On the price of risk in a mean-risk optimization model

We investigate a mean-risk model for portfolio optimization where the risk quantifier is selected as a semi-deviation or as a standard deviation of the portfolio return. We analyse the existence of solutions to the problem under general assumptions. When the short positions are not constrained, we establish a lower bound on the cost of risk associated with optimizing the mean–standard deviation model and show that optimal solutions do not exist for any positive price of risk which is smaller than that bound. If the investment allocations are constrained, then we obtain a lower bound on the price of risk in terms of the shadow prices of said constraints and the data of the problem. A Value-at-Risk constraint in the model implies an upper bound on the price of risk for all feasible portfolios. Furthermore, we provide conditions under which using this upper bound as the cost of risk parameter in the model provides a non-dominated optimal portfolio with respect to the second-order stochastic dominance. Additionally, we study the relationship between minimizing the mean–standard deviation objective and maximizing the coefficient of variation and show that both problems are equivalent when the upper bound is used as the cost of risk. Additional relations between the Value-at-Risk constraint and the coefficient of variation are discussed as well. We illustrate the results numerically.     

Quantity and Quality Concerns about Technology Impacts

Paleoanthropologists have taught us that, in the earliest Homo-human history, technology, human cognition, and social institutions influenced each other and evolved together. They remain integrated in our complex social institutions today. Robert Owen and Clarence Ayres emphasized the importance of the human-technology relationship. This article moves a step beyond Owen and Ayres by recognizing that humans are technology. Without the recognition of human technology, it is not possible to compare it with and evaluate how it should fit with other technologies. It is also not possible to adequately analyze and judge technological innovations, in general, without the use of social belief criteria. Furthermore, any technological comparisons and evaluations should recognize that decreases in production are needed in order to deal with climate change. Technological assessment has become more important given the vast and profound societal penetration of modern technology such as robotics, artificial intelligence, and genetic editing.     

International Investment Agreements and the Escalation of Private Power in the Global Agri-Food System

Journal of Business Ethics - Using food regime analysis, this paper critically analyzes how corporate actors amass, secure and apply power in the global agrifood system through International...     

Confidence Intervals for the Area Under the Receiver Operating Characteristic Curve in the Presence of Ignorable Missing Data

Receiver operating characteristic curves are widely used as a measure of accuracy of diagnostic tests and can be summarised using the area under the receiver operating characteristic curve (AUC). Often, it is useful to construct a confidence interval for the AUC; however, because there are a number of different proposed methods to measure variance of the AUC, there are thus many different resulting methods for constructing these intervals. In this article, we compare different methods of constructing Wald‐type confidence interval in the presence of missing data where the missingness mechanism is ignorable. We find that constructing confidence intervals using multiple imputation based on logistic regression gives the most robust coverage probability and the choice of confidence interval method is less important. However, when missingness rate is less severe (e.g. less than 70%), we recommend using Newcombe's Wald method for constructing confidence intervals along with multiple imputation using predictive mean matching.     

Review of Honorable Business: A Framework for Business in a Just and Humane Society by James R. Otteson

Journal of Business Ethics -     

Risk dynamics around restatement announcements

Review of Quantitative Finance and Accounting - We investigate the dynamic nature and temporal daily changes in systematic (beta), as well as idiosyncratic and total risk around restatement...     

Higher Co-Moment CAPM and Hedge Fund Returns

Atlantic Economic Journal - This paper uses a higher moment capital asset pricing model to characterize the returns of several types of hedge fund indices. The quantile regression approach is used...     

