60 resultados para Risk and loss functions


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Preference reversals are frequently observed in the lab, but almost all designs use completely transparent prospects, which are rarely features of decision making elsewhere. This raises questions of external validity. We test the robustness of the phenomenon to gambles that incorporate realistic ambiguity in both payoffs and probabilities. In addition, we test a recent explanation of preference reversals by loss aversion, which would also restrict the incidence of reversals outside the lab. According to this account, reversals occur largely because the valuation task endows subject with a gamble, activating loss aversion. This contrasts with the choice task, where the reference point is pre-experiment wealth. We test this explanation by holding the reference point constant. Our evidence suggests that reversals are only slightly diminished with ambiguity. We find no evidence supporting their explanation by loss aversion.

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Purpose – This paper aims to explore the nature of the emerging discourse of private climate change reporting, which takes place in one-on-one meetings between institutional investors and their investee companies. Design/methodology/approach – Semi-structured interviews were conducted with representatives from 20 UK investment institutions to derive data which was then coded and analysed, in order to derive a picture of the emerging discourse of private climate change reporting, using an interpretive methodological approach, in addition to explorative analysis using NVivo software. Findings – The authors find that private climate change reporting is dominated by a discourse of risk and risk management. This emerging risk discourse derives from institutional investors' belief that climate change represents a material risk, that it is the most salient sustainability issue, and that their clients require them to manage climate change-related risk within their portfolio investment. It is found that institutional investors are using the private reporting process to compensate for the acknowledged inadequacies of public climate change reporting. Contrary to evidence indicating corporate capture of public sustainability reporting, these findings suggest that the emerging private climate change reporting discourse is being captured by the institutional investment community. There is also evidence of an emerging discourse of opportunity in private climate change reporting as the institutional investors are increasingly aware of a range of ways in which climate change presents material opportunities for their investee companies to exploit. Lastly, the authors find an absence of any ethical discourse, such that private climate change reporting reinforces rather than challenges the “business case” status quo. Originality/value – Although there is a wealth of sustainability reporting research, there is no academic research on private climate change reporting. This paper attempts to fill this gap by providing rich interview evidence regarding the nature of the emerging private climate change reporting discourse.

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Purpose – This paper aims to explore the nature of the emerging discourse of private climate change reporting, which takes place in one-on-one meetings between institutional investors and their investee companies. Design/methodology/approach – Semi-structured interviews were conducted with representatives from 20 UK investment institutions to derive data which was then coded and analysed, in order to derive a picture of the emerging discourse of private climate change reporting, using an interpretive methodological approach, in addition to explorative analysis using NVivo software. Findings – The authors find that private climate change reporting is dominated by a discourse of risk and risk management. This emerging risk discourse derives from institutional investors' belief that climate change represents a material risk, that it is the most salient sustainability issue, and that their clients require them to manage climate change-related risk within their portfolio investment. It is found that institutional investors are using the private reporting process to compensate for the acknowledged inadequacies of public climate change reporting. Contrary to evidence indicating corporate capture of public sustainability reporting, these findings suggest that the emerging private climate change reporting discourse is being captured by the institutional investment community. There is also evidence of an emerging discourse of opportunity in private climate change reporting as the institutional investors are increasingly aware of a range of ways in which climate change presents material opportunities for their investee companies to exploit. Lastly, the authors find an absence of any ethical discourse, such that private climate change reporting reinforces rather than challenges the “business case” status quo. Originality/value – Although there is a wealth of sustainability reporting research, there is no academic research on private climate change reporting. This paper attempts to fill this gap by providing rich interview evidence regarding the nature of the emerging private climate change reporting discourse.

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A holistic perspective on changing rainfall-driven flood risk is provided for the late 20th and early 21st centuries. Economic losses from floods have greatly increased, principally driven by the expanding exposure of assets at risk. It has not been possible to attribute rain-generated peak streamflow trends to anthropogenic climate change over the past several decades. Projected increases in the frequency and intensity of heavy rainfall, based on climate models, should contribute to increases in precipitation-generated local flooding (e.g. flash flooding and urban flooding). This article assesses the literature included in the IPCC SREX report and new literature published since, and includes an assessment of changes in flood risk in seven of the regions considered in the recent IPCC SREX report—Africa, Asia, Central and South America, Europe, North America, Oceania and Polar regions. Also considering newer publications, this article is consistent with the recent IPCC SREX assessment finding that the impacts of climate change on flood characteristics are highly sensitive to the detailed nature of those changes and that presently we have only low confidence1 in numerical projections of changes in flood magnitude or frequency resulting from climate change.

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We extend all elementary functions from the real to the transreal domain so that they are defined on division by zero. Our method applies to a much wider class of functions so may be of general interest.

