Risk premia in general equilibrium

This paper shows that non-linearities from a neoclassical production function alone can generate time-varying, asymmetric risk premia and predictability over the business cycle. These empirical key features become relevant when we allow for non-normalities in the form of rare disasters. We employ analytical solutions of dynamic stochastic general equilibrium models, including a novel solution with endogenous labor supply, to obtain closed-form expressions for the risk premium in production economies. In contrast to an endowment economy with constant investment opportunities, the curvature of the consumption function affects the risk premium in production economies through controlling the individual's effective risk aversion.     

Saving motives and multivariate precautionary premia

This paper extends the concept of precautionary premium to a multivariate setting so as to measure the intensity of the precautionary saving motive to protect against multivariate risks. This makes it possible to disentangle and to link the various motives of precautionary saving depending on the configuration of the risks the individual wants to protect against.     

The ancient olympics as a signal of city-state strength

Ancient Greece was wealthy enough to invent many of the foundations of Western Civilization. In order to accomplish this, they had to avoid the trap of dissipating wealth through continuous feuding. We contend that the ancient Olympics was one, of several, institutions that helped achieve this by acting as a signal of city-state strength. Although it could not prevent all battles, it provided information to reduce hostilities between competing cities. This hypothesis explains the rise and fall of the Olympics, and the unique and puzzling characteristics of the rules and events.     

Tests of risk premia in linear factor models

We show that statistical inference on the risk premia in linear factor models that is based on the Fama–MacBeth (FM) and generalized least squares (GLS) two-pass risk premia estimators is misleading when the β$\beta$’s are small and/or the number of assets is large. We propose novel statistics, that are based on the maximum likelihood estimator of Gibbons [Gibbons, M., 1982. Multivariate tests of financial models: A new approach. Journal of Financial Economics 10, 3–27], which remain trustworthy in these cases. The inadequacy of the FM and GLS two-pass t$t$/Wald statistics is highlighted in a power and size comparison using quarterly portfolio returns from Lettau and Ludvigson [Lettau, M., Ludvigson, S., 2001. Resurrecting the (C)CAPM: A cross-sectional test when risk premia are time-varying. Journal of Political Economy 109, 1238–1287]. The power and size comparison shows that the FM and GLS two-pass t$t$/Wald statistics can be severely size distorted. The 95% confidence sets for the risk premia in the above-cited work that result from the novel statistics differ substantially from those that result from the FM and GLS two-pass t$t$-statistics. They show support for the human capital asset pricing model although the 95% confidence set for the risk premia on labor income growth is unbounded. The 95% confidence sets show no support for the (scaled) consumption asset pricing model, since the 95% confidence set of the risk premia on the scaled consumption growth consists of the whole real line, but do not reject it either.     

Probabilistic forecasts of volatility and its risk premia

The object of this paper is to produce distributional forecasts of asset price volatility and its associated risk premia using a non-linear state space approach. Option and spot market information on the latent variance process is captured by using dual ‘model-free’ variance measures to define a bivariate observation equation in the state space model. The premium for variance diffusive risk is defined as linear in the latent variance (in the usual fashion) whilst the premium for variance jump risk is specified as a conditionally deterministic dynamic process, driven by a function of past measurements. The inferential approach adopted is Bayesian, implemented via a Markov chain Monte Carlo algorithm that caters for the multiple sources of non-linearity in the model and for the bivariate measure. The method is applied to spot and option price data on the S&P500 index from 1999 to 2008, with conclusions drawn about investors’ required compensation for variance risk during the recent financial turmoil. The accuracy of the probabilistic forecasts of the observable variance measures is demonstrated, and compared with that of forecasts yielded by alternative methods. To illustrate the benefits of the approach, it is used to produce forecasts of prices of derivatives on volatility itself. In addition, the posterior distribution is augmented by information on daily returns to produce value at risk predictions. Linking the variance risk premia to the risk aversion parameter in a representative agent model, probabilistic forecasts of (approximate) relative risk aversion are also produced.     

