Three essays on the psychology of investment and financial markets

Préface My thesis consists of three essays where I consider equilibrium asset prices and investment strategies when the market is likely to experience crashes and possibly sharp windfalls. Although each part is written as an independent and self contained article, the papers share a common behavioral approach in representing investors preferences regarding to extremal returns. Investors utility is defined over their relative performance rather than over their final wealth position, a method first proposed by Markowitz (1952b) and by Kahneman and Tversky (1979), that I extend to incorporate preferences over extremal outcomes. With the failure of the traditional expected utility models in reproducing the observed stylized features of financial markets, the Prospect theory of Kahneman and Tversky (1979) offered the first significant alternative to the expected utility paradigm by considering that people focus on gains and losses rather than on final positions. Under this setting, Barberis, Huang, and Santos (2000) and McQueen and Vorkink (2004) were able to build a representative agent optimization model which solution reproduced some of the observed risk premium and excess volatility. The research in behavioral finance is relatively new and its potential still to explore. The three essays composing my thesis propose to use and extend this setting to study investors behavior and investment strategies in a market where crashes and sharp windfalls are likely to occur. In the first paper, the preferences of a representative agent, relative to time varying positive and negative extremal thresholds are modelled and estimated. A new utility function that conciliates between expected utility maximization and tail-related performance measures is proposed. The model estimation shows that the representative agent preferences reveals a significant level of crash aversion and lottery-pursuit. Assuming a single risky asset economy the proposed specification is able to reproduce some of the distributional features exhibited by financial return series. The second part proposes and illustrates a preference-based asset allocation model taking into account investors crash aversion. Using the skewed t distribution, optimal allocations are characterized as a resulting tradeoff between the distribution four moments. The specification highlights the preference for odd moments and the aversion for even moments. Qualitatively, optimal portfolios are analyzed in terms of firm characteristics and in a setting that reflects real-time asset allocation, a systematic over-performance is obtained compared to the aggregate stock market. Finally, in my third article, dynamic option-based investment strategies are derived and illustrated for investors presenting downside loss aversion. The problem is solved in closed form when the stock market exhibits stochastic volatility and jumps. The specification of downside loss averse utility functions allows corresponding terminal wealth profiles to be expressed as options on the stochastic discount factor contingent on the loss aversion level. Therefore dynamic strategies reduce to the replicating portfolio using exchange traded and well selected options, and the risky stock.

Tree-based message diffusion for managing replicated data in unreliable and resource-constrained peer-to-peer environment

Abstract This thesis proposes a set of adaptive broadcast solutions and an adaptive data replication solution to support the deployment of P2P applications. P2P applications are an emerging type of distributed applications that are running on top of P2P networks. Typical P2P applications are video streaming, file sharing, etc. While interesting because they are fully distributed, P2P applications suffer from several deployment problems, due to the nature of the environment on which they perform. Indeed, defining an application on top of a P2P network often means defining an application where peers contribute resources in exchange for their ability to use the P2P application. For example, in P2P file sharing application, while the user is downloading some file, the P2P application is in parallel serving that file to other users. Such peers could have limited hardware resources, e.g., CPU, bandwidth and memory or the end-user could decide to limit the resources it dedicates to the P2P application a priori. In addition, a P2P network is typically emerged into an unreliable environment, where communication links and processes are subject to message losses and crashes, respectively. To support P2P applications, this thesis proposes a set of services that address some underlying constraints related to the nature of P2P networks. The proposed services include a set of adaptive broadcast solutions and an adaptive data replication solution that can be used as the basis of several P2P applications. Our data replication solution permits to increase availability and to reduce the communication overhead. The broadcast solutions aim, at providing a communication substrate encapsulating one of the key communication paradigms used by P2P applications: broadcast. Our broadcast solutions typically aim at offering reliability and scalability to some upper layer, be it an end-to-end P2P application or another system-level layer, such as a data replication layer. Our contributions are organized in a protocol stack made of three layers. In each layer, we propose a set of adaptive protocols that address specific constraints imposed by the environment. Each protocol is evaluated through a set of simulations. The adaptiveness aspect of our solutions relies on the fact that they take into account the constraints of the underlying system in a proactive manner. To model these constraints, we define an environment approximation algorithm allowing us to obtain an approximated view about the system or part of it. This approximated view includes the topology and the components reliability expressed in probabilistic terms. To adapt to the underlying system constraints, the proposed broadcast solutions route messages through tree overlays permitting to maximize the broadcast reliability. Here, the broadcast reliability is expressed as a function of the selected paths reliability and of the use of available resources. These resources are modeled in terms of quotas of messages translating the receiving and sending capacities at each node. To allow a deployment in a large-scale system, we take into account the available memory at processes by limiting the view they have to maintain about the system. Using this partial view, we propose three scalable broadcast algorithms, which are based on a propagation overlay that tends to the global tree overlay and adapts to some constraints of the underlying system. At a higher level, this thesis also proposes a data replication solution that is adaptive both in terms of replica placement and in terms of request routing. At the routing level, this solution takes the unreliability of the environment into account, in order to maximize reliable delivery of requests. At the replica placement level, the dynamically changing origin and frequency of read/write requests are analyzed, in order to define a set of replica that minimizes communication cost.

