Correlation dynamics and international diversification benefits

Forecasting the evolution of security co-movements is critical for asset pricing and portfolio allocation. Hence, we investigate patterns and trends in correlations over time using weekly returns for developed markets (DMs) and emerging markets (EMs) over the period 1973–2012. We show that it is possible to model co-movements for many countries simultaneously using BEKK, DCC, and DECO models. Empirically, we find that correlations have trended upward significantly for both DMs and EMs. Based on a time-varying measure of diversification benefits, we find that it is not possible to circumvent the increasing correlations in a long-only portfolio by adjusting the portfolio weights over time. However, we do find some evidence that adding EMs to a DM-only portfolio increases diversification benefits.     

Urban Mega-Events,Evictions and Housing Rights: The Canadian Case

This article examines how community-based groups have dealt with the potential housing impacts of urban mega-events (also known as 'hallmark events') in the city. Three Canadian case studies are used- Expo '86 in Vancouver, the 1988 Calgary Winter Olympics, and the rejected proposal for the 1996 Summer Olympic Games in Toronto- to discuss a range of issues including the nature and impact of community action in forcing the organisers of mega-events to address the potential of event-related housing impacts. The research findings suggest that mega-eventrelated forced evictions should be viewed as an expected result of this form of urban restructuring as these events are used to bring new people, new facilities, and new money to cities ata rapid pace,and this goalis rarely evaluated in an open democratic manner. Further, the critical prerequisite for any effective community action to occur is the presence of an organised, strategic and resourceful coalition of community-based groups which have the capacity to analyse complex situations, act forcefully at a variety of levels, and use diverse strategies in order to take advantage of key 'openings' when seeking to achieve their goals.     

The Impact of Land-Use Change on Ecosystem Services,Biodiversity and Returns to Landowners: A Case Study in the State of Minnesota

Land-use change has a significant impact on the world’s ecosystems. Changes in the extent and composition of forests, grasslands, wetlands and other ecosystems have large impacts on the provision of ecosystem services, biodiversity conservation and returns to landowners. While the change in private returns to landowners due to land-use change can often be measured, changes in the supply and value of ecosystem services and the provision of biodiversity conservation have been harder to quantify. In this paper we use a spatially explicit integrated modeling tool (InVEST) to quantify the changes in ecosystem services, habitat for biodiversity, and returns to landowners from land-use change in Minnesota from 1992 to 2001. We evaluate the impact of actual land-use change and a suite of alternative land-use change scenarios. We find a lack of concordance in the ranking of baseline and alternative land-use scenarios in terms of generation of private returns to landowners and net social benefits (private returns plus ecosystem service value). Returns to landowners are highest in a scenario with large-scale agricultural expansion. This scenario, however, generated the lowest net social benefits across all scenarios considered because of large losses in stored carbon and negative impacts on water quality. Further, this scenario resulted in the largest decline in habitat quality for general terrestrial biodiversity and forest songbirds. Our results illustrate the importance of taking ecosystem services into account in land-use and land-management decision-making and linking such decisions to incentives that accurately reflect social returns.     

Special issue: Australian Accounting Standards Board Research Forum

The Australian Accounting Standards Board (AASB) engages with academics and encourages them to make practical recommendations for the standard‐setter across three sectors: for‐profit, public and other not‐for‐profit sectors. In doing so, the AASB organised Research Forums in 2016 and 2017 that were of great value to researchers, practitioners and the standard‐setters. Four papers from the Forums in 2016 and 2017 were submitted and accepted for publication in this special issue. This paper provides an overview of the Forum, discusses the impact of conducting research and how the findings of the researchers informed the AASB’s standard‐setting process.     

Reorienting the Economy to the Rhythms of Nature: Learning to Live with Intermittent Energy Supply

In much current thinking about the necessary and rapid transition to a carbon-emissions-free energy system, there is implicit acceptance of the high-tech, high-energy nature of the current economy. But by asking deeper questions about this economy, we reveal new opportunities as well as new challenges. First, throughout most of history, both production and consumption were dramatically influenced by the weather, and activities were undertaken or curtailed according to varying availability of energy. In the future, if we again adjust energy demand to such intermittent supplies wherever and whenever possible, we can nevertheless benefit from many scientific and technological advantages that our ancestors did not have centuries ago. Second, in the pursuit of highly energy-efficient machines that might become new sources of highly concentrated energy, we have begun to rely on “clean energy” machinery made in significant part from non-recyclable materials. With our current generation of wind turbines, for example, we have sacrificed sustainability in the pursuit of a supposedly renewable-energy system. By contrast, if we reduce our need for always-on energy sources by adjusting energy demand to intermittent energy supply, we can greatly reduce the overall energy infrastructure needed, and we will face less pressure to sacrifice sustainability.     

