risk rationality and time diversification the validity of the concept of time diversification is the subject of long running debate supporters of the concept argue that risk decreases as investment horizon increases detractors suggest that the concept is false on the face of it we argue that time diversification is consistent both theoretically and empirically with current conceptions of risk and rationality and we also note the implications of changes in investment horizon for stock market behavior

explaining the choice of organic produce cosmetic defects prices and consumer preferences the choice between organic and conventional produce was estimated empirically using a two equation probit model data were collected in store on cosmetic defects produce prices and consumers demographic and economic traits store choice displayed a significant impact on the probability of purchasing organic produce shoppers at the specialty grocer were sensitive to price differences between organic and conventional items households with children under eighteen were more likely to purchase organic produce while shoppers with graduate or professional degrees were less likely to do so differences in cosmetic defects had statistically significant albeit small effects on the probability of purchasing organics

an economic analysis of sardine fishing in the gulf of valencia spain abstract the optimal management of a particular fishery is illustrated using data describing previous fishery exploitation relevant biological and economic relationships are estimated then the optimum levels of catches effort and stock are calculated the prices that if implemented would ensure the current efficient exploitation of the fishery are also calculated finally the welfare gains that can be achieved by a movement from the freemarket equilibrium to the socially optimum solution are demonstrated

industry self regulation without sanctions the chemical industry s responsible care program industry self regulation the voluntary association of firms to control their collective action has been proposed as a complement to government regulation proponents argue that the establishment of

fishing down the value chain biodiversity and access regimes in freshwater fisheries the case of malawi abstract this paper considers the connection between the diversity of catch in a multi species fishery and the productivity of the fishery under different access regimes a modified gordon schaefer model is used to analyse the importance of the level of diversity in a fishery in open access and profit maximising regimes the modified model which includes both environmental and bioeconomic variables is fitted to data from a gillnet fishery in lake malawi pressure on stocks is shown to be greater at all levels of biodiversity in open access than it is in profit maximising regimes however in a profit maximising regime both catch and the productivity of fishing effort is highest when there is a single marketed species by contrast in an open access regime catches are maximised at higher levels of bioeconomic diversity than in profit maximising regimes implications for policy are discussed

overcompliance and voluntary agreements voluntary agreements with industry offer many examplesof overcompliance with respect to environmentalstandards such phenomena seem to be irrational butappear less surprising considering firms strategiesare aimed to internalise environmental quality wemodel the choice of the environmental quality ofproducts in a one shot game between a monopolist andconsumers to show the existence of inefficientequilibria where quality is low because of moralhazard the firm can however change its equilibriumstrategy in a repeated but finite game in order tobuild an environmental reputation if we suppose thatconsumers information is not only imperfect withregard to quality but also incomplete with respect toany environmental constraint that may affect thebehaviour of firms like the threat either of astricter regulation or of potential entry in atwo period model we show the existence of a perfectbayesian equilibrium in mixed strategies where thefirm can revert to the production of green products inorder to influence consumers beliefs and acquire anenvironmentally friendly reputation due to thepeculiarity of environmental information greenproducts are credence goods we claim that anexplicit agreement is also necessary in order toestablish monitoring and controlling procedures toverify the performance of firms these procedures canexplain per se the diffusion of voluntary agreementsthat are nevertheless self enforcing because of thereputation effect

guaranteeing individual accounts global aging is prompting workers and taxpayers everywhere to recognize their vulnerability to the inherent uncertainty of unfunded social security systems this has generated an international wave of social security reforms over the last two decades prompting more than 20 countries to establish individual account ia plans in the united states the idea of individual accounts has attracted recent interest with the release of the final report of the president s commission to strengthen social security csss here voluntary individual accounts were proposed as a key element of a reformed national old age system see commission to strengthen social security 2001 john f cogan and mitchell 2003 strengths of ia s include the fact that participants gain ownership in their accounts and diversify their pension investments nevertheless ia participants also must bear capital market risk recent market volatility has reminded investors of the importance of capital market fluctuations and their potential impact on retirement income in response some policymakers have suggested that guarantees be designed to help protect ia investments abroad such guarantees have been adopted in several latin american countries undergoing reform and most recently in japan and germany mitchell and kent smetters 2003 sensible public policy recommending the adoption of guarantees must identify their costs and who will pay for them in this paper we discuss how to evaluate such costs in the context of a social security reform that includes ia s along with ways to finance them

