one sided performance measures under gram charlier distributions angel leon would like to acknowledge the financial support from the spanish ministry for science and innovation through the grant eco2014 58434 p and from the grant prometeoii 2013 015 manuel moreno gratefully acknowledges financial support by grants p12 sej 1733 and ppii 2014 030 p

the effect of product introduction delays on operating performance this paper provides empirical evidence on the effect of product introduction delays on accounting based measures of operating performance based on a diverse set of 450 publicly traded firms that experienced product introduction delays we find that delays have a statistically significant negative effect on profitability depending on the method used to estimate abnormal performance the median abnormal decline in return on assets roa ranges from 2 70 to 3 44 over a three year period around the year of the delay announcement the median decline in sales over assets ranges from 5 92 to 10 99 and the median decline in return on sales ranges from 1 48 to 3 06 cross sectional regression analysis indicates that the impact of delays on abnormal roa is more negative for smaller firms and for firms that are more profitable before the delay furthermore the impact is more negative for firms that operate in industries that are larger and more profitable we also find a positive association between abnormal roa and abnormal stock price performance around the product introduction delay announcements

a non expected utility model and its application in practical auctions this article presents a non expected utility decision model which is nonlinear in the winning probabilities the model not only explicitly expresses bidders attitudes to risk but also addresses t

optimal retailer investments in green operations and preservation technology for deteriorating items abstract this paper examines the impact of dynamic retailer investments in green operations while considering the reference price effect a replenishment problem based on joint pricing dynamic investment in green operations preservation technology and optimal replenishment times for deteriorating items is considered as a way to maximize retailer profit in this problem the demand rate depends on the sales and reference prices as well as green concern level optimal control theory is employed to obtain a dynamic investment rate and a simulated annealing algorithm is used to find the solution of the nonlinear constraint optimization problem which determines the price preservation technology investment and replenishment cycle time in addition computational simulations and sensitivity analyses are carried out to offer managerial insights the findings suggest that continuous investment in green operations and preservation technology can significantly improve the retailer s financial performance the consumer reference price is an important influence on the retailer s decision to invest in green operations furthermore results show that the higher price sensitivity of the market always discourages the retailer from investing in green operations the retailer needs to invest more in green operations for products with relatively high unit value

stochastic dominance and mean variance measures of profit and loss for business planning and investment in this paper we first extend the stochastic dominance sd theory by introducing the first three orders of both ascending sd asd and descending sd dsd to decisions in business planning and investment to risk averse and risk loving decision makers so that they can compare both return and loss we provide investors with more tools for empirical analysis with which they can identify the first order asd and dsd prospects and discern arbitrage opportunities that could increase his her utility as well as wealth and set up a zero dollar portfolio to make huge profit our tools also enable investors and business planners to identify the third order asd and dsd prospects and make better choices to complement the stochastic dominance approach we also introduce an improved mean variance criterion to decisions in business planning or investment on both return and loss for risk averse and riskloving investors we then illustrate the superiority of the present approaches with well known examples in the literature and discuss the relationship between the improved stochastic dominance and mean variance criteria

testing for risk aversion a stochastic dominance approach we conduct an experiment based on the stochastic dominance framework in order to investigate risk aversion in isolation of other effects such as subjective probability distortion the certainty effect and framing effects the result is striking most individuals are not risk averse 2001 elsevier science b v all rights reserved

holding on for too long an experimental study on inertia in entrepreneurs and non entrepreneurs disinvestment choices abstract disinvestment in the sense of project termination and liquidation of assets including the cession of a venture is an important realm of entrepreneurial decision making this study presents the results of an experimental investigation modeling the choice to disinvest as a dynamic problem of optimal stopping in which the patterns of decisions are analyzed with entrepreneurs and non entrepreneurs our experimental results reject the standard net present value approach as an account of observed behavior instead most individuals seem to understand the value of waiting their choices are weakly related to the disinvestment triggers derived from a formal optimal stopping benchmark consistent with real options reasoning we also observe a pronounced psychological inertia i e most individuals hold on to a losing project for even longer than real options reasoning would predict the study provides evidence for entrepreneurs and non entrepreneurs being quite similar in their behavior

