Power-law behaviour, heterogeneity, and trend chasing

Long-range dependence in volatility is one of the most prominent examples in financial market research involving universal power laws. Its characterization has recently spurred attempts to provide some explanations of the underlying mechanism. This paper contributes to this recent line of research by analyzing a simple market fraction asset pricing model with two types of traders---fundamentalists who trade on the price deviation from estimated fundamental value and trend followers whose conditional mean and variance of the trend are updated through a geometric learning process. Our analysis shows that agent heterogeneity, risk-adjusted trend chasing through the geometric learning process, and the interplay of noisy fundamental and demand processes and the underlying deterministic dynamics can be the source of power-law distributed fluctuations. In particular, the noisy demand plays an important role in the generation of insignificant autocorrelations (ACs) on returns, while the significant decaying AC patterns of the absolute returns and squared returns are more influenced by the noisy fundamental process. A statistical analysis based on Monte Carlo simulations is conducted to characterize the decay rate. Realistic estimates of the power-law decay indices and the (FI)GARCH parameters are presented.

E-Commerce Innovations in the Personal Tax System of the United Kingdom

This study finds evidence that attempts to reduce costs and error rates in the Inland Revenue through the use of e-commerce technology are flawed. While it is technically possible to write software that will record tax data, and then transmit it to the Inland Revenue, there is little demand for this service. The key finding is that the tax system is so complex that many people are unable to complete their own tax returns. This complexity cannot be overcome by well-designed software. The recommendation is to encourage the use of agents to assist taxpayers or simplify the tax system. The Inland Revenue is interested in saving administrative costs and errors by encouraging electronic submission of tax returns. To achieve these objectives, given the raw data it would seem clear that the focus should be on facilitating the work of agents.

The influence of gender in the direction of Spanish cooperative societies on profitability and indebtedness: an empirical analysis

In this paper the claim for the market for a new business management to ensure the presence of women in decision -making to respond to new social needs addressed. Thus, this paper analyzes the influence of gender diversity of the directors on the profitability and the level of debt for a sample of 5,199 Spanish cooperatives. Unlike capitalist societies, these organizations have a number of peculiarities in their government, and that the partners are themselves major time, agents and customers. The study focuses on the Spanish context, where there is an open debate on the importance of women's business management, as in other countries, driven by the proliferation of legislation on gender equality, being, in addition, Spain, the pioneer in having specific legislation on Social Economy. The results show that cooperatives with greater female representation in theirs Boards have higher profitability. On the other hand, those Boards with a higher percentage of women show a lower level of indebtedness.

Determining factors of the innovative behavior of cooperatives: an analysis of the case of Castilla y León

Cooperatives have a long historical experience in the Spanish economy and have demonstrated their ability to compete against traditional firms in the market. To maintain this capability, while taking advantage of the competitive advantages associated with their idiosyncrasies as social economy enterprises, they should take into consideration that the economy is increasingly globalized and increasingly knowledge-based, especially with regards to technological content. As a consequence, the innovative capacity appears to be a key aspect in order to be able to challenge competitors. This article characterizes the innovative behavior of cooperatives in the region of Castile and Leon and analyses the internal and external factors affecting their innovative performance, based on data from a survey of 581 cooperatives. The results of the empirical analysis, which is performed by multivariate binary logistic regression on various types of innovation, lead us to identify the size of the organizations, the existence of planning, the R & D activities and the human capital as the main determining factors.