Perceptions of Home Insurance and Policy Directions: Comparing Mexican Americans and Non-Hispanic White Americans

With prior research on home insurance largely focused on supply side practices, we know little about demand side attributes of this market, especially about consumer perceptions of insurance. This article demonstrates that, despite seemingly more equitable industry practices, ethnic homeowners (Mexican Americans in this study), relative to the majority White population, have a greater tendency to view home insurance as a cost burden (as opposed to coverage against potential damages and injuries) and, hence, are more vulnerable to living with minimal or no home insurance coverage. The findings suggest that this disparity is attributable to cultural differences rooted in diverse structural and institutional circumstances in which ethnic homeowners often find themselves situated. The role of ethnic identity is salient even after accounting for personal, household, property, mortgage, and natural calamity factors. New directions for policy are proposed to address the situation by informing and empowering vulnerable consumers.     

Inequality, inflation, and central bank independence

What can account for the different contemporaneous inflation experiences of various countries, and of the same country over time? We present an analysis of the determination of inflation from a political economy perspective. We document a positive correlation between income inequality and inflation and then present a theory of the determination of inflation outcomes in democratic societies that illustrates how greater inequality leads to greater inflation, owing to a desire by voters for wealth redistribution. We conclude by showing that democracies with more independent central banks tend to have better inflation outcomes for a given degree of inequality. JEL Classification E5, H0 Inégalité, inflation et l'indépendance de la banque centrale. Quels sont les facteurs qui pourraient expliquer les expériences inflationnistes tellement différentes des divers pays dans le passé récent, et l'expérience tellement différente d'un pays donné dans le temps? Les auteurs analysent ce problème de la détermination du taux d'inflation dans une perspective d'économie politique. Ils déterminent qu'il y a une corrélation positive entre l'inégalité et l'inflation, et présentent une théorie de la détermination de l'inflation dans les sociétés démocratiques qui montre comment une inégalité plus grande entraîne une inflation plus grande à cause du désir des électeurs de demander une redistribution de la richesse. Le mémoire montre en terminant que les démocraties e´quipées de banques centrales plus indépendantes tendent à avoir de meilleurs résultats en terme d'inflation pour un degré d'inégalité donné.     

Audit committee activity and agency costs

Menon and Williams indicate that many United States (US) over-the-counter (OTC) firms which form audit committees appear not to rely on them (cf. Menon, K., Williams, J.D. 1994. Journal of Accounting and Public Policy, 13(2), 121–139). Reliance on audit committees appears to depend upon board composition, while audit committee activity is associated with firm size. In this paper, we compare the US experience and evidence on audit committees and monitoring with the position in the United Kingdom (UK), where there has been a steady growth in the number of major companies voluntarily forming audit committees over the last 15 years (Collier, P.A. 1996. Accounting, Business and Financial History 6(2), 121–140). We contend that the dataset is best analyzed using the Heckman procedure (cf. Heckman, J.A. 1979. Econometrica 47(1), 153–161) which captures the two stages of the decision on audit committee activity.Our results show little support from the UK data for the findings of Menon and Williams (cf. Menon and Williams, 1994. Journal of Accounting and Public Policy 13(2), 121–139). However, consistent with their agency theoretic perspective of monitoring, we found that high quality (Big Six) auditors, and to some degree leverage have a positive relationship with audit committee activity. Contrary to an agency theoretic expectation, we found that audit committee activity is reduced in firms that combine the role of chairman and chief executive. On the basis of this result we explored the impact of insiders (executive directors) and found that their presence on an audit committee had a significant negative impact on audit committee activity. This result suggests that the emphasis placed by the US Securities and Exchange Commission (SEC) (Staff Report on Corporate Accountability, US Government Printing Office, Washington, DC, 1980, p. 491) and the Cadbury Committee (Committee on the Financial Aspects of Corporate Governance. 1992. Report of the Committee on the Financial Aspects of Corporate Governance. Gee, London) on the independence of audit committee members may be well founded.The reduction in audit committee activity that arises from the combination of the role of chairman and chief executive officer, and the presence of insiders on the audit committee, has important policy implications. Indeed, in the UK, both practices are the subject of recommendations in the Hampel Committee report Hampel Committee 1998. Committee on Corporate Governance. Gee, London.