Stationary measures for some Markov chain models in ecology and economics

Summary. Let continuous, exists in for x in . Let be an i.i.d. sequence from F and X₀ be a nonnegative random variable independent of . Let be the Markov chain generated by the iteration of random maps by . Such Markov chains arise in population ecology and growth models in economics. This paper studies the existence of nondegenerate stationary measures for {X_n}. A set of necessary conditions and two sets of sufficient conditions are provided. There are some convergence results also. The present paper is a generalization of the work on random logistics maps by Athreya and Dai (2000).Received: 20 March 2002, Revised: 4 December 2002, JEL Classification Numbers: C22, D9.The author wishes to thank Professor Mukul Majumdar and the referees for several useful suggestions.     

Beta adjustment methods

This study is an analysis of the forecasting ability of adjusted and unadjusted betas. Based on the Canadian data for 252 stocks, random errors in betas are the most important reason for the poor predictive ability of individual security betas. Most of this random error is eliminated if securities are grouped into portfolios. However, further improvements in forecasting ability are gained by adjusting the security betas for bias and inefficiency. Five methods of adjusting the naive beta estimates have been tried, including two methods not tested before. These two, Vasicek's two-stage method and order-bias adjustment method, gave results generally superior to others.     

Daily income target effects: Evidence from a large sample of professional commodities traders

We provide evidence of rational reference-dependent preferences in the proprietary trading of professional traders. We find increased trading effort and risk taking by traders following morning losses. Further analysis provides no evidence of a deterioration in trading performance subsequent to losses, as neither risk-adjusted performance nor trade execution appear to be negatively affected by prior losses. The evidence supports the existence of rational reference-dependent preferences in the form of trader daily income targets: these professional traders exhibit increased work effort subsequent to abnormal morning losses. The evidence is inconsistent with the alternative explanation of costly loss aversion.     

Analysts' Forecasts of German Firms' Earnings: a Comparative Analysis

This paper examines analysts' forecasts of the annual earnings per share of German firms over the period of February 1987 to December 1995. The German case is particularly interesting as the accounting and institutional structures vary from those in more thoroughly researched markets such as the U.S. or U.K. The paper therefore considers the features of the German forecasting environment which distinguish it from the Anglo-American model, and whether these might be reflected in forecasting performance. The results for Germany show that the accuracy of analysts' forecasts improves as the forecast horizon shortens, are less accurate than a naive prediction model over longer horizons, and contain a positive bias. When the results for Germany are contrasted with the results for the U.K., as reported in a recent paper, they are found to be a little less accurate but the positive bias is greater in U.K. forecasts. Taken overall the forecasting process in Germany appears to be less efficient than in the U.K., but this may be due to the distinct features of the German forecasting environment.     

Interactive data and retail investor decision‐making: an experimental study

The results of an experimental study of retail investors' use of eXtensible Business Reporting Language tagged (interactive) data and PDF format for making investment decisions are reported. The main finding is that data format made no difference to participants' ability to locate and integrate information from statement footnotes to improve investment decisions. Interactive data were perceived by participants as quick and ‘accurate’, but it failed to facilitate the identification of the adjustment needed to make the ratios accurate for comparison. An important implication is that regulators and software designers should work to reduce user reliance on the comparability of ratios generated automatically using interactive data.     

When trade hurts: Consumption indivisibilities and labor market distortions

We present a simple model where complementarities between wages and demand due to factor market distortions can make a transition economy worse off from trade. Prior to trade, a virtuous circle prevails: high wages in industry support a high demand for indivisible industrial goods, which in turn supports high wages. However, factor market distortions in the transition economy create a comparative disadvantage in industry. Opening up to trade results in the import of indivisibles and a fall in manufacturing wages, breaking this virtuous circle. Consequently, trade liberalization without structural reform can have serious adverse effects in a transition economy.     

Subscriber return, underpricing, and long-term performance of U.K. privatization initial public offers

This study distinguishes between issuer underpricing and subscriber returns, and estimates their magnitudes for U.K. privatization initial public offers (PIPOs). It proposes and tests empirical models which incorporate theoretical, institutional, and other factors which interact to explain subscriber returns and issuer underpricing. The estimates reveal that, on average, issuer underpricing, which is measured relative to the total equity market value on the first day of trading, is 23.62%, whereas the average raw return available to subscribers is up to 41%. Regression analysis shows that underwriters' commission, market volatility, regulatory situation of the company, proportion of share clawback, and demand for shares taken together explain up to 70% of the variation in issuer underpricing and 64% of subscribers' returns. The evaluation of the long-run performance of PIPOs to assess the extent to which initial gains to subscribers persist for longer periods concludes that U.K. PIPOs, on average, provide long-run holding gains to investors, unlike their private sector counterparts.     

Wage Effects of Trade Reform with Endogenous Worker Mobility

In this paper, we use a linked employer–employee database from Brazil to evaluate the wage effects of trade reform. With an aggregate (firm-level) analysis of this question, we find that a decline in trade protection is associated with an increase in average wages in exporting firms relative to domestic firms, consistent with earlier studies. However, using disaggregated, employer–employee level data, and allowing for the endogenous assignment of workers to firms due to match-specific productivity, we find that the premium paid to workers at exporting firms is economically and statistically insignificant, as is the differential impact of trade openness on the wages of workers at exporting firms relative to otherwise identical workers at domestic firms. We also find that workforce composition improves systematically in exporting firms, in terms of the combination of worker ability and the quality of worker–firm matches, post-liberalization. These results stand in stark contrast to the findings reported in many earlier studies and underscore the importance of endogenous matching and, more generally, non-random labor market allocation mechanisms, in determining the effects of trade policy changes on wages.     

Portfolio Selection and Optimization with Higher Moments: Evidence from the Indian Stock Market

The Markowitz portfolio optimization model, popularly known as the Mean-Variance model, assumes that stockreturns follow normal distribution. But when stock returns do not follow normal distribution, this model wouldbe inadequate as it would prescribe sub-optimal portfolios. Stock market literature often deliberates that stock returns are non-normal. In such context the Markowitz model would not be sufficient to estimate the portfolio risks. The purpose of this paper is to expand the original Markowitz portfolio theory (mean-variance) via adding the higher order moments like skewness (third moment about the mean) and kurtosis (fourth moment about the mean) in the return characteristics. The research paper investigates the impact of including higher moments using multi-objective programming model for portfolio stock selection and optimization. The empirical results indicate that the inclusion of higher moments had a considerable impact in estimating the returns behavior of portfolios. The portfolios optimized using all the four moments, generated higher returns for the given level of risk in comparison to the returns of the Markowitz model during the study period 2000–2011. The results of this study would be immensely useful to fund managers, portfolio managers and investors as it would help them in understanding the Indian stock market behavior better and also in selecting alternative portfolio selection models.