optimal advertising and pricing for new green products in the circular economy abstract in the circular economy era environmental sustainability is critical and both green and non green products with similar functions co exist in practice there is little doubt that these two types of products are competing and may substitute one another even though one is more environmental friendly than the other in this paper we build analytical models to explore the optimal advertising and pricing decisions for a green product in the presence of a non green product substitute we investigate both simultaneous and sequential pricing strategies under which there are three possible pricing scenarios namely 1 both prices of green and non green products are determined simultaneously strategy ip 2 the green product s price is decided first and then the non green product s price is determined strategy gl and 3 the non green product s price is decided first and then the green product s price is determined strategy nl we find that the sequential pricing strategy is more profitable than the simultaneous pricing strategy for both green and non green supply chains it is interesting to prove the existence of second mover advantage in the pricing game moreover we identify that if the green supply chain uses strategy nl it could achieve a better performance in profit and minimize the corresponding environmental impact if the green supply chain is truly socially responsible it should design a product with low substitutability so that the environmental impact can be enhanced furthermore our numerical results indicate that strategy ip never performs the best in terms of consumer surplus and social welfare when the product substitution level is sufficiently high findings of this paper contribute to the literature on cleaner production systems in the circular economy era

consistent testing for stochastic dominance under general sampling schemes we propose a procedure for estimating the critical values of the extended kolmogorov smirnov tests of stochastic dominance of arbitrary order in the general k prospect case we allow for the observations to be serially dependent and for the first time we can accommodate general dependence amongst the prospects which are to be ranked also the prospects may be the residuals from certain conditional models opening the way for conditional ranking we also propose a test of prospect stochastic dominance our method is based on subsampling and we show that the resulting tests are consistent and powerful against some n 1 2 local alternatives we also propose some heuristic methods for selecting subsample size and demonstrate in simulations that they perform reasonably we describe an alternative method for obtaining critical values based on recentring the test statistic and using full sample bootstrap methods we compare the two methods in theory and in practice

uncertainty and the employment dynamics of small and large businesses we examine the impact of uncertainty on employment dynamics alternative measures of uncertainty are constructed based on the survey of professional forecasters and regression based forecasting models for gdp growth inflation sp the impact on large businesses are generally non existent or weaker our results suggest that to truly understand the effects of uncertainty on employment dynamics we need to focus on the relatively smaller and entrepreneurial businesses we discuss implications for the framing of economic policy

a multi research method approach to studying environmental sustainability in retail operations abstract retailers increasingly incorporate environmental protection measures to improve their value chain operations although environmental sustainability in operations management has been widely examined in the manufacturing context its adoption in the retail industry is largely recent in this study we explore through both qualitative and quantitative approaches in the real retail context what green practices retailers have put in place to meet the needs of diverse stakeholders and examine whether or not such practices improve retailers financial performance undertaking this study in two phases we first conducted a secondary data analysis of 345 publicly traded retailers in japan to identify the green retail operations gros that retailers have adopted we presented empirical evidence on the performance impact of gros adoption and analyzed changes in the performance before and after gros adoption as measured by return on assets roa in the second phase we carried out an empirical study with survey data collected from 141 retailers in hong kong to validate the measurement of gros and examined the financial implications of gros adoption we conclude that there is a positive impact of gros adoption on firms financial performance in the retail industry

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

ecological modernisation new perspectives abstract ecological modernisation understood as systematic eco innovation and its diffusion has by far the largest potential to achieve environmental improvements in general the market logic of modernisation and competition for innovation combined with the market potential of global environmental needs serve as important driving forces behind ecological modernisation in recent times however additional factors like rising energy prices or fears from climate change have favoured the rise of this innovation based approach to environmental policy the article deals with two special driving forces first there is growing evidence for the importance of smart environmental regulation secondly the increasingly complex actor constellation of global environmental governance leads to mounting business risks for polluters and thereby exerts pressure for eco innovation despite these favourable framework conditions the strategy of ecological modernisation nonetheless faces a number of inherent limitations these include the unavailability of marketable technological solutions for relevant environmental problems like the loss of species the rebound effect neutralising the incremental environmental improvements through economic growth the dilemma of the n curve as well as resistance by modernisation losers against this background structural solutions seem indispensable here eco innovations should be supported by transition management or ecological structural policy

globalization and the environment determinants of firm self regulation in china critics assert that globalization is detrimental to the environment because it encourages location of polluting industries in countries with low environmental regulations we suggest that globalization might also have positive environmental effects because global ties increase self regulation pressures on firms in low regulation countries using survey data from firms in china we find that multinational ownership multinational customers and exports to developed countries increase self regulation of environmental performance

stochastic dominance and expected utility survey and analysis while stochastic dominance has been employed in various forms as early as 1932 it has only been since 1969 1970 that the notion has been developed and extensively employed in the area of economics finance agriculture statistics marketing and operations research in this survey the first second and third order stochastic dominance rules are discussed with an emphasis on the development in the area since the 1980s

