Average drawdown risk reduction and risk tolerances

We investigate the effects of average drawdown risk reduction on US mutual funds. Due to numerous evidence of the asymmetric distribution of portfolio returns, the asymmetric risk measures have extensively been used in risk management during the recent decades with extensive usages on the n-degree lower partial moment (LPM) methodology. Unlike the previous literature, we use the n-degree average drawdown risk measure, which is a special case of n-degree LPM, to empirically investigate the impacts of n-degree average drawdown risk reduction on the risk tolerances generated by the US mutual funds.The evidence shows that skewness does not impose any significant problem on the n-degree A-DRM model. Moreover, the effect of changing the tolerances of average drawdown risk in the n-degree A-DRM models is a reduction in the fund returns. The n-degree CA-DRM optimization model reduces investors׳ risk more than other models. Thus, the A-DRM can be accommodated with risk-averse investors׳ approach. The efficient set of mean–variance choices from the investment opportunity set, as described by Markowitz, shows that the n-degree CA-DRM algorithms create this set with lower risk than other algorithms. It implies that the mean–variance opportunity set generated by the n-degree CA-DRM creates lower risk for a given return than covariance and CLPM.     

Characterization of the Average Tree solution and its kernel

In this article, we study cooperative games with limited cooperation possibilities, represented by a tree on the set of agents. Agents in the game can cooperate if they are connected in the tree. We first derive direct-sum decompositions of the space of TU-games on a fixed tree, and two new basis for these spaces of TU-games. We then focus our attention on the Average (rooted)-Tree solution (see Herings et al. (2008)). We provide a basis for its kernel and a new axiomatic characterization by using the classical axiom for inessential games, and two new axioms of invariance called Invariance with respect to irrelevant coalitions and Weighted addition invariance on bi-partitions. We also solve the inverse problem for the Average (rooted)-Tree solution.     

The price of anarchy of serial, average and incremental cost sharing

We compute the price of anarchy (PoA) of three familiar demand games, i.e., the smallest ratio of the equilibrium to efficient surplus, over all convex preferences quasi-linear in money. For any convex cost, the PoA is at least in the average and serial games, where n is the number of users. It is zero in the incremental game for piecewise linear cost functions. With quadratic costs, the PoA of the serial game is , and for the average and incremental games. This generalizes if the marginal cost is convex or concave, and its elasticity is bounded.      

Foreign exchange risk and the predictability of carry trade returns

This paper provides an empirical investigation of the time-series predictive ability of foreign exchange risk measures on the return to the carry trade, a popular investment strategy that borrows in low-interest currencies and lends in high-interest currencies. Using quantile regressions, we find that higher market variance is significantly related to large future carry trade losses, which is consistent with the unwinding of the carry trade in times of high volatility. The decomposition of market variance into average variance and average correlation shows that the predictive power of market variance is primarily due to average variance since average correlation is not significantly related to carry trade returns. Finally, a new version of the carry trade that conditions on market variance generates performance gains net of transaction costs.     

Nonparametric quantile regression analysis of R&D-sales relationship for Korean firms

This paper applies the nonparametric quantile regression estimation procedure to the analysis of the innovation-firm size relationship using Korean manufacturing firms data. Due to the high asymmetric distribution of R&D expenditure, the mean regression does not capture properly the stylized facts of R&D behavior; hence it underestimates the sales elasticity. Comparing the parametric estimates and nonparametric estimates allows us to see that there exists a nonlinear relationship in innovative activity and sales. Dividing the data into three groups according to the sales volume, the elasticity in the medium-sized firms is the biggest for scientific firms. This result conforms that the findings of Scherer (1965) coincide with findings from Korean manufacturing firms data in the sense that R&D expenditure tends to increase faster than firm size with size up to a point and then more slowly among larger firms. For the non-scientific firms, it steadily increases showing increasing returns to scale in innovative activity in large firms.     

The effects of standardized tax rates,average tax rates,and the distribution of income on tax progressivity

This study examines the changes in US individual income tax progressivity over the 1986–2003 period using the indexes developed by [Kakwani, N.C., 1976. Measurement of tax progressivity: An international comparison. Economic Journal 87(March), 71–80]. Although progressivity over this time frame has generally been studied in the literature, we provide additional insights by decomposing the changes in index values to account for the effects of concurrent changes in the standardized tax rates, average tax rates, and the income distribution. The decomposition should prove to be particularly useful when different summary indexes lead to conflicting conclusions about progressivity changes, as is often the case. From a policy standpoint, we show that it is the standardized tax rates, a derivative of the legislated tax rates, which need to be monitored and managed to offset the negative progressivity effects of increasing before-tax income inequality.     

Empirical likelihood for average derivatives of hazard regression functions

In this paper, we propose an empirical likelihood ratio method for the inference about average derivatives in semiparametric hazard regression models for competing risks data. Empirical loglikelihood ratio for the vector of the average derivatives of a hazard regression function is defined and shown to be asymptotically chi-squared with degrees of freedom equal to the dimension of covariate vector. Monte Carlo simulation studies are presented to compare the empirical likelihood ratio method with the normal-approximation-based method.     

Kleine Bemerkung zum Zinsfussproblem

Abstract

In den Mitteilungen schweizerischer Versieherungsmathematiker ¹ H. Christen: Das Zinsfussproblem bei der Leibrente (M. d. V. sch. V., Heft 25, 1930). hat H. CHRISTEN eine eingehende Arbeit über das Zinsfussproblem veröffentlieht, zu dem er eine sehr gute Lösung beigetragen hat. Die Hauptergebnisse seiner Untersuehullg hat er aueh in der Skandinavisk Aktuarietidskrift ² H. Christen: Das Zinsfussproblem bei der Leibrente (M. d. V. sch. V., Heft 25, 1930). mitgeteilt.     

Economics of biodiversity and sustainable fisheries management

Marine ecosystems are complex, and many marine species are ecologically interdependent. As a result, losing a species could produce a cascading effect on other species. Fishery scientists advocate an ecosystem-based approach to fishery management to meet long-term sustainable goals. This paper models the complex interrelationships among species and the relationship between biomass growth and phenotypic diversity. We found that the equilibrium stock and catch/yield levels are overestimated when the diversity is not accounted for. Consequently, if species are diverse, fishery policy based on a single fishery management could overestimate catch potentials and potentially results in biological overfishing and stock collapse.