Basis risk in static versus dynamic longevity-risk hedging

This paper provides a tractable, parsimonious model for assessing basis risk in longevity and its effect on the hedging strategies of Pension Funds and annuity providers. Basis risk is captured by a single parameter, that measures the co-movement between the portfolio and the reference population’s longevity. The paper sets out the static, full and customized swap-hedge for an annuity, and compares it with a dynamic, partial, and index-based hedge. We calibrate our model to the UK and Scottish populations. The effectiveness of static versus dynamic strategies depends on the rebalancing frequency of the second, on the relative costs, and on basis risk, which does not affect fully-customized, static hedges. We show that appropriately calibrated dynamic hedging strategies can still be reasonably effective, even at low rebalancing frequencies.     

Capital gains taxation and shareholder wealth in takeovers

Before December 1999, the capital gains of shareholders who sold their shares into Australian takeovers have been taxable irrespective of payment method. Subsequently, shareholders can elect to rollover capital gains in equity takeovers. We examine the effect of this change on the association between target shareholder capital gains and bidder and target firm shareholder wealth. The results indicate that prior to the regulatory change, cash consideration results in higher target shareholder returns for non‐taxation reasons. After the introduction of capital gains tax rollover relief, we find that target and acquiring firm shareholders earn lower returns when cash consideration is offered to shareholders with greater capital gains.     

Quality competition and entry: a media market case

In this paper, we study the optimal tax policy in a differential oligopoly game where the competing firms share the access to a productive renewable resource. We show that, in a Feedback Nash Equilibrium of the game, a linear Markov tax, imposed on the output, and specified as an affine function of the available resource stock, leads the competing firms to produce the socially optimal quantities over time, thus overcoming the dynamic interplay between the tragedy of the commons and the firms’ market power. The optimal tax turns out to be independent from the resource stock in a monopoly, and it cannot be defined in a duopoly.     

Consumer creativity influenced by hope,integral emotions and socio‐economic status

Low socio economic stratum (SES) consumers face constrains that engender creativity as they try to solve consumption problems using the scant products and services available by repurposing such products. This research investigates mechanisms by which hope and integral emotions interact with SES to influence consumer creativity. Experiments with low and high SES participants in an emerging economy show that when hope is enhanced, positive integral emotions are directed to creativity by all consumers, but when hope is diminished, positive integral emotions are not consistently directed to creativity. SES exerts a moderating role when hope is diminished, and only high SES participants are able to cope with the absence of hope by redirecting dominance feelings to creativity. Results suggest that increasing hope among low SES consumers can enhance their creativity, and that hope can be enhanced through actions undertaken by companies and public organizations.     

ON THE HIERARCHY OF SOME QUALITATIVE STRUCTURES IN THE VON NEUMANN AND RELATED MODELS

In this paper we collect some old and new qualitative-structural properties on the input and output matrices involved in the classical von Neumann model, properties relevant, from the formal and/or economic point of view, in the study of the equilibria of the said model. It is established the hierarchy, i.e. the relations of inclusion, partial overlapping and disjunction, among these properties, which permits to amend some current slips in the analysis of the von Neumann model (one due to von Neumann himself). The results obtained can be fitted to other production and exchange multisectorial models.     

Soil-specific agro-ecological strategies for sustainable land use – A case study by using MicroLEIS DSS in Sevilla Province (Spain)

To reverse the negative environmental impacts of agriculture, a land evaluation decision support system (DSS) known as MicroLEIS-DSS was used to design the most sustainable land use and management practices for selected Mediterranean benchmark sites in Sevilla Province, Southern Spain. This DSS is based on the multifunctional evaluation of soil quality, using input data collected in standard soil surveys, and with particular reference to the peculiarities of the Mediterranean region. Specific agro-ecological strategies to prevent soil degradation in the benchmark sites were designed within two major topics: (i) strategies related to land use planning at a regional level: segregation of agricultural lands, restoration of marginal areas, diversification of crop rotation, and identification of vulnerability areas; and (ii) those related to land management planning at a farm level: organic matter restoration, formulation of tillage practices and workability timing, optimum machinery use, and input rationalization. The predicted results of applying the 12 agro-ecological land evaluation model constituents of MicroLEIS DSS are presented and discussed for each application site. The main conclusion of this paper is that using soil type information in decision-making is at the heart for sustainable use and management of agricultural land. This agro-ecological approach can be especially useful when formulating soil-specific agricultural practices to reverse environmental degradation, based on the spatial variability of soils and related resources.     

