Colliding Interests – Age as an Automobile Insurance Rating Variable: Equitable Rate-Making or Unfair Discrimination?

Many private business relationships are increasingly characterized by claims that certain actions should not be permitted since particular right claims are involved. Such claims should be taken seriously, but are they always ethically legitimate? This paper analyzes one context, the use of age as a rating variable in the pricing of automobile insurance, where such claims are made. By identifying, evaluating and assessing the relevant basis for the differentiation, actuarial equity, it is concluded that there is an ethical basis for such a practice. The analysis also provides an equivalent means for considering other such analogous claims where actuarial equity is involved.     

一种OFDM系统中PAPR的抑制算法

为降低正交频分复用(OFDM)系统中发射信号的峰值功率,提出了在一个OFDM符号内使用两种信号星座图对二进制数据进行编码,通过在各个子载波处选用合理的信号星座图来实现对峰值均值功率比(PAPR)的抑制。由于算法不改变现有OFDM系统的实现结构,在不影响OFDM中其它信号处理性能的条件下,仿真表明算法能有效地降低系统的峰值均值功率比。     

Catastrophe equity put options with floating strike prices

In this study, we extend the results in Cox et al. (2004) by considering floating strike prices, which are affected by accumulated losses. We employ a compound Poisson process to describe catastrophe losses and adopt a mean-reverting square root process to capture the volatility of the underlying stock. In the numerical section, we first compare the differences in the prices of the options with fixed and floating strike prices. In addition, we illustrate the variance of the portfolios consisting of the stock and options with alternative kinds of strike prices by holding the total cost of the options constant. Variance-optimal portfolios are also investigated. Interestingly, numerical results show that the portfolios consisting of the stock and options with floating strike prices have lower variances in all cases, even when we hold the total option costs constant.     

Revisiting the gender gap in CEO compensation: Replication and extension of Hill,Upadhyay, and Beekun's (2015) work on CEO gender pay gap

Research Summary: The increasing number of women chief executives motivates considerable interest in examining possible gender differences in CEO compensation. Recently, Hill, Upadhyay and Beekun reported that female CEOs receive greater compensation than male CEOs, which runs counter to common wisdom that the gender pay gap in the labor market favors men over women. With the goal of contributing to cumulative knowledge development in this area, we seek to reexamine Hill et al.'s finding about gender differences in CEO compensation by extending the analyses further in time, using a larger sample of firms and more rigorous empirical analyses. Our findings, which are robust to different statistical procedures and econometric specifications, do not reveal reliable evidence for differences in compensation paid to male and female CEOs. Managerial Summary : For years, a lively debate has centered on the issue of gender pay gap. The ubiquity of the pay gap between men and women has recently been questioned by Hill et al. who identify the chief executive officer (CEO) role as a workplace position where women receive greater compensation than men. Our investigation examines whether women CEOs are indeed compensated substantively more than male CEOs. We seek to replicate earlier work by Hill and colleagues, using an expanded dataset over a longer period of time and with more rigorous analytical tools. We do not find reliable evidence for a difference in compensation paid to male and female CEOs, suggesting that claims about gender gap in CEO compensation favoring women over men may be premature.     

Changing board behaviour: The role of the ‘Two Strikes’ rule in improving the efficacy of Australian Say-on-Pay

This article analyses whether the transition from the 2004 CLERP 9 advisory Say-on-Pay regime to the ‘Two Strikes’ rule in 2012 influenced CEO pay in Australian firms. Analysing a panel of 2,074 firm-years (2005–2015), we find that (i) CEO pay is a positive predictor of shareholder dissent; (ii) firm performance has a reducing effect on shareholder dissent; (iii) excessive shareholder dissent moderated CEO pay under the ‘Two Strikes’ rule relative to the CLERP 9 regime, and (iv) the market responded favourably to the introduction of the ‘Two Strikes’ rule and negatively to ‘strike’ instances after its introduction.     

