On measuring serial correlation: Implications for finance and accounting research studies

Accounting and finance studies that measure serial correlation implicitly make two assumptions. One, the studies assume that the sample estimate of the autocorrelation coefficient is unbiased. The assumption is intuitively appealing, but incorrect. This article provides a measure of the size of the bias. Two, the studies assume that the target of the time series is constant over time. However, over a long period target values may change. This article models the general case in which not only do random shocks affect actual values, but also random changes affect target values.     

On the correlation of acting probabilities

Abstract

In a paper printed in this journal n:r 4–5 1916, I have treated the problem of correlation in homograde statistics. This led in the case of constant acting probabilities to the discussion of an extension of the theorem of Bernoulli to embrace the occurrences of two attributes.     

On the theory of frequency-distributions

Abstract

The following pages contain a brief sketch to a general theory of freq ueney-distributions for n variables. Ta simplify the exposition we begin with frequency-distributions for one variable or frequency curves all though the results here are not novel.     

Dynamical macroprudential stress testing using network theory

The increasing frequency and scope of financial crises have made global financial stability one of the major concerns of economic policy and decision makers. This has led to the understanding that financial and banking supervision has to be thought of as a systemic task, focusing on the interdependent relations among the institutions. Using network theory, we develop a dynamic model that uses a bipartite network of banks and their assets to analyze the system’s sensitivity to external shocks in individual asset classes and to evaluate the presence of features underlying the system that could lead to contagion. As a case study, we apply the model to stress test the Venezuelan banking system from 1998 to 2013. The introduced model was able to capture monthly changes in the structure of the system and the sensitivity of bank portfolios to different external shock scenarios and to identify systemic vulnerabilities and their time evolution. The model provides new tools for policy makers and supervision agencies to use for macroprudential dynamical stress testing.     

On the theory of market information efficiency

This paper discusses the concept of market information efficiency and demonstrates the following: As the number of traders who participate in the market becomes large, the variations in the price of a security caused by the variations in traders' beliefs make the market price vary as if traders all knew the ‘true’ distribution of returns on the security. The empirical implications of the analysis are also explored.     

On the theory of moving average graduation

Abstract

In this paper a new criterion for judging the properties of moving averages is given, and moving averages which are optimal according to this criterion under general assumptions are derived. For the standard case where the observations are uncorrelated and have equal variance, our optimal moving averages generalize two well-known optimal moving averages: The minimum-variance and the minimum-R_z moving averages. This case is given some particular attention in the theoretical discussion, and some Monte Carlo experiments throw further light on it. These investigations indicate that our generalization is of practical as well as theoretical interest. The paper also contains the result that Spencer's 21-term moving average is approximately equal to the corresponding minimum-R ₅ moving average.     

On the correlation of exchange rates and interest rates

This note shows that a negative correlation between the price of foreign currency and nominal interest rates in not necessarily an indication of movements in the real rate of interests. Such a correlation could be consistent with a monetarist model in which the real rate is constant.     

On Hattendorff's theorem in the theory of risk

Abstract

1. Two of the most important measures of dispersion are the {istandard }deviation and the {iaverage deviation}¹ which, if we are concerned with the financial effects of deviations from an assumed mortality, are called the {imean risk} and the {iaverage risk} and are denoted by {iM} and {iR} respectively.     

On the application of finance theory to the insurance firm

The primary argument set forth in this article is that the theory of finance can and should be rigorously applied to the study of the insurance firm. In order to illustrate this point, we turn our attention to the insurance solvency literature, where the implications of default risk for insurance company decision-making and regulatory policy are widely discussed but not nearly as widely understood. Rather than treat the probability of ruin as an exogenous constraint that is arbitrarily imposed by regulators, the approach taken here is to endogenize the probability of ruin with respect to a complex contracting process undertaken by a variety of self-interested claim holders. This treatment enables us to evaluate regulatory constraints such as minimum capital requirements within a rigorous theoretical framework. Our analysis suggests that even in an unregulated market, insurers would voluntarily limit their premium-capital ratios in an effort to economize on contracting costs. Furthermore, mutual insurers are likely,ceteris paribus, to employ less leverage than insurers organized as stock corporations.     

On the probability function in the collective theory of risk

Abstract

Upon reading Dr. LUNDBERG'S paper ?Über die Wahrscheinlichkeitsfunktion einer Risikenmaase?¹ and trying to penetrate it along my own lines of thought, I found another way of deducing some of his formulas, giving the results in a form that directly invites a fairly simple approximation of the probability function. Though time has not permitted my going deeper into the problem, I propose here to give a brief account of the method.     

