Does the Measurement of Property and Structural Characteristics Affect Estimated Implicit Prices for Environmental Amenities in a Hedonic Model?

Hedonic models are commonly used to estimate marginal willingness to pay for environmental amenities. These studies utilize variables that are assumed to be measured without error (such as the square footage of the lot or the number of bedrooms) and proxy variables (such as neighborhood or school quality). Lot and structural characteristics may in fact be measured with error. Potential sources of error include inaccurate measures and inconsistent updating. We investigate the effect of using tax-assessor data versus survey data from purchasers to estimate the implicit price of an environmental amenity, lake-water clarity. Convergent validity of the implicit price for water clarity is established if the town and survey data provide statistically indistinguishable estimates of implicit prices for this amenity. Overall, the town-office and survey data on property characteristics were not statistically different in three of the four market groupings examined, which suggests that the traditional municipal sources of these data may not contain substantial measurement error. Furthermore, convergent validity is satisfied in all four market areas. However, differences in computed implicit prices of clarity in two of the market areas are large enough that policy decisions for environmental quality could be affected by the source of the lot and structural data.     

Reserve regulation and recourse as a source of risk premia in the federal funds market

In this paper we demonstrate that there is a pronounced and persistent daily pattern of returns in the federal funds market, centered on Wednesday. We present evidence that explains this phenomenon as a reflection of the optimal behavior of banks operating in an environment in which there are effective reserve requirements and a penalty cost for recourse to discount borrowing. In particular, we report empirical evidence that shows there was a significant upward shift in the amplitude of this pattern of daily returns that resulted from (1) the increase in uncertainty associated with the change in Federal Reserve operating procedures during the 1979–1982 period, and (2) the imposition of a surcharge on discount borrowing instituted by the Federal Reserve. Our results demonstrate that what otherwise might be regarded as anomalous interest-rate behavior is consistent with the optimal response of banks to the regulatory environment within which they operate.     

Two paths of risk regulation: the concurrence of scientific and sociocultural decision-making in the European law of agricultural genetic engineering

Future hazards which may result from genetically engineered plants can currently only be anticipated. Therefore, the handling of the potential risks is becoming a crucial political and legal question. The following article describes the differing national regulatory approaches in Europe: an economic, a scientific, and a sociopolitical approach pre-existed the European Union’s deliberate release Directive, which itself follows a primarily science-based approach. The latter is based on objective technological assessments of individual cases. At the same time, however, the Directive contains elements of a sociocultural approach, which is open to value-based judgments and thus, necessarily takes a subjective, general assessment of the use of genetically modified organisms. As a result, the European law of Agricultural Genetic Engineering provides two paths of risk regulation in parallel.     

Selection of participatory formats as success factor for effective risk communication and decision-making processes. Conclusions from a systematic empirical format comparison

The article contributes arguments to the discussion about the effectiveness of dialogue and participation within the field of risk communication and decision-making, considering the special issue of societal resilience. The contribution summarises selected empirical findings of a systematic comparison of participatory formats based on a multi method and a multi concept approach as well as a comprehensive data base. The analyses detected systematic differences between the formats according to their internal impact on the persons involved and their external impact. These differences can be explained by procedural features of the formats. Appropriate format selection turned out to be an important success factor for developing effective participatory projects. The article sketches the opportunities for synthesising research findings to assess and compare formats. In addition, the potentials of how integrative research can structure and refine the available knowledge are illustrated, so that coordinators and organizers in the field are supported, for instance in selecting formats appropriately. Systematic knowledge of success factors does not only facilitate the practical field work. A couple of arguments from interdisciplinary literature indicate that effective interactive communication and decision-making can be seen as a functional and relevant resource in democratic systems to strengthen the society to react effectively against threats, and to cope with development issues. Effective dialogue and participation, therefore, can be understood as resources for strengthening the social resilience of modern democratic societies.     