Debt stabilization games in the presence of risk premia

As a result of the recent financial crisis and the ensuing economic recession, fiscal deficits have soared in many OECD countries. As a consequence, government debt has been on the rise again after a period of stable or declining government debt. In this paper we analyze debt stabilization in a country that features endogenous risk premia, imposed by financial markets that evaluate the probability of debt default by governments. Endogenous risk premia arise by assuming, e.g., simple linear relations between risk premia and the level of debt. As a result the real interest rate on government debt can be written as a constant (measuring the risk-free real interest rate corrected for real output growth) plus an endogenous risk premium that depends on the debt level. We bring such an endogenous risk premium into Tabellini (1986) model and analyze the impact of it. This gives rise to a non-linear differential game. We solve this game for both a cooperative setting and a non-cooperative setting. The non-cooperative game is solved under an open-loop information structure. We present a bifurcation analysis w.r.t. the risk premium parameter.     

Modeling common volatility characteristics and dynamic risk premia in European equity markets

The paper applies a Factor-GARCH model to evaluate the impact of the market portfolio, as a single common dynamic risk factor, on conditional volatility and risk premia for the returns on size-based equity portfolios of three major European markets; France, Germany and the United Kingdom. The results show that for the size-based portfolios the factor loading for the dynamic market factor is significant and positive but the association between the risk premia and the conditional market volatility is weak. However, the dynamic market factor is shown to explain common characteristics in the conditional variance such as asymmetry and persistence. This finding is consistent across markets and portfolio sizes.     

A quality-oriented framework with QoS management using Bluetooth as a case

In a modern society that is inundated with cell phones, laptops, PDAs and other IT facilities, it is little wonder that digital handheld tools and facilities have followed suit in the wireless trend. Services in Bluetooth promise to allow industries and businesses to adapt rapidly to changes in the business environment and to the needs of IT users. Nevertheless, the dramatic changes of services in Bluetooth also result in undesirable interactions that negatively influence quality of service and customer satisfaction regarding Bluetooth. Consequently, it is important to discuss the service quality, service feature interaction and service recovery about Bluetooth and their influence on user satisfaction and trust. Due to particular properties of wireless communication services, there exist software testing models and methodologies in the domain of wireless communication services. Based on the previous literature that defines the overall quality of wireless communication services, this study proposes a quality-oriented framework that may be effectively applied to the area of wireless communication.     

Project management models as value creators

Based on findings from five case studies, we discuss benefits obtained by using a common project management model. The case studies are part of an international research project aimed at determining the value of project management. All five companies applied a customized project management model. The five models are presented, and their characteristics, similarities, and differences are discussed. Based on interviews and comparisons with literature, the values obtained are identified. The values relate to efficiency, legitimacy, power and control, and stakeholder satisfaction. Further, the article points to necessary preconditions (both technical and human factors) in order to harvest the values.     

An investigation of ingratiation as a career management strategy: evidence from Singapore

In spite of the recognition that career politics, and therefore ingratiation, is widely used to manage careers, there is a dearth of empirical studies on ingratiation as a career management strategy. Consistent with Ferris and Kacmar's (1988) suggestion, the study reported here investigated the conditions (defined by situational variables, career concerns and personality variables) under which ingratiation is used as a career management strategy. Data were obtained through a structured questionnaire from professional employees (N = 214) in public and private sector organizations in Singapore.

Factor analysis of the 21-item career concerns scale revealed four solutions representing internal and external career concerns. The results of the hierarchical regression revealed that situational variables explained most of the variance in ingratiation, followed by career concerns and personality variables. Among the individual variables, task ambiguity, supervisor reward power, managerial responsibility and need for achievement were significant while personal success approached significance. Internal career concern of autonomy development was unrelated to ingratiation. Of the interaction terms, only supervisor reward power and Machiavellianism approached significance. Directions for future studies are suggested.     

