How many bad apples are in a bunch? An experimental investigation of perceived pesticide residue risks

Subjective risks of having contaminated apples elicited via the Exchangeability Method (EM) are examined in this study. In particular, as the experimental design allows us to investigate the validity of elicited risk measures, we examine the magnitude of differences between valid and invalid observations. In addition, using an econometric model, we also explore the effect of consumers’ socioeconomic status and attitudes toward food safety on subjects’ perceptions of pesticide residues in apples. Results suggest first, that consumers do not expect an increase in the number of apples containing only one pesticide residue, but, rather, in the number of those apples with traces of multiple residues. Second, we find that valid subjective risk measures do not significantly diverge from invalid ones, indicative of little effect of internal validity on the actual magnitude of subjective risks. Finally, we show that subjective risks depend on age, education, a subject’s ties to the apple industry, and consumer association membership.

Econometric analysis of microscopic simulation models

Microscopic simulation models are often evaluated based on visual inspection of the results. This paper presents formal econometric techniques to compare microscopic simulation (MS) models with real-life data. A related result is a methodology to compare different MS models with each other. For this purpose, possible parameters of interest, such as mean returns, or autocorrelation patterns, are classified and characterized. For each class of characteristics, the appropriate techniques are presented. We illustrate the methodology by comparing the MS model developed by He and Li [J. Econ. Dynam. Control, 2007, 31, 3396-3426, Quant. Finance, 2008, 8, 59-79] with actual data.

Testing of a Market Fraction Model and Power-law Behaviour in the DAX 30

This paper tests a simple market fraction asset pricing model with heterogeneous
agents. By selecting a set of structural parameters of the model through a systematic procedure, we show that the autocorrelations (of returns, absolute returns and squared returns) of the market fraction model share the same pattern as those of the DAX 30. By conducting econometric analysis via Monte Carlo simulations, we characterize these power-law behaviours and find that estimates of the power-law decay indices, the (FI)GARCH parameters, and the tail index of the selected market fraction model closely match those of the DAX 30. The results strongly support the explanatory power of the heterogeneous agent models.