Longevity Risk

Most of the western world has seen a steady increase in the average lifetime of its inhabitants over the past century. Although the past trends suggest that further changes in mortality rates are to be expected, considerable uncertainty exists regarding the future development of mortality. This type of uncertainty is referred to as longevity risk. This paper reviews the current state of the literature concerning longevity risk. First, we discuss the modeling of future mortality, including the Lee and Carter (J Am Stat Assoc 87:659–671, 1992)-approach, as well as other approaches. Second we discuss the importance of longevity risk for the solvency of portfolios of pension and life insurance products. Finally, we investigate possibilities for longevity risk management. In particular, we consider longevity risk management through securitization and/or pension and insurance (re)design.     

Limits to labels: The role of eco‐labels in the assessment of product sustainability and routes to sustainable consumption

There has been rapid development in the methods, data and protocols for the assessment of product sustainability over the past decade. Notwithstanding this welcome development, the widespread provision of sustainable products has not occurred. Moreover, indications from a myriad of surveys suggest that consumers remain full of intent to purchase sustainably, yet these stated preferences have not translated into a widespread uptake in the purchase of more sustainable products. Heightened interest in climate change over the past couple of years has led to rising calls for labelling to allow consumers to differentiate between more or less sustainable options. Such calls apparently assume that if consumers are presented with appropriate label information their purchases will change and more sustainable purchasing will result. For many observers these calls bring more than a ring of déjà vu as the failures (or at least unfulfilled expectations) of environmental labelling schemes of the past spring to mind. A review and assessment of eco‐labelling schemes is presented. Discussion focuses on the history, successes and failures of such schemes, and consideration of their potential role (or not) in future shifts towards sustainable consumption. Behavioural, social practice, institutional and infrastructure factors are considered and labelling, legislation and other options are explored. Conclusions are drawn regarding potential routes to sustainable consumption, with particular reference to eco‐labels.     

Share repurchase,executive options and wealth changes to stockholders and bondholders

We test the signaling and wealth transfer hypotheses around the announcement of share repurchases using a recent and larger sample of data than previously examined while employing a methodology designed to enhance the power of our tests. Disentangling the wealth transfer and signaling hypotheses is difficult; they are not mutually exclusive and can have opposite effects for bondholders. Wealth transfers decrease bondholder wealth while positive signals increase it; the combined result obscures tests of each hypothesis. By focusing on sub-samples where signaling is more and less likely to be present we increase our ability to isolate the separate effects. In addition to traditional tests of wealth effects, we feature information inherent in the correlation of wealth changes to equity and debt. Our results are generally consistent with the positive signaling effect of stock repurchases, but also provide some support for wealth transfer. Our work also emphasizes the importance of trying to disentangle the various hypotheses. In the subset of option funding repurchases, where signaling effects are less likely, the positive correlation of wealth changes between stockholders and bondholders is completely eliminated. Bond ratings are much more likely to be upgraded in samples without executive options which is precisely where the signaling effects are expected to be concentrated. Firms with weaker shareholder rights experience greater bondholder wealth losses at the announcement of stock repurchases.     

Optimal management of a flammable forest providing timber and carbon sequestration benefits: an Australian case study*

In deciding to keep or fell a forest stand given its age, the risk of loss of timber through wildfire is an important consideration. If trees also have value from sequestration of carbon, another effect of fire is the unplanned loss of stored carbon. Factors affecting the decision to keep or fell trees, and how much to spend on fire protection, are investigated using stochastic dynamic programming, using carbon sequestration in stands of mountain ash in Victoria as a case study. The effect of treating sawlogs as a permanent carbon sink after harvesting is explored.     

Exploring the Seeds of Organisational Decline

This study develops a composite model and a two-dimensional classification illustrating the seeds of organisational decline. In the first dimension, the origins of decline are shown as being internal or external to the organisation. The second dimension links the nature of the decline problem to people, technology, or fiscal policy factors. A Delphi study lent preliminary support to the conceptual model and suggested certain amendments. The revised model was then tested using a sample of 44 public accountants. The results suggest that accountants use information about an organisation's people, technology, and fiscal policies when assessing its likelihood of declining, and that human resources is the most powerful of the three factors.     

Some evidence on Ross' resolution irrelevancy hypothesis

This research attempts to discriminate empirically between the predictable events and resolution irrelevancy hypotheses as both pertain to abnormal stock price performance around regular and special proxy statement mailing dates and the related shareholder meeting dates. We find no evidence that these events result in the positive wealth effects suggested by the predictable events hypothesis. We do find evidence of increased idiosyncratic stock price volatility or information flow around special meeting proxy statement mailing dates and special meeting dates. Thus, our evidence supports the resolution irrelevancy hypothesis.     

Trends, lead times and forecasting

The innovations representation for a local linear trend can adapt to long run secular and short term transitory effects in the data. This is illustrated by the theoretical power spectrum for the model which may possess considerable power at frequencies that might be associated with cycles of several years' duration. Whilst advantageous for short term forecasting, the model may be of less use when interest is in the underlying long run trend in the data. In this paper we propose a generalisation of the innovations representation for a local linear trend that is appropriate for representing short, medium and long run trends in the data.     

The Costs of Deception: Evidence from Psychology

Recently, it has been argued that the evidence in social science research suggests that deceiving participants in an experiment does not lead to a significant loss of experimental control. Based on this assessment, experimental economists were counseled to lift their de facto prohibition against deception to capture its potential benefits. To the extent that this recommendation is derived from empirical studies, we argue that it draws on a selective sample of the available evidence. Building on a systematic review of relevant research in psychology, we present two major results: First, the evidence suggests that the experience of having been deceived generates suspicion that in turn is likely to affect the judgment and decision making of a non-negligible number of participants. Second, we find little evidence for the reputational spillover effects that have been hypothesized by a number of authors in psychology and economics (e.g., Kelman, H.C., 1967. Psychological Bulletin. 67, 1–11; Davis, D.D. and Holt, C.A., 1993. Experimental Economics. Princeton University Press, Princeton). Based on a discussion of the methodological costs and benefits of deception, we conclude that experimental economists' prohibition of deception is a sensible convention that economists should not abandon.