Portfolio Analysis with Factors and Scenarios

Recently there has been a growing interest in the scenario model of covariance as an alternative to the one-factor or many-factor models. We show how the covariance matrix resulting from the scenario model can easily be made diagonal by adding new variables linearly related to the amounts invested; note the meanings of these new variables; note how portfolio variance divides itself into “within scenario” and “between scenario” variances; and extend the results to models in which scenarios and factors both appear where factor distributions and effects may or may not be scenario sensitive.     

COUNTERVAILING POWER IN WHOLESALE PHARMACEUTICALS*

Using data on wholesale prices for antibiotics sold to U.S. drugstores, we test the growing theoretical literature on ‘countervailing power’ (a term for the ability of large buyers to extract discounts from suppliers). Large drugstores receive a modest discount for antibiotics produced by competing suppliers but no discount for antibiotics produced by monopolists. These findings support theories suggesting that supplier competition is a prerequisite for countervailing power. As further evidence for the importance of supplier competition, we find that hospitals receive substantial discounts relative to drugstores, attributed to hospitals' greater ability to induce supplier competition through restrictive formularies.     

A probability model of aggregate meat consumption in the U.S.A.*

This study illustrates the use of Markov analysis to investigate the nature of competition among demand-related products when only aggregate consumption data are available. Applied to meat consumption in the U.S.A. before and after 1976, the year in which per capita beef consumption began to decline, the results indicate that beef has not lost dramatically to chicken. This is contrary to conventional wisdom where consumers are thought to substitute chicken for beef because of the perceived high fat and cholesterol content of beef, and because of the relatively cheaper price of chicken.     

Wealth Destruction on a Massive Scale? A Study of Acquiring‐Firm Returns in the Recent Merger Wave

Acquiring‐firm shareholders lost 12 cents around acquisition announcements per dollar spent on acquisitions for a total loss of $240 billion from 1998 through 2001, whereas they lost $7 billion in all of the 1980s, or 1.6 cents per dollar spent. The 1998 to 2001 aggregate dollar loss of acquiring‐firm shareholders is so large because of a small number of acquisitions with negative synergy gains by firms with extremely high valuations. Without these acquisitions, the wealth of acquiring‐firm shareholders would have increased. Firms that make these acquisitions with large dollar losses perform poorly afterward.     

Mean-Variance Versus Direct Utility Maximization

Levy and Markowitz showed, for various utility functions and empirical returns distributions, that the expected utility maximizer could typically do very well if he acted knowing only the mean and variance of each distribution. Levy and Markowitz considered only situations in which the expected utility maximizer chose among a finite number of alternate probability distributions. The present paper examines the same questions for a case with an infinite number of alternate distributions, namely those available from the standard portfolio constraint set.     

Productive Restructuring and ‘Standardization’ in Mexican Horticulture: Consequences for Labour

In this paper we discuss how the establishment of strict quality and food safety norms for horticulture to satisfy the current consumer demands has forced enterprises to invest in modifying their productive processes. In the light of the unavoidable trend in favour of consumers, we analyze the precarious situation of farm workers, a situation that is not in tune with the concept of decent work promoted by the International Labour Organization or with the Social Accountability Standard promoted by the United Nations. We conclude that the enterprises have achieved major progress in productive restructuring to comply with quality standards, but at the expense of their workers' salaries and living and working conditions. This contradiction between the well‐being of the consumer and the misery of the worker is a fundamental characteristic explaining the current success of globalized agro‐food systems.