The roles of contextual moderation and personality in relation to the knowledge–risk link in the workplace

While hypothesized, a consistent association between knowledge about a hazard and the estimation of risk associated with that hazard has not been found. Risk communication is premised on the fact that knowledge about a hazard (information) will change people's perceptions of risk and behaviour. In this review methodological and theoretical factors that might account for this lack of consistent association are explored. In this context issues to do with the measurement and assessment of hazard knowledge, knowledge calibration, and the role of context as a moderator are explored. It is argued that contextual factors moderate the knowledge–risk link, with this link being stronger in less controllable, ambiguous contexts. Further this review asks: How can messages be framed (using prospect theory) so as to be more effective in the work place? It is argued that messages framed as gains should be more useful for prevention behaviours (e.g. wearing ear guards) and messages framed as losses should be more effective for detection behaviours (using radiation meters). Finally, the role of personality (e.g. need for cognition, typical intellectual engagement, and self-esteem) in relation to knowledge about a hazard, message framing and risk perception is discussed.     

Improvement in finite sample properties of the Hansen–Jagannathan distance test

Jagannathan and Wang [Jagannthan, R., and Wang, Z., “The conditional CAPM and the cross-section of expected returns.” Journal of Finance, 51 (1996), 3–53] derive the asymptotic distribution of the Hansen–Jagannathan distance (HJ-distance) proposed by Hansen and Jagannathan [Hansen, L.P., and Jagannathan, R., Assessing specific errors in stochastic discount factor models." Journal of Finance, 52 (1997), 557–590], and develop a specification test of asset pricing models based on the HJ-distance. While the HJ-distance has several desirable properties, Ahn and Gadarowski [Ahn, S.C., and Gadarowski, C., “Small sample properties of the GMM specification test based on the Hansen–Jagannathan distance.” Journal of Empirical Finance, 11 (2004), 109–132] find that the specification test based on the HJ-distance overrejects correct models too severely in commonly used sample size to provide a valid test. This paper proposes to improve the finite sample properties of the HJ-distance test by applying the shrinkage method [Ledoit, O., and Wolf, M., “Improved estimation of the covariance matrix of stock returns with an application to portfolio selection.” Journal of Empirical Finance, 10 (2003), 603–621] to compute its weighting matrix. The proposed method improves the finite sample performance of the HJ-distance test significantly.     

Predictability and the earnings–returns relation

This paper studies the effects of predictability on the earnings–returns relation for individual firms and for the aggregate. We demonstrate that prices better anticipate earnings growth at the aggregate level than at the firm level, which implies that random-walk models are inappropriate for gauging aggregate earnings expectations. Moreover, we show that the contemporaneous correlation of earnings growth and stock returns decreases with the ability to predict future earnings. Our results may therefore help explain the apparently conflicting recent evidence that the earnings–returns relation is negative at the aggregate level but positive at the firm level.     

An analysis of “exactly distributed” test statistics for multivariate event tests

In this paper we derive a rule that identifies when exact tests may be used in the context of the multivariate regression model. Our derivation extends distribution theory reported in Rao (1973) and leads to the specification of exact tests for several event study hypothesis forms of interest to accounting and finance researchers. For tests where the event parameter is constrained to be equal across firms, we show that an infinite set of exact tests is available, of which the well known portfoliot-test is a special case. We conduct simulations using data from the CRSP Daily Returns file, and find that several test statistics, including exactly distributed statistics derived using the multivariate regression model, significantly over-reject the hypotheses examined.     

An Introduction to the 6 Key Towns in Beijing

1. Panggezhuang Town of Daxing District1.1 External Conditions for Panggezhuang Town to Be a New Small TownTen kilometers from the south of the satellite town of Huangcun in Daxing District, Panggezhuang Town has an administrative area of 109.3 square kilometers, a population     

Investor sentiment and the mean–variance relation

This study shows the influence of investor sentiment on the market's mean–variance tradeoff. We find that the stock market's expected excess return is positively related to the market's conditional variance in low-sentiment periods but unrelated to variance in high-sentiment periods. These findings are consistent with sentiment traders who, during the high-sentiment periods, undermine an otherwise positive mean–variance tradeoff. We also find that the negative correlation between returns and contemporaneous volatility innovations is much stronger in the low-sentiment periods. The latter result is consistent with the stronger positive ex ante relation during such periods.     

