A note on bimatrix games with an unknown payoff matrix

We show that, using a simple decision rule, two players repeatedly playing the same zero-sum game without the direct knowledge of the payoff matrix will ultimately achieve the Nash Equilibrium if the game possesses a unique pure strategy Nash Equilibrium. For other bimatrix games, the simple decision rule does not suffice to generate the nice convergence property.     

MEASURING THE EFFECT OF SEXUAL ORIENTATION ON INCOME: EVIDENCE OF DISCRIMINATION?

The effect of nonheterosexuality on individual income is estimated using 1991–1996 General Social Survey data. Other researchers have concluded that homosexuals earn less than similarly qualified workers, in contrast to the popular perception that homosexuals are more affluent than nonhomosexuals. Using improved statistical techniques, this article finds noticeable earnings effects that go in opposite directions across genders. Nonheterosexual men earn 22% less than heterosexual men, and nonheterosexual women earn 30% more than heterosexual women. These findings, viewed together with previous empirical work on this topic, help narrow the field of theories that can explain the sexual-orientation earnings gaps present in the data.     

Estimating the optimal hedge ratio with focus information criterion

In recent years, the error‐correction model without lags has been used in estimating the minimum‐variance hedge ratio. This article proposes the use of the same error‐correction model, but with lags in spot and futures returns in estimating the hedge ratio. In choosing the lag structure, use of the Akaike information criterion (AIC) and recently proposed focus information criterion (FIC) by G. Claeskens and N. L. Hjort (2003) is suggested. The proposed methods are applied to 24 different futures contracts. Even though the FIC hedge ratio is expected to perform better in terms of mean‐squared error, the AIC hedge ratio is found to perform as well as the FIC and better than the simple hedge ratios in terms of hedging effectiveness. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:1011– 1024, 2005     

Spot‐futures spread,time‐varying correlation,and hedging with currency futures

This article investigates the effects of the spot‐futures spread on the return and risk structure in currency markets. With the use of a bivariate dynamic conditional correlation GARCH framework, evidence is found of asymmetric effects of positive and negative spreads on the return and the risk structure of spot and futures markets. The implications of the asymmetric effects on futures hedging are examined, and the performance of hedging strategies generated from a model incorporating asymmetric effects is compared with several alternative models. The in‐sample comparison results indicate that the asymmetric effect model provides the best hedging strategy for all currency markets examined, except for the Canadian dollar. Out‐of‐sample comparisons suggest that the asymmetric effect model provides the best strategy for the Australian dollar, the British pound, the deutsche mark, and the Swiss franc markets, and the symmetric effect model provides a better strategy than the asymmetric effect model in the Canadian dollar and the Japanese yen. The worst performance is given by the naïve hedging strategy for both in‐sample and out‐of‐sample comparisons in all currency markets examined. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:1019–1038, 2006     

Management and Risk Characteristics of Part-Time and Full-Time Farmers in Norway

The objective of this exploratory study was to provide empirical insight into how different categories of farmers perceive and manage risk. The data originate from a questionnaire of dairy and crop farmers in Norway. The associations between part-time and full-time farming and farm and farmer characteristics, farmers' goals and future plans, risk perceptions, and risk management responses were examined with simple t - and chi-square tests, as well as with logistic regression. The results indicate that full-time and part-time farmers' goals, risk perceptions, and management strategies differ significantly. Policy makers and advisers should consider these differences when developing policies and recommendations for the different types of farmers.     

The effects of China’s split-share reform on firms’ capital structure choice

China’s split-share structure reform in 2005–2006 mitigates agency conflicts between controlling shareholders and minority shareholders and thus may bring substantial changes to corporate financing behaviour. This article examines the impact of that reform on the capital structure decisions of firms by applying a variety of trade-off and pecking-order models. Using data from 1176 non-financial Chinese listed firms during the period 2000–2012, we present empirical evidence indicating that equity tracks the financing deficit better than debt in Chinese firms, a finding which is not consistent with pecking-order theory. This phenomenon is more prominent after 2006 as share reform increases trading activity in the secondary stock market and improves the transparency of financial markets. In addition, Chinese firms have an optimal leverage ratio and they adjust below-target leverage ratios faster than above-target leverage ratios after the implementation of share structure reform, although they make symmetric adjustments towards the target leverage ratio before 2007. Finally, recent share reform has prompted Chinese firms to more quickly address the divergence of actual leverage ratios from long-term target levels, but has slowed their response to short-term target leverage divergence.