Optimising the use of virtual and conventional simulation: a clinical and economic analysis

Background and purpose: Currently, optimal use of virtual simulation for all treatment sites is not entirely clear. This study presents data to identify specific patient groups for whom conventional simulation may be completely eliminated and replaced by virtual simulation. Sampling and method: Two hundred and sixty patients were recruited from four treatment sites (head and neck, breast, pelvis, and thorax). Patients were randomly assigned to be treated using the usual treatment process involving conventional simulation, or a treatment process differing only in the replacement of conventional plan verification with virtual verification. Data were collected on set-up accuracy at verification, and the number of unsatisfactory verifications requiring a return to the conventional simulator. A micro-economic costing analysis was also undertaken, whereby data for each treatment process episode were also collected: number and grade of staff present, and the time for each treatment episode. Results: The study shows no statistically significant difference in the number of returns to the conventional simulator for each site and study arm. Image registration data show similar quality of verification for each study arm. The micro-costing data show no statistical difference between the virtual and conventional simulation processes. Conclusions: At our institution, virtual simulation including virtual verification for the sites investigated presents no disadvantage compared to conventional simulation.

The Cost of Sustainability Capital and the Creation of Sustainable Value by Companies

We develop and apply a valuation methodology to calculate the cost of sustainability capital, and, eventually, sustainable value creation of companies. Sustainable development posits that decisions must take into account all forms of capital rather than just economic capital. We develop a methodology that allows calculation of the costs that are associated with the use of different forms of capital. Our methodology borrows the idea from financial economics that the return on capital has to cover the cost of capital. Capital costs are determined as opportunity costs, that is, the forgone returns that would have been created by alternative investments. We apply and extend the logic of opportunity costs to the valuation not only of economic capital but also of other forms of capital. This allows (a) integrated analysis of use of different forms of capital based on a value-based aggregation of different forms of capital, (b) determination of the opportunity cost of a bundle of different forms of capital used in a company, called cost of sustainability capital, (c) calculation of sustainability efficiency of companies, and (d) calculation of sustainable value creation, that is, the value above the cost of sustainability capital. By expanding the well-established logic of the valuation of economic capital in financial markets to cover other forms of capital, we provide a methodology that allows determination of the most efficient allocation of sustainability capital for sustainable value creation in companies. We demonstrate the practicability of the methodology by the valuation of the sustainability performance of British Petroleum (BP).

Bio-folio: applying portfolio theory to biodiversity

Genes, species and ecosystems are often considered to be assets. The need to ensure a sufficient diversity of this asset is being increasingly recognised today. Asset managers in banks and insurance companies face a similar challenge. They are asked to manage the assets of their investors by constructing efficient portfolios. They deliberately make use of a phenomenon observed in the formation of portfolios: returns are additive, while risks diversify. This phenomenon and its implications are at the heart of portfolio theory. Portfolio theory, like few other economic theories, has dramatically transformed the practical work of banks and insurance companies. Before portfolio theory was developed about 50 years ago, asset managers were confronted with a situation similar to the situation the research on biodiversity faces today. While the need for diversification was generally accepted, a concept that linked risk and return on a portfolio level and showed the value of diversification was missing. Portfolio theory has closed this gap. This article first explains the fundamentals of portfolio theory and transfers it to biodiversity. A large part of this article is then dedicated to some of the implications portfolio theory has for the valuation and management of biodiversity. The last section introduces three development openings for further research.

Do benchmark African equity indices exhibit the stylized facts?

This paper investigates if benchmark African equity indices exhibit the stylized facts reported for financial time-series returns. The returns distributions of the Africa All-Share, Large, Medium and Small Company Indices were found to be leptokurtotic, had fat-tails, over time experienced volatility clustering and exhibited long memory in volatility. Both the All-Share and Large Company Indices were found to exhibit leverage effects. In contrast, positive shocks had a greater impact on future volatility for the Small Company Index which implies a reverse leverage effect. This finding could reflect a bull/bubble market for small capitalisation stocks in Africa.

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.

The diversification and financial performance of US credit unions

For US credit unions, revenue from non-interest sources has increased significantly in recent years. We investigate the impact of revenue diversification on financial performance for the period 1993–2004. The impact of a change in strategy that alters the share of non-interest income is decomposed into a direct exposure effect, reflecting the difference between interest and non-interest bearing activities, and an indirect exposure effect which reflects the effect of the institution’s own degree of diversification. On both risk-adjusted and unadjusted returns measures, a positive direct exposure effect is outweighed by a negative indirect exposure effect for all but the largest credit unions. This may imply that similar diversification strategies are not appropriate for large and small credit unions. Small credit unions should eschew diversification and continue to operate as simple savings and loan institutions, while large credit unions should be encouraged to exploit new product opportunities around their core expertise.

