A Growth Theory for the Insurance Industry

Insurance economics models of statics and comparative statics assume that the process of economic adjustment must inevitably lead to equilibrium. The question of attainability of equilibrium has not been addressed so far. This is the domain of dynamic analysis. In this article, we develop a model of economic growth for the insurance industry. The production function of the insurance industry is based on the assumption that the output, "incurred losses," is a function of "invested assets" and "other labor and nonlabor inputs." The latter grow at the rate  n , a proxy of the growth rate of insurance expenses. The assets–inputs ratio,  r , characterizes the steady-state growth path that the insurance industry eventually attains. The adjustment process takes place through the assets–losses ratio,  v , which is affected by the insurance leverage, the loss ratio, and the insurance exposure of the insurance industry. An insurance industry that has reached a steady state will have its output growing at the rate  n  +π, where π is the growth rate of average productivity. The incremental reserve ratio,  s , determines definitely a steady-state growth path for the insurance industry. An increase or decrease in  s  may move the insurance industry to a higher or lower growth path. We suggest that this analysis provides a stronger theoretical context for analyzing dynamic phenomena in the insurance industry.     

Nonparametric correlation models for portfolio allocation

This article proposes time-varying nonparametric and semiparametric estimators of the conditional cross-correlation matrix in the context of portfolio allocation. Simulations results show that the nonparametric and semiparametric models are best in DGPs with substantial variability or structural breaks in correlations. Only when correlations are constant does the parametric DCC model deliver the best outcome. The methodologies are illustrated by evaluating two interesting portfolios. The first portfolio consists of the equity sector SPDRs and the S&P 500, while the second one contains major currencies. Results show the nonparametric model generally dominates the others when evaluating in-sample. However, the semiparametric model is best for out-of-sample analysis.     

Measuring populist discourse with semantic text analysis: an application on grassroots populist mobilization

Populism is a concept employed to qualify the political behavior of a large number of actors at a worldwide scale, with scientists classifying the latter into populists and non-populists according to dimensions such as ideology, strategy, discourse, economic policy, and even style. This article analyzes existing schools of thought on the nature of populism and argues that conceptualizing populism as a specific type of anti-elite discourse in the name of the People is both conceptually and methodologically the most coherent and useful way to understand the phenomenon. Additionally, it suggests discarding crude, dichotomous classification in favor of a gradated view of populist mobilization by means of quantifying populist discourse and observing its spatial and temporal variation. It adds value to current methods of measurement by demonstrating why and how clause-based semantic text analysis can provide optimal quantitative results while retaining qualitative elements for mixed-methods analysis. Aiming, moreover, at expanding the scope of populism studies by overcoming a narrow view that focuses exclusively at party system developments, it applies semantic text analysis to the study of grassroots mobilization during the Great Recession. Results point to the wide use of populist discourse on the part of movement activists seeking an inclusive language when framing disparate social grievances in a given constituency, a finding with important implications with regards to how populism can facilitate straddling the divide that purportedly distinguishes institutionalized party system behavior from the social movement milieu.     

Stock market integration between new EU member states and the Euro-zone

This paper measures the degree in stock market integration between five Eastern European countries and the Euro-zone. A potentially gradual transition in correlations is accommodated by smooth transition conditional correlation models. We find that the Czech, Slovenian and Polish markets have increased their correlation to the Euro-zone from 1997 to 2008. However, this is not a broad-based phenomenon across Eastern Europe. The results also show that the increase in correlations is not a reflection of a world-wide phenomenon of financial integration but is mainly driven by EU-related developments.     

Distribution of Marketing Research Material to Universities: The Case of Archive of Market and Social Research (AMSR)

ABSTRACT

The aim of this note is to understand how content relating to marketing and market research is distributed to and within universities. The focus of the study includes the behavior of all those in this market for information, namely suppliers (whether content generators, aggregators, packagers, or distributors of content) of marketing research, university staff, and students. The case study method was implemented to collect data. The case study focuses on UK Higher Education. Specifically, the authors use the case study of the newly developed Archive of Market and Social Research (AMSR) to explore how content relating to marketing and market research is distributed to and within universities. The research involved personal interviews with 15 librarian senior managers selected from 14 universities.

