‐economies, while the number of farms would have been reduced by slightly more than 70%. Thus, both gains and structural effects are substantially less than in 1972. Nevertheless, the calculated gains for 1996 make almost 5 billion NOK. This corresponds almost exactly to the total public support to the dairy farms in 1996. The unexploited scale‐economies are largely due to the agricultural policy. Thus, a substantial share of the same can be considered as part of the‘price’ the Norwegian society has to pay for this policy. In addition, there are likely to be large hidden costs of this policy due in particular to the quota system and other direct production regulations. They imply that technical innovations and other efficiency‐improving investments requiring increased production to be profitable are not carried out. This is the more likely explanation for the extremely poor efficiency development in Norwegian dairy production in the period studied.     

How stakeholders view the impacts of international ICT standards

Assessing the impacts of standards is a challenging task. A survey instrument was developed aiming at assessing standards impacts from the point of view of stakeholders in the standard development process. The survey was administered to members of ETSI (European Telecommunication Standards Institute), ITU (International Telecommunication Union) and CEN/ISSS (European Committee for Standardisation/Information Society Standardisation System) standards committees. Many of the findings either countered the predictions of much current theory or otherwise raised new grounds to question many common assumptions about the impacts of standards. Although many variations were found according to whether the standards were formal, informal or proprietary, several strong general findings emerged also. Overall, the findings indicate that cost-related impacts are less relevant to stakeholders than various market shaping aspects. Stakeholders perceived the main positive impacts in terms of the ability to increase product variety and to develop new global outsourcing opportunities. Finally, the impacts of formal standards were rated significantly higher and more positively than the other types of standards. It was concluded that the changes in the institutional landscape of standardisation in the ICT sector represent a challenge both for the theory of standardisation and for the development of adequate methodologies to assess their impacts.