Systematic Identification of High Crash Locations Final Report, 2001

Federal and state policy makers increasingly emphasize the need to reduce highway crash rates. This emphasis is demonstrated in Iowa’s recently released draft Iowa Strategic Highway Safety Plan and by the U.S. Department of Transportation’s placement of “improved transportation safety” at the top of its list of strategic goals. Thus, finding improved methods to enhance highway safety has become a top priority at highway agencies. The objective of this project is to develop tools and procedures by which Iowa engineers can identify potentially hazardous roadway locations and designs, and to demonstrate the utility of these tools by developing candidate lists of high crash locations in the State. An initial task, building an integrated database to facilitate the tools and procedures, is an important product, in and of itself. Accordingly, the Iowa Department of Transportation (Iowa DOT) Geographic Information Management System (GIMS) and Geographic Information System Accident Analysis and Location System (GIS-ALAS) databases were integrated with available digital imagery. (The GIMS database contains roadway characteristics, e.g., lane width, surface and shoulder type, and traffic volume, for all public roadways. GIS-ALAS records include data, e.g., vehicles, drivers, roadway conditions, and the crash severity, for crashes occurring on public roadways during then past 10 years.)

Paved Shoulders on Primary Highways in Iowa: An Analysis of Shoulder Surfacing Criteria, Costs, and Benefits, 2001

The value of providing paved shoulders adjacent to many higher volume roadways has been accepted in many states across the country. Iowa’s paved shoulder policy is considerably more conservative than neighboring states, particularly on rural four-lane and high-volume two-lane highways. The objectives of this research are to examine current design criteria for shoulders employed in Iowa and surrounding states, compare benefits and costs of alternative surface types and widths, and make recommendations based on this analysis for consideration in future design policies for primary highway in Iowa. The report finds that many safety and maintenance benefits would result from enhancing Iowa’s paved shoulder and rumble strip design practices for freeways, expressways, and Super 2 highway corridors. The benefits of paved shoulders include reduced numbers of certain crashes, higher capacity potentials, reduced maintenance, enhanced opportunities for other users such as bicyclists, and even possible increased longevity of pavements. Alternative paved shoulder policies and programming strategies are also offered, with detailed assessments of the benefits, costs, and budget impacts.

Angle Parking on Iowa's Low Volume Primary Extentions in Small Towns, January 2003

On-street parking has been considered problematic by engineers for many years. In fact, numerous studies have concluded that diagonal or angle parking in particular is potentially more of a safety concern than parallel or no parking at all. It is a common position of many states, including Iowa, to discourage or completely prohibit angle parking on primary road extensions in urban areas. However, with the acceptance of “context sensitive design” and traffic calming techniques, policies for on-street parking are receiving re -consideration in many agencies including the FHWA. This study was undertaken to analyze operational and safety histories in the state of Iowa where various types of on-street parking have existed for many years, concentrating in particular on smaller communities. Specifically of interest was a comparison of diagonal parking locations to other types with regard to related crash histories. If possible, it was intended to develop guidelines to assist Iowa Department of Transportation designers in the consideration of parking requirements for road improvements through small communities. In this regard, several criteria were analyzed to determine possible contribution to crash history including road width, clearance to parked vehicles, traffic volumes, community population, and length of parking area. None of these factors, with the possible exception of population, displayed a clearly definable relationship to crash history. However, when average crash rates for various parking types were compared for non-intersection crashes, differences in rates between areas with diagonal parking and those with parallel parking were almost negligible. In fact, those observed rates were less than sample locations with no parking at all. These results seem to indicate that indeed there may exist no compelling justification for blanket prohibition of angle parking along Iowa’s primary extensions in all urban areas. Rather, a case-by-case investigation with each project design of the most applicable parking type would seem appropriate in smaller communities.

