REDUCING INEQUALITIES AMONG UNEQUALS

This article establishes an equivalence between four incomplete rankings of distributions of income among agents who are vertically differentiated with respect to some nonincome characteristic (health, household size, etc.). The first ranking is the possibility of going from one distribution to the other by a finite sequence of income transfers from richer and more highly ranked agents to poorer and less highly ranked ones. The second ranking is the unanimity among utilitarian planners who assume that agents' marginal utility of income is decreasing with respect to both income and the source of vertical differentiation. The third ranking is the Bourguignon (Journal of Econometrics, 42 (1989), 67–80) Ordered Poverty Gap dominance criterion. The fourth ranking is a new dominance criterion based on cumulative lowest incomes.     

VOLATILITY AND COVARIATION ESTIMATION WHEN MICROSTRUCTURE NOISE AND TRADING TIMES ARE ENDOGENOUS

This paper considers practically appealing procedures for estimating intraday volatility measures of financial assets. The underlying microstructure model accommodates the inherent properties of ultra high‐frequency data with the assumption of continuous efficient price processes. In this model, microstructure noise and trading times are endogenous but do not only depend on the prices. Using the (observed) last traded prices of the assets, we develop a new approach that enables to approximate the values of the efficient prices at some random times. Based on these approximated values, we build an estimator of the integrated volatility and give its asymptotic theory. We also give a consistent estimator of the integrated covariation when two assets (asynchronous by construction of the model) are observed.     

Science-policy interfaces for sustainable climate-smart agriculture uptake: lessons learnt from national science-policy dialogue platforms in West Africa

Connecting science with policy has always been challenging for both scientists and policymakers. In Ghana, Mali and Senegal, multi-stakeholder national science-policy dialogue platforms on climate-smart agriculture (CSA) were setup to use scientific evidence to create awareness of climate change impacts on agriculture and advocate for the mainstreaming of climate change and CSA into agricultural development plans. Based on the platforms' operations and achievements, we used semi-structured questionnaire interviews and reviewed technical reports produced by the platforms to analyse how their modes of operation and achievements improve understanding of the science-policy interfaces between agricultural and climate change decision making. Results showed that these platforms constitute an innovative approach to effectively engaging decision-makers and sustainably mainstreaming climate change into development plans. Effective science-policy interaction requires: (a) institutionalizing dialogue platforms by embedding them within national institutions, which improves their credibility, relevance and legitimacy among policymakers; (b) two-way communication, which contributes substantially to the co-development of solutions that address climate change vulnerabilities and impacts; and (c) relevant communication products and packaging of evidence that aligns with country priorities, which facilitates its uptake in policy-making processes. We conclude with a framework of sustainable operation for such platforms based on lessons learnt in the three countries.     

Composite Lognormal–Pareto model with random threshold

This paper further considers the composite Lognormal–Pareto model proposed by Cooray & Ananda (2005) and suitably modified by Scollnik (2007). This model is based on a Lognormal density up to an unknown threshold value and a Pareto density thereafter. Instead of using a single threshold value applying uniformly to the whole data set, the model proposed in the present paper allows for heterogeneity with respect to the threshold and let it vary among observations. Specifically, the threshold value for a particular observation is seen as the realization of a positive random variable and the mixed composite Lognormal–Pareto model is obtained by averaging over the population of interest. The performance of the composite Lognormal–Pareto model and of its mixed extension is compared using the well-known Danish fire losses data set.     

Surprendre positivement les clients : une tactique en marketing relationnel pour développer un avantage concurrentiel dans le secteur des services financiers

The turbulent environment in which financial institutions evolve motivates strategic thinking aimed at competitive advantage. Drawing from the literature on relationship marketing, one potentially successful strategy at the level of front line service is for financial advisors to behave in a pleasantly surprising way toward their clients (e.g., acknowledging a family member's birthday; covering a parking expense; giving tickets to an entertainment venue). We examine both antecedents and consequences of clients' perceptions of their advisors behaving in a pleasantly surprising way toward them. Antecedents included advisors' customer orientation, knowledge of client, and sense of humour. Consequences included clients' trust, satisfaction, purchase intentions, and word‐of‐mouth intentions. Several strategic recommendations and research avenues following from these findings are offered. Copyright © 2008 ASAC. Published by John Wiley & Sons, Ltd.     

