Option valuation with long-run and short-run volatility components

This paper presents a new model for the valuation of European options, in which the volatility of returns consists of two components. One is a long-run component and can be modeled as fully persistent. The other is short-run and has a zero mean. Our model can be viewed as an affine version of Engle and Lee [1999. A permanent and transitory component model of stock return volatility. In: Engle, R., White, H. (Eds.), Cointegration, Causality, and Forecasting: A Festschrift in Honor of Clive W.J. Granger. Oxford University Press, New York, pp. 475–497], allowing for easy valuation of European options. The model substantially outperforms a benchmark single-component volatility model that is well established in the literature, and it fits options better than a model that combines conditional heteroskedasticity and Poisson–normal jumps. The component model's superior performance is partly due to its improved ability to model the smirk and the path of spot volatility, but its most distinctive feature is its ability to model the volatility term structure. This feature enables the component model to jointly model long-maturity and short-maturity options.     

Country-image discourse model: Unraveling meaning, structure, and function of country images

The country-image discourse model provides an alternative theoretical framework to explain the meaning of country-of-origin (COO) effects. Unlike previous work, this research relies on the key principles underlying semiotics and discourse theory. The model integrates the semantic and pragmatic dimension of COO and provides hypotheses regarding the structure and function of country-images. Empirical verification through structural equation modeling indicates that the data offer substantial support for the proposed internal structure of the country-image construct, such that country-specific cognitions influence affect, which influences conation. Country-related conations also represent the predominant influence on subjects' beliefs, evaluation, and purchase intentions.     

Robust explicit estimators of Weibull parameters

The Weibull distribution plays a central role in modeling duration data. Its maximum likelihood estimator is very sensitive to outliers. We propose three robust and explicit Weibull parameter estimators: the quantile least squares, the repeated median and the median/Q _n estimator. We derive their breakdown point, influence function, asymptotic variance and study their finite sample properties in a Monte Carlo study. The methods are illustrated on real lifetime data affected by a recording error.     

Ecological services to and from rangelands of the United States

The over 300 million ha of public and private rangelands in the United States are characterized by low and variable precipitation, nutrient-poor soils, and high spatial and temporal variability in plant production. This land type has provided a variety of goods and services, with the provisioning of food and fiber dominating through much of the 20th century. More recently, food production from a rangeland-based livestock industry is often pressured for a variety of reasons, including poor economic returns, increased regulations, an aging rural population, and increasingly diverse interests of land owners. A shift to other provisioning, regulating, cultural, and supporting services is occurring with important implications for carbon sequestration, biodiversity, and conservation incentives. There are numerous goods and services possible from rangelands that can supply societal demands such as clean water and a safe food supply. The use of ecologically-based principles of land management remains at the core of the ability of private land owners and public land managers to provide these existing and emerging services. We suggest that expectations need to be based on a thorough understanding of the diverse potentials of these lands and their inherent limits. A critical provisioning service to rangelands will be management practices that either maintain ecological functions or that restore functions to systems that have been substantially degraded over past decades. With proper incentives and economic benefits, rangelands, in the U.S. or globally, can be expected to provide these historical and more unique goods and services in a sustainable fashion, albeit in different proportions than in the past.     

Economic Growth And Global Inequality In Long Run Perspective

Book reviewed in this article:
Angus Maddison, The World Economy, A Millennial Perspective     

In the LEED: Racing to the Top in Environmental Self‐Regulation

Does voluntary participation in eco‐certification become more substantive over time, or less? Although past research on voluntary programs suggests that later participants are more likely to greenwash by only symbolically adopting voluntary standards, theories of regulatory competition suggest a possible “race to the top.” We argue that participation in voluntary programs can facilitate competition that enables a race, and we advance a theory of self‐regulatory competition to explain dynamics of participation in voluntary environmental programs. Under this perspective, environmental self‐regulation may facilitate a race to the top, despite possibilities for purely symbolic adoption. Analyzing data from a voluntary green building certification program in the United States, we introduce a methodology to distinguish propensities for symbolic certification from more substantive environmental performance. Data demonstrate that later adopters invest additional resources to attain higher certification, becoming greener and suggesting a race to the top in a voluntary greenbuilding certification program.     

Jump robust two time scale covariance estimation and realized volatility budgets

We estimate the daily integrated variance and covariance of stock returns using high-frequency data in the presence of jumps, market microstructure noise and non-synchronous trading. For this we propose jump robust two time scale (co)variance estimators and verify their reduced bias and mean square error in simulation studies. We use these estimators to construct the ex-post portfolio realized volatility (RV) budget, determining each portfolio component’s contribution to the RV of the portfolio return. These RV budgets provide insight into the risk concentration of a portfolio. Furthermore, the RV budgets can be directly used in a portfolio strategy, called the equal-risk-contribution allocation strategy. This yields both a higher average return and lower standard deviation out-of-sample than the equal-weight portfolio for the stocks in the Dow Jones Industrial Average over the period October 2007–May 2009.     

Implementation of the forest expansion policy in the Netherlands in the period 1986–2007: Decline in success?

The current study explains why Dutch forest expansion policy is at risk of failure. To study the forest expansion implementation process we have chosen to further operationalize Matland's policy type implementation model to an extended and comprehensive typology of relevant implementation characteristics. In addition, a case study methodology with mixed-method design was used to collect and analyze the data. The Dutch forest expansion policy is currently an example of symbolic implementation. The symbolic implementation is a consequence of the absence of central guidance, the legislative complexity, the low policy stability, the lack of supporting conditions for policy innovation, the lack of regulatory responsiveness and the latent policy at state level and in many provinces. Nevertheless, the transferable development rights method of the province of Limburg is a promising innovation and forest expansion still happens, which is mainly the result of a good internal and external communication, an effective actor network of forest expansion advocates and the willingness to realize negotiated project aims that lead to a win–win situation for all actors involved. Nonetheless, it is expected that the forest expansion targets will be not reached, unless most of the above shortcomings are solved.     

Towards new Triple Helix organisations? A comparative study of competence centres as knowledge,consensus and innovation spaces

This contribution explores new organisational forms facilitating Triple Helix relations. Analysts have pointed to the blurring of institutional boundaries and the emergence of hybrid organisations at the interface between university, industry and government. Starting out from the notion that Triple Helix organisations develop and maintain knowledge, consensus and innovation spaces, we explore four cases of competence centres that operate in this context. Comparing them, we identify Finnish SHOK centres as the most radical departure from more traditional forms of university–industry collaboration. These can be characterised as independent legal entities that are involved in integrating a large, possibly cluster‐level or technology‐focused network, defining the agenda for specific specialisation areas by engaging in all or most of the Triple Helix spaces. We argue they could be better positioned than existing intermediary organisations to deliver the Triple Helix concept.