Optimal investment and consumption with return predictability and execution costs

We provide a closed-form solution to an optimal investment and consumption problem for a constant absolute risk aversion (CARA) agent, who faces execution costs when trading correlated risky assets with return predictability. The optimal investment strategy indicates that the agent should trade gradually toward a dynamic aim portfolio, which is an adjusted Merton portfolio with modifications to account for the persistence of the return-predicting signals and the execution costs. The optimal consumption strategy is quadratic in the return-predicting signals and linear in the agent's wealth. Our numerical studies show that the execution costs diminish the importance of asset return predictability on the agent's optimal investment strategy, thereby confirming the conjecture raised by Liu (2004). In addition, the presence of the intermediate consumption leads to a more aggressive aim portfolio than the case without consumption.     

Why do companies issue convertible bond loans? An empirical analysis for the Canadian market

To identify issuer motives, we study the determinants of announcement effects of convertible debt issues in the Canadian market. Classified into equity‐ and debt‐like, wealth effects are significantly more negative for equity‐like convertible bond issuers. Equity‐like convertibles are significantly negatively affected by agency costs of equity. However, agency costs of debt have no significant effect on debt‐like convertibles. Consistent with Stein (1992), this suggests convertibles in particular represent a substitute for equity. Moreover, convertible debt offers announced by income trusts experience significantly less negative wealth effects than offers by nontrusts—a finding explained by a more debt‐like convertible design, very low agency costs of equity in case of income trusts, or both. Copyright © 2008 ASAC. Published by John Wiley & Sons, Ltd.     

SIMULATION-BASED PORTFOLIO OPTIMIZATION FOR LARGE PORTFOLIOS WITH TRANSACTION COSTS

We consider a portfolio optimization problem where the investor's objective is to maximize the long-term expected growth rate, in the presence of proportional transaction costs. This problem belongs to the class of stochastic control problems with singular controls , which are usually solved by computing solutions to related partial differential equations called the free-boundary Hamilton–Jacobi–Bellman (HJB) equations . The dimensionality of the HJB equals the number of stocks in the portfolio. The runtime of existing solution methods grow super-exponentially with dimension, making them unsuitable to compute optimal solutions to portfolio optimization problems with even four stocks. In this work we first present a boundary update procedure that converts the free boundary problem into a sequence of fixed boundary problems. Then by combining simulation with the boundary update procedure, we provide a computational scheme whose runtime, as shown by the numerical tests, scales polynomially in dimension. The results are compared and corroborated against existing methods that scale super-exponentially in dimension. The method presented herein enables the first ever computational solution to free-boundary problems in dimensions greater than three.     

隐性质量成本初探

隐性质量成本对企业经营存在着潜伏性的危害,在企业管理中处于薄弱环节。文章阐述了隐性质量成本的涵义、特征和构成,剖析了隐性质量成本的产生原因,并从会计核算和管理体系两个方面提出了控制对策。     

征税还是收费：政府的选择

税收及收费是政府收入的两种来源,二者都是政府为其提供的产品或服务而索取的补偿。从市场的角度看,政府应该采用“谁使用、谁付费”的方式,向其产品或服务的使用者合理地收费。然而,考虑到征收税费的各种交易费用,用一定程度的价格体系扭曲为代价换取交易费用的节约,或者说用税部分地替代费,可能是有效率的。进一步,两种方式的使用程度则依赖于各自交易成本的权衡。     

A new institutional approach to pro-poor agricultural development: Lessons from Asia

Dr. Naya has been one of only two instructors of a course unique to the University of Hawaii called, “The Economics of Cooperation.” He was an early observer of deliberation councils and other institutions whereby the investment coordination problem was partly solved by extra-market cooperation in the East Asian “miracle” countries. These insights contributed to The Economics of Cooperation (1992), which featured the role of government as facilitator—a theme of Hawaii State Development Planning when Dr. Naya served on the Governor’s cabinet.Reconsidering government as a facilitator, and not as a replacement for markets, is one of the primary contributions of the New Institutional Economics (NIE). This paper extends and applies the facilitation perspective to the problem of agricultural development. Policy failures are detailed and sourced to the fallacy of misplaced exogeneity. In contrast, the method of fundamental explanation, inherent in NIE, acts as a corrective to misguided interventionism that has prevented pro-poor rural development from taking place.     

On the Measurement of Changes in Product Quality in Marginal Intra-Industry Trade

There is a long established thread of the international trade literature concerned with the measurement of intra-industry trade (IIT). Two distinct strands of the literature have developed: First, measures of marginal IIT that are concerned with the adjustment implications of volume-based changes in IIT; second, measures of vertical and horizontal IIT that are concerned with quality-based differences in IIT. This paper marries the two literatures to provide a new perspective on the smooth adjustment hypothesis debate and suggests the use of the marginal product quality index, a new measure of changes in quality in matched trade changes that complements dynamic measures of volume-based IIT. JEL no.  F19     

企业绿色成本管理研究

由于没有考虑环境成本而造成产品价格扭曲和市场失灵,在环境资源恶化和批判传统会计的基础上产生了企业绿色成本管理。绿色成本管理是将企业实施绿色管理的各项活动纳入其成本核算之中。本文通过对绿色成本的概念界定及特征分析,探讨了企业尝试进行绿色成本管理的意义及有效措施。     

Civil conflict and secessions

This paper studies secessions as the outcome of conflict between regions. We study under what conditions regions will divert costly resources to fight each other over political borders. We derive the probability of secession and the amount of resources diverted to separatist conflict, and show how those variables depend on factors such as heterogeneity costs, economies of scale, relative size, and external threats. We also model civil conflict over types of government, after borders have been determined, and study how this political conflict affects the incentives to secede. This paper has been written in memory of Herschel Grossman, and owes much to his inspiration. I am grateful to Michelle Garfinkel and David Weil, who co-organized a conference in Herschel’s honor at Brown in April 2006, for their encouragement. I thank Michelle Garfinkel and an anonymous referee for useful comments and suggestions. The usual disclaimer applies.