Respondent uncertainty in a contingent market for carbon offsets

The main objective of this paper is to provide additional empirical evidence of what explains respondent uncertainty in contingent valuation (CV) and how this in turn affects stated willingness to pay (WTP). Air travelers asked to pay a carbon travel tax to offset carbon emissions from flying were asked how likely it is that they will actually pay if the tax is voluntary. When changing the market compliance imperative from a mandatory carbon tax to a voluntary contribution, a third of all air travelers consider it unlikely they will actually pay their stated WTP amount. An ordered probit estimation approach is applied to identify the sources of respondent uncertainty. Besides the bid price, respondent sense of responsibility and belief in the effectiveness of the voluntary carbon market are among the main reasons for the experienced uncertainty.     

Hedging derivative securities with genetic programming

One of the most recent applications of GP to finance is to use genetic programming to derive option pricing formulas. Earlier studies take the Black–Scholes model as the true model and use the artificial data generated by it to train and to test GP. The aim of this paper is to provide some initial evidence of the empirical relevance of GP to option pricing. By using the real data from S&P 500 index options, we train and test our GP by distinguishing the case in-the-money from the case out-of-the-money. Unlike most empirical studies, we do not evaluate the performance of GP in terms of its pricing accuracy. Instead, the derived GP tree is compared with the Black–Scholes model in its capability to hedge. To do so, a notion of tracking error is taken as the performance measure. Based on the post-sample performance, it is found that in approximately 20% of the 97 test paths GP has a lower tracking error than the Black–Scholes formula. We further compare our result with the ones obtained by radial basis functions and multilayer perceptrons and one-stage GP. Copyright © 1999 John Wiley & Sons, Ltd.     

Implications of Components of Income Excluded from Pro Forma Earnings for Future Profitability and Equity Valuation

Abstract:  This study addresses three research questions relating to total exclusions, special items, and other exclusions. Are each of these pro forma exclusion components forecasting irrelevant? Are each of the exclusion components value irrelevant? Are the valuation multiples on the exclusion components justified by their ability to forecast future profitability as predicted by the Ohlson (1999) model? Findings are generally consistent with the market-inefficiency results presented in Doyle et al. (2003) . Total exclusions are valued negatively by the market despite the prediction that total exclusions will be valued positively. Valuation results also suggest that stocks with positive other exclusions are overpriced.     

An Economic Analysis of Auto Compensation Systems: Choice Experiences From New Jersey and Pennsylvania

Nearly since the first automobile traveled on U.S. soil, questions about how best to compensate people injured by their use have been raised. As early as in 1932, in fact, the tort system of imposing costs on negligent drivers was strongly criticized, and a system of compensation without regard to negligence recommended. Yet despite various efforts to identify and implement improved systems during the past more than 70 years, no clear best compensation mechanism has been found. Current discussions have focused on the “choice” system, under which insureds are allowed to select either a tort system or a no‐fault system of compensation at the time of insurance purchase. New Jersey and Pennsylvania, which implemented very similar choice programs in 1989 and 1990, respectively, offer an opportunity to observe the effects of choice on outcomes such as: use of attorneys, speed of payment, and consistency (equity) of payment. Our results indicate outcomes consistent with expectations in New Jersey (NJ), which switched from no‐fault to choice, but inconsistent with expectations in Pennsylvania (PA), which switched from tort to choice. Furthermore, analysis of tort versus no‐fault selectors postchoice in New Jersey and Pennsylvania does not offer clear evidence of no‐fault's lower administrative costs and speedier, more equitable payment in these jurisdictions.     

The Dynamics of Productivity: A Decompostion Approach Using Distribution Functions

In this paper we use a micro panel data set of Spanish manufacturing firms to measure the contributions of continuing firms and turnover to total factor productivity growth over the period 1990–1997. The paper proposes an approach to the decomposition of productivity growth that is based on the estimation of productivity distributions. We characterize the dynamics of productivity distributions defining counterfactual distributions and using non-parametric methods. The results we obtain indicate that incumbent firms are the main factor contributing to the change in the productivity distribution. Net entry contributes positively to TFP growth. Finally, changes in the relative weights of incumbent, entering and exiting firms produce a counter-cyclical movement of productivity.     

MIGRATION,SOCIAL NETWORKS,AND CREDIT: EMPIRICAL EVIDENCE FROM PERU

We seek evidence of the causal relationship between migration, social networks, and the probability of receiving credit in a developing country where credit markets are weak and internal migration is common. Migrants may face binding asymmetric information constraints as they often lack collateral. Social networks can help mitigate these constraints. Conversely, migrants might face higher liquidity constraints and might, therefore, demand more credit than nonmigrants. The effect of migration on participation in the credit market is thus ambiguous. Compounding this, migration and credit may be jointly determined. We utilize rich data from Peru to establish the net effect of migration on credit and the role that social networks play in this relationship.     

An Evaluation of the Actuarial structure of manitoba crop Insurance Program and its Implications

Very little research has been done in evaluating the basic principles and assumptions of the actuarial structure for premium ratemaking in crop insurance programs. Therefore, the objectives of this study are: (a) to examine the Pearson probability distribution of actual crop yields as compared with an application of normal-curve theory to crop yields as compared with an application of normal-curve theory to crop yield distributions and in turn to crop insurance ratemaking which was suggested by Botts and Boles in 1958 [1]; (b) to evaluate the pure premium rates derived from estimated Pearson probability distributions for wheat yields in 14 crop districts of the province of Manitoba; and to establish an experience rating system for the crop insurance program based upon the estimated Pearson distribution of actual crop yields on the individual farm.     

Renminbi Internationalization： Progress, Prospect and Comparison

Using principal component analyses, this paper constructs two internationalization indices for the renminbi (RMB) and 32 other major currencies. We find that the RMB's currency internationalization degree index (CIDI) is still low, and far behind the 4 most important international currencies. In 2009, it was ranked 18th among all important international currencies. However, in terms of the currency internationalization prospect index (CIPI), the RMB has remained the world's fifth highest since 2006. Although it is still far behind the US dollar and the euro, surpassing the ranking of the yen and the pound is possible in the near future. The dramatic difference in the ranking between the CIDI and the CIPI is a result of China's tight capital account control, the usage continuity of international currency due to network externalities, and the narrow foreign exchange and imperfect financial markets. Hence, to a large degree, the RMB's potential as an international currency depends on China's capital account liberalization.     

Will Japan,Taiwan or the US be isolated by China? A macroeconomic game approach

In Taiwan, Japan and even the United States, economic isolation has become a major concern due to the growing Chinese economy, which may lead to welfare losses for the isolated countries. On the basis of the framework developed by Plasmans et al. [Plasmans, J., Engwerda, J., van Aarle, B., Di Bartolomeo, G., Michalak, T., 2005. Dynamic Modelling of Monetary and Fiscal Cooperation Among Nations. Springer], this paper establishes a four-player game with an open-loop information structure to measure possible losses by an international policy coordination approach instead of the conventional free trade agreements. We simulate macroeconomic adjustments of the four countries according to the different institutional scenarios and economic shocks. The baseline simulation and sensitivity analyses indicate that Taiwan can get benefit by participating in coalitional mechanisms including China. In addition, most of the feasible policy coalitions cannot come into effect without US participation. This implies that at the current stage the US rather than China should be the main economic partner of Taiwan and Japan to prevent them from being economically marginalized.