International day-of-the-week effects: An empirical examination of iShares

Ample evidence suggests that day-of-the-week patterns exist in US and foreign equity returns. We extend the evidence on the day-of-the-week effect in equity returns by examining the return patterns of iShares for 17 countries and Standard and Poor's Depository Receipts (SPDRs) to establish whether previously observed predictabilities in equity returns are reflected in iShares' returns. We utilize a split sample to examine return patterns and develop trading rules using the initial subsample. We then test those trading rules out of sample. Empirical results reveal that iShares exhibit day-of-the-week return patterns that can be exploited by informed traders.     

Downstream benthic responses to small dam removal in a coldwater stream

Increased awareness of the negative effects of dams combined with an aging dam infrastructure has led to an increase in dam removals. However, ecological responses of downstream biota to such actions are poorly understood. We examined the influence of a pair of small dam removals on downstream periphyton and macroinvertebrates in Boulder Creek, WI (USA). The dams were 180 m apart and both were removed on 9 July 2003. We monitored algae and macroinvertebrates as well as habitat characteristics for approximately 2 months before and after the removals upstream and downstream from the two dams, and continued our observations over a similar period (mid‐May to mid‐July) the following summer. After the removals, an initial release of sediment significantly increased the proportion of fine sediments in the downstream reach and buried benthic substrate. This burial led to a 60% reduction in chlorophyll in the downstream reach the week following removal, while concentrations increased in the upstream reference reach. Similarly, macroinvertebrate densities 2 weeks post‐removal were lower relative to pre‐removal densities and were associated with declines of ephemeropterans, trichopterans and dipterans. Examination of Trichoptera genera demonstrated substantial changes in this assemblage associated with diminished densities of the formerly dominant genus Brachycentrus. Algal and invertebrate populations increased in the weeks after the dam removal, but did not reach densities similar to the upstream reference reach. In the following year, both periphyton and invertebrate densities were lower in the downstream reach, suggesting a long‐term effect of the removal. Thus, effects of the dam removal were alternatively positive or negative over time, and indicate that the time scale of consideration has a strong effect on the interpretation of the consequences of this management activity. Copyright © 2008 John Wiley & Sons, Ltd.     

Derivatives Usage and Financial Risk Management in Large and Small Economies: A Comparative Analysis

The objective of this paper is to expand and update previous New Zealand — based surveys in order to compare and contrast risk management practices of firms in the small, foreign trade-dependent economy of New Zealand to those of firms in the considerably larger, more developed US, UK, and German markets. This survey examines patterns of usage, reasons and objectives for derivatives use, and reporting and control procedures and finds that the practice of hedging with derivative instruments among New Zealand firms appears to be evolving as global markets become more integrated. We find that the percentage of firms involved in hedging, both large and small, has grown since the last New Zealand surveys, and that New Zealand firms have many of the same reasons and objectives for using derivatives as firms in the much larger American and European economies. We also find that the focus on control and reporting derivatives transactions in New Zealand is similar to that of firms in the other countries and appears to have strengthened since previous surveys.     

THE RELATIONSHIP BETWEEN LARGE FISCAL ADJUSTMENTS AND SHORT-TERM OUTPUT GROWTH UNDER ALTERNATIVE FISCAL POLICY REGIMES

A small but growing body of literature searches for evidence of non-Keynesian effects of fiscal contractions. That is, some evidence exists that large fiscal contractions stimulate short-run economic activity. This article continues that research effort by systematically examining the effects (if any) of unusual fiscal events—either non-Keynesian results within a Keynesian model or Keynesian results within a neoclassical model—on short-run economic activity. The authors examine this issue within three separate models—a St. Louis equation, a Hall-type consumption equation, and a growth accounting equation. The empirical findings do not provide strong systematic support for the view that unusually large fiscal contractions/expansions reverse the effects of normal fiscal events. Moreover, the authors find only limited evidence that trigger points are empirically important.     

Knowledge inventories and managerial myopia

Managing knowledge inventories is the central issue posed by the knowledge‐based view of the firm. Knowledge inventory management involves acquiring, retaining, deploying, idling, and abandoning technologies. Because of future opportunities to switch technologies over time, managing knowledge inventories requires valuing flexibility. Real option theory presents normative conceptual frameworks and pricing formulas for valuing flexibility. These formulas assume managers consider the full time horizon of technologies as well as all available substituting and complementary technologies. This study considers the implications of violations of these assumptions (i.e., temporal and spatial myopia) for managers' technology investment decisions. Specifying decision criteria under alternative forms of myopia reveals possible sources and patterns of technology management decision errors. This study highlights the cognitive sources of path dependencies and organizational rigidities. Copyright © 2002 John Wiley & Sons, Ltd.     

FOSTERING SUSTAINABLE COMPLEXITY IN THE MICROFINANCE INDUSTRY: WHICH WAY FORWARD?

The microfinance movement has gained tremendous popularity over the past 30 years, but it is still far from meeting its full potential. The industry stands at a crossroads between increased commercialisation and increased philanthropic aid. Standard economic discourse does little to resolve the debate. F. A. Hayek's concept of the'extended order' sheds new light on how we might understand the future development of microfinance.     

A new approach to managerial selection

There are two keys to picking the right man for a job: knowing the results the man has achieved on past jobs (not only the names of those jobs) and knowing the objectives of the job to be filled. If he has in the past achieved the results the present job is aiming for—he's the right man.     

Decision-making under uncertainty for capital budgeting and hiring

Most business decisions are not merely risky but are subject to uncertainty. Different individuals estimate different measures of merit. It is shown that the traditional procedure of ranking the alternatives by their estimated measure of merit and then choosing the highest ranked alternative frequently gives the wrong answer even where the estimates are unbiased. The argument will be made using a simple decision tree. The effect will be shown to be especially serious where there is competition, direct or indirect, between the alternatives.     

Designing Effective Graphs

Abstract

Actuaries, like other business professionals, communicate quantitative ideas graphically. Because the process of reading, or decoding, graphs is more complex than reading text, graphs are vulnerable to abuse. To underscore this vulnerability, we give several examples of commonly encountered graphs that mislead and hide information. To help creators design more effective graphs and to help viewers recognize misleading graphs, this article summarizes guidelines for designing graphs that show important numerical information. When designing graphs, creators should:

• (1) Avoid chartjunk

• (2) Use small multiples to promote comparisons and assess change

• (3) Use complex graphs to portray complex patterns

• (4) Relate graph size to information content

• (5) Use graphical forms that promote comparisons

• (6) Integrate graphs and text

• (7) Demonstrate an important message

• (8) Know the audience.

Some of these guidelines for designing effective graphs, such as (6), (7) and (8), are drawn directly from principles for effective writing. Others, such as guidelines (3), (4) and (5), come from cognitive psychology, the science of perception. Guidelines (1) and (2) have roots both in effective writing and in graphical perception. For example, the writing principle of brevity demonstrates how eliminating pseudo three-dimensional perspectives and other forms of chartjunk improve graphs. As another example, the writing principle of parallel structure suggests using small multiple variations of a basic graphical form to visualize complex relationships across different groups and over time.

To underscore the scientific aspect of graphical perception, we examine the process of communicating with a graph, beginning with a sender’s interpretation of data and ending with a receiver’s interpretation of the graph. In keeping with scientific tradition, this article discusses several studies in the literature on the effectiveness of graphs.

We conclude that the actuarial profession has many opportunities to improve its practice, making communication more efficient and precise.