Estimating a covariance matrix for market risk management and the case of credit default swaps

We analyze covariance matrix estimation from the perspective of market risk management, where the goal is to obtain accurate estimates of portfolio risk across essentially all portfolios—even those with small standard deviations. We propose a simple but effective visualisation tool to assess bias across a wide range of portfolios. We employ a portfolio perspective to determine covariance matrix loss functions particularly suitable for market risk management. Proper regularisation of the covariance matrix estimate significantly improves performance. These methods are applied to credit default swaps, for which covariance matrices are used to set portfolio margin requirements for central clearing. Among the methods we test, the graphical lasso estimator performs particularly well. The graphical lasso and a hierarchical clustering estimator also yield economically meaningful representations of market structure through a graphical model and a hierarchy, respectively.     

Benchmarking as a Tool for the Modernisation of Local Government

This paper examines benchmarking as a tool of the modernisation process in local government and the contradictory tensions in the Best Value scheme are explored. Benchmarking is shown to encapsulate the dichotomous nature of a modernising philosophy which espouses innovation and local solutions alongside the government's centralising tendencies. One consequence is the advancement of 'compulsory' and 'defensive' modes of benchmarking with local authorities benchmarking for external accountability reasons; issues of tangible improvement are secondary concerns. These tensions are viewed as irreconcilable, the implication is that local government will need to carefully manage and evaluate its benchmarking activities.     

The surplus prior to ruin and the deficit at ruin for a correlated risk process

This paper presents an explicit characterization for the joint probability density function of the surplus immediately prior to ruin and the deficit at ruin for a general risk process, which includes the Sparre-Andersen risk model with phase-type inter-claim times and claim sizes. The model can also accommodate a Markovian arrival process which enables claim sizes to be correlated with the inter-claim times. The marginal density function of the surplus immediately prior to ruin is specifically considered. Several numerical examples are presented to illustrate the application of this result.     

The tick/volatility ratio as a determinant of the compass rose: empirical evidence from decimalisation on the NYSE

Recent research suggests that volatility has an important role to play in the appearance of the compass rose pattern. The introduction of decimal prices on the New York Stock Exchange (NYSE) provides an ideal opportunity to test this hypothesis using actual market data. The empirical evidence presented in this paper suggests that the 85 per cent reduction in the tick/volatility ratio resulting from the decimalisation of prices was not sufficient to eliminate the compass rose pattern.     

我国城乡基本公共服务非均等化原因探析

本文通过对众多有关城乡基本公共服务均等化的文献进行综述,从理论和实践两个角度探讨城乡基本公共服务非均等化出现的原因,以期为更好地实现城乡基本公共服务均等化提供一个清晰的认识。     

Dimensions of strategic intervention for risk reduction and mitigation: a case study of the MV Sewol incident

Organizations in disaster management system should learn from previous experience and strategically use their lesson for the refinement of a system’s competencies for risk management. However, the MV Sewol incident revealed the absence of the organizational learning in the Korean disaster management system. With mixed methods of content analysis, in-depth interview, and social network analysis, this study identified key failure factors in response to the incident and categorized them by managerial, structural, and institutional domains. While the Korean government took bold steps to rebuild its risk management system, those efforts were biased to structural reforms and lacked fundamental changes in human and informational resources management. Based on the findings, this study suggests the balanced efforts for system refinement for effective risk management.     

An analysis of a three-factor model proposed by the Danish Society of Actuaries for forecasting and risk analysis

This paper provides the explicit solution to the three-factor diffusion model recently proposed by the Danish Society of Actuaries to the Danish industry of life insurance and pensions. The solution is obtained by use of the known general solution to multidimensional linear stochastic differential equation systems. With offset in the explicit solution, we establish the conditional distribution of the future state variables which allows for exact simulation. Using exact simulation, we illustrate how simulation of the system can be improved compared to a standard Euler scheme. In order to analyze the effect of choosing the exact simulation scheme over the traditional Euler approximation scheme frequently applied by practitioners, we carry out a simulation study. We show that due to its recursive nature, the Euler scheme becomes computationally expensive as it requires a small step size in order to minimize discretization errors. Using our exact simulation scheme, one is able to cut these computational costs significantly and obtain even better forecasts. As probability density tail behavior is key to expected investment portfolio performance, we further conduct a risk analysis in which we compare well-known risk measures under both schemes. Finally, we conduct a sensitivity analysis and find that the relative performance of the two schemes depends on the chosen model parameter estimates.     

