Risk decomposition,estimation error,and naïve diversification

How to achieve adequate diversification is important in portfolio construction. Efficient markets should not reward an investor for taking on risk that can be diversified away. Hence, when minimizing risk exposure, investors need to measure what part of total portfolio risk is systematic and what part can be diversified away. I examine several methods for decomposing total portfolio risk into systematic and diversifiable components and then carry out simulations to compare cross-sectional distributions of estimated and true risk as number of stocks increases in portfolios constructed using naïve diversification. Ordinary least squares estimators of diversifiable risk are relatively robust, and their cross-sectional distributions closely track the cross-sectional distributions of the corresponding true diversifiable risk. Other proposed estimators of diversifiable risk as well as all estimators of systematic risk have cross-sectional dispersion much greater than the corresponding true risk although, with one exception, bias is small. Results are relatively robust to the choice of method for generating market returns and to the underlying asset pricing model but not to random security betas. The simulation analysis also shows that risk and magnitude of shocks due to diversifiable risk are not negligible, even for 300-stock portfolios.     

The trouble with naïve Keynesianism

Since the Keynesian Revolution of the 1930s, many prominent economists have argued that a useful policy response to economic depression is to boost government spending. But pressure to spend quickly increases the potential for waste and inefficiency: this is ignored or dismissed in the Keynesian literature. For example, a widely cited cost–benefit analysis of stimulus spending does not even acknowledge the possibility of waste, and some Keynesians go so far as to argue that wasteful spending during a crisis can nonetheless be desirable. Here we extend the typical analysis by accounting explicitly for the leading sources of cost including waste, resource costs, and the excess burden of taxation. Our results suggest that stimulus spending that is largely wasteful is unlikely to generate net wealth. A proper response to economic depression must consider the possibility that government waste can render stimulus spending counterproductive.     

Feature weighted naïve Bayes algorithm for information retrieval of enterprise systems

Automated information retrieval is critical for enterprise information systems to acquire knowledge from the vast amount of data sets. One challenge in information retrieval is text classification. Current practices rely heavily on the classical naïve Bayes algorithm due to its simplicity and robustness. However, results from this algorithm are not always satisfactory. In this article, the limitations of the naïve Bayes algorithm are discussed, and it is found that the assumption on the independence of terms is the main reason for an unsatisfactory classification in many real-world applications. To overcome the limitations, the dependent factors are considered by integrating a term frequency–inverse document frequency (TF-IDF) weighting algorithm in the naïve Bayes classification. Moreover, the TF-IDF algorithm itself is improved so that both frequencies and distribution information are taken into consideration. To illustrate the effectiveness of the proposed method, two simulation experiments were conducted, and the comparisons with other classification methods have shown that the proposed method has outperformed other existing algorithms in terms of precision and index recall rate.     

What Are the Lessons from Post‐Communist Transitions?

This paper provides a review of the literature on post‐communist transitions. It outlines the debate between the proponents of rapid reforms and the advocates of neo‐institutionalism. Providing evidence from the transitional countries, it suggests an alternative approach, explicitly acknowledging the impact of two categories of constraints on reforms.     

Labour solidarity in crisis? Lessons from General Motors

Why was the 2008–09 economic downturn not matched by an internationally coordinated trade union response? Drawing on the evidence from General Motors, this article argues that this was due to states' extraordinary involvement in the economy during the crisis, which provided strategic alternatives to labour transnationalism at the national level.     

Do investors still benefit from international diversification with investment constraints?

This paper empirically investigates the potential benefits of international diversification for the U.S. investor with various investment constraints from both long-term and time-rolling perspectives. While the addition of portfolio bounds makes asset allocation more feasible, our findings suggest that adding short-selling and over-weighting constraints reduce but do not completely eliminate the diversification benefits of international investment. The over-time analyses show that diversifying portfolios internationally is still beneficial even though financial markets are becoming more integrated. The out-of-sample test suggests that the Markowitz model does not necessarily realize improved mean–variance efficiency but demonstrates risk reduction. The significant time variation in optimal asset allocation implies the necessity for the fund manager to rebalance international portfolio dynamically.     