On Some alternative estimates of the adjustment coefficient in risk theory

Abstract

Recently, Csörgö and Steinebach proposed to estimate the adjustment coefficient in risk theory via a quantile type estimate based upon a sequence of intermediate order statistics. In the present paper, further alternative estimators are discussed which may be viewed as convex combinations of a Hill type and a quantile type estimate. Consistency is proved and rates of convergence are studied. Some simulation results are presented to illustrate the finite sample behavior of the proposed estimators.     

On the theory of financial contracting: The personal loan market

Assuming rational expectations, the differing incentives of borrowers and lenders in competitive loan markets determine the typically complex nature of personal loan contracts. Given this framework, contractual provisions such as collateralization, escrow accounts, and other restrictive covenants are efficient mechanisms to control the incentive conflict: credit rationing (market failure) arguments are not necessary to explain the inclusion of these contractual provisions. Within a competitive lending market the benefits from these provisions ultimately accrue to the borrower by lowering the total cost of borrowing.     

论新增长理论与中国经济增长质量的提高

西方新增长理论 ,又称为内生增长理论 ,是在 2 0世纪年代 ,以罗默 (PualM .Romer,1 986)和卢卡斯 (RobertE .Lucas,Jr.1 988)等人为代表的经济学家 ,在对新古典理论重新思考的基础上 ,得出一种共同的基本结论 ,即经济增长是经济系统内生因素作用的结果 ,而不是外部力量推动的结果。一方面内生的技术创新是经济长期增长的源泉 ,而劳动分工程度和专业化人力资本的积累水平是决定技术创新水平高低的主要因素。另一方面 ,政府实施的某些经济决策对一国的经济增长具有重要影响。在中国发展的新阶段 ,正是实施三步走战略的关键阶段。充分认识中国经济增长过程中的现实状况 ,保证经济长期、快速、健康地增长最主要是着力提高经济增长的质量。因此 ,借鉴西方的新增长理论 ,加强政府在推进技术进步、人力资本积累以及合理调整产业结构等方面作用 ,对于确保中国小康目标的实现具有重大的现实意义     

On the complete monotonicity of the compound geometric convolution with applications in risk theory

We prove that the complete monotonicity is preserved under mixed geometric compounding, and hence show that the ruin probability, the Laplace transform of the ruin time, and the density of the tail of the joint distribution of ruin and the deficit at ruin in the Sparre Andersen model are completely monotone if the claim size distribution has a completely monotone density.     

On break-even correlation: the way to price structured credit derivatives by replication

We consider the pricing of European-style structured credit pay-off under the Gaussian Copula Model (GCM). When no sudden jump-to-default events occur, the perfect replication of these pay-offs under the GCM is obtained if and only if the underlying single-name credit spreads follow a particular family of dynamics and if the pricing parameters are given by so-called ‘break-even’ correlations. We exhibit a class of Merton-style models that are consistent with this result. We calculate break-even correlations explicitly to price nth-to-default baskets under the GCM. Finally, we illustrate the usefulness of this concept as a relative-value tool.     

On the connection between tests of significance for correlation coefficients and for differences between means

1. Some questions about the connection between statistical tests of significance for simple and multiple correlation coefficients and for differences between sample means (and between sample means and population means) of variables of one or several dimensions are treated in this paper. The distributions of the random variables that are considered in such tests are given, under certain conditions, by frequency functions of the following types ¹ the recently published treatise “Mathematical Methods of Statistics” by Professor Harald Cramér (Uppsala 1945). : where - ∞ < t < ∞, n≧1; where where 0 < t < ∞, k≧1, n≧k; and where .     

论恩格斯晚年对社会主义道路理论的贡献

在恩格斯的晚年 ,世界历史正经历着巨大的变化。以电的发现与运用为标志的第二次科学技术革命的兴起 ,为资本主义注入了新的生机。资本主义的社会表现出许多新情况、新特点。面对历史的巨大变化与发展 ,恩格斯一方面依据资本主义从自由竞争向垄断过渡阶段所呈现出的新情况、新特点 ,对马克思主义关于从资本主义社会向共产主义过渡的理论进行了新的修订与发展。另一方面 ,依据东方社会的情况 ,使马克思主义的东方社会跨越资本主义“卡夫丁峡谷”的理论得以完善。并将二者有机结合起来共同构成了完整的关于向未来社会过渡的理论。     

重点测试行的测试风险分析与对策

为提高测试效率和测试效果，将测试风险降到最低，重点测试行应该认真分析测试风险的形成原因，并采取积极有效的应对措施。     

Capital structure and firm performance: A new approach to testing agency theory and an application to the banking industry

Corporate governance theory predicts that leverage affects agency costs and thereby influences firm performance. We propose a new approach to test this theory using profit efficiency, or how close a firm’s profits are to the benchmark of a best-practice firm facing the same exogenous conditions. We are also the first to employ a simultaneous-equations model that accounts for reverse causality from performance to capital structure. We find that data on the US banking industry are consistent with the theory, and the results are statistically significant, economically significant, and robust.