Scale Efficiency and Productivity Change

Thefirst objective of this paper is to develop a generic measureof scale efficiency for a multiple-input multiple-output firm,using basic principles of modern production theory. The secondobjective is to combine measures of technological change, technicalefficiency change, and scale efficiency change into an encompassing(primal) measure of productivity change. This measure and itsdecomposition is compared to a number of recent proposals inorder to shed light on what seems to have become a controversialissue. The paper proceeds by developing an encompassing dualmeasure of productivity change. This dual measure is then appliedto panel data of a set of Dutch firms, continuing the empiricalwork of Balk (1998). It turns out that extending the Malmquistproductivity index with factors measuring scale efficiency changeand input mix change leads to appreciably different outcomes.     

VAR and CTE Criteria for Optimal Quota-Share and Stop-Loss Reinsurance

Abstract

It is well known that reinsurance can be an effective risk management tool for an insurer to minimize its exposure to risk. In this paper we provide further analysis on two optimal reinsurance models recently proposed by Cai and Tan. These models have several appealing features including (1) practicality in that the models could be of interest to insurers and reinsurers, (2) simplicity in that optimal solutions can be derived in many cases, and (3) integration between banks and insurance companies in that the models exploit explicitly some of the popular risk measures such as value-at-risk and conditional tail expectation. The objective of the paper is to study and analyze the optimal reinsurance designs associated with two of the most common reinsurance contracts: the quota share and the stop loss. Furthermore, as many as 17 reinsurance premium principles are investigated. This paper also highlights the critical role of the reinsurance premium principles in the sense that, depending on the chosen principles, optimal quota-share and stop-loss reinsurance may or may not exist. For some cases we formally establish the sufficient and necessary (or just sufficient) conditions for the existence of the nontrivial optimal reinsurance. Numerical examples are presented to illustrate our results.     

The stocks at stake: Return and risk in socially responsible investment

We relate US portfolio returns, book-to-market values and excess stock returns to different dimensions of socially responsible performance. We find that socially responsible investing (SRI) impacts on stock returns by lowering the book-to-market ratio and not by generating positive alphas. Our result is consistent with the theoretical work suggesting that SRI is reflected in demand differences between SRI and non-SRI stock. It also explains why so few studies are able to establish a link between alpha’s and SRI.     

Normalized Exponential Tilting

Abstract

This article discusses methods of risk-neutralizing multivariate probability distributions by applying exponential tilting to the joint probability density function with respect to a set of reference risks. To ensure consistent interpretations of the exponential tilting parameters, a normalization procedure is performed on the reference risks via percentile mapping to standard normal variables. The article establishes links between normalized exponential tilting and multivariate probability distortions. It provides efficient methods for computing risk-neutralized multivariate probability distributions, and it gives illustrative examples in pricing contingent claims on multiple risks.     

Valuation of Equity-Linked Insurance and Annuity Products with Binomial Models

Abstract

In this paper we develop a valuation method for equity-linked insurance products. We assume that the premium information of term life insurances, pure endowment insurances, and endowment insurances at all maturities is obtainable within a company or from the insurance market. Using a method similar to that of Jarrow and Turnbull (1995), we derive three martingale probability measures associated with these basic insurance products. These measures are agedependent, include an adjustment for the mortality risk, and reproduce the premiums of the respective insurance products. We then extend the martingale measures to include the financial market information using copulas and use them to evaluate equity-linked insurance contracts and equity-indexed annuities in particular. This is different from the traditional approach under which diversification of mortality risk is assumed. A detailed numerical analysis is performed for various existing equity-indexed annuities in the North American market.     

Do Retail Foreign Direct Investment Restrictions Affect Retail Channel Structure?

The purpose of this study is to contribute to the existing retail channel structure research by investigating the impact of retail foreign direct investment (FDI) restrictions on retail channel structure as well as the moderating impact of a country's level of economic development on this relationship. Using a panel data set of 79 countries over the period 1999–2012, we show that retail FDI restrictions can influence retail channel structure development and that the relationship between retail FDI restrictions and retail channel structure is moderated by a country's level of economic development.     

Testing uncovered interest rate parity using LIBOR

We test uncovered interest rate parity (UIP) using London InterBank Offered Rate (LIBOR) interest rates for a wide range of maturities. In contrast to other markets, LIBOR markets have minimal frictions. Whereas most previous studies reject UIP, we find that UIP holds for several short-term LIBOR maturities using block bootstrap panel unit root tests suggested by Palm et al. (2011) and cointegration techniques by Westerlund (2007). Furthermore, the estimation results suggest that the speed of adjustment to the long-run equilibrium marginally differs across the maturity of the underlying instrument, thus supporting the efficient market hypothesis.     

An empirical analysis of excess interbank liquidity: a case study of Pakistan

We investigate the drivers of excess interbank liquidity in Pakistan, using the Autoregressive Distributed Lag approach on weekly data for December 2005 to July 2011. We find that the financing of the government budget deficit by the central bank and nonbanks leads to persistence in excess liquidity. Moreover, we identify a structural shift in the interbank market in June 2008. Before June 2008, low credit demand was driving the excess liquidity holdings by banks. After June 2008, banks’ precautionary investments in risk-free securities drive excess liquidity holdings. Monetary policy is less effective if banks hold excess liquidity for precautionary reasons.     

中国的税制改革(下)

(接上期)四、扩大地方政府的财政自主权在中国,相当一部分公共服务都是由地方政府提供的。中国的地方政府分成以下四级:省、市、县/区、乡镇。这些地方政府负责提供如卫生、教育、退休金、失业保险和最低生活保障等重要的公共服务。除此之外,这些地方政府还要负责大部分的城市基础设施(例如交通和改善环境)投资(World Bank,2012)。地方政府的地方税税基非常有限,调整税率的权力几