How to escape poverty through education?: intergenerational evidence in Spain

This article analyses the determinants of escaping poverty through education in Spain, with this being the country that, is among the top European countries regarding the percentage of the population affected by poverty. Specifically, the article studies the transmission of poverty over two generations by analysing the factors that affect the probability of having completed the secondary level of education. To that end, we use the conceptual Quantity–Quality model of Becker–Lewis, empirically estimated by using the Survey of Living Conditions (2011) provided by the Spanish Statistical Institute. Our results confirm the intergenerational transmission of poverty in Spain, in such a way that the probability that the respondent has completed secondary education is determined, although not exclusively, by the family conditions of the respondents during their teenage years.     

Information technologies and entrepreneurship

This article shows how the increase of information availability due to new technologies positively affects aggregate entrepreneurship in national economies. We rely on an “occupational choice” model of managerial production, extended to include the managerial use of information, to explain variations in the number of entrepreneurs, and thus of firms, as measured by the aggregate new business creation data. We present evidence that supports such a theory of industrial organization dynamics for a sample of 78 economies over the period 2004–2012 using panel data instrumental variable regressions.     

Influences of visual attributes of food packaging on consumer preference and associations with taste and healthiness

Two experiments designed to investigate how the shape and colour of packaging, and product category, conjointly impact consumers’ product and packaging expectations are reported. In Experiment 1, the shape (rounded vs. angular) and visual appearance (greyscale, red‐to‐yellow and blue‐to‐green colour schemes) of the packaging were manipulated. Dependent measures were preference (willingness to purchase the product, how attention‐capturing the packaging is, and the pleasantness of the design) and any taste associations. In Experiment 2, shape (rounded vs. angular), colour (red‐to‐yellow vs. blue‐to‐green colour schemes), and product category (buttery vs. cereal cookies) were manipulated. In this case, the dependent measures were the perceived product healthiness and the preference of consumers. The results of Experiment 1 revealed that packaging colour influenced product preference. Red‐to‐yellow and blue‐to‐green colour schemes and angular packaging were preferred over greyscale and round packaging. Colour also influenced taste associations, while shape only influenced ratings of expected sweetness. In Experiment 2, packaging shape and product category influenced product preference. In particular, rounded packaging and the packaging of buttery cookies were preferred over angular packaging and the cereal cookies packaging. The healthiness of the product was rated higher for the rounded and red‐to‐yellow packaging containing a buttery product. Taken together, these results highlight the important role played by colour, shape, and category on the expectations and associations elicited by viewing product packaging.     

The Commitment to Income-Decreasing Accounting Choices as a Credible Signal to Reducing Information Asymmetry: The Case of Asset Revaluations*

Bagnoli and Watts (2005) proposed that a manager could reduce information asymmetry by choosing an income-decreasing accounting choice that signals the firm's relatively good future prospects. A limitation in testing this theory is that most income-decreasing accounting choices over time reverse such that aggregated earnings would be the same, regardless of the choice. One income-decreasing accounting choice that never reverses is the choice of upward asset revaluation, where the resulting gains are recognized through other comprehensive income and reduce future earnings by increasing future depreciation expense. In the United Kingdom, prior to FRS15, firms had the option to upwardly revalue on a one-time basis. FRS15, and subsequently International Financial Reporting Standards, however, require those firms that upwardly revalue precommit to revalue on a consistent basis. This precommitment sacrifices future reporting discretion, which, according to the aforementioned study, serves as a costly signal of a firm's relatively good future prospects that reduces information asymmetry. The choice not to upwardly revalue, therefore, serves as a signal of a firm's relatively poor future prospects and also reduces information asymmetry, but this choice does not require precommitment such that the reduction in information asymmetry would be less than the choice to precommit to upward revaluations. Using a propensity-score matched-pair design on a sample of United Kingdom firms to test our predictions during the period requiring precommitment, we find lower forecast dispersion, lower return volatility, and a lower cost of capital for firms that precommit to upward asset revaluations, relative to those firms that choose not to upwardly revalue their operating assets. Keywords: upward asset revaluations, income-decreasing accounting choice, information asymmetry, precommitment