The interviews with librarians provided insight into how AMSR could be distributed to university libraries and how it could be accessed. The findings highlight the role of university academics in specifying the content of marketing and market research. They focus on ‘real world’ management problems to deliver research with impact and relevant teaching. Therefore, they need company and industry information and are more likely to use current sources. The study maps the process of acquisition of marketing and market research content by universities and identifies the different roles involved in this process. The study is in line with the emerging literature that focuses on the role of education in explaining the relevance gap in marketing research. The study contrasts between the situation in the university market and industrial buying and adds to our understanding of the complexities associated with the distribution of the marketing research material. The result is expected to be a much sharper focus for the marketing of the archive material, leading to greater use of recent high-quality market research by marketing educators, and changes to marketing and market research syllabuses.

This note provides insight into how suppliers (whether content generators, aggregators, packagers, or distributors of content) of market and marketing research should market to universities and ensure the use of their information resources by students and teachers and how they should. The findings of the study contribute to understanding customer needs and shaping a new service product proposition. In addition, the study provides insight into how university students and staff access and should access commercial research on marketing from the market research industry (in particular from the Archive of Market and Social Research) and use it in their learning, so that their knowledge will be more up to date and their employability will be increased. Adding several insights to the issue of distribution of marketing research material to universities. The paper relates to the marketing of information resources to universities, specifically to the work of the Archive of Market and Social Research, in marketing their information assets to universities, and more specifically the relationship between the “push” of suppliers, libraries, journal and textbook suppliers and information aggregators (such as EBSCO and JISC) and the pull coming from academic researchers and lecturers, who might use this information in their teaching and research. The present study can be seen as a classic case study of understanding buyer behavior, but in a modern world of information platforms, aggregation, and the digital economy.     

What if they had not Gone Negative? A Counterfactual Assessment of the Impact from Negative Interest Rates

The counterfactual estimation technique of Pesaran and Smith ( 2016 ) is employed to provide an assessment of the impact stemming from the implementation of negative interest rates in three European economies (Denmark, Sweden and Switzerland). The analysis indicates that negative interest rates did not have a significant effect on bank lending growth or inflation in any country. This failure to reject the policy ineffectiveness hypothesis most likely lies in the fact that negative interest rates did not ease the situation for the factors restricting the supply of bank lending, namely bank funding costs and Return‐on‐Equity.     

Smooth transition patterns in the realized stock–bond correlation

This paper explores the time variation in the stock–bond correlation using high-frequency data. Gradual transitions between regimes of negative and positive stock–bond correlation are well accommodated by the smooth transition regression (STR) model. We find that the regimes are systematically related to movements in financial and to a minor extent macroeconomic transition variables. In particular, the most informative transition variables are the short rate, the yield spread, and the VIX volatility index. Importantly, both in-sample and out-of-sample evaluation criteria show that multiple transition variable STR specifications considerably outperform single transition variable STR models. Our results are robust to different forecast horizons.     

Is real GDP stationary? Evidence from a panel unit root test with cross-sectional dependence and historical data

We use historical data that cover more than one century on real GDP for industrial countries and employ the Pesaran panel unit root test that allows for cross-sectional dependence to test for a unit root on real GDP. At first, we find strong evidence against the unit root null. Our results seem to be robust to the chosen group of countries and, in most cases, the sample period. However, the sequential panel selection method reveals that the rejection of the unit root null is due to the stationarity of real GDP in a few countries only. Real GDP is less stationary mostly in fixed exchange rate regimes like the Gold Standard and the Bretton Woods system.     

Idiosyncratic volatility puzzle: influence of macro-finance factors

Review of Quantitative Finance and Accounting - We analyze the cross-sectional relation between expected idiosyncratic volatility and stock returns. The expected idiosyncratic volatility is...