Guidelines for the Conversion of Urban Four-Lane Undivided Roadways to Three-Lane Two-Way Left-turn Lane Facilities, April 2001

Four-lane undivided roadways in urban areas can experience a degradation of service and/or safety as traffic volumes increase. In fact, the existence of turning vehicles on this type of roadway has a dramatic effect on both of these factors. The solution identified for these problems is typically the addition of a raised median or two-way left-turn lane (TWLTL). The mobility and safety benefits of these actions have been proven and are discussed in the “Past Research” chapter of this report along with some general cross section selection guidelines. The cost and right-of-way impacts of these actions are widely accepted. These guidelines focus on the evaluation and analysis of an alternative to the typical four-lane undivided cross section improvement approach described above. It has been found that the conversion of a four-lane undivided cross section to three lanes (i.e., one lane in each direction and a TWLTL) can improve safety and maintain an acceptable level of service. These guidelines summarize the results of past research in this area (which is almost nonexistent) and qualitative/quantitative before-and-after safety and operational impacts of case study conversions located throughout the United States and Iowa. Past research confirms that this type of conversion is acceptable or feasible in some situations but for the most part fails to specifically identify those situations. In general, the reviewed case study conversions resulted in a reduction of average or 85th percentile speeds (typically less than five miles per hour) and a relatively dramatic reduction in excessive speeding (a 60 to 70 percent reduction in the number of vehicles traveling five miles per hour faster than the posted speed limit was measured in two cases) and total crashes (reductions between 17 to 62 percent were measured). The 13 roadway conversions considered had average daily traffic volumes of 8,400 to 14,000 vehicles per day (vpd) in Iowa and 9,200 to 24,000 vehicles per day elsewhere. In addition to past research and case study results, a simulation sensitivity analysis was completed to investigate and/or confirm the operational impacts of a four-lane undivided to three-lane conversion. First, the advantages and disadvantages of different corridor simulation packages were identified for this type of analysis. Then, the CORridor SIMulation (CORSIM) software was used x to investigate and evaluate several characteristics related to the operational feasibility of a four-lane undivided to three-lane conversion. Simulated speed and level of service results for both cross sections were documented for different total peak-hour traffic, access densities, and access-point left-turn volumes (for a case study corridor defined by the researchers). These analyses assisted with the identification of the considerations for the operational feasibility determination of a four -lane to three-lane conversion. The results of the simulation analyses primarily confirmed the case study impacts. The CORSIM results indicated only a slight decrease in average arterial speed for through vehicles can be expected for a large range of peak-hour volumes, access densities, and access-point left-turn volumes (given the assumptions and design of the corridor case study evaluated). Typically, the reduction in the simulated average arterial speed (which includes both segment and signal delay) was between zero and four miles per hour when a roadway was converted from a four-lane undivided to a three-lane cross section. The simulated arterial level of service for a converted roadway, however, showed a decrease when the bi-directional peak-hour volume was about 1,750 vehicles per hour (or 17,500 vehicles per day if 10 percent of the daily volume is assumed to occur in the peak hour). Past research by others, however, indicates that 12,000 vehicles per day may be the operational capacity (i.e., level of service E) of a three-lane roadway due to vehicle platooning. The simulation results, along with past research and case study results, appear to support following volume-related feasibility suggestions for four-lane undivided to three-lane cross section conversions. It is recommended that a four-lane undivided to three-lane conversion be considered as a feasible (with respect to volume only) option when bi-directional peak-hour volumes are less than 1,500 vehicles per hour, but that some caution begin to be exercised when the roadway has a bi-directional peak-hour volume between 1,500 and 1,750 vehicles per hour. At and above 1,750 vehicles per hour, the simulation indicated a reduction in arterial level of service. Therefore, at least in Iowa, the feasibility of a four-lane undivided to three-lane conversion should be questioned and/or considered much more closely when a roadway has (or is expected to have) a peak-hour volume of more than 1,750 vehicles. Assuming that 10 percent of the daily traffic occurs during the peak-hour, these volume recommendations would correspond to 15,000 and 17,500 vehicles per day, respectively. These suggestions, however, are based on the results from one idealized case xi study corridor analysis. Individual operational analysis and/or simulations should be completed in detail once a four-lane undivided to three-lane cross section conversion is considered feasible (based on the general suggestions above) for a particular corridor. All of the simulations completed as part of this project also incorporated the optimization of signal timing to minimize vehicle delay along the corridor. A number of determination feasibility factors were identified from a review of the past research, before-and-after case study results, and the simulation sensitivity analysis. The existing and expected (i.e., design period) statuses of these factors are described and should be considered. The characteristics of these factors should be compared to each other, the impacts of other potentially feasible cross section improvements, and the goals/objectives of the community. The factors discussed in these guidelines include • roadway function and environment • overall traffic volume and level of service • turning volumes and patterns • frequent-stop and slow-moving vehicles • weaving, speed, and queues • crash type and patterns • pedestrian and bike activity • right-of-way availability, cost, and acquisition impacts • general characteristics, including - parallel roadways - offset minor street intersections - parallel parking - corner radii - at-grade railroad crossings xii The characteristics of these factors are documented in these guidelines, and their relationship to four-lane undivided to three-lane cross section conversion feasibility identified. This information is summarized along with some evaluative questions in this executive summary and Appendix C. In summary, the results of past research, numerous case studies, and the simulation analyses done as part of this project support the conclusion that in certain circumstances a four-lane undivided to three-lane conversion can be a feasible alternative for the mitigation of operational and/or safety concerns. This feasibility, however, must be determined by an evaluation of the factors identified in these guidelines (along with any others that may be relevant for a individual corridor). The expected benefits, costs, and overall impacts of a four-lane undivided to three-lane conversion should then be compared to the impacts of other feasible alternatives (e.g., adding a raised median) at a particular location.