The scope of “marketing” research in the nonprofit sector: Lessons from the last 20 years literature

Over the last several decades, the field of nonprofit marketing has produced a growing number of publications; however, little attention has been paid to examine what research topics have been studied by nonprofit scholars from the marketing perspectives. This knowledge production research contributes to the literature by reviewing trends in research themes and methodologies over the last 20 years among the articles for which authors use the terminology “marketing.” Employing a thematic review using text network analysis, and an in-depth methodology review, this study finds that nonprofit marketing studies have been shifting to become more subdivided and diversified in terms of research themes and methodologies. However, we also find that there is still room for further development, which we provided recommendations based on the findings. With its findings, this paper provides critical guidance for future studies.     

Do short selling restrictions destabilize stock markets? Lessons from Taiwan

Short sellers have been routinely blamed for triggering, or exacerbating, stock market declines. The experience of Taiwan provides an interesting case study of the impact of short selling bans on stock returns volatility in a time series framework due to the length of time the short selling ban was in place there. Estimating several variants of an asymmetric GARCH model and a Markov switching GARCH model we find robust evidence that short selling restrictions raise stock returns volatility. The only qualifier is that the impact of short sale bans is a feature of the expansionary phase of business cycles. During recessions this effect dissipates.     

When to haggle,when to hold firm? Lessons from the used‐car retail market

Though haggling has been the conventional way for auto retailers to sell cars, the last two decades have witnessed the systematic adoption of no‐haggle prices by many large dealerships, including the largest new‐ and used‐car dealership chains. This paper develops a structural empirical model to estimate sellers' profits under posted price and haggling, and investigates how market conditions affect sellers' optimal pricing formats. The model incorporates a simple class of bargaining mechanisms into a standard random‐coefficient discrete‐choice model. With the extension, the product‐level demand system is estimated using data with only list prices, and the unobserved price discounts are also recovered in the estimation. The counterfactual experiments yield a few interesting findings. First, dealers' adopted pricing formats seem superior to the alternative ones. Second, dealers enjoying larger market power through vertical differentiation and carrying a large number of models are more likely to have posted price as their optimal pricing format.     

Lessons from management–union partnership in teacher performance appraisal in the New South Wales public education system

Performance appraisal is frequently seen as one of the hallmarks of the ‘new managerialism’ in public sector human resource management. It is also commonly represented as a device for individualizing the employment relationship. Yet even appraisal offers scope for employee voice/participation, both individually and collectively, and for varying degrees of management–union cooperation. This study examines an unlikely case of management–union partnership in performance appraisal – that applied since 2000 to teachers in Australia's largest public schooling bureaucracy, the NSW Department of Education and Training, whose teachers have a long history of union solidarity and industrial militancy. The experiment can be seen as a union retreat from confrontationism, a concession to managerialism, and a resignation to the dominance of individualism over collectivism. However, we argue that it has also widened the scope for both union and employee voice at workplace level.     

Let’s Not Go Down that Path Again: Lessons from the Past Applied to Immigrant-Targeted Discrimination

Immigrants, both legal and illegal, are a staple of the modern United States workplace. While much of the discussion of this fact centers on negative consequences for the U.S., far less attention has been paid to the detrimental impact on immigrants resulting from their workplace experiences, particularly relating to being targets of discrimination. In this article, we outline: a) a variety of types of workplace discrimination potentially relating to immigrant status; b) potential negative outcomes arising from said discrimination for both immigrant employees and their employers, and; c) how existing and predicted employment law standards place organizations in a legally vulnerable position when such discrimination goes unchecked. We further discuss implications of immigrant-targeted discrimination (ITD) for organizations and managers, and plausible extensions of workplace discrimination laws to specifically include ITD.     

Does VC fund diversification pay off? An empirical investigation of the effects of VC portfolio diversification on fund performance

The paper tests different theories of how diversification by Venture Capital (VC) firms affects fund performance. The Financial Intermediation and the Resource-based Theory suggest that lower financial risk associated with diversification implies a lower return. However, the assumptions of these theories are questionable in the context of venture capital. We test their validity using data on VC portfolio diversification by industry and country using an original dataset of 649 VC funds originating in the United Kingdom over the period 1981–2000. Results show that higher diversification by industry does indeed lower VC fund success rates. Diversification by geographical region, on the contrary, increases returns.     