A monotonically converging algorithm for the severity of ruin in a discrete semi-markov risk model

This paper deals with the severity of ruin in a discrete semi-Markov risk model. It is shown that the work of Reinhard and Snoussi (Stochastic Models, 18) can be extended to cover the case where the premium is an integer value and no restriction on the annual result is imposed. In particular, it is shown that the severity of ruin without initial surplus is solution of a system of equations. It can be obtained by a monotonically converging algorithm when the claims are bounded.     

Combining LCA and RA for the integrated risk management of emerging technologies

Emerging risks of innovative technologies, like for instance nanotechnology, require proactive assessments in order to guarantee that their future materials and products will not result in adverse effects on health, safety and the environment. The combination of Life Cycle Assessment (LCA) and Risk Assessment (RA) offers a systematic approach to identify and assess potential impacts. LCA is a well-known analytical tool, standardised in ISO 14040-14044, to assess the environmental impact of the entire life-cycle of a product or service. Its strengths are the systematic approach to analyse all life-cycle stages of complex systems. Integrated risk management can benefit in various ways from LCA. Firstly, LCA offers a new dimension to the safety paradigm, exploring the principles and synergies between LCA and RA. Secondly, LCA offers a systematic approach to analyse the risks of innovative technologies along their entire life-cycle (from design, building, maintenance, operation to decommissioning). Thirdly, LCA offers an analytical tool to quantify the environmental impact of emerging technologies. In combination with RA, LCA can provide scientifically sound information for the early assessment of potential impacts on health, safety and the environment.     

Cross-ownership as a structural explanation for over- and underestimation of default probability

Based on the work of Suzuki, we consider a generalization of Merton’s asset valuation approach in which two firms are linked by cross-ownership of equity and liabilities. Suzuki’s results then provide no arbitrage prices of firm values, which are derivatives of exogenous asset values. In contrast to the Merton model, the assumption of lognormally distributed assets does not result in lognormally distributed firm values, which also affects the corresponding probabilities of default. In a simulation study we see that, depending on the type of cross-ownership, the lognormal model can lead to both over- and underestimation of the actual probability of default of a firm under cross-ownership. In the limit, i.e. if the levels of cross-ownership tend to their maximum possible value, these findings can be shown theoretically as well. Furthermore, we consider the default probability of a firm in general, i.e. without a distributional assumption, and show that the lognormal model is often able to yield only a limited range of probabilities of default, while the actual probabilities may take any value between 0 and 1.     

The Conceptual Framework as a Coherent System for the Development of Accounting Standards

The Financial Accounting Standards Board (FASB) visualized a conceptual accounting framework as a 'coherent system of interrelated objectives and fundamentals that can lead to consistent standards that prescribes the nature, function, and limits of financial accounting and financial statements' (FASB, 1976). To Australian standard setters, the primary purpose of the conceptual framework (CF) was only to be used as a 'guide' in developing and reviewing accounting standards (AASB, 1995, para. 5). The International Accounting Standards Committee (IASC) diminished the role of a conceptual framework even further by openly acknowledging that some standards are inconsistent with the guidelines offered by the framework (IASC, 1989 para. 12). Even though the Australian Accounting Standards Board (AASB) supposedly pursues a policy of harmonization of conceptual frameworks and accounting standards, there are also acknowledged inconsistencies in the conceptual frameworks of the IASC.
The aim of this article is to assess the coherence of the Australian (and IASC) conceptual framework. This analysis identifies confusion in drafting or construction of the conceptual framework, internal inconsistencies, and inconsistency with the legal framework within which business entities operate. Accordingly it is suggested that the adoption of a conceptual framework will not lead to consistent accounting standards, and inevitably the conceptual framework will lack credibility so long as it is inconsistent with legislation.     