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Attitudes towards risk and uncertainty have been indicated to be highly context-dependent, and to be sensitive to the measurement technique employed. We present data collected in controlled experiments with 2,939 subjects in 30 countries measuring risk and uncertainty attitudes through incentivized measures as well as survey questions. Our data show clearly that measures correlate not only within decision contexts or measurement methods, but also across contexts and methods. This points to the existence of one underlying “risk preference”, which influences attitudes independently of the measurement method or choice domain. We furthermore find that answers to a general and a financial survey question correlate with incentivized lottery choices in most countries. Incentivized and survey measures also correlate significantly between countries. This opens the possibility to conduct cultural comparisons on risk attitudes using survey instruments.

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We examine the impact of accounting quality, used as a proxy for information risk, on the behavior of equity implied volatility around quarterly earnings announcements. Using US data during 1996–2010, we observe that lower (higher) accounting quality significantly relates to higher (lower) levels of implied volatility (IV) around announcements. Worse accounting quality is further associated with a significant increase in IV before announcements, and is found to relate to a larger resolution in IV after the announcement has taken place. We interpret our findings as indicative of information risk having a significant impact on implied volatility behavior around earnings announcements.

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This paper characterizes the dynamics of jumps and analyzes their importance for volatility forecasting. Using high-frequency data on four prominent energy markets, we perform a model-free decomposition of realized variance into its continuous and discontinuous components. We find strong evidence of jumps in energy markets between 2007 and 2012. We then investigate the importance of jumps for volatility forecasting. To this end, we estimate and analyze the predictive ability of several Heterogenous Autoregressive (HAR) models that explicitly capture the dynamics of jumps. Conducting extensive in-sample and out-of-sample analyses, we establish that explicitly modeling jumps does not significantly improve forecast accuracy. Our results are broadly consistent across our four energy markets, forecasting horizons, and loss functions

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Recent research has suggested that forecast evaluation on the basis of standard statistical loss functions could prefer models which are sub-optimal when used in a practical setting. This paper explores a number of statistical models for predicting the daily volatility of several key UK financial time series. The out-of-sample forecasting performance of various linear and GARCH-type models of volatility are compared with forecasts derived from a multivariate approach. The forecasts are evaluated using traditional metrics, such as mean squared error, and also by how adequately they perform in a modern risk management setting. We find that the relative accuracies of the various methods are highly sensitive to the measure used to evaluate them. Such results have implications for any econometric time series forecasts which are subsequently employed in financial decisionmaking.

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A method is presented to calculate economic optimum fungicide doses accounting for the risk-aversion of growers responding to variability in disease severity between crops. Simple dose-response and disease-yield loss functions are used to estimate net disease-related costs (fungicide cost, plus disease-induced yield loss) as a function of dose and untreated severity. With fairly general assumptions about the shapes of the probability distribution of disease severity and the other functions involved, we show that a choice of fungicide dose which minimises net costs on average across seasons results in occasional large net costs caused by inadequate control in high disease seasons. This may be unacceptable to a grower with limited capital. A risk-averse grower can choose to reduce the size and frequency of such losses by applying a higher dose as insurance. For example, a grower may decide to accept ‘high loss’ years one year in ten or one year in twenty (i.e. specifying a proportion of years in which disease severity and net costs will be above a specified level). Our analysis shows that taking into account disease severity variation and risk-aversion will usually increase the dose applied by an economically rational grower. The analysis is illustrated with data on septoria tritici leaf blotch of wheat caused by Mycosphaerella graminicola. Observations from untreated field plots at sites across England over three years were used to estimate the probability distribution of disease severities at mid-grain filling. In the absence of a fully reliable disease forecasting scheme, reducing the frequency of ‘high loss’ years requires substantially higher doses to be applied to all crops. Disease resistant cultivars reduce both the optimal dose at all levels of risk and the disease-related costs at all doses.

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In this paper, we study the role of the volatility risk premium for the forecasting performance of implied volatility. We introduce a non-parametric and parsimonious approach to adjust the model-free implied volatility for the volatility risk premium and implement this methodology using more than 20 years of options and futures data on three major energy markets. Using regression models and statistical loss functions, we find compelling evidence to suggest that the risk premium adjusted implied volatility significantly outperforms other models, including its unadjusted counterpart. Our main finding holds for different choices of volatility estimators and competing time-series models, underlying the robustness of our results.