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.

An exploratory study of Principal Investigator roles in UK University Proof-of-Concept processes: an Absorptive capacity perspective

The increasing emphasis on academic entrepreneurship, technology transfer and research commercialisation within UK universities is predicated on basic research being developed by academics into commercial entities such as university spin-off companies or licensing arrangements. However, this process is fraught with challenges and risks, given the degree of uncertainty regarding future returns. In an attempt to minimise such risks, the Proof-of-Concept (PoC) process has been developed within University Science Park Incubators (USIs) to test the technological, business and market potential of embryonic technology. The key or the pivotal stakeholder within the PoC is the Principal Investigator (PI), who is usually the lead academic responsible for the embryonic technology. Within the current literature, there appears to be a lack of research pertaining to the role of the PI in the PoC process. Moreover, Absorptive Capacity (ACAP) has emerged within the literature as a theoretical framework or lens for exploring the development and application of new knowledge and technology, where the USI is the organisation considered in the current study. Therefore, the aim of this paper is to explore the role and influence of the PI in the PoC process within a USI setting using an ACAP perspective. The research involved a multiple case analysis of PoC applications within a UK university USI. The results demonstrate the role of the PI in developing practices and routines within the PoC process. These practices and processes were initially tacit and informal in nature but became more explicit and formal over time so that knowledge was retained within the USI after the PIs had completed the PoC process. © 2010 The Authors. R&D Management © 2010 Blackwell Publishing Ltd.

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.

What Happened to the ‘Development’ in Sustainable Development? Business Guidelines Two Decades After Brundtland

Over twenty years ago ‘Our Common Future’ presented a conceptualization and explanation of the concept of sustainable development. Since then numerous alternative definitions of the concept have been offered, of which at least some are exclusive to each other. At the same time, the role of business in the transition to sustainable development has increasingly received attention. Bringing these two trends in sustainable development together, this paper returns to the Brundtland version of the concept to examine to what extent the original principles of sustainable development are still embedded within key business guidelines, namely the UN Global Compact, the OECD Guidelines for Multinational Enterprises, the ICC Business Charter for Sustainable Development, the CAUX Principles, the Global Sullivan Principles and the CERES Principles. The findings suggest that these business guidelines tend to emphasize environmental rather than social aspects of sustainable development, in particular to the detriment of the original Brundtland prioritization of the needs of the poorest. Furthermore, the attention to environmental aspects stresses win-win situations and has a clear managerialist focus; whereas more conceptual environmental issues concerning systems interdependencies, critical thresholds or systemic limits to growth find little attention. The normative codes and principles targeted at the private sector thus not only add another voice to the multiple discourses on sustainable development but also contribute to a reinterpretation of the original agenda set by Brundtland towards conceptualizations of sustainable development around the needs of industrialised rather than developing countries. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment

Dynamic pricing models for used products in remanufacturing with lost-sales and uncertain quality

In this paper, we investigate the remanufacturing problem of pricing single-class used products (cores) in the face of random price-dependent returns and random demand. Specifically, we propose a dynamic pricing policy for the cores and then model the problem as a continuous-time Markov decision process. Our models are designed to address three objectives: finite horizon total cost minimization, infinite horizon discounted cost, and average cost minimization. Besides proving optimal policy uniqueness and establishing monotonicity results for the infinite horizon problem, we also characterize the structures of the optimal policies, which can greatly simplify the computational procedure. Finally, we use computational examples to assess the impacts of specific parameters on optimal price and reveal the benefits of a dynamic pricing policy. © 2013 Elsevier B.V. All rights reserved.