Demographic effects of extreme winter weather in the barn owl.

Extreme weather events can lead to immediate catastrophic mortality. Due to their rare occurrence, however, the long-term impacts of such events for ecological processes are unclear. We examined the effect of extreme winters on barn owl (Tyto alba) survival and reproduction in Switzerland over a 68-year period (approximately 20 generations). This long-term data set allowed us to compare events that occurred only once in several decades to more frequent events. Winter harshness explained 17 and 49% of the variance in juvenile and adult survival, respectively, and the two harshest winters were associated with major population crashes caused by simultaneous low juvenile and adult survival. These two winters increased the correlation between juvenile and adult survival from 0.63 to 0.69. Overall, survival decreased non-linearly with increasing winter harshness in adults, and linearly in juveniles. In contrast, brood size was not related to the harshness of the preceding winter. Our results thus reveal complex interactions between climate and demography. The relationship between weather and survival observed during regular years is likely to underestimate the importance of climate variation for population dynamics.

Living Snow Fences, 2006

Blowing snow can cause significant problems for mobility and safety during winter weather in three distinct ways. It may drift onto the road, thus requiring almost continuous plowing while the wind is blowing (which may occur when a given winter storm is over). Snow may drift onto wet pavement (perhaps caused by ice control chemicals) and dilute out the chemicals on the road, creating ice on the road. And sufficient blowing snow can cause a major deterioration in visibility on the road, a factor which has been shown to be significant in winter crashes. The problem of blowing snow can be very effectively addressed by creating a snow storage device upwind of the road that requires protection from snow drifting. Typically, these storage devices are fences. Extensive design guidance exists for the required height and placement of such fences for a given annual snowfall and given local topography. However, the design information on the placement of living snow fences is less complete. The purpose of this report is to present the results of three seasons of study on using standing corn as snow fences. In addition, the experience of using switch grass as a snow storage medium is also presented. On the basis of these experimental data, a design guide has been developed that makes use of the somewhat unique snow storage characteristics of standing corn snow fences. The results of the field tests on using standing corn showed that multiple rows of standing corn store snow rather differently than a traditional wooden snow fence. Specifically, while a traditional fence stores most of the snow downwind from the fence (and thus must be placed a significant distance upwind of the road to be protected, specifically at least 35 times the snow fence height) rows of standing corn store the majority of the snow within the rows. Results from the three winters of testing show that the standing corn snow fences can store as much snow within the rows of standing corn as a traditional fence of typical height for operation in Iowa (4 to 6 feet) can store. This finding is significant because it means that the snow fences can be placed at the edge of the farmer’s field closest to the road, and still be effective. This is typically much more convenient for the farmer and thus may mean that more farmers would be willing to participate in a program that uses standing corn than in traditional programs. ii On the basis of the experimental data, design guidance for the use of standing corn as a snow storage device in Iowa is given in the report. Specifically, it is recommended that if the fetch in a location to be protected is less than 5,000 feet, then 16 rows of standing corn should be used, at the edge of the field adjacent to the right of way. If the fetch is greater than 5,000 feet, then 24 rows of standing corn should be used. This is based on a row spacing of 22 inches. Further, it should be noted that these design recommendations are ONLY for the State of Iowa. Other states of course have different winter weather and without extensive further study, it cannot be said that these guidelines would be effective in other locations with other winter conditions.

