Incorporating Higher Moments into Value at Risk Forecasting

Value-at-risk (VaR) forecasting generally relies on a parametric density function of portfolio returns that ignores higher moments or assumes them constant. In this paper, we propose a simple approach to forecasting of a portfolio VaR. We employ the Gram-Charlier expansion (GCE) augmenting the standard normal distribution with the first four moments, which are allowed to vary over time. In an extensive empirical study, we compare the GCE approach to other models of VaR forecasting and conclude that it provides accurate and robust estimates of the realized VaR. In spite of its simplicity, on our dataset GCE outperforms other estimates that are generated by both constant and time-varying higher-moments models.

Current brood size and residual reproductive value predict offspring desertion in the burying beetle Nicrophorus vespilloides

Life-history theory suggests that offspring desertion can be an adaptive reproductive strategy, in which parents forgo the costly care of an unprofitable current brood to save resources for future reproduction. In the burying beetle, Nicrophorus vespilloides, parents commonly abandon their offspring to the care of others, resulting in female-only care, male-only care, brood parasitism, and the care of offspring sired by satellite males. Furthermore, when there is biparental care, males routinely desert the brood before larval development is complete, leaving females behind to tend their young. We attempted to understand these patterns of offspring desertion by using laboratory experiments to compare the fitness costs associated with parental care for each sex and the residual reproductive value of the 2 sexes. We also tested whether current brood size and residual reproductive value together predicted the incidence of brood desertion. We found that males and females each sustained fecundity costs as a consequence of caring for larvae and that these costs were of comparable magnitude. Nevertheless, males had greater residual reproductive value than females and were more likely than females to desert experimental broods. Our results can explain why males desert the brood earlier than females in nature and why female-only care is more common than male-only care. They also suggest that the tipping point from brood parasitism or satellite male behavior to communal breeding (and vice versa) depends on the value of the current brood relative to residual reproductive value.

Applying species distribution modelling to identify areas of high conservation value for endangered species: A case study using Margaritifera margaritifera (L.)

The development and implementation of a population supplementation and restoration plan for any endangered species should involve an understanding of the species’ habitat requirements prior to the release of any captive bred individuals. The freshwater pearl mussel, Margaritifera margaritifera, has undergone dramatic declines over the last century and is now globally endangered. In Northern Ireland, the release of captive bred individuals is being used to support wild populations and repatriate the species in areas where it once existed. We employed a combination of maximum entropy modelling (MAXENT) and Generalized Linear Mixed Models (GLMM) to identify ecological parameters necessary to support wild populations using GIS-based landscape scale and ground-truthed habitat scale environmental parameters. The GIS-based landscape scale model suggested that mussel occurrence was associated with altitude and soil characteristics including the carbon, clay, sand, and silt content. Notably, mussels were associated with a relatively narrow band of variance indicating that M. margaritifera has a highly specific landscape niche. The ground-truthed habitat scale model suggested that mussel occurrence was associated with stable consolidated substrates, the extent of bankside trees, presence of indicative macrophyte species and fast flowing water. We propose a three phase conservation strategy for M. margaritifera identifying suitable areas within rivers that (i) have a high conservation value yet needing habitat restoration at a local level, (ii) sites for population supplementation of existing populations and (iii) sites for species reintroduction to rivers where the mussel historically occurred but is now locally extinct. A combined analytical approach including GIS-based landscape scale and ground-truthed habitat scale models provides a robust method by which suitable release sites can be identified for the population supplementation and restoration of an endangered species. Our results will be highly influential in the future management of M. margaritifera in Northern Ireland.

Measuring the value to the public of pig welfare improvements: a contingent valuation approach

The welfare of farm animals is a policy area that has increased greatly in importance in recent years. When deciding whether a proposed policy should be implemented, it can be useful for policymakers to compare the costs of the proposed improvement with the perceived benefits. The costs are relatively straightforward to calculate but little is known about the benefits. The Contingent Valuation Method (CVM), a direct survey-based method, can be used to shed some light on this. This approach elicits the willingness-to-pay (WTP) for the provision of some public good or service. This paper reports the results of a contingent valuation study of the value of welfare improvements for growing pigs. Attitudes and opinions with regard to form animal welfare are explored and WTP elicited for various pig welfare improvements including increases in space allowance, environmental enrichment and research into improved pig housing design. The results reveal a positive WTP for these improvements. However, it is also noteworthy that a significant proportion of the general public is willing to pay nothing for these improvements. Overall, the study illustrates the usefulness of the CVM approach as a tool for policymakers in assessing the merits of possible policy initiatives affecting the welfare of animals.

Long-term return reversals-Value and growth or tax? UK evidence

This paper examines (i) whether value-growth characteristics have more power than past performance in predicting return reversals; and (ii) whether typical rational behaviour such as incentives to delay paying capital gain taxes can better explain long-term reversals than past performance. We find that value-growth characteristics generally provide better explanations for long-term stock returns than past performance. The evidence also shows that winners identified by capital gains dominate past performance winners in predicting reversals in the cross-sectional comparison. However, in the time-series analysis, when returns on capital gain winners are adjusted by the Fama and French (1996) risk factors, the predictive power of capital gain winners disappears. Our results show that capital gain winners are heavily featured as growth stocks. Return reversals in capital gain winners potentially reflect market price corrections for growth stocks. We conclude that investors’ incentives to delay paying capital gain taxes cannot fully rationalise long-term reversals in the UK market. Our results also imply that the long-term return pattern potentially reflects a mixture of investor rational and irrational behaviour.

Value creation and value claiming in strategic outsourcing decisions: A resource contingency perspective

This study integrates the concepts of value creation and value claiming into a theoretical framework that emphasizes the dependence of resource value maximization on value-claiming motivations in outsourcing decisions. To test this theoretical framework, it develops refutable implications to explain the firm's outsourcing decision, and it uses data from 178 firms in the publishing and printing industry on outsourcing of application services. The results show that in outsourcing decisions, resource value and transaction costs are simultaneously considered and that outsourcing decisions are dependent on alignment between resource and transaction attributes. The findings support a resource contingency view that highlights value-claiming mechanisms as resource contingency in interorganizational strategic decisions.

Unlocking synergies between business units: internal value creation at Royal Vopak.

This paper examines the process of creating and exploiting synergies between business units of a multi-unit corporation and the creation of internal value by combining and exploiting knowledge. It offers a framework to create and manage such synergies and undertakes an empirical test through in-depth study across three business units of Royal Vopak, a Dutch-based global multi-unit corporation. Finally, it offers lessons for corporate managers trying to create and manage cross-unit synergies.