Forward-looking portfolio selection with multivariate non-Gaussian models

In this study, we suggest a portfolio selection framework based on time series of stock log-returns, option-implied information, and multivariate non-Gaussian processes. We empirically assess a multivariate extension of the normal tempered stable (NTS) model and of the generalized hyperbolic (GH) one by implementing an estimation method that simultaneously calibrates the multivariate time series of log-returns and, for each margin, the univariate observed one-month implied volatility smile. To extract option-implied information, the connection between the historical measure P and the risk-neutral measure Q, needed to price options, is provided by the multivariate Esscher transform. The method is applied to fit a 50-dimensional series of stock returns, to evaluate widely known portfolio risk measures and to perform a forward-looking portfolio selection analysis. The proposed models are able to produce asymmetries, heavy tails, both linear and non-linear dependence and, to calibrate them, there is no need for liquid multivariate derivative quotes.     

Euro depreciation and trade asymmetries between Germany and Italy versus the US: industry-level estimates

Since April 2014 to March 2015, the European Central Bank expansionary monetary policy instigates a huge depreciation of the euro in terms of dollar. According to the mainstream monetary theory, these dynamics should make the exports cheaper and at the same time make the imports more expensive. Has real depreciation of the euro helped in the improvement of European countries’ trade balances? Following the main methodologies in the recent literature, our study analyses the effects of this depreciation both for Italy and Germany towards the US. We use industry-level data at monthly frequency. The results are different from each bilateral relationship. We find that 11 industries register a long-run improvement (8 for Italy and 3 for Germany). The J-curve effect is proven just in six cases, always for Italy. The inverted J-curve effect is proven in eight cases, four for Germany, and four for Italy. These results seem to be an indirect demonstration of the structural asymmetries between German and Italian economies: German economic system is more able to be competitive with a strong currency, than Italy.     

The contribution of Design Thinking to the R of R&D in technological innovation

Literature on Design Thinking has mainly focused on whether its key principles enhance performance in the development phase (the D of R&D) of the technological innovation process. However, it has dedicated scant attention to the earlier research phase (the R of R&D). This aspect is surprising, given that many innovations fail as a result of early research actions and decisions. This article examines how it is possible and desirable to apply Design Thinking to the research phase of the technological innovation process. How can Design Thinking support innovation, even when advanced breakthrough technologies are at stake, the market is distant, and product applications and specific user needs have not been identified yet? To respond to this question, we investigate the research work of the design center of a global electronics company that uses a design approach called Proxemics to envision future interactions between bodies (people), objects (technology), and spaces (context). Although Proxemics is consistent with and implements the human centeredness and experimentation principles of Design Thinking, results of this study show that its logics and tools are different from those used in Design Thinking in the D of R&D due to the more abstract nature of the tasks in the R of R&D.     

Tempered stable and tempered infinitely divisible GARCH models

In this paper, we introduce a new GARCH model with an infinitely divisible distributed innovation. This model, which we refer to as the rapidly decreasing tempered stable (RDTS) GARCH model, takes into account empirical facts that have been observed for stock and index returns, such as volatility clustering, non-zero skewness, and excess kurtosis for the residual distribution. We review the classical tempered stable (CTS) GARCH model, which has similar statistical properties. By considering a proper density transformation between infinitely divisible random variables, we can find the risk-neutral price process, thereby allowing application to option-pricing. We propose algorithms to generate scenarios based on GARCH models with CTS and RDTS innovations. To investigate the performance of these GARCH models, we report parameter estimates for the Dow Jones Industrial Average index and stocks included in this index. To demonstrate the advantages of the proposed model, we calculate option prices based on the index.     

Testing for convergence: evidence from non-parametric multimodality tests

In this paper, we test the convergence hypothesis in a cross-section of 119 countries by means of bootstrap multimodality tests and nonparametric density estimation techniques. By looking at the density distribution of GDP across countries in 1970, 1980 and 1989, we find low mobility patterns of intra-distribution dynamics and increasing evidence for bimodality. The findings stand in sharp contrast with the convergence prediction. © 1997 John Wiley & Sons, Ltd.     

Exploring Urban Consumers’ Attitudes and Intentions to Purchase Local Food in Chile

Although local food consumption is growing in importance, there remains a lack of research addressing local food consumption preferences in less developed countries. This article aims to examine the drivers of local food purchase intentions for Chilean consumers. A model of local food behavioral intention was developed from consumer behavior theory. The model was tested using structural equation modeling with data from Chilean shoppers located in Santiago (n = 283). The analysis revealed that Chilean consumers are willing to purchase local food based on their positive attitude toward buying local food and their feelings of connectedness with the environment, but not because they have a desire to support local businesses. These findings have implications for retailers, marketers, and food producers.     

Equity risk versus retirement adequacy: asset allocation solutions for KiwiSaver

New Zealand's KiwiSaver superannuation system operates with a conservatively low asset allocation towards equity investments. Evidence suggests ‘conservative’ portfolios are riskier than portfolios holding more growth assets when considering shortfall risk. This study employs stochastic simulation to determine the optimal asset allocation to improve the balance of probabilities for retirement adequacy. The findings show that KiwiSaver default funds are excessively conservative, preventing investors from reaching their retirement goals. Increasing the asset allocation to equities across the range of available KiwiSaver funds is the only solution to significantly improve retirement adequacy in New Zealand given the low contribution rates observed.     

Ecological risk assessment of pesticides in the EU: what factors and groups influence policy changes?

For the last couple of years, European environmental risk assessment (ERA) regulations have undergone significant changes. The new 1107/2009 directive which came into effect in 2011 has triggered an on-going debate on defining specific protection goals for ERA. During this period, we conducted a study on policy change among the most influential ERA stakeholders from Europe. We interviewed 43, purposively sampled, participants from the European safety authorities, plant protection product industry and academia. Transcribed interviews underwent thematic analysis conducted separately by two coders. As we followed the advocacy coalition framework, our findings focus on stakeholders’ processes, interrelations and values behind the ERA policy change. The main challenges emerging from our analysis turned out to be the slow uptake of scientific developments into ERA and very broadly defined protection goals. The use of safety factors and cut-off criteria left risk assessors with many uncertainties. With ERA in its current form it turned out to be impossible to determine whether the current scheme is over- or under-protective. Still, the study shows that the problem of over- or under-protectiveness lies deep in the perception of stakeholders and depends greatly on their priorities. Academics strive for better ecological relevance as a priority. They have concerns that ERA is oversimplified. Regulators worry that ERA relies too much on risk mitigation and is possibly not protective enough, but at the same time, the majority believes that the assessment is well established and straightforward to follow. Industry representatives would like to see ERA based more on probabilistic risk assessment. Recent changes, according to risk assessment and management practitioners have led to an inevitable increase in complexity, which is not perceived as a positive thing, and does not necessarily translate into better risk assessment.