Mergers and synergism—some chance-constraint perspectives

This paper presents a single-period model in which profit-maximizing firms, subjected to externally imposed risk-constraints, can generate synergistic benefits through merger. It is shown that those effects depend upon several conditions and assumptions, whose reflection of the real world can vary from one case to another. The model provides some important theoretical insights to understanding the conflicting empirical results of several recent studies concerning synergistic benefits.     

Value at risk and conditional extreme value theory via markov regime switching models

This study develops a new conditional extreme value theory‐based (EVT) model that incorporates the Markov regime switching process to forecast extreme risks in the stock markets. The study combines the Markov switching ARCH (SWARCH) model (which uses different sets of parameters for various states to cope with the structural changes for measuring the time‐varying volatility of the return distribution) with the EVT to model the tail distribution of the SWARCH processed residuals. The model is compared with unconditional EVT and conditional EVT‐GARCH models to estimate the extreme losses in three leading stock indices: S&P 500 Index, Hang Seng Index and Hang Seng China Enterprise Index. The study found that the EVT‐SWARCH model outperformed both the GARCH and SWARCH models in capturing the non‐normality and in providing accurate value‐at‐risk forecasts in the in‐sample and out‐sample tests. The EVTSWARCH model, which exhibits the features of measuring the volatility of a heteroscedastic financial return series and coping with the non‐normality owing to structural changes, can be an alternative measure of the tail risk. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:155–181, 2008     

Modeling Mortality With Jumps: Applications to Mortality Securitization

In this article, we incorporate a jump process into the original Lee–Carter model, and use it to forecast mortality rates and analyze mortality securitization. We explore alternative models with transitory versus permanent jump effects and find that modeling mortality via transitory jump effects may be more appropriate in mortality securitization. We use the Swiss Re mortality bond in 2003 as an example to show how to apply our model together with the distortion measure approach to value mortality-linked securities. Pricing the Swiss Re mortality bond is challenging because the mortality index is correlated across countries and over time. Cox, Lin, and Wang (2006) employ the normalized multivariate exponential tilting to take into account correlations across countries, but the problem of correlation over time remains unsolved. We show in this article how to account for the correlations of the mortality index over time by simulating the mortality index and changing the measure on paths.     

Racial Earnings Disparities and Family Structure

One explanation for the widening of racial earnings gaps among family heads during the 1980s is that black families were increasingly headed by females during that period. This explanation is tested using data on black and white family heads in 1976 and 1985 from the Institute for Research on Poverty's Current Population Survey. Log-earnings equations, corrected for selection bias and for the endogeneity of labor force participation, are estimated for blacks and whites in 1976 and 1985. If the impact of rising female-family headship on labor force participation is ignored, one finds support for the family structure explanation. But support for alternative explanations is also found. There are substantial impacts of within-race gender discrimination and of market racial discrimination. When the endogeneity of family structure is taken into account, further support is found for the view that endowment differences only explain a modest portion of the rising gap in earnings between black and white family heads.     

Race and prosecution expenditures

There has been a steady accumulation of literature on racial differentials in crime and the response of the criminal justice system. A neglected component of societal response to crime has been the volume of prosecution expenditures. This article seeks to repair this neglect by examining state level difference inper capita prosecution expenditures in 1980 using a multiple regression equation. The results show that, holding other factors constant, lower prosecution expenditures are associated with higher percentages of blacks in a state’s population. The relationship of this to discrimination is discussed in terms of England.     

Law commentary: Unjust dismissal laws in other countries: some cautionary notes*

In this article the author provides a view from the USA on the workings of unfair dismissal legislation in a number of countries.     

Impacts in Uganda of rising global food prices: the role of diversified staples and limited price transmission

This study assesses the potential impact of rising world food prices on the welfare of Ugandan households. While Uganda experienced sharply higher food prices in 2008, as a landlocked, food‐exporting country the causes of those price changes were mainly regional and indirect rather than directly transmitted from global markets. Using trade volumes, food prices, and household survey data we describe how Uganda, unlike some other countries, is partially shielded from direct impacts of global food price movements. Although the majority of Ugandans are net food buyers, the adverse impact at household‐level of rising global prices is moderated by the relatively large quantity and range of staples consumed that come from home production. Moreover, several of these are not widely traded. Some population groups in Uganda are vulnerable to rising food prices, however, primarily those for whom maize is an important staple, including those dependent upon humanitarian relief and the urban poor. Only a relatively small group of Ugandan households will benefit directly and immediately from rising food prices—the significant net sellers of food crops constituting between 12% and 27% of the population. In this assessment we do not estimate the level and extent of wider second round effects from these higher prices.     

How Africa can benefit from knowledge

Africa's poverty partly stems from the lack of strong scientific, technological and knowledge bases. The abundance of natural resources on the continent has been of limited value to the African people because they do not have the tools with which to turn their resources into consumable wealth. To rectify this situation, African policy makers would have to undertake various measures. First, they need to define the type of knowledge their countries require. Second, they ought to establish conditions for nurturing strategic leaders who will, in turn, seek the right forms of knowledge to tackle Africa's problems. Third, policy makers need to build the political and legal frameworks that encourage the absorption and application of scientific innovations. Fourth, African leaders ought to revamp the universities, establish regional research centres, and take capacity building more seriously. It is these measures that will facilitate Africa's meaningful participation in global knowledge flows. Above all, knowledge creation should aim at attaining human welfare, participatory democracy, peace building and socio-economic justice.