How do firms perceive policy rationales behind the variety of instruments supporting collaborative R&D? Lessons from the European Framework Programs

The main objective of the paper is to analyze to which extent participation in public programs supporting collaborative R&D meets the goals pursued by policy makers when setting up such instruments. Theoretically, these policy instruments are designed to overcome a set of failures (market and systemic failures) impeding the innovation process. We use as an example in the empirical part the European Framework Programs (FP) 5 and 6, which include a large and representative range of instruments. Each of these FP instruments is characterized according to the set of failures it is supposed to solve, its objectives and characteristics, and we discuss how these aspects are perceived and exploited by participating companies. Using data collected in the Innoimpact survey, involving thousands of FP5 and FP6 project participants, we compare the motivations of firms in choosing these instruments with our theoretical predictions. We find that the motivation to participate in a FP project does not differ greatly from one instrument to the other and the characteristics of the projects do not exhibit major differences. The paper concludes with some policy recommendations.     

An applied stochastic model of the quality–quantity trade-off in the public health care sector

It is a striking feature of the many of the developing country public service sectors that the sectors in question often overproduce the quantity of services but underproduce the quality. This feature, which is exemplified in this paper, is rooted in a wide spectrum of economic and sociological factors ranging from the economic and sociological profile of the service receiving people to the asymmetric density of service-receiving population across their regions. This feature, we conjecture, is a source of a considerable degree of suboptimality in some of the developing countries. If our conjecture is correct, correcting such suboptimalities is likely to yield significant welfare improvements that could help speed up the process of development in the underdeveloped regions of the world. To analyze the supoopimalites in question, we will first develop a concept (and a model) of optimal quality in the public service sector, which indicates the level of quality that maximizes expected public satisfaction subject to available resources. Resources are used in an efficient manner to produce the service in question. The concept and the model in the paper make a needed contribution to the quality discourse by presenting a way of determining the quality improvements (or adjustments) necessary to achieve optimum in the public service sector. The paper presents an application (a case study) of this new concept in the public healthcare sector in Turkey, and explores the differences between the actual and optimal quality in the sector in question. It turns out that there is a considerable difference between the actual and optimal levels of quality (as well as those of quantity) in the Turkish public healthcare sector in an overpopulated city (Istanbul), indicating a significant overproduction of quantity and underproduction of quality. Thus, to achieve the optimal levels, the sector should increase quality and reduce quantity by a considerable margin. The quantified differences (gaps) between actual and optimal levels point out a considerable room for welfare improvement. Optimum-seeking adjustments closing these gaps could be shown to lead to considerable satisfaction and welfare gains, the measurement of which is worthy of future research.     

Can the “one-drop rule” tell us anything about racial discrimination? New evidence from the multiple race question on the 2000 Census

The inclusion of multiple race information for the first time in the 2000 Census allows for a novel test for the presence of labor discrimination using the “one-drop rule.” Identifying discrimination is straightforward and essentially relies on the discontinuous nature of the one-drop rule, which treats biracial blacks similarly as monoracial blacks. If biracial blacks have levels of unmeasurable and measurable human capital that lie between the levels of monoracial blacks and whites then, absent discrimination, their wages should also lie between the wages of the two groups. Estimates from the Census indicate that biracial blacks have levels of education that lie almost perfectly between monoracial blacks and whites. In contrast, however, biracial blacks have wages that are roughly similar to monoracial blacks after controlling for education and potential work experience. Estimates from the 1980 Census also do not indicate that the parental characteristics and educational outcomes of biracial children differ from what would be expected by having both black and white parents. Several additional factors that potentially affect the human capital of biracial adults are explored. These findings provide some suggestive evidence on the “one drop rule” and the presence of discrimination in the labor market and provide new estimates of wages and educational levels of biracial blacks.     

Lessons from Sweden’s first large-scale implementation of Six Sigma in healthcare

The Skaraborg Hospital Group (SkaS) has implemented a variety of quality management initiatives in the last 20 years in accordance with its strategy of excelling at quality development to fulfill the needs and expectations of its patients. One such initiative is Six Sigma, which has contributed to more than 40 completed improvement projects. Using an action research approach, this article describes the lessons that were learned from the first 22 Six Sigma projects, completed between 2006 and 2008 and having a success rate of 75%. We further describe how these insights have contributed to other ongoing quality improvement activities at SkaS. In particular, the paper presents some key points not earlier described in other Six Sigma healthcare applications.