Dealing with risk–risk interdependencies and trade-offs in relation to development and use of new technologies

The paper deals with the recognized need to systematically explore trade-offs in modern among single risks in modern risk management systems. These risk trade-offs have often been downplayed as ‘side effects’ or ‘unintended consequences’ and, even more often, poorly examined, quantified, and managed. The paper proposes how to deal with the real or possible trade-offs and within a framework which covers also the emerging risks: from early notion and indications up to fully developed and recognized (mature) risks. The trade-offs have been quantified primarily by means of indicators key/safety performance indicators. The framework relies very much on the ideas proposed by IRGC, ISO 31000, Solvency directive and other recognized concepts and takes practical examples from the running EU project iNTeg-Risk.     

Liver function tests: what is the risk?

Five laboratory assays are commonly called liver function tests (LFTs), although these tests are neither specific to the liver nor true measures of liver function. As a result, alanine aminotransferase (ALT or SGPT), aspartate aminotransferase (AST or SGOT), gamma-glutamyltransferase (GGT), alkaline phosphatase (ALP) and bilirubin have proven problematic for clinicians and risk selection professionals alike. Further, underwriters and insurance medical directors find these tests difficult to assess because of the lack of data directly relating LFT elevations to mortality outcome. Nonetheless, the tests are frequently encountered, so a strategy for evaluating abnormal results is critical to ensure accurate and fair pricing. This paper reviews basic information on LFTs, available mortality data and the application of this knowledge to the underwriting process.     

How fast to run in the Red Queen race?

This paper creates a market ecosystem, via an agent‐based model, that combines the dynamic features of the Red Queen effect with well‐accepted business world performance indicators. Essentially, firms are tasked with remaining ‘alive’ by adapting to their environment through implementing a competitive response of innovating or imitating. An analysis of the firms’ behaviours delivers a deep understanding of the drivers of innovative behaviour within the economy. The key findings of the paper are (1) that concentrated markets are not entirely detrimental to innovative behaviour, with the blend of firm type being a more important consideration, and (2) that the rate at which an innovation impairs existing markets affects the activity levels of the firms within the population. The model's results are validated against a matching study based on real‐world data.     

Does It Pay to Work in the Public Sector?

This paper uses microeconomic data from the British Household Panel and General Household Surveys to describe how the distribution of pay differs between the public and private sectors in 1983 and in the early 1990s. Separate analyses by gender and education group reveal that it is women and those with intermediate-level qualifications who do best in the public sector. The large differences between the shapes of the conditional (that is, holding age and education constant) distributions of wages in the public and private sectors are demonstrated using quantile regressions estimated separately for each education group. The paper also exploits the longitudinal structure of the data used to assess how much of these differences can be explained by the unobserved characteristics of individuals. JEL classifications: J31, J45.     

An empirical re-examination of the dividend–investment relation

Modigliani and Miller show that, in perfect capital markets, the optimal investment decisions of a firm are not affected by how these investments are financed. Miller and Modigliani further imply that, under the assumption of perfect capital markets, a firm's investment decisions are not affected by its dividend decisions, although dividend decisions may or may not be influenced by investment decisions. Fama and Miller label this result the separation principle. Most recent studies of the separation principle that take into account the existence of market imperfections report sharply contradictory results. This paper tests for linear and nonlinear causality between dividends and investments using both firm-specific and aggregate data for a sample of 417 firms over the 1962 to 2004 period. In general, linear causality tests support the separation principle, whereas nonlinear causality test results contradict the separation principle by revealing strong bi-directional linkages between dividends and investments.     

