Feature selection methods involving support vector machines for prediction of insolvency in non‐life insurance companies

We propose two novel approaches for feature selection and ranking tasks based on simulated annealing (SA) and Walsh analysis, which use a support vector machine as an underlying classifier. These approaches are inspired by one of the key problems in the insurance sector: predicting the insolvency of a non‐life insurance company. This prediction is based on accounting ratios, which measure the health of the companies. The approaches proposed provide a set of ratios (the SA approach) and a ranking of the ratios (the Walsh analysis ranking) that would allow a decision about the financial state of each company studied. The proposed feature selection methods are applied to the prediction the insolvency of several Spanish non‐life insurance companies, yielding state‐of‐the‐art results in the tests performed. Copyright © 2005 John Wiley & Sons, Ltd.     

Artificial neural networks with feature transformation based on domain knowledge for the prediction of stock index futures

A feature transformation method based on domain knowledge for arti?cial neural networks (ANNs) is proposed. The method of feature transformation based on domain knowledge converts continuous values into discrete values in accordance with the knowledge of experts in speci?c application domains. This approach effectively ?lters data, trains the classi?er, and extracts the rules from the classi?er. In addition, it reduces the dimensionality of the feature space, which not only decreases the cost and time in the operation but also enhances the generalizability of the classi?er. The experimental results of the proposed approach will be compared and tested statistically with the results of the linear transformation method. The results show that the method of feature transformation based on domain knowledge outperforms the linear transformation in modelling of ANNs. Copyright © 2004 John Wiley & Sons, Ltd.     

The service sector of Cuba: An analysis and critique

The Cuban economy has experienced a significant increase in foreign direct investment over the past decade due to the end of the Soviet Union and the establishment of more liberal trade policies. Although the U.S. embargo of trade with Cuba still exists, there has been movement lately that suggests the end of the four‐decades‐old policy. The purpose of this article is to analyze the current Cuban business environment and to identify potential entrepreneurial opportunities in the service sector. Major trade partners are also reviewed and managerial implications discussed. © 2006 Wiley Periodicals, Inc.     

Book Reviews

Anthony J. Whitten, Sengli J. Damanik, Jazanul Anwar and Nazaruddin Hisyam, The Ecology of Sumatra, Yogyakarta: Gadjah Mada University Press, Second Edition, 1987, pp. 583 + xx.

Christine Drake, National Integration in Indonesia: Patterns and Policies, Honolulu: University of Hawaii Press, 1989, pp. 354 + xvi. Cloth: US$ 35.00.

Geoffrey B. Hainsworth (ed.), Environmental Linkages, Halifax: School for Resource and Environmental Studies, Dalhousie University, 1985, pp. 97.

R. Repetto et al., Wasting Assets: Natural Resources in the National Income Accounts, Washington DC: World Resources Institute, June 1989, pp. 69 + vi. Paper: US$10.00.

William E. James, Seiji Naya and Gerald M. Meier, Asian Development: Economic Success and Policy Lessons, Madison, Wisconsin: University of Wisconsin Press, 1989, pp. 281 + Xviii.

Robert B. Dickie and Thomas A. Layman, Foreign Investment and Government Policy in the Third World: Forging Common Interests in Indonesia and Beyond, London: MacMillan, 1988, pp. 240 + xxxi. £35.

Alan Gelb and Associates, Oil Windfalls: Blessing or Curse? New York: Oxford University Press, for the World Bank, 1988, pp. 357 + x. $32.50.

Benjamin Higgins, The Road Less Travelled: A Development Economist's Quest, History of Development Studies 2, Canberra: National Centre For Development Studies, the Australian National University, pp. 204 + x. Paper: A$20.00

BRIEFLY NOTED: Sarwar Hobohm, Indonesia to 1993: Breakthrough in the Balance, London: Economist Intelligence Unit, Special Report no. 2012, 1989, pp. 91, £190 for this Plus the Companion Report, Indonesia to 1991: Can Momentum be Regained?

Geoffrey Hainsworth and Hasan Poerbo (eds), Local Resource Management: Towards Sustainable Development, Halifax: School for Resource and Environmental Studies, Dalhousie University, 1987, pp. 69 + xii.

H.W. Dick, Industri Pelayaran Indonesia: Kompetisi dan Regulasi, Jakarta: LP3ES, 1990, 306 + xxv.     

Product differentiation and dynamic price behavior in fish markets

The objective of this paper is to estimate the dynamics of aquaculture and fish prices as a response to price shocks. The vector autoregression approach will be used to explain the dynamics of the sea bream market in both cultured and wild fishing. The main result is that changes in public regulation or in production conditions could stimulate production responses which may take time to settle. Usually, the change is a matter of adjusting between equilibria over a period of time, with the pattern and speed of the adjustment, depending on the nature and degree of disequilibrium in the fishing system. Comments from reviewers have been incorporated into the paper and are gratefully acknowledged. Financial support was provided by Direcció General de Recerca, Departament d'Universitats, Recerca i Societat de la Informació project N^o SGR2001-160.     