averting risk in the face of large losses bernoulli vs tversky and kahneman abstract prospect theory asserts that people display risk attraction in high probability losses but our subjects tend to avoid fair risks for large 30 to 90 high probability 80 real losses vindicating bernoulli s view that risk aversion is the dominant attitude

diversification versus optimality is there really a diversification puzzle abstractin this paper we provide a general valuation of the diversification attitude of investors first we empirically examine the diversification of mean variance optimal choices in the us stock market during the 11 year period 2003 2013 we then analyze the diversification problem from the perspective of risk averse investors and risk seeking investors second we prove that investors optimal choices will be similar if their utility functions are not too distant independent of their tolerance or aversion to risk finally we discuss investors attitude towards diversification when the choices available to investors depend on several parameters

precautionary principle as a rule of choice with optimism on windfall gains and pessimism on catastrophic losses abstract the paper investigates a decision making process involving both risk and ambiguity differently from existing papers basili m chateauneuf a fontini f 2005 choices under ambiguity with familiar and unfamiliar outcomes theory and decision 58 195 207 chichilnisky g 2000 axiomatic approach to choice under uncertainty with catastrophic risks resources and energy economics 22 221 231 chichilnisky g 2002 in el shaarawi a h piegorsch w w eds catastropic risks encyclopedia of environmetrics vol 1 john wiley sons ltd chichester uk pp 274 279 we assume that in a choquet expected utility framework the decision maker is pessimistic with respect to unfamiliar catastrophic losses optimistic with respect to unfamiliar windfall gains and ambiguity neutral with respect to the familiar world a representation of the decision maker s choice is obtained that mimics the restricted bayes hurwicz criterion in this way a characterization of the precautionary principle is introduced for decision making processes under ambiguity with catastrophic losses and or windfall gains

the impact of environmental management on firm performance environmental management has the potential to play a pivotal role in the financial performance of the firm many individuals suggest that profitability is hurt by the higher production costs of environmental management initiatives while others cite anecdotal evidence of increased profitability a theoretical model is proposed that links strong environmental management to improved perceived future financial performance as measured by stock market performance the linkage to firm performance is tested empirically using financial event methodology and archival data of firm level environmental and financial performance significant positive returns were measured for strong environmental management as indicated by environmental performance awards and significant negative returns were measured for weak environmental management as indicated by environmental crises the implicit financial market valuation of these events also was estimated cross sectional analysis of the environmental award events revealed differences for first time awards and between industries first time award announcements were associated with greater increases in market valuation although smaller increases were observed for firms in environmentally dirty industries possibly indicative of market skepticism this linkage between environmental management and financial performance can be used by both researchers and practitioners as one measure of the benefits experienced by industry leaders and as one criterion against which to measure investment alternatives

prospect theory and mean variance analysis the experimental results of prospect theory pt reveal suggest that investors make decisions based on change of wealth rather than total wealth that preferences are s shaped with a risk seeking segment and that probabilities are subjectively distorted this article shows that while pt s findings are in sharp contradiction to the foundations of mean variance mv analysis counterintuitively when diversification between assets is allowed the mv and pt efficient sets almost coincide thus one can employ the mv optimization algorithm to construct ptefficient portfolios the markowitz 1952a tobin 1958 mean variance mv rule is probably the most popular investment decision rule under uncertainty in economics and in finance and it is widely employed by both academics and practitioners the strength of the mv analysis is that in the case of normal return distributions the choice of any expected utility maximizing risk averse individual will be according to the mv rule 1 the mv framework is the foundation of the sharpe 1964 lintner 1965 capital asset pricing model capm which is a cornerstone of modern finance moreover the mv framework provides a very important practical procedure for the construction of efficient portfolios while standard economic theory and in particular mv analysis assume expected utility maximization and risk aversion in a breakthrough article kahneman and tversky 1979 show that the actual behavior of individuals systematically and consistently violates these

loss aversion in aggregate macroeconomic time series abstract prospect theory has been the focus of increasing attention in many fields of economics however it has scarcely been addressed in macroeconomic growth models neither on theoretical nor on empirical grounds in this paper we use prospect theory in a stochastic optimal growth model thereafter the focus lies on linking the euler equation obtained from a prospect theory growth model of this kind to real macroeconomic data we will use generalized method of moments gmm estimation to test the implications of such a non linear prospect utility euler equation our results indicate that loss aversion can be traced in aggregate macroeconomic time series

stochastic dominance tests abstract we develop stochastic dominance tests of a given prospect compared with multiple choice alternatives we account for all types of preferences the tests are formulated in terms of linear as well as mip models and developed based on bayesian analysis which relies on novel markov chain monte carlo procedures empirical results indicate that the market portfolio is prospect stochastic dominance optimal this implies that there are s shaped utility functions that rationalize the market portfolio