Optimal targeted reduction in reserve requirement ratio in China

This study determines the optimal targeted reduction in reserve requirement ratio in China. We find that a targeted reduction in reserve requirement ratio incentivizes commercial banks to reallocate more credit resources to micro and small enterprises, thus eliminating the negative output gap, slightly dampening the rise in unemployment, but also increasing financial instability. Although there is little direct effect on inflation, raising the targeted reduction in reserve requirement ratio can help mitigate the positive effect of output gap on inflation so that an output gap increase is accompanied by a smaller increase in inflation. Optimal rules for targeted reduction in reserve requirement ratio and interest rate policy are derived. Output gap, inflation, and financial instability are three main factors driving the policy dynamics. A targeted reduction in reserve requirement ratio is complementary to interest rate policy, which helps eliminate the negative output gap and allows the interest rate to be less responsive to inflation volatility.     

Passive blockholders,informational efficiency of prices,and firm value

This paper analyzes the role of passive blockholders in corporate governance using data on Schedule 13G filings. We show that firm value increases with the number and aggregate ownership of passive blockholders after controlling for other possible determinants of firm value. More importantly, we show that the informational efficiency of prices (IEP) increases with the number and aggregate ownership of passive blockholders, and IEP is a channel through which passive blockholders affect firm value. Overall, our results suggest that managers perform better when stock prices reflect the economic consequences of their actions promptly and accurately through information‐based trading of blockholders.     

Valuation and applications of compound basket options

This study investigates compound basket options, which are options on portfolios of options. Although they may be new to financial markets, they are available as equity basket options, equity spread options, stocks of holding companies, and collateralized debt obligations. Using moments of portfolio values, we provide formulas for pricing compound basket options. According to numerical analysis, a lower bound and a weighted average of bounds yield relatively small errors. Additionally, ignoring the compound feature increases the pricing error of equity basket options because the feature captures the capital structure and leverage effect of stock prices.     

Valuation of brand equity and retailer growth strategies using real options

In marketing, significant attention has been devoted to the study of drivers and outcomes of strategic flexibility drawing on real options theory. However, research that quantifies the specific value of flexibility reflected in a bundle of strategic real options is lacking. To remedy this gap, we develop a real options-based framework that takes account of brand expansion and extension options to value brand equity and retailer growth strategies. We show how to value the bundle of strategic real options associated with a flexible marketing strategic vision and how to assess the growth strategies related to the corporate brand of an international retailer. We apply our method to estimating the brand equity of Starbucks both under growth and adversity conditions. The results reveal that our method can more reliably incorporate the growth potential of the brand under uncertainty conditions. Comparisons with other brand valuation approaches are discussed. Our study helps clarify the links among management’s strategic plans, brand-based marketing strategies and share price, and allows to better monitor the impact of retailer strategic choices on long-term brand equity value.     

Does voluntary balance sheet disclosure mitigate post-earnings-announcement drift?

Theory suggests that balance sheet information such as total assets, total equity, or total liabilities complements earnings information in helping investors assess a firm’s profitability and estimate earnings growth. The voluntary disclosure of balance sheet information at earnings announcement could help investors gather and process this information at a lower cost. We therefore predict that voluntary balance sheet disclosure at the time of an earnings announcement helps investors promptly understand the implication of current earnings news for future earnings and subsequently reduces post-earnings-announcement drift (PEAD). Consistent with these predictions, our results show that when firms provide voluntary balance sheet disclosures, the earnings response coefficient in the event window is significantly higher and the corresponding PEAD is significantly lower. We further find that the impact of voluntary balance sheet disclosure on PEAD is more pronounced when the magnitude of balance sheet value surprise is larger, when balance sheet value is more informative about future earnings, when earnings uncertainty is higher, or when information cost is higher, consistent with our conjectures that helping investors to better understand future earnings performance and lowering information costs are key mechanisms underlying the effect of voluntary balance sheet disclosure on PEAD.