Criteria for the Stochastic Ordering of Random Sums,with Actuarial Applications

It is shown that vectors ( S M 1 , … , S Mn ) and ( S' M'1 , …, S' M'n ) of random sums of positive random variables are stochastically ordered by upper orthant dependence, lower orthant dependence, concordance or by the supermodular ordering whenever their corresponding random numbers of terms ( M 1 , … , M n ) and ( M' 1 , … , M' n ) are themselves ordered in this fashion. Actuarial applications of these results are given to different dependence structures for the collective risk model with several classes of business.     

Heterogeneity effects from market interventions

The aim of this paper is to test whether the European Commission activities generate a heterogeneity effect on the merging parties. A sample of 74 firms involved in 45 contested merger and acquisition operations during the years 1990 to 1999 is used. The methodology is based on the GARCH framework. The main result is that, globally, the DGC interventions seem not to reduce significantly the heterogeneity among investors, except for the operations where it takes strong decisions like prohibition. In these last cases, the signal coming from the DGC encompasses valuable information and is well understood by market participants.     

A stochastic dominance approach to the measurement of discrimination

This note suggests a bridge between stochastic dominance (Rothschild and Stiglitz, 1970 [17], 1973 [18]), inequality measurement (Atkinson, 1970 [1]) and discrimination measurement (Gastwirth, 1975 [10]). Discrimination orderings are defined and illustrated through discrimination curves, in the same spirit as stochastic dominance analysis. The main result, which links the second order discrimination curve and the Gastwirth discrimination index, also generalizes the equivalence between Generalized Lorenz dominance and second order stochastic dominance.     

Empirical Analysis of the Innovation Phenomena in the Sports Equipment Industry

This article presents the results of a survey conducted in 108 firms in the French sports industry. The inquiry was based on three main themes: research & development, innovation and adoption of new materials. The study has shown a link between the product's life cycle and the structure of the industry. In fact the various levels of achievements reached by sports products have generated various structures among the sectors already mentioned. Slightly declining sectors, like skiing or yachting, are rather concentrated and tend to focus on process innovations. Fast expanding sectors, like snowboard, mountain bike and cycling, are rather atomized and innovate much more on new product and materials.     

“It's not Easy Being Green”: Exploring Green Creeds,Green Deeds,and Internal Environmental Locus of Control

The authors report on the development of a novel construct, internal environmental locus of control (INELOC), which captures consumers’ multifaceted attitudes pertaining to personal responsibility towards and ability to affect environmental outcomes. Using data gathered from a sample of consumers, the linkages between INELOC and a wide array of environmental behaviors were investigated. Exploratory and confirmatory factor analyses revealed four first‐order dimensions (“green consumer,” “activism,” “advocate,” and “recycling attitudes”) embedded within a second‐order INELOC factor. Structural equations modeling techniques showed that INELOC was a strong positive predictor of many behaviors. However, the nature of the attitude–behavior relationship varied considerably across behavioral contexts, implying that people do not consistently behave in a proenvironmental manner. © 2012 Wiley Periodicals, Inc.     

The contractual and value relevance of reported earnings in a dividend-focused environment

This study investigates the relevance of reported earnings in the context of an institutional environment, i.e., Switzerland, in which investors focus on dividends. In conjunction with a dividend focus, the financial reporting environment faced by Swiss firms provides their managers with more accounting discretion than managers of Anglo-Saxon firms typically have. From a contractual perspective, dividendbased earnings management is expected since Swiss corporate law explicitly states that dividends, which must be voted on by stockholders, are to be based upon a firm's reported earnings. From a value perspective, thin trading conditions and a long-term investment horizon are expected to increase the importance of dividend payments and to influence the informativeness of reported earnings. Results indicate that Swiss managers do engage in dividend-based earnings management, that earnings quality signals are used by managers to voluntarily constrain their accounting choices and that the value relevance of earnings is conditional upon dividend payments.     

Forecasting the US term structure of interest rates using a macroeconomic smooth dynamic factor model

We extend the class of dynamic factor yield curve models in order to include macroeconomic factors. Our work benefits from recent developments in the dynamic factor literature related to the extraction of the common factors from a large panel of macroeconomic series and the estimation of the parameters in the model. We include these factors in a dynamic factor model for the yield curve, in which we model the salient structure of the yield curve by imposing smoothness restrictions on the yield factor loadings via cubic spline functions. We carry out a likelihood-based analysis in which we jointly consider a factor model for the yield curve, a factor model for the macroeconomic series, and their dynamic interactions with the latent dynamic factors. We illustrate the methodology by forecasting the U.S. term structure of interest rates. For this empirical study, we use a monthly time series panel of unsmoothed Fama–Bliss zero yields for treasuries of different maturities between 1970 and 2009, which we combine with a macro panel of 110 series over the same sample period. We show that the relationship between the macroeconomic factors and the yield curve data has an intuitive interpretation, and that there is interdependence between the yield and macroeconomic factors. Finally, we perform an extensive out-of-sample forecasting study. Our main conclusion is that macroeconomic variables can lead to more accurate yield curve forecasts.     

Strategic financial signalling

In an entry game, the entrant and financial markets are uninformed about the incumbent's costs. The entrant wishes to enter the market if and only if the incumbent has high costs. Therefore, a low cost incumbent would like to signal its cost to the entrant to deter its entry. Simultaneously, it would like to reveal its private information to financiers to obtain actuarially fair financial prices. We suggest that financial structure may act as a common signal in financial and output markets. In equilibrium, a low cost incumbent's highly leveraged financial stucture becomes an effective entry deterrent as it reveals private information to the entrant (and financiers).