Adapting and testing the Fama and French model,with some variations of company characteristics

We examine whether the Fama and French (1992) (F&F) model can be adapted to become a more versatile and flexible tool, capable of incorporating variations of company characteristics in a more dynamic form. For this, the risk factors are reconstructed at the end of each reading of monthly data. We argue that, over time, the evaluation of a company may change as a result of variations in its market price, size or book price, and we are aware that the F&F model does not accurately reflect these dynamics. Our results show that the adapted model is able to capture the behaviour of a greater number of stocks than the original F&F model and risk factors are more significant when building them through our procedure. In addition, we carry out these adaptations during a period of instability in financial markets.     

Network analysis of exchange data: interdependence drives crisis contagion

In this paper, we examine linear and nonlinear co-movements that appear in the real exchange rates of a group of 28 developed and developing countries. The matrix of Pearson correlation and Phase Synchronous coefficients have been used in order to construct a topology and hierarchy of countries by using the Minimum Spanning Tree (MST). In addition, the MST cost and global correlation coefficients have been calculated to observe the co-movements’ dynamics throughout the time sample. By comparing Pearson and Phase Synchronous information, a new methodology is emphasized; one that can uncover meaningful information pertaining to the contagion economic issue and, more generally, the debate surrounding interdependence and/or contagion in financial time series. Our results suggest some evidence of contagion in the Asian currency crises; however, this contagion is driven by previous and stable interdependence.     

Pricing CIR Yield Options by Conditional Moment Matching

We propose an approximation scheme for the pricing of yield options in the CIR model using conditional moment matching based on the gamma and lognormal distributions. This method is fast and simple to implement, and it shows a high degree of accuracy without being subject to the numerical instabilities that can be encountered with more sophisticated approaches.     

Model-Based and Nonparametric Approaches to Clustering for Data Compression in Actuarial Applications

Clustering is used by actuaries in a data compression process to make massive or nested stochastic simulations practical to run. A large data set of assets or liabilities is partitioned into a user-defined number of clusters, each of which is compressed to a single representative policy. The representative policies can then simulate the behavior of the entire portfolio over a large range of stochastic scenarios. Such processes are becoming increasingly important in understanding product behavior and assessing reserving requirements in a big-data environment. This article proposes a variety of clustering techniques that can be used for this purpose. Initialization methods for performing clustering compression are also compared, including principal components, factor analysis, and segmentation. A variety of methods for choosing a cluster's representative policy is considered. A real data set comprising variable annuity policies, provided by Milliman, is used to test the proposed methods. It is found that the compressed data sets produced by the new methods, namely, model-based clustering, Ward's minimum variance hierarchical clustering, and k-medoids clustering, can replicate the behavior of the uncompressed (seriatim) data more accurately than those obtained by the existing Milliman method. This is verified within sample by examining location variable totals of the representative policies versus the uncompressed data at the five levels of compression of interest. More crucially it is also verified out of sample by comparing the distributions of the present values of several variables after 20 years across 1000 simulated scenarios based on the compressed and seriatim data, using Kolmogorov-Smirnov goodness-of-fit tests and weighted sums of squared differences.     

Leisure consumption in cricket: devising a model to contrast forms and time preferences

A large body of research exists on the motivation to follow sporting and leisure events. However, the main focus of these studies has been on those who attend events (direct consumers). Little research has extended the investigation of sporting and leisure consumption to include those who consume sport by other means such as the media (indirect consumers) and their scheduling preferences. With the growth of indirect consumption and its importance from both a finance and marketing perspective, this is an area of increasing interest in sports and leisure management. The purpose of this paper is to examine the consumption of sport in the UK and time and form preferences of spectators. We develop and validate a four-dimensional model to measure spectators’ consumption, empirically testing it using 632 questionnaires in the context of cricket. Our findings show that although there was a stronger preference for direct consumption, there was a greater engagement in indirect consumption forms. A number of these activities, such as following the sport on the Internet are peripheral to the actual game and complement consumption of the match. A further finding of the research was that weekend consumption was most favoured by those who were more involved in the sport as club members. They expressed a stronger preference for Friday evening and Sunday scheduling for two different competitions.     

Improving public trust in the voluntary sector: an empirical analysis

Public trust and confidence in the voluntary sector continues to be at the heart of the government's new policy agenda. A number of initiatives are currently under way to review how trust and confidence could be bolstered. In this study the authors review the findings of a major new study of how donors feel about voluntary organisations and the factors that drive trust therein. Managerial and public policy recommendations are offered in the light of the findings. Copyright © 2002 Henry Stewart Publications