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Previous research has shown that people's evaluations of explanations about medication and their intention to comply with the prescription are detrimentally affected by the inclusion of information about adverse side effects of the medication. The present study (Experiment 1) examined which particular aspects of information about side effects (their number, likelihood of occurrence, or severity) are likely to have the greatest effect on people's satisfaction, perception of risk, and intention to comply, as well as how the information about side effects interacts with information about the severity of the illness for which the medication was prescribed. Across all measures, it was found that manipulations of side effect severity had the greatest impact on people's judgements, followed by manipulations of side effect likelihood and then number. Experiments 2 and 3 examined how the severity of the diagnosed illness and information about negative side effects interact with two other factors suggested by Social Cognition models of health behaviour to affect people's intention to comply: namely, perceived benefit of taking the prescribed drug, and the perceived level of control over preventing or alleviating the side effects. It was found that providing people with a statement about the positive benefit of taking the medication had relatively little effect on judgements, whereas informing them about how to reduce the chances of experiencing the side effects had an overall beneficial effect on ratings.

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In a cross-sectional study of 400 randomly selected smallholder dairy farms in the Tanga and Iringa regions of Tanzania, 14.2% (95% confidence interval (CI) = 11.6-17.3) of cows had developed clinical mastitis during the previous year. The point prevalence of subclinical mastitis, defined as a quarter positive by the California Mastitis Test (CMT) or by bacteriological culture, was 46.2% (95% Cl = 43.6-48.8) and 24.3% (95% Cl = 22.2-26.6), respectively. In a longitudinal disease study in Iringa, the incidence of clinical mastitis was 31.7 cases per 100 cow-years. A randomised intervention trial indicated that intramammary antibiotics significantly reduced the proportion of bacteriologically positive quarters in the short-term (14 days post-infusion) but teat dipping had no detectable effect on bacteriological infection and CMT positive quarters. Other risk and protective factors were identified from both the cross-sectional and longitudinal included animals with Boran breeding (odds ratio (OR) = 3,40, 95% CI = 1.00-11.57, P < 0.05 for clinical mastitis, and OR = 3.51, 95% CI = 1.299.55, P < 0.01 for a CMT positive quarter), while the practice of residual calf suckling was protective for a bacteriologically positive quarter (OR = 0.63, 95% Cl = 0.48-0.81, P <= 0.001) and for a CMT positive quarter (OR = 0.69, 95% Cl = 0.63-0.75, P < 0.001). A mastitis training course for farmers and extension officers was held, and the knowledge gained and use of different methods of dissemination were assessed over time. In a subsequent randomised controlled trial, there were strong associations between knowledge gained and both the individual question asked and the combination of dissemination methods (village meeting, video and handout) used. This study demonstrated that both clinical and subclinical mastitis is common in smallholder dairying in Tanzania, and that some of the risk and protective factors for mastitis can be addressed by practical management of dairy cows following effective knowledge transfer. (c) 2006 Elsevier B.V. All rights reserved.

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In a cross-sectional study of 400 randomly selected smallholder dairy farms in the Tanga and Iringa regions of Tanzania, 14.2% (95% confidence interval (CI) = 11.6-17.3) of cows had developed clinical mastitis during the previous year. The point prevalence of subclinical mastitis, defined as a quarter positive by the California Mastitis Test (CMT) or by bacteriological culture, was 46.2% (95% Cl = 43.6-48.8) and 24.3% (95% Cl = 22.2-26.6), respectively. In a longitudinal disease study in Iringa, the incidence of clinical mastitis was 31.7 cases per 100 cow-years. A randomised intervention trial indicated that intramammary antibiotics significantly reduced the proportion of bacteriologically positive quarters in the short-term (14 days post-infusion) but teat dipping had no detectable effect on bacteriological infection and CMT positive quarters. Other risk and protective factors were identified from both the cross-sectional and longitudinal included animals with Boran breeding (odds ratio (OR) = 3,40, 95% CI = 1.00-11.57, P < 0.05 for clinical mastitis, and OR = 3.51, 95% CI = 1.299.55, P < 0.01 for a CMT positive quarter), while the practice of residual calf suckling was protective for a bacteriologically positive quarter (OR = 0.63, 95% Cl = 0.48-0.81, P <= 0.001) and for a CMT positive quarter (OR = 0.69, 95% Cl = 0.63-0.75, P < 0.001). A mastitis training course for farmers and extension officers was held, and the knowledge gained and use of different methods of dissemination were assessed over time. In a subsequent randomised controlled trial, there were strong associations between knowledge gained and both the individual question asked and the combination of dissemination methods (village meeting, video and handout) used. This study demonstrated that both clinical and subclinical mastitis is common in smallholder dairying in Tanzania, and that some of the risk and protective factors for mastitis can be addressed by practical management of dairy cows following effective knowledge transfer. (c) 2006 Elsevier B.V. All rights reserved.