prospect theory much ado about nothing prospect theory is a paradigm challenging the expected utility paradigm one of the fundamental components of prospect theory is the s shaped value function the value function is mainly justified by experimental investigation of the certainty equivalents of prospects confined either to the negative or to the positive domain but not of mixed prospects which characterize most actual investments we conduct an experimental study withmixed prospects using for the first time recently developed investment criteria called prospect stochastic dominance psd and markowitz stochastic dominance msd we reject the s shaped value function showing thatat least 62 76 of the subjects cannot be characterized by such preferences we find support for the markowitz utility function which is a reversed s shaped function exactly the opposite of the prospect theory value function it is possible that the previous results supporting the s shaped value function are distorted because the prospects had only positive or only negative outcomes presenting hypothetical situations which individuals do not usually face and which are certainly not common in financial markets

labor market frictions and optimal steady state inflation in central theories of monetary non neutrality the ramsey optimal steady state inflation rate varies between the negative of the real interest rate and zero this paper explores how the interaction of nominal wage and search and matching frictions affect the policy prescription we show that adding the combination of such frictions to the canonical monetary model can generate an optimal inflation rate that is significantly positive specifically for a standard u s calibration we find a ramsey optimal inflation rate of 1 16 percent per year

theories of risk testing investor behaviour on the taiwan stock and stock index futures markets investor behavior towards risk lies at the heart of economic decision making in general and modern investment theory and practice in particular this paper uses both the mean variance mv criterion and stochastic dominance sd procedures to analyze the preferences for four of the most widely studied investor types in the taiwan stock and stock index futures market we find that risk averters concave utility function prefer spot to futures whereas risk seekers convex utility function prefer futures to spot our findings also show that investors with s shaped utility functions prefer spot futures to futures spot when markets move upward downward finally our results imply that investors with reverse s shaped utility functions prefer futures spot to spot futures when markets move upward downward these results are robust with respect to sub periods spot returns including dividends and diversification although we do not check whether risk averters risk seekers and investors with s shaped and reverse sshaped utility functions actually exist in the market we do show that their existence is plausible the implications of our findings on market efficiency and the existence of arbitrage opportunities are also discussed in this study

individual vs aggregate preferences the case of a small fish in a big pond we study the relationship between the risk preferences of individuals and the risk preferences of the aggregate economy to emphasize the vast differences that can occur between individual and market preferences brought about through aggregation we assume an economy consisting entirely of risk seekers we show that such individuals can lead to an aggregate economy that is risk averse the converse is also true an aggregate economy that exhibits risk aversion does not imply an economy of individual risk averters an economy demanding a risk premium can be formed from individuals who do not demand such compensation understanding the relationship between the preferences of individuals and the preferences of the aggregate economy is crucial for understanding the connection between the behavioral finance literature which focuses on individual preferences and the asset pricing literature which focuses on aggregate prices we discuss empirical implications of these results this paper was accepted by wei xiong finance

on the potential for observational equivalence in experiments on risky choice when a power value function is assumed we demonstrate theoretically and illustrate the implications of assuming power utility when the true function is of the expo power form empirical results can appear to be consistent with cumulative prospect theory when they are in fact generated from a markowitz model

market efficiency of oil spot and futures a mean variance and stochastic dominance approach this paper examines the market efficiency of oil spot and futures prices by using both mean variance mv and stochastic dominance sd approaches based on the west texas intermediate crude oil data for the sample period 1989 2008 we find no evidence of any mv and sd relationships between oil spot and futures indices this infers that there is no arbitrage opportunity between these two markets spot and futures do not dominate one another investors are indifferent to investing spot or futures and the spot and futures oil markets are efficient and rational the empirical findings are robust to each sub period before and after the crises for different crises and also to portfolio diversification

corporate environmental initiatives in the chinese context performance implications and contextual factors although a number of studies have been conducted on the relationship between environmental management and firm performance most of them are conducted in the western context due to the unique social and economic environments in china the performance implications of environmental management might be quite different in the chinese context we examine the impact of corporate environmental initiatives ceis on the market value of firms in china we find that in contrast to the findings in the western context chinese investors react negatively to cei announcements the negative reaction is more significant when the announcements are related to processes rather than products and for state owned enterprises rather than privately owned corporations however there is no difference whether the cei is self declared or third party endorsed overall our research indicates that chinese investors consider ceis to be in conflict with shareholder interest in particular ceis in state owned enterprises might be considered by investors as signals that firms need to sacrifice profits to shoulder more social responsibility