MEASURING THE LIFETIME REDISTRIBUTION ACHIEVED BY DUTCH TAXATION, CASH TRANSFER AND NON-CASH BENEFITS PROGRAMS

This paper assesses how the Dutch system of taxation, cash transfers and non-cash benefits redistributes between the rich and the poor. The approach in this paper deviates from the usual approach by incorporating the full life cycle in the measurements, rather than only the annual effects. Moreover, the coverage is larger than is usually the case: the paper takes account of both direct and indirect taxes and direct and indirect benefits. In order to obtain the measurements on redistribution, we use the level of educational attainment to classify the population. We therefore measure, in terms of present values, the average net benefit from government policies for an average representative person of each level of education. The results indicate a sizable redistribution from the rich to the poor and a significant reduction of welfare inequality. The net effect on welfare inequality is, however, substantially smaller than when measured on an annual basis.     

EXCHANGE RATE FUNDAMENTALS,FORECASTING, AND SPECULATION: BAYESIAN MODELS IN BLACK MARKETS

Although speculative activity is central to black markets for currency, the out‐of‐sample performance of structural models in those settings is unknown. We substantially update the literature on empirical determinants of black market rates and evaluate the out‐of‐sample performance of linear models and non‐parametric Bayesian treed Gaussian process (BTGP) models against the random walk benchmark. Fundamentals‐based models outperform the benchmark in out‐of‐sample prediction accuracy and trading rule profitability measures given future values of fundamentals. In simulated real‐time trading exercises, however, the BTGP achieves superior realized profitability, accuracy and market timing, while linear models do no better than a random walk. Copyright © 2013 John Wiley & Sons, Ltd.     

Fund Liquidation, Self-selection, and Look-ahead Bias in the Hedge Fund Industry

A wide range of empirical biases hampers hedge fund databases.In this paper we focus upon survival-related biases and disentanglelook-ahead biases due to self-selection of funds and due tofund termination. Self-selection arises because funds voluntarilyreport their information to data vendors and may decide to stopdoing so. By extending existing methodology, we analyze persistencein hedge fund performance over the period 1994–2000, takinginto account the above biases. The results show that look-aheadbiases due to liquidation and self-selection enforce each otherand may lead to overestimating expected returns by as much as8% per year. Overall, the results are consistent with positivepersistence in hedge fund returns at horizons of two and fourquarters.     

Reverse convertible bonds analyzed

We study the pricing of reverse convertible (RC) bonds. These are bonds that carry high coupon payments. In exchange, the issuer has an option at the maturity date to either redeem the bonds in cash or to deliver a pre‐specified number of shares. We find that Dutch plain vanilla and knock‐in RC bonds are, on average, overpriced by almost 6%. This overpricing is confirmed in a model‐free analysis with respect to option‐ and bond‐pricing models. We find that rational factors explain 23% of the documented overpricing. In addition, we find that the combination of financial marketing, framing, and the representativeness bias further increases our ability to explain the documented overpricing to more than 35%. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:895–919, 2009     

Is ethical money financially smart? Nonfinancial attributes and money flows of socially responsible investment funds

We study the money flows into and out of socially responsible investment (SRI) funds around the world. In their investment decisions, investors in SRI funds may be more concerned with ethical or social issues than with fund performance. Therefore, SRI money flows are less related to past fund returns. Ethical money is less sensitive to past negative returns than are conventional fund flows, especially when SRI funds primarily use negative or Sin/Ethical screens. Social attributes of SRI funds weaken the relation between money inflows and past positive returns. However, money flows into funds with environmental screens are more sensitive to past positive returns than are conventional fund flows. Stock picking based on in-house SRI research increases the money flows. These results give evidence on the role of nonfinancial attributes, which induce heterogeneity of investor clienteles within SRI funds. We find no evidence of a smart money effect, as the funds that receive more inflows neither outperform nor underperform their benchmarks or conventional funds.     

The price of ethics and stakeholder governance: The performance of socially responsible mutual funds

Do investors pay a price for investing in socially responsible investments (SRI) funds, or do they obtain superior returns? This paper investigates these under- and overperformance hypotheses for all SRI funds across the world. Consistent with investors paying a price for ethics, SRI funds in the US, the UK, and in many continental European and Asia-Pacific countries underperform their domestic benchmarks by − 2.2% to − 6.5%. However, with the exception of some countries such as France, Japan and Sweden, the risk-adjusted returns of SRI funds are not statistically different from the performance of conventional funds. We also find that the underperformance of SRI funds is not driven by loadings on an ethics style factor. There is mixed evidence of a smart money effect: SRI investors are unable to identify the funds that will outperform in the future, whereas they show some fund-selection ability in identifying funds that will perform poorly. Finally, corporate governance and social screens yield lower risk-adjusted returns.     

Optimizing the Life-Cycle Path of Pension Premium Payments and the Pension Ambition in the Netherlands

De Economist - We determine the optimal life-cycle path of pension premiums during the working ages and pension benefits during retirement, assuming that households can choose these freely. We...     

Spatial Models in Marketing

Marketing science models typically assume that responses of one entity (firm or consumer) are unrelated to responses of other entities. In contrast, models constructed using tools from spatial statistics allow for cross-sectional and longitudinal correlations among responses to be explicitly modeled by locating entities on some type of map. By generalizing the notion of a map to include demographic and psychometric representations, spatial models can capture a variety of effects (spatial lags, spatial autocorrelation, and spatial drift) that impact firm or consumer decision behavior. Marketing science applications of spatial models and important research opportunities are discussed. This paper is based upon the discussions of the Spatial Models in Marketing seminar at the Sixth Invitational Choice Symposium, June 2004. Eric T. Bradlow, Bart Bronnenberg and Gary J. Russell served as co-chairs of the session.     

The rise (or fall) of lottery adoption within the logic of collective action: Some empirical evidence

This paper builds upon previous work on the economics of lottery adoption by incorporating the collective action logic developed in an important series of works by Mancur Olson. Public choice research points out that legislators are rational maximizers, and act within a costbenefit framework in attempting to implement means of budget finance. Discrete-time hazard models presented suggest that lottery adoption is more likely to occur in older states where rent seeking groups are older and more organized, and can more effectively engage in efforts for collective action (and benefits). By implementing lotteries as taxshifting mechanisms, the role of, government and the direction of social evolution are also altered.     

Information needs and risk perception as predictors of risk information seeking

This paper introduces a theoretical framework that describes the importance of public's information sufficiency, risk perception, and self‐efficacy as predictors of intended risk information seeking behaviour. Based on theoretical assumptions, measurement instruments for relevant concepts were developed and validated using data from a mail questionnaire. Relationships among selected determinants of risk information seeking behaviour were analysed. Results indicate that information needs, risk perception, and current knowledge are direct predictors of intentions to seek information. Trust, engagement, social influence, and self‐efficacy affect risk perception and the need for information is influenced by engagement and social influence.