This is what the leading indicators lead

We propose an optimal filter to transform the Conference Board Composite Leading Index (CLI) into recession probabilities in the US economy. We also analyse the CLI's accuracy at anticipating US output growth. We compare the predictive performance of linear, VAR extensions of smooth transition regression and switching regimes, probit, non‐parametric models and conclude that a combination of the switching regimes and non‐parametric forecasts is the best strategy at predicting both the NBER business cycle schedule and GDP growth. This confirms the usefulness of CLI, even in a real‐time analysis. Copyright © 2002 John Wiley & Sons, Ltd.     

Linking Public Investment to Private Investment. The Case of Spanish Regions

Public investment constitutes one of the main instruments of regional policies. The existence of a direct link between infrastructure and regional income per capita is usually accepted. Literature also describes a positive effect of public investment on private capital accumulation. This paper seeks to provide new empirical evidence on this latter relationship for the case of Spanish regions over the period 1965–1997 using panel data methodology. The results show a positive effect of productive and social public investment (especially in education) on private investment. The spillover effects generated by the productive infrastructures located in other regions do not seem to encourage the private investment in neighbouring regions. Public consumption and interest rate exert a negative influence on private capital accumulation. These results are robust to changes in the econometric specification.     

Book Reviews

W.T. Woo, B. Glassburner and Anwar Nasution, Macroeconomic Policies, Crises, and Long-term Growth in Indonesia, 1965–90, Comparative Economic Studies, The World Bank, Washington DC, 1994, pp. xiii + 216. Paper: $13.95.

Hal Hill (ed.), Indonesia's New Order; The Dynamics of Socio-Economic Transformation, Allen and Unwin, Sydney, 1994, pp. xxxv + 364. Paper: A$29.95.

J. Thomas Lindblad (ed.), New Challenges in the Modern Economic History of Indonesia: Proceedings of the First Conference on Indonesia 's Modern Economic History, Jakarta, October 1–4, 1991, Programme of Indonesian Studies, Leiden University, Leiden, 1993, pp. viii + 306.

Thee Kian Wie, Explorations in Indonesia's Economic History, Lembaga Penerbit Fakultas Ekonomi Universitas Indonesia, Jakarta, 1994, pp. xv + 187.

Nancy Lee Peluso, Rich Forests, Poor People: Resource Control and Resistance in Java, University of California Press, Berkeley, 1992, pp. xv + 321.

Effendi Pasandaran, Agus Pakpahan, Edwin B. Oyer and Norman Uphoff (eds), Poverty Alleviation with Sustainable Agricultural and Rural Development in Indonesia, Published jointly by the Center for Agro-Socioeconomic Research (CASER) (Bogor), and the Cornell International Institute for Food, Agriculture and Development (CIIFAD) (Ithaca), Bogor 1992, pp. vi + 233.

Eric Thorbecke and Theodore van der Pluijm, Rural Indonesia: Socio-Economic Development in a Changing Environment, IFAD (International Fund for Agricultural Development) Studies in Rural Development no. 3, New York University Press, New York, 1993, pp. xxix + 360.

Niels Mulder, Inside Southeast Asia: Thai, Javanese and Filipino Interpretations of Everyday Life, Duang Kamol, Bangkok, 1992, pp. xiii + 178.

M.C. Ricklefs, War, Culture and Economy in Java, 1677–1726: Asian and European Imperialism in the Early Kartasura Period, ASAA Southeast Asia Publications Series no. 24, Allen & Unwin, Sydney, 1993, pp. xi + 425. A$29.95.

Ken Young, Islamic Peasants and the State: The 1908 Anti-Tax Rebellion in West Sumatra, Yale Southeast Asia Studies Monograph 40, Yale Center for International and Area Studies, New Haven, pp. xviii + 361.

Saya Shiraishi and Takashi Shiraishi (eds), The Japanese in Colonial Southeast Asia, Translation Series, Translation of Contemporary Japanese Scholarship on Southeast Asia, vol. 3, Southeast Asia Program, Cornell University, Ithaca, 1993, pp. 172.     

Is globalization a road to duopoly?

In global markets, the market shares of the two or three biggest firms sum up more than 90 percent and firms do marketing efforts. However, the classical neo-walrasiano theoretical framework only is able to justify these stylized facts with particular firms’ cost structures, being one reason the presumption that there are no information costs. Towards the rationalization of those stylized facts, I study the evolution of the market structure in a model of price advertising with a variable that controls the degree of openness of regional markets. The main result of the model is that in equilibrium the structure of a global market is the duopoly.     

Enterprise Risk Management and the Cost of Capital

Enterprise risk management (ERM) is a process that manages all risks in an integrated, holistic fashion by controlling and coordinating any offsetting risks across the enterprise. This research investigates whether the adoption of the ERM approach affects firms' cost of equity capital. We restrict our analysis to the U.S. insurance industry to control for unobservable differences in business models and risk exposures across industries. We simultaneously model firms' adoption of ERM and the effect of ERM on the cost of capital. We find that ERM adoption significantly reduces firm's cost of capital. Our results suggest that cost of capital benefits are one answer to the question how ERM can create value.