Minimax character of the two-sample χ2-test

Abstract  We consider the problem of testing equality of the mean vectors of two multivariate normal populations when covariates are present and the covariance matrix is known. As an application of the H unt -S tein theorem it is shown that the χ²-^-test of level a maximizes, among all level a tests, the minimum power on each of the contours where the χ²-^-test has constant power. A corollary is that the χ²-^-test is most stringent level a .     

Winners, Losers, and the Nuclear-Waste Dilemma

This paper explores how property-right assignment affects social efficiency when a public program has both “public good” and “public bad” components. We show that when willingness to accept a public bad exceeds the willingness to pay, the net benefit is unambiguously lower when the property right supports the status quo institutional structure. Thus, Kaldor–Hicks efficiency tests tend to favor public programs and mitigation over the status quo even when mitigation negatively affects another group. To illustrate the result, we develop social-cost estimates for moving nuclear waste from current temporary-storage facilities to a permanent central repository at Yucca Mountain, NV, USA. For a representative city with a population of 226,195, the present value of the external cost of shipping waste is $1.42 billion when those living near temporary nuclear-waste storage facilities are assigned the property right to “health and safety.” That number swells to $5.95 billion when those living near the transport route are assigned the property right. Thus, property-right assignment affects the efficient level of nuclear-waste, and thus nuclear energy, produced.     

On the pricing of forward starting options in Heston’s model on stochastic volatility

We consider the problem of pricing European forward starting options in the presence of stochastic volatility. By performing a change of measure using the asset price at the time of strike determination as a numeraire, we derive a closed-form solution within Hestons stochastic volatility framework applying distribution properties of the volatility process. In this paper we develop a new and more suitable formula for pricing forward starting options. This formula allows to cover the smile effects observed in a Black-Scholes environment, in which the extreme exposure of forward starting options to volatility changes is ignored.Received: July 2004, Mathematics Subject Classification (2000): 91B28, 60G44, 60H30, 60E10JEL Classification: G13It is a pleasure to thank the anonymous referee for his valuable comments and suggestions on this paper. Furthermore, we would like to thank Holger Kraft, University of Kaiserslautern, and Alexander Giese, HypoVereinsbank AG Munich, for fruitful discussions and suggestions.     

An axiomatic approach to \boldsymbol{\varepsilon}-contamination

Summary.  Suppose that an economic agent is 100% certain that uncertainty she faces is characterized by a particular probability measure, but that she has a fear that, with 100% chance, her conviction is completely wrong and she is left perfectly ignorant about the true measure in the present as well as in the future. This situation is often called -contamination of confidence. The purpose of this paper is to provide a simple set of behavioral axioms under which the decision-makers preference is represented by the Choquet expected utility with the -contamination of confidence.Received: 25 November 2002, Revised: 15 November 2004, JEL Classification Numbers:   D81. Correspondence to: Hiroyuki OzakiWe are grateful to an anonymous referee. The referees comments greatly improved the exposition of the paper. The work reported here is partially supported by a grant from the Economic and Social Research Insitute, the Cabinet Office, the Government of Japan.     

Bayesian selection of technology assumptions for the transformation from supply-use to input–output tables

ABSTRACT

In the construction of input–output models from supply-use tables, technology assumptions disambiguate how an industry uses inputs in the production recipe of multiple outputs. This paper uses Bayes' theorem to select technology assumptions, taking into account empirical observations. The paper presents a formulation to explore hybrids between product and industry technology assumptions in product-by-product tables. We then present Markov chain Monte-Carlo techniques to implement the Bayesian method for selecting technology assumptions. We apply the method in a case study using Eurostat supply-use tables of 2004 and 2005, exhibiting a volume of secondary products of less than 13%, and 59 products and industries per country. The results show that the choice of technology is not important, given that there is no strong evidence in favour of any of them.     

Is it the economic policy,stupid? Economic policy,political parties & the gubernatorial incumbent advantage

Incumbent politicians have a well-known advantage in seeking re-election. Using the Economic Freedom of North America dataset, we examine how changes in economic policy during an incumbent governor's tenure influence the probability of losing their re-election bid. Put simply, does economic policy matter for the incumbent advantage? The results suggest that a decrease in economic freedom increases the probability of an incumbent loss, regardless of the governor's party. A decomposition analysis indicates that these results are primarily driven by the government spending sub-index. Furthermore, a more granular analysis suggests that: (1) increases in government consumption spending and government employment are associated with a lower probability of re-election among Democratic incumbent governors, but a higher probability among Republicans; (2) increases in transfer payments relative to personal income reduce the likelihood of re-election, regardless of party; and (3) among Republican incumbents, increases of income taxation and of top marginal tax rates are associated with a higher and lower, respectively, probability of losing re-election. Finally, controlling for a variety of demographic, political and socioeconomic factors, we find that high unemployment increases the probability that an incumbent loses re-election, while increasing net population migration reduces it.     

废墟中的景观:新制度主义批判

在资产阶级经济学的各个分支中,新制度经济学可算是"此物最相思",但实际情况并非如此。所谓的古典主义—新古典主义—新制度主义,乃是资产阶级本体论意义上的虚假理论发展之路;其"虚假"就在于本体论工作预设,在于逻辑推理所依据的本体的虚假性,这样才有社会物理学→数学物理学→现象学的社会物理学的体系更迭性和知识不断翻新,而其中的话语是高度一致的物象学科(工作)语言。这种资产阶级理论为社会主观批判实践提供了"漫画",创立工作范型,巧设了批判模本,而要求研究对象规定的真正意义的去魅。     

A constraint-free approach to optimal reinsurance

Reinsurance is available for a reinsurance premium that is determined according to a convex premium principle H. The first insurer selects the reinsurance coverage that maximizes its expected utility. No conditions are imposed on the reinsurer's payment. The optimality condition involves the gradient of H. For several combinations of H and the first insurer's utility function, closed-form formulas for the optimal reinsurance are given. If H is a zero utility principle (for example, an exponential principle or an expectile principle), it is shown, by means of Borch's Theorem, that the optimal reinsurer's payment is a function of the total claim amount and that this function satisfies the so-called 1-Lipschitz condition. Frequently, authors impose these two conclusions as hypotheses at the outset.     

Continuous-time American foreign exchange option pricing model

The flexibility of American foreign exchange option at exertion time can be measured by time value of capital. The paper develops a continuous-time American foreign exchange option pricing model using Black-Scholes currency model, CMG theorem of measure change and Ito calculus. The model is more simple and reliable than others.