http://repub.eur.nl/res/concept/jel-C0/ Recent publications classified by JEL Code C0 en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/38776/ 2013-01-22T00:00:00Z Allen, D.E. Anwar, A.M. McAleer, M.J. Powell, R.J. Singh, A.K. http://repub.eur.nl/res/pub/37781/ 2012-07-01T00:00:00Z This paper presents a general technique for comparing the concavity of different utility functions when probabilities need not be known. It generalizes: (a) Yaari's comparisons of risk aversion by not requiring identical beliefs; (b) Kreps and Porteus' information-timing preference by not requiring known probabilities; (c) Klibanoff, Marinacci, and Mukerji's smooth ambiguity aversion by not using subjective probabilities (which are not directly observable) and by not committing to (violations of) dynamic decision principles; (d) comparative smooth ambiguity aversion by not requiring identical second-order subjective probabilities. Our technique completely isolates the empirical meaning of utility. It thus sheds new light on the descriptive appropriateness of utility to model risk and ambiguity attitudes. Baillon, A. Driesen, B. Wakker, P.P. http://repub.eur.nl/res/pub/37312/ 2012-06-13T00:00:00Z During the last decades, China has experienced double-digit economic growth rates and rising inequality. This paper implements a new decomposition on the China Health and Nutrition panel Survey (1991-2006) to examine the extent to which changes in level and distribution of incomes and in income mobility are related to health disparities between rich and poor. We find that health disparities in China relate to rising income inequality and in particular to the adverse health and income experience of older (wo)men, but not to the growth rate of average incomes over the last decades. These findings suggest that replacement incomes and pensions at older ages may be one of the most important policy levers in combating health disparities between rich and poor Chinese. Baeten, S.A. Ourti, T.G.M. van Doorslaer, E.K.A. van http://repub.eur.nl/res/pub/15181/ 2009-03-09T00:00:00Z We present a mathematical analysis of the long-run behavior of genetic algorithms that are used for modeling social phenomena. The analysis relies on commonly used mathematical techniques in evolutionary game theory. Assuming a positive but infinitely small mutation rate, we derive results that can be used to calculate the exact long-run behavior of a genetic algorithm. Using these results, the need to rely on computer simulations can be avoided. We also show that if the mutation rate is infinitely small the crossover rate has no effect on the long-run behavior of a genetic algorithm. To demonstrate the usefulness of our mathematical analysis, we replicate a well-known study by Axelrod in which a genetic algorithm is used to model the evolution of strategies in iterated prisoner’s dilemmas. The theoretically predicted long-run behavior of the genetic algorithm turns out to be in perfect agreement with the long-run behavior observed in computer simulations. Also, in line with our theoretically informed expectations, computer simulations indicate that the crossover rate has virtually no long-run effect. Some general new insights into the behavior of genetic algorithms in the prisoner’s dilemma context are provided as well. Waltman, L.R. Eck, N.J.P. van http://repub.eur.nl/res/pub/13440/ 2008-11-01T00:00:00Z This paper studies an model equation model and its error-correction equivalent as a temporal aggregate of an underlying true equation in continuous time. Given a stylized fact about α0 / α1 we find that this underlying equation is not a Koyck partial adjustment model, but again an error-correction model. An illustration is given. Cate, A. ten Franses, Ph.H.B.F. http://repub.eur.nl/res/pub/7876/ 2006-07-08T00:00:00Z We model and measure simultaneous large losses of the market value of insurers to understand the impact of shocks on the insurance sector. The downside risk of insurers is explicitly modelled by common and idiosyncratic risk factors. Since reinsurance is important for the capacity of insurers, we measure risk dependence among European insurers and reinsurers. The results point to a relatively low insurance sector wide risk. Dependence among insurers is higher than among reinsurers. Slijkerman, J.F. http://repub.eur.nl/res/pub/6618/ 2004-08-17T00:00:00Z The aim of the paper is to obtain confidence intervals for the tail index and high quantiles taking into account the optimal rate of convergence of the estimator. The common approach to obtaining confidence intervals presented in the literature is to use the normal distribution approximation at a non-optima1 rate. Instead, we propose to use the optimal rate, but then a bias term with unknown sign has to be estimated. We provide an estimator for this sign and the full programme to obtain the optimal confidence intervals. Moreover, we demonstrate the gain in coverage, and show the relevance of these confidence intervals by calculating the reduction in capital requirements in a financia1 Value at Risk exercise. Simulation results are also presented. It is weIl known that extreme value parameter estimators which balance the asymptotic bias squared and variance yield the lower asymptotic mean square error. Here we demonstrate the relevance of using the confidence bands for the quantiles using the optima1 number of order statistics on simulated and actua1 data. It appears that if one does not correct for the sign factor the confidence bands are considerably larger. In the financia1 application for the determination of appropriate capita1 buffers usage of the optima1 confidence band implies considerable reduction in capital provisioning. The band without the correction term sometimes requires about 10% more capital vis á vis the optimal band. Since investment banks nowadays have to provision against such losses by holding capital, .reduction in capital requirements in the order of 10% gives quite a significant reduction in operating costs. Ferreira, A. Vries, C.G. de http://repub.eur.nl/res/pub/304/ 2003-03-31T00:00:00Z Nowadays there is an increasing tendency of visualizing data in favor of tables. An important advantage is that results can be derived more easily and interpretation is more direct. For example, the correlations of returns of stock market indices can be mapped by multidimensional scaling, separating closely related markets from less related markets. In this inaugural address, dynamic visualization is added as a new element to such maps. We discuss applications of this idea in interactively constructing a map, modeling changing correlations over time of stock exchanges by dynamic maps, and interactive construction of a map of the Dutch political parties. Combining visualization with interaction and dynamics provides an easier way to gain insight in complex data than using static visualization. Groenen, P.J.F. http://repub.eur.nl/res/pub/6876/ 2001-02-12T00:00:00Z Using US data from June 1984 to July 1999, we show that the impact of firm-specific characteristics like size and book-to-price on future excess stock returns varies considerably over time. The impact can be either positive or negative at different times. This time variation is partially predictable. We investigate whether the partial predictability signals security mispricing or risk compensation by formulating alternative modeling strategies. The strategies are compared empirically, In particular, we allow for a state-dependent choice of investment styles rather than a once-and-for-all choice for a particular style, for example based on high book-to-price ratios or small market cap values. Using alternative ways to correct for risk, we find significant and robust excess returns to style rotating investment strategies. Business cycle oriented approaches exhibit the best overall performance. Purely statistical models for style rotation or fixed investment styles reveal less robust behavior. Lucas, A. Dijk, R. van Kloek, T. http://repub.eur.nl/res/pub/12438/ 1989-01-01T00:00:00Z Haan, L.F.M. de Resnick, S. Rootzen, H. Vries, C.G. de