New tips from TIPS: Identifying inflation expectations and the risk premia of break-even inflation

This paper decomposes the break-even inflation rates derived from inflation-indexed bonds into inflation risk premia, liquidity risk premia, and inflation expectations. I estimate a common factor model with autoregressive conditionally heteroscedastic (ARCH) errors that extracts co-movements from twenty-two monthly and quarterly indicators to identify these three components. The results indicate that the sharp declines in the 10-year and 5-year break-even inflation rates in 2009 reflect a substantial increase in liquidity risk rather than a decrease in inflation expectations. Break-even inflation rates underestimate inflation expectations over nearly the entire sample due to the liquidity risk premia carried by the inflation indexed bond yields. Also, the model-implied inflation expectations show better forecast performance for the average annual inflation rates than raw break-even inflation rates, the Survey of Professional Forecasters, and the Surveys of Consumers inflation forecasts.     

Dynamic estimation of volatility risk premia and investor risk aversion from option-implied and realized volatilities

This paper proposes a method for constructing a volatility risk premium, or investor risk aversion, index. The method is intuitive and simple to implement, relying on the sample moments of the recently popularized model-free realized and option-implied volatility measures. A small-scale Monte Carlo experiment confirms that the procedure works well in practice. Implementing the procedure with actual S&P500 option-implied volatilities and high-frequency five-minute-based realized volatilities indicates significant temporal dependencies in the estimated stochastic volatility risk premium, which we in turn relate to a set of macro-finance state variables. We also find that the extracted volatility risk premium helps predict future stock market returns.     

Incorporating a tracking signal into a state space model

It is a common practice to complement a forecasting method such as simple exponential smoothing with a monitoring scheme to detect those situations where forecasts have failed to adapt to structural change. It will be suggested in this paper that the equations for simple exponential smoothing can be augmented by a common monitoring statistic to provide a method that automatically adapts to structural change without human intervention. The resulting method, which turns out to be a restricted form of damped trend corrected exponential smoothing, is compared with related methods on the annual data from the M3 competition. It is shown to be better than simple exponential smoothing and more consistent than traditional damped trend exponential smoothing.     

风景为何这边独好——从出租车窗口看上海服务管理

"要了解一个城市及当地人的特点,坐几回出租车就知道了." 上海的出租车给人什么印象呢?一个最近到过上海的外地乘客说的一段话,或许很有代表性:"我到上海3天,乘的出租车少说也有10次.上海出租车一般都干净整洁,上海‘的哥'也都亲切、周到.问你好,答问题,给发票,说谢谢,道再见,让人感到自然、舒服."     

Knowledge management technology as a stage for strategic self-presentation: Implications for knowledge sharing in organizations

This article explores why it is often difficult for organizations to capture, store, and share employees' individually held expertise. Drawing on studies of the social construction of expertise and theories of transactive memory systems and self-presentation in computer-mediated environments, we argue that knowledge management technologies are not simple containers for the storage of expertise, but that they are stages upon which individuals enact performances of expertise. Through a longitudinal study of the work of IT technicians we show that users of a knowledge management technology strategically craft their own information entries to position themselves as experts vis-à-vis their coworkers. The data suggest that proactive self-presentations enacted by a few actors early on may spur reactive behaviors of strategic self-presentation across the organization. We explore implications of these findings for theories of transactive memory systems and technology use in organizations.     

Diversity and its management as a dialectical process: Encountering Sweden and the U.S.

This article approaches diversity and its management from a dialectical, socio-historical perspective. Two social–historical contexts are examined: the U.S., where social productions of ideas of diversity (management) first appeared; and Sweden, where some original ideas about diversity and its management relocated and were partly reinterpreted, creating new ideas about diversity. The article shows linkages between the development of the ideas and praxes of diversity in these contexts, drawing attention to different actors and milieus, and their often-conflicting ideas and interests, as well as unequal power relations. Like many other social phenomena, diversity and its management are mediated by socio-historical relationships that reflect their ongoing productions. Consequently these productions are not fixed realities immune to human intervention and change.