Safety Impacts of Pavement Edge Drop-offs, 2006

A vehicle may leave its travel lane for a number of reasons, such as driver error, poor surface conditions, or avoidance of a collision with another vehicle in the travel lane. When a vehicle leaves the travel lane, pavement edge drop-off poses a potential safety hazard because significant vertical differences between surfaces can affect vehicle stability and reduce a driver’s ability to handle the vehicle. Numerous controlled studies have tested driver response to encountering drop-offs under various conditions, including different speeds, vehicle types, drop-off height and shape, and tire scrubbing versus non-scrubbing conditions. The studies evaluated the drivers’ ability to return to and recover within their own travel lane after leaving the roadway and encountering a drop-off. Many of these studies, however, have used professional drivers as test subjects, so results may not always apply to the population of average drivers. Furthermore, test subjects are always briefed on what generally is to be expected and how to respond; thus, the sense of surprise that a truly naïve driver may experience upon realizing that one or two of his or her tires have just dropped off the edge of the pavement, is very likely diminished. Additionally, the studies were carried out under controlled conditions. The actual impact of pavement edge drop-off on drivers’ ability to recover safely once they leave the roadway, however, is not well understood under actual driving conditions. Additionally, little information is available that quantifies the number or severity of crashes that occur where pavement edge drop-off may have been a contributing factor. Without sufficient information about the frequency of edge drop-off-related crashes, agencies are not fully able to measure the economic benefits of investment decisions, evaluate the effectiveness of different treatments to mitigate edge drop-off, or focus maintenance resources. To address these issues, this report details research to quantify the contribution of pavement edge drop-off to crash frequency and severity. Additionally, the study evaluated federal and state guidance in sampling and addressing pavement edge drop-off and quantified the extent of pavement edge drop-off in two states. This study focused on rural two-lane paved roadways with unpaved shoulders, since they are often high speed facilities (55+ mph), have varying levels of maintenance, and are likely to be characterized by adverse roadway conditions such as narrow lanes or no shoulders.

Crash Data Validation: An Iowa Case Study, February, 2007

With the quickening pace of crash reporting, the statistical editing of data on a weekly basis, and the ability to provide working databases to users at CTRE/Iowa Traffic Safety Data Service, the University of Iowa, and the Iowa DOT, databases that would be considered incomplete by past standards of static data files are in “public use” even as the dynamic nature of the central DOT database allows changes to be made to both the aggregate of data and to the individual crashes already reported. Moreover, “definitive” analyses of serious crashes will, by their nature, lag seriously behind the preliminary data files. Even after these analyses, the dynamic nature of the mainframe data file means that crash numbers can continue to change long after the incident year. The Iowa DOT, its Office of Driver Services (the “data owner”), and institutional data users/distributors must establish data use, distribution, and labeling protocols to deal with the new, dynamic nature of data. In order to set these protocols, data must be collected concerning the magnitude of difference between database records and crash narratives and diagrams. This study determines the difference between database records and crash narratives for the Iowa Department of Transportation’s Office of Traffic and Safety crash database and the impacts of this difference.

Riding the South Sea bubble

This paper presents a case study of a well-informed investor in the South Sea bubble. We argue that Hoare's Bank, a fledgling West End London banker, knew that a bubble was in progress and nonetheless invested in the stock; it was profitable to "ride the bubble." Using a unique dataset on daily trades, we show that this sophisticated investor was not constrained by institutional factors such as restrictions on short sales or agency problems. Instead, this study demonstrates that predictable investor sentiment can prevent attacks on a bubble; rational investors may only attack when some coordinating event promotes joint action.

Iowa Problem Identification, February 2010

Each year, traffic crashes in the United States result in nearly 300,000 deaths and serious injuries. In 2008 alone, traffic crashes cost the nation an estimated $230 billion, nine times more than the estimated cost of all crime. Highway crashes represent the leading cause of death and disabling injury for persons under age 35. In recognition of this problem, the Congress of the United States enacted national highway safety legislation in 1966, which led to the establishment of the National Highway Traffic Safety Administration (NHTSA). The legislation also provided for federal highway safety monies to be made available to the states with a goal of reducing death and injury on the nation’s roads. Iowa has been very active in the federal-state local highway safety partnership since the mid 1960s.