Reinsurance decisions in life insurance: An empirical test of the risk–return criterion

Recent studies have analyzed optimal reinsurance contracts within the framework of profit maximization and/or risk minimization. This type of framework, however, does not consider reinsurance as a tool for capital management and financing. In the present paper, we consider different proportional reinsurance contracts used in life insurance (viz., quota-share, surplus, and combinations of quota-share and surplus) while taking into account the insurer's capital constraints. The objective is to determine how different reinsurance transactions affect the risk/reward profile of the insurer and whether factors, such as claims severity, premiums, and insurer's risk appetite, influence the choice of a proportional reinsurance coverage. We compare each reinsurance structure based on actual insurance company data, using the risk–return criterion. This criterion determines the type of reinsurance that enables insurer to retain the largest underwriting profits and/or minimize the risk of the retained claims while keeping the insurer's risk appetite constant, assuming a given capital constraint. The results of this study confirm that the choice of reinsurance arrangement depends on many factors, including risk retention levels, premiums, and the variance of the sum insured values (and therefore claims). As such, under heterogeneous insurance portfolio single type of reinsurance arrangement cannot maximize insurer's returns and/or minimize the risk, therefore a combination of different reinsurance coverages should be employed. Hence, future research on optimal risk management choices should consider heterogeneous portfolios while determining the effects of different financial and risk management tools on companies' risk–return profiles.     

Laws on Foreign Trade Expected to Issue in the Early Half of the Year

Mr. Yu Guangzhou, Vice Minister of Commerce disclosed on 2004 Seminar of China Development Top Forum that Laws on Foreign Trade was expected to be issued in the early half of the year, which would promote the healthy and standardized development of foreign trade.     

From metaphoric litany text to scenarios—How to use metaphors in futures studies

Metaphor and metonymy belong to the key concepts of semiotics and general linguistics. As illustrations of scenarios, metaphors already have a long history in the futures studies, too. Metaphors were discussed in the CLA Reader 1.0¹ (Inayatullah ed., 2004) but the CLA Reader 2.0 edited by Inayatullah and Milojevic (2015) gives metaphors the central role in futures research² that they deserve. The article compares the approaches of semiotics and the CLA and suggests practical steps for the analysis of metaphoric futures oriented texts and their use in the construction of scenarios. Assuming that the litany is a text, metaphors may be present on all levels of the CLA: litany, systemic causes, worldview and myth/emotion. Metaphors are suitable even for the illustration of the CLA second level quantitative causal relations between variables. As an illustrating case study, we analyze a text that suggests the great future of the Northern Sea Route. The deconstruction of the litany results in two narratives or scenarios. They are constructed utilizing proverbs and other metaphoric sayings that get many citations on the Internet.     

A test of the Bolton–Scheinkman–Xiong hypothesis of how speculation affects the vesting time of options granted to directors

This paper investigates empirically the Bolton et al. (2006) hypothesis, according to which initial shareholders may provide incentives to managers to take actions that stimulate speculative bubbles. We test this hypothesis with data on up to 8544 directors and up to 1677 companies between 2004–2008. Using vesting time as a measure of the short-term performance weighting in CEO compensation and various alternative measures of the extent of speculation, the findings support the hypothesis: vesting time decreases with more intensive speculation. The results prove robust in various empirical model specifications.     

Kolmogorov’s forward PIDE and forward transition rates in life insurance

We consider a doubly stochastic Markov chain, where the transition intensities are modelled as diffusion processes. Here we present a forward partial integro-differential equation (PIDE) for the transition probabilities. This is a generalisation of Kolmogorov’s forward differential equation. In this set-up, we define forward transition rates, generalising the concept of forward rates, e.g. the forward mortality rate. These models are applicable in e.g. life insurance mathematics, which is treated in the paper. The results presented follow from the general forward PIDE for stochastic processes, of which the Fokker–Planck differential equation and Kolmogorov’s forward differential equation are the two most known special cases. We end the paper by considering the semi-Markov case, which can also be considered a special case of a general forward partial integro-differential equation.     

On the ω test of dependence between statistical variables

Abstract

1. In an earlier Note¹ I have suggested to measure the dependence between statistical variables by the expression where p_ij is the probability that x assumes the value x_i and y the value y_j , while By is meant summation with respect to all i and j for which p_ij > p_i* p_*j .