Cover's universal portfolio,stochastic portfolio theory,and the numéraire portfolio

Cover's celebrated theorem states that the long‐run yield of a properly chosen “universal” portfolio is almost as good as that of the best retrospectively chosen constant rebalanced portfolio. The “universality” refers to the fact that this result is model‐free, that is, not dependent on an underlying stochastic process. We extend Cover's theorem to the setting of stochastic portfolio theory: the market portfolio is taken as the numéraire, and the rebalancing rule need not be constant anymore but may depend on the current state of the stock market. By fixing a stochastic model of the stock market this model‐free result is complemented by a comparison with the numéraire portfolio. Roughly speaking, under appropriate assumptions the asymptotic growth rate coincides for the three approaches mentioned in the title of this paper. We present results in both discrete and continuous time.     

The Theory of Planned Behavior in the Context of a Food and Drink Event: A Case Study

The present case study seeks to contribute to the culinary event management literature, investigating key motivators among participants to the Derbyshire Food and Drink Fair, United Kingdom. A questionnaire, which was partly based on predictors related to the theory of planned behavior was designed and distributed; 308 usable responses were collected. The validity and impact of attitude toward the behavior, perceived behavioral control, and subjective norms on behavioral intention was confirmed. Additionally, several motivators, such as “commitment and perceived importance,” “consumption and entertainment,” “attendance and discovery,” and “joining others” were identified as key factors. Finally, statistically significant differences were noticed among various participating groups, namely, in terms of age, gender, or distance traveled to the event. The findings have important implications for event managers and organizers, in terms of promotion, and addressing the needs and wants of various segments of food festival attendees.     

Indirect taxation with shadow cost of public funds in mixed oligopoly

We adopt a mixed oligopoly model, where a state-owned welfare-maximizing public firm competes with a profit-maximizing private firm, to compare the welfare effects of the specific and ad valorem tax in the presence of the shadow cost of public funds. Following the assumption of most previous literature that total output is constant under specific and ad valorem taxation, we find that, when the shadow cost of public funds exists, the tax policy must be adjusted according to the privatization level of the public firm; if the privatization level is low (medium, high), the government needs to adopt ad valorem (specific, ad valorem) tax. Moreover, the private firm will earn a higher (lower) profit under ad valorem tax than under specific tax, if the public firm is not fully privatized and the shadow cost of public funds is high (low).     

Instructional Manipulation Checks: A longitudinal analysis with implications for MTurk

Instructional Manipulation Checks (IMCs) assess respondent behavior by, for example, asking participants not to answer a trick question. We find IMCs can be used to detect problematic response behavior in longitudinal surveys. This is important because a Latent Class Analysis based on IMC-failure in the two reported studies reveals that between 9% and 12% of respondents can be labelled Inattentive Stayers at the first survey-wave and between 13% and 17% at the third wave. The tendency of Inattentive Stayers to remain in the panel is particularly relevant for online panel services such as MTurk, with workers participating in many surveys over longer time-periods. We find IMC-failure to be mitigated by a warning to respondents that their attention will be checked early in the survey, but not by repeated exposure to IMCs, or a timer leaving questions on the screen longer. Respondent personality also plays a role in IMC-failure, which implies persistency of undesirable respondent behavior.     

Corporate political strategies and firm performance: indications of firm‐specific benefits from personal service in the U.S. government

Firms employ a variety of political strategies (e.g., lobbying, contributions) in an attempt to gain influence or access to the public policy process. A variety of benefits may accrue to firms that are successful in creating a linkage with the government: information, access, influence, reduced uncertainty and transaction costs, etc. However, the direct benefits of such strategies are difficult to observe. One political strategy is studied here—personal service (having a firm representative serve in a political capacity). Event‐study methodology results show that such linkages with the government positively affect firm value. These findings indicate that firm‐specific benefits may result from political strategies. Copyright © 1999 John Wiley & Sons, Ltd.     

Entrenched management,capital structure changes and firm value

The relationship between managerial share ownership and the firm’s change in leverage around a security issuance is examined. We find that entrenched managers are not more likely to issue equity, however they do affect lower leverage by choosing debt issuances which are smaller and equity issuances that are larger than those chosen by managers that are not entrenched. The magnitude of the decline in leverage that occurs from before the issuance to after the issuance is positively related to managerial share ownership. In addition, this relationship is confined to only the “entrenchment” range of managerial share ownership. The market reacts negatively to an issuance announcement when managerial share ownership is high.

Foreign competition and optimal privatization with excess burden of taxation

We examine in a mixed oligopoly setting how foreign competition and the excess burden of taxation will affect privatization policy in the presence of strategic tax/subsidy policies. We show that in the presence of excess burden of taxation with foreign competitors, output subsidy coupled with import tariff and partial privatization is adopted to improve the social welfare. However, if the excess burden of taxation is relatively large, the government may switch to use production tax coupled with tariff policy and partial privatization to improve the social welfare.     

Neighborhood price externalities of foreclosure rehabilitation: an examination of the Neighborhood Stabilization Program

The federally funded, HUD-administered Neighborhood Stabilization Program (NSP) was enacted in the wake of the financial recession to mitigate the underlying adverse neighborhood effects associated with foreclosed properties. We examined the neighborhood price impacts of NSP-funded foreclosure rehabilitation undertaken by Habitat for Humanity in Dallas County, Texas, using a difference-in-difference framework. Foreclosure rehabilitation projects in Dallas County produced an average 15% increase in neighborhood home prices that sold up to 30 months after the rehabilitated property sale and within 0.1 miles of the rehabilitated property. Foreclosure rehabilitation that involved significant exterior repairs was associated with the largest estimated effect sizes. Results suggest that NSP funding in Dallas County effectively targeted homes that had the potential to have the most severe neighborhood impacts and that rehabilitation was an effective means of reversing neighborhood price externalities associated with blighted foreclosed properties.     

Currency returns, market regimes and behavioral biases

Covered interest rate parity assumes that there is no risk premium on the hedged returns on currencies. However, empirical evidence indicates that risk premiums are not identically zero, and this is referred to as the forward premium puzzle. We show that there exist market regimes, within which behavioral biases affect decisions, and a type of parity holds within regimes. The foreign exchange market switches between regimes where there is a premium. This paper presents various tests for the hypotheses of currency regimes and regime dependent risk premiums. Based on the existence of regimes, a diversified currency portfolio is created with a mean-variance criterion. Using the Federal Exchange Rate Index as a proxy for the currency benchmark and the U.S. T-Bill as the risk free asset, the similarity between the benchmarks and the implied equilibrium hedged and unhedged portfolios provides evidence for regimes and decision bias. Within each regime interest rate parity is appropriate for modeling currency returns.     

Explaining forecasting bias: The case of real exchange rate variance

Recent tests of the rational expections hypothesis (REH), based on the assumption that agents are risk-neutral, have yielded conflicting results when applied to foreign exchange markets. Here a two-stage procedure which does not assumej risk-neutrality is derived from a model of a utility-maximizing importer who incurs an adjustment cost if he changes his import order. Although a short-run test (based on aggregate imports) leads to rejection of the REH in the majortity of cases, a longer-ren test (based on manchinery imports) is more favourable to the null huypthesis. The observed shot-run tendency to, in effect, ignore low levels of real exchange rate variation is found to be more likely when bilateral rates have remained relatively stable, when the importingj economy is relatively closed, or when governments have announced policies of intervention to stabilize bilateral rates.