Beyond risk-based portfolios: balancing performance and risk contributions in asset allocation

Asset allocation using a new Performance/Risk Contribution measure improves the performance of risk-based portfolios     

Health,height, and the household at the turn of the twentieth century

This article examines the health and height of men born in England and Wales in the 1890s who enlisted in the army at the time of the First World War, using a sample of recruits from the army service records. These are linked to their childhood circumstances as observed in the 1901 census. Econometric results indicate that height on enlistment was positively related to socio‐economic class, and negatively to the number of children in the household in 1901 and the proportion of household members who were earners, as well as to the degree of crowding. Adding the characteristics of the locality has little effect on the household‐level effects. However local conditions were important; in particular the industrial character of the district, local housing conditions, and the female illiteracy rate. These are interpreted as representing the negative effect on height of the local disease environment. The results suggest that changing conditions at both household and locality levels contributed to the increase in height and health in the following decades.     

Is long memory necessary? An empirical investigation of nonnegative interest rate processes

This paper analyzes a class of nonnegative processes for the short-term interest rate. The dynamics of interest rates and yields are driven by the dynamics of the conditional volatility of the pricing kernel. We study Markovian interest rate processes as well as more general non-Markovian processes that display “short” and “long” memory. These processes also display heteroskedasticity patterns that are more general than those of existing models. We find that deviations from the Markovian structure significantly improve the empirical performance of the model. Certain aspects of the long memory effect can be captured with a (less parsimonious) short memory parameterization, but a simulation experiment suggests that the implied term structures corresponding to the estimated long- and short-memory specifications are very different. We also find that the choice of proxy for the short rate affects the estimates of heteroskedasticity patterns.     

COMMON‐ENEMY EFFECTS: MULTIDISCIPLINARY ANTECEDENTS AND ECONOMIC PERSPECTIVES

A disparate literature hypothesizes what can broadly be described as the common‐enemy effect: the fact that the interaction with a common enemy (formed by Nature, an individual, or a group) increases cooperation. This review identifies the multidisciplinary antecedents of this effect, and then distinguishes between several strands of literature applying noncooperative game theory to account for it. A first strand argues that the threat posed by a common enemy makes each player's cooperative effort more critical. In a second strand a behavioral common‐enemy effect caused by group interaction is studied experimentally. A third strand models the common‐enemy effect as the formation of a coalition of players against another player in a contest. A fourth strand formalizes the principle that the ‘enemy of my enemy is my friend’, either in a model of social relations, interdependent altruistic preferences, or indirect reciprocity in repeated games. The connections between these strands of literature are investigated, and questions for future research are proposed.     

New environmental policy instruments to realize forest expansion in Flanders (northern Belgium): A base for smart regulation?

This paper evaluates the current instrument mix, designs options for smart regulation and estimates the support base of new instruments for the forest expansion policy in Flanders (northern Belgium). The framework applied is a combination of theories on instrument choice (ICT), policy transfer and legitimacy. The ICT points out that there is a need for new environmental policy instruments (NEPI) oriented to private actors that inform them or create win–win situations for all involved parties. The need is especially high for farmers, who are key actors. The policy transfer analysis suggested instruments currently in use in the Netherlands, England and Denmark that can fulfill these needs. However, the acceptability – or legitimacy – of the suggested instruments in Flanders is only high for three of these, notably the carbon fund, flexible grant scheme and expert advice (especially by forest groups). This largely fills some smart regulation gaps, like the need for information (expert advice), the involvement of other institutional actors (certifiers, forest groups) and the higher involvement of the private sector (all). However, some gaps, such as flexible land purchase through cooperation with real estate agents or other private agents and opportunities for win–win outcomes with farmers, remain. Thus, it is not possible to fully optimize the instrument mix in accordance with the smart regulation requirements in Flanders’ forest expansion policy at this moment. However, as continuity or incremental change is characteristic of most public policy, this does not mean that the suggested changes will be impossible in the near future, especially with the changing character of the rural space.