consumer preferences for fresh food items with multiple quality attributes evidence from an experimental auction of pork chops this study illustrates an application of experimental auction methods using both experimental economics and experimental design to evaluate consumer perceptions and willingness to pay wtp for fresh pork chops we test and reject hypotheses that a market prices and consumers wtp are unaffected by the level of attributes embodied in the pork chops b appearance based on photographs or actual product and actual taste are equally good sources of consumer information and c consumers are consistent in their preferences for fresh pork attributes a major conclusion is that predicting consumer demand for fresh pork or any fresh food based on appearance without tasting is unproductive

a resource based perspective on corporate environmental performance and profitability drawing on the resource based view of the firm we posited that environmental performance and economic performance are positively linked and that industry growth moderates the relationship with the returns to environmental performance higher in high growth industries we tested these hypotheses with an analysis of 243 finns over two years using independently developed environmental ratings results indicate that it pays to be green and that this relationship strengthens with industry growth we conclude by highlighting the study s academic and managerial implications making special reference to the social issues in management literature

on the risk of stocks in the long run a resolution to the debate in response to the ongoing debate in this journal about whether the risk of investments in the stock market is increased or decreased by lengthening the investment period we show that bodie s attempt to identify market risk with the price of put options leads to a circular argument within the workings of arbitrage free option pricing models thus bodie failed to rebut the conventional view that longer investment horizons may be thought of as less risky bodie s put option prices are relevant however to determining market prices of stock investment insurance

misconceptions about optimal equity allocation and investment horizon our analysis and results offer some resolution to a debate that has continued for 30 years we demonstrate that in contrast to prior claims no conflict exists between the implications of economic models of choice under uncertainty and a rational investor preference for larger equity allocations at longer investment horizons using examples of expected utility of wealth and mean variance utility we show that the effect of a longer horizon on risky asset allocation is consistent with increasing or decreasing optimal equity allocations even under the assumption of constant relative risk aversion

experimental auction procedure impact on valuation of quality differentiated goods despite increased use of experimental auctions a myriad of different procedures are being employed without formal consideration of how the procedures might affect results this study investigates the effect of several procedural issues on valuation estimates from experimental auctions results indicate the second price auction generates higher valuations than english becker degroot marschak bdm and random nth price auctions especially in latter bidding rounds and that random nth price auction yields lower valuations than english and bdm auctions we find that endowing subjects with a good prior to eliciting bids can have an impact on valuations but the effect varies across auction mechanism

do native and invasive labels affect consumer willingness to pay for plants evidence from experimental auctions ornamental plant sales have been identified as an important vector for the introduction of invasive plants increased concerns about the economic and ecological costs of invasive plants have spawned interest in identifying strategies to curtail introductions one possible strategy is labeling plants based on whether they are invasive or native the primary purpose of this paper was to explore how labeling plants based on invasive and native attributes might affect consumer demand to accomplish this objective a second price auction was used to elicit the willingness to pay wtp for plants with and without labels on average we found a 0 35 premium for plants labeled as noninvasive and native and a 1 01 to 1 66 discount for plants labeled as invasive the size of these premiums and discounts differed in relation to various demographic attitudinal and preference related factors overall our results suggest that labeling plants as invasive or native could be a viable strategy for reducing the introduction of invasive plants

asset allocation in a downside risk framework 1991 asset allocation in a downside risk framework financial analysts journal vol 47 no 5 pp 28 40

investments with downside insurance and the issue of time diversification of two insurance policies that guarantee the same minimum rate of return on a portfolio and differ only in their time horizons which is riskier this study shows that if the minimum rate is lower than the risk free rate and if the risk is measured by the cost of insurance then the degree of risk is not a monotonic function of the policy s time horizon for every positive level of concession rate defined as the risk free rate minus the insured rate the cost of such insurance peaks at a finite time horizon this peak