Does risk aversion drive financial crises? Testing the predictive power of empirical indicators

There are several types of risk aversion indicators used by financial institutions. These indicators, which are estimated in diverse ways, often show differing developments, although it is not possible to directly assess which is the most appropriate. Here, we consider the most well-known of these indicators and construct others with standard methods. As financial crises generally coincide with periods in which risk aversion increases, we try to check if these indicators rise just before the crises and also if they are able to forecast crises. We estimate logit and multilogit models of financial crises – exchange rate and stock market crises – using control variables and each of the risk aversion indicators. In-sample simulations allow us to assess their respective predictive powers. Risk aversion indicators are found to be good leading indicators of stock market crises, but less so for currency crises.     

The selection of supply chain management projects: A case study approach

Organizations undertake strategic supply chain initiatives through project implementation. However, selecting the right supply chain projects can be difficult due to high levels of organizational risk and technical complexity. Although the literature is rich in quantitative and qualitative methods for project management, prior research into best management practices specific to supply chain management (SCM) project selection is limited. This paper examines the methods used in evaluating and selecting SCM projects used by the management at three publically held multi-national organizations. The primary objective of this research is to identify a set of generalizable good practices in the selection and evaluation of SCM projects. Nine useful business practices in SCM project selection have been identified based on cross-case comparisons and a close examination of the literature. Eight practices had been previously identified, but were scattered throughout the literature on ERP, IT management, and R&D management. A new practice calls for the consideration of supply chain partners’ return-on-investment (ROI) in the project selection process. Highest preference should be given to win-win projects for the organization and its partner(s). The practices identified here sho`uld provide the foundation of practical guidelines that can be used during the planning stage of SCM projects. This paper reduces the knowledge gap in SCM project management by analyzing organizations with significant supply chain experience and synthesizing these results with the current related literature.     

Audit Quality and the Market Valuation of Banks’ Allowance for Loan Losses*

The recent banking crisis has led market participants to focus on the adequacy and quality of banks’ balance sheet items such as the allowance for loan losses. Beaver and Engel (1996) document that the capital market prices the nondiscretionary component of loan loss allowance negatively and the discretionary component less negatively. Using data from the pre‐crisis period and three measures of audit quality, auditor type (i.e., Big 5 versus non–Big 5), auditor industry specialization/expertise, and audit and nonaudit fees paid to auditors, we examine the effect of audit quality on the market valuation of the discretionary component of the allowance for loan losses. We find that, relative to the nondiscretionary component, the market valuation of the discretionary component of loan loss allowance is higher for banks audited by Big 5 auditors than for banks audited by non–Big 5 auditors. We also find that the relative market valuation of the discretionary component of loan loss allowance is increasing in auditor expertise. Regarding the impact of fees paid to auditors, we find that banks paying higher audit fees have higher relative market valuation of the discretionary component of the allowance for loan losses, but banks that pay higher nonaudit fees do not.     

Hedge Fund Indices: Reconciling Investability and Representativity

Following a growing concern among investors about the quality of hedge fund index return data, this paper addresses the question of whether designing hedge fund indices that fulfil the usual requirements (in particular representative and investable) is or not a feasible task, given a variety of features that are specific to that industry. To test whether or not investability should necessarily come at the cost of representativity, we use a well‐known methodology in the asset pricing literature based on the concept of factor replicating portfolios. Our results suggest that it is actually possible to construct representative indices based on a limited number of funds that are open to new investments, except perhaps in the case of equity market neutral strategies, provided that: i) these funds are suitably selected and ii) a portfolio is constructed with the objective of replicating the common trend in hedge fund returns for a given strategy. A range of robustness tests are performed that show that high correlation of the factor replicating portfolios with the common factor of returns for each strategy is remarkably stable with respect to modifying the number of funds in the replicating portfolio or changing the frequency of rebalancing.     

The generosity of the welfare state towards the elderly

This paper distinguishes among three types of generosity of social security systems: average generosity, generosity towards early retirement and generosity towards the poor. On the basis of theoretical predictions, it examines the statistical correlations among those types of generosity for 14 OECD countries over the period 1985–2000. It also shows how they have evolved over time and tries to relate this evolution to the process of economic integration. There are three main findings, the first one being a positive relation between average social security spending and poverty alleviation. There is the negative relation between average spending and inequality reduction. Finally, over the period 1985–1995 one sees that poverty alleviation increases on average, but to a degree that decreases with economic openness.