Robust min–max portfolio strategies for rival forecast and risk scenarios

We consider an extension of the Markowitz mean–variance optimization framework to multiple return and risk scenarios. It is well known that asset return forecasts and risk estimates are inherently inaccurate. The method proposed provides a means for considering rival representations of the future. The optimal portfolio is computed, simultaneously with the worst case, to take account of all rival scenarios. This is a min-max strategy which is essentially equivalent to a robust pooling of the scenarios. Robustness is ensured by the noninferiority of min–max. For example, a basic worst-case optimal return is guaranteed in view of multiple return scenarios. If robustness happens to have too high a cost, guided by the min–max pooling, it is also possible to explore other pooling alternatives. A min–max algorithm is used to solve the problem and illustrate the robust character of min–max with return and risk scenarios. We study the properties of the min–max risk–return frontier and compare with the potentially suboptimal worst-case where the investment strategy and the worst case are computed separately.     

ESTIMATING SOURCES OF FLUCTUATIONS IN THE AUSTRALIAN WOOL MARKET: AN APPLICATION OF VAR METHODS

Vector autoregression (VAR) methods are used to analyse the contribution of supply, demand and policy shocks to unpredictable fluctuations in the market for Australian wool. VAR procedures are compared with conventional structural econometric models as methods for decomposing sources of instability. While each has advantages and disadvantages, VAR procedures might be viewed as preferable when the underlying market structure is complex and uncertain, as it is in the case of wool. Based on the results obtained, demand shocks are the dominant source of uncertainty in the wool market in the absence of Australian Wool Corporation intervention, but intervention has blunted their effects, reducing market uncertainty and increasing the average level of prices and revenues.     

A new method for measuring congestion in data envelopment analysis

In data envelopment analysis (DEA), there are two principal methods for identifying and measuring congestion: Those of Färe et al. [Färe R, Grosskopf S. When can slacks be used to identify congestion. An answer to W. W. Cooper, L. Seiford, J. Zhu. Socio-Economic Planning Sciences 2001;35:1–10] and Cooper et al. [Cooper WW, Deng H, Huang ZM, Li SX. A one-model approach to congestion in data envelopment analysis. Socio-Economic Planning Sciences 2002;36:231–8]. In the present paper, we focus on the latter work in proposing a new method that requires considerably less computation. Then, by proving a selected theorem, we show that our proposed methodology is indeed equivalent to that of Cooper et al.     

Contrarian strategies and investor overreaction under price limits

This study investigates the effects of price limits on investment performance of contrarian trading strategies in Taiwan’s stock market over the period 1997 to 2006. All contrarian strategies in intraday limit-hit stocks lead to superior returns relative to the benchmark index return, and the findings support the overreaction effect. Also, there is evidence of delayed overreaction reflected by price continuations for the overnight period and price reversals for the subsequent trading day. Moreover, investment performance of contrarian strategies is related to firm characteristics where investors tend to overreact more in small-size, high-turnover, and non-high-tech stocks. Finally, price overreaction is strong for up-hit stocks in the aftermath of catastrophic events. If overreaction exists, price-limit regulation designed to cool off investors and reduce price volatility may not be effective.     

Comparisons of Bayesian estimation procedures for two-way contingency tables without interaction

Bayesian and empirical Bayesian estimation methods are reviewed and proposed for the row and column parameters in two-way Contingency tables without interaction. Rasch's multiplicative Poisson model for misreadings is discussed in an example. The case is treated where assumptions of exchangeability are reasonable a priori for the unknown parameters. Two different types of prior distributions are compared, It appears that gamma priors yield more tractable results than lognormal priors.     

Firms as knowledge repositories

One reason firms exist is to serve as knowledge repositories. Firms compete against other firms and need profits to survive. Firms must be entrepreneurial to discover and act on profit opportunities. Knowledge required to spot profit opportunities is disbursed among economic actors and often is tacit knowledge that can only be obtained by those in close proximity. This gives rise to agglomeration economies, which can be leveraged within firms. In a competitive economy people have an incentive to keep knowledge from people in other firms, but to share it with those in their firm. One role of the firm is to act as a repository of knowledge for those within the firm’s boundaries, and to lower the cost of obtaining knowledge about profit opportunities. Entrepreneurs need firms to contain and capture the profits from their innovations.     

Die neutrale Verbraucherinformation über die Qualität von Dienstleistungen — einige methodische Probleme

Zusammenfassung Auch wenn die vielbeschriebene Entwicklung zum Dienstleistungssektor häufig überschätzt wird, haben Verbraucherorganisationen die neutrale Berichterstattung über die Qualität privater und öffentlicher Leistungen in ihr Serviceangebot einzubeziehen. Die bei einer solchen Informationsstrategie entstehenden methodischen Probleme der Qualitätsmessung immaterieller Produkte sind zahlreich und unterscheiden sich erheblich von denjenigen des Warentests. Sie liegen einerseits in der Natur des Untersuchungsgegenstandes selbst sowie in den Besonderheiten der Marktstrukturen; zum anderen entstehen sie aus den verfügbaren Meßmethoden und Bewertungskriterien. Die Unterschiede zwischen Dienstleistungen und physischen Markenartikeln sowie die noch unbefriedigend entwickelte Methodologie der Dienstleistungstests sind in den Kommunikationsaktivitäten der Verbraucherorganisationen entsprechend zu berücksichtigen.

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Independent consumer information about quality of services — some methodological questions

Though the increasing importance of service industries in modern societies is mostly overrated, consumer organizations should offer independent information about the quality of private and public services. In setting up such information programmes there will arise a lot of methodological issues, different to those of comparative testing of products. Some of the problems stem from the nature of the research object itself and the market structure; other problems are connected with the social science research methods that have to be used and with the choice of criteria of evaluation. The differences between services and physical products as well as the little developed methodology of service testing have to be considered in the choice and design of the testing organization's communication activities.

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Günther Rosenberger ist Leiter der Abteilung Dienstleistungen bei der Stiftung Warentest, Lützowplatz 11–13, D-1000 Berlin 30.