Living in a foreign country: the meaning of place of origin and gender for risk perceptions,experiences, and behaviors

Abstract

Previous research has convincingly proven that perceptions, experience, and exposure to risks vary among certain groups in society. By drawing from a unique combination of Swedish survey data and interviews, this study aims to investigate perceptions and experiences of risks as well as in relation to behavior by analyzing the cleavages related to interactions between place of origin and gender. Theoretically, we see individual risk perception as part of situated hierarchical power relations where an individual’s position (which is an intersection of, for example, gender, race, age, and place of origin) structures action and thought. Findings verify that foreign-born men and women perceive risks to a greater extent than those born in Sweden. However, no direct pattern of ethnicity is apparent in exposure to risks, but since predictors measuring experience of discrimination are shown to be significant, the effect can be mediated by such circumstances. In terms of how risks have affected behavior, women, irrespective of their ethnicity, are affected. Exposure to tragic experiences among those who are foreign born can pose risks that are perceived to a greater extent. Furthermore, more vulnerable material conditions can also affect how risks are perceived, and uncertainty due to a lack of resources and as an inherent ingredient of living in a foreign country seem to enhance perceptions of risk and feelings of unsafety. Last, the sense of discrimination appears to influence exposure to certain risks, which might capture an interaction between racism and violence.     

Domestic fire risk: a narrative review of social science literature and implications for further research

In this paper, we make the case for more social science research into fire incidents and fire-related risk behaviour. Unlike other vulnerabilities, such as crime, illness or risk-associated activities such as smoking, or accident avoidance, remarkably little research has focused on this area. This is perhaps surprising given the propensity for fire, its emotional, social and economic impacts, and evidence that fires and fire victims are not equally distributed across socio-demographic or geographical domains. In making our case, we outline: recent numbers and trends in incidents in the UK, focusing on domestic incidents and recent policy developments affecting fire and rescue services. Next, we review the social-science based literature on fire incidents, suggesting that while this offers useful insight, much more needs to be done to develop a rigorous evidence base. While we would not want to dismiss or downplay existing social science contributions, our contention is that a considerable number of opportunities exist for further work in this area. Consequently, we propose a number of ways in which popular ideas about risk theory can be applied to a domestic fire context and raise a number of questions that social scientists are well positioned to contribute to an interdisciplinary understanding of domestic fire incidents and associated risks.     

Mobility and the Role of Education as a Commitment Device

In closed economies, human capital investment faces a hold-up problem of excessive redistributive taxation. Increased international labor mobility, however, changes the constraints which affect optimal education and tax policy. We show that in a non-altruistic, gerontocratic world, investments in human capital which increase the mobility of the young generation can be interpreted as a commitment device overcoming the hold-up problem. This is in line with Kehoe (1989) who derives a similar result with respect to capital mobility.     

Cross-border trading as a mechanism for implicit capital flight: ADRs and the Argentine crisis

Cross-listed shares may confound government efforts to control capital outflows by providing a legal means through which investors can transfer their wealth outside the country. We study the recent experience of investors who while subject to capital controls, were able to purchase cross-listed shares using local currency, convert them into dollar-denominated shares, re-sell them abroad, and deposit the dollar proceeds in foreign bank accounts. Capital controls drive a wedge between the price of local shares and their corresponding cross-listed shares. This wedge provides an implicit devaluation forecast and the market's valuation of capital control circumvention.     

The new political importance of the old hurricane risk: a contextual approach to understanding contemporary struggles with hurricane risk and insurance

In the United States, policy-makers struggle to resolve conflict between public demands for affordable insurance costs covering hurricanes and market demands for risk-based insurance pricing. Given the socially constructed nature of risk, a risk-based pricing approach prioritizes insurer values and business practices over all societal value goals expressly limiting democratic inclusion in decision-making about risk. As a step towards the more democratically inclusive approach of risk governance, this article uses the state of Florida as a case study to provide a narrative of the social and political context for the evolution of the idea of U.S. hurricane risk. I argue that today’s hurricane risk is a product of long-standing shared efforts to build prosperity. However, it is no longer a simple risk for society to overcome on its way to economic well-being. Contemporary hurricane risk is systemic and serves as a nexus for political battles over American values.