Iowa Comprehensive Highway Safety Plan, September 2006

In Iowa, hundreds of people die and thousands more are injured on our public roadways each year despite decades of efforts to end this su�ffering. Past safety e�efforts have resulted in Iowans bene�fiting from one of the best state roadway systems in the nation. Due to multi-agency e�efforts, Iowa has achieved 90 percent compliance with the state’s mandatory front seat belt use law, earned the nation’s second-lowest percent of alcohol involvement in fatal crashes and made safety gains in system-wide roadway design and operational improvements. Despite these ongoing e�efforts, the state’s annual average of 445 deaths and thousands of life-changing injuries is a tragic toll and an unacceptable public health epidemic in our state. To save more lives on our roadways, Iowans must be challenged to think �differently about lifesaving measures addressing young drivers, safety belts, and motorcycle helmet use and accept innovative designs such as roundabouts. Iowa must apply evidence-based strategies and create a safety culture that motivates all citizens to travel more responsibly. They must demand a lower level of tolerance for Iowa’s roadway deaths and injuries. The Iowa Comprehensive Highway Safety Plan (CHSP) engages diverse safety stakeholders and charts the course for this state, bringing to bear sound science and the power of shared community values to change the culture and achieve a standard of safer travel for our citizens. How many roadway deaths and injuries are too many? Iowa’s highway safety stakeholders believe that, “One death is one too many” and e�effective culture-changing policy and program strategies must be implemented to help reduce this death toll from an annual average of 445 to 400 by the year 2015.

Clear Zone – A Synthesis of Practice and an Evaluation of the Benefi ts of Meeting the 10-ft Clear Zone Goal on Urban Streets, November 2008

In urban communities, there are often limited amounts of right-of-way available for establishing a large setback distance from the curb for fixed objects. Urban communities must constantly weigh the cost of purchasing additional right-of-way for clear zones against the risk of fixed object crashes. From 2004 to 2006, this type of crash on curbed roads represented 15% of all fatal crashes and 3% of all crashes in the state of Iowa. Many states have kept the current minimum AASHTO recommendations as their minimum clear zone standards; however, other states have decided that these recommendations are insufficient and have increased the required minimum clear zone distance to better suit the judgment of local designers. This report presents research on the effects of the clear zone on urban curbed streets. The research was conducted in two phases. The first phase involved a synthesis of practice that included a literature review and a survey of practices in jurisdictions that have developmental and historical patterns similar to those of Iowa. The second phase involved investigating the benefits of a 10 ft clear zone, which included examining urban corridors in Iowa that meet or do not meet the 10 ft clear zone goal. The results of this study indicate that a consistent fixed object offset results in a reduction in the number of fixed object crashes, a 5 ft clear zone is most effective when the goal is to minimize the number of fixed object c ashes, and a 3 ft clear zone is most effective when the goal is to minimize the cost of fixed object crashes.

Pavement Markings and Safety Final Report, November 2010

Previous research on pavement markings from a safety perspective tackled various issues such as pavement marking retroreflectivity variability, relationship between pavement marking retroreflectivity and driver visibility, or pavement marking improvements and safety. A recent research interest in this area has been to find a correlation between retroreflectivity and crashes, but a significant statistical relationship has not yet been found. This study investigates such a possible statistical relationship by analyzing five years of pavement marking retroreflectivity data collected by the Iowa Department of Transportation (DOT) on all state primary roads and corresponding crash and traffic data. This study developed a spatial-temporal database using measured retroreflectivity data to account for the deterioration of pavement markings over time along with statewide crash data to attempt to quantify a relationship between crash occurrence probability and pavement marking retroreflectivity. First, logistic regression analyses were done for the whole data set to find a statistical relationship between crash occurrence probability and identified variables, which are road type, line type, retroreflectivity, and traffic (vehicle miles traveled). The analysis looked into subsets of the data set such as road type, retroreflectivity measurement source, high crash routes, retroreflectivity range, and line types. Retroreflectivity was found to have a significant effect in crash occurrence probability for four data subsets—interstate, white edge line, yellow edge line, and yellow center line data. For white edge line and yellow center line data, crash occurrence probability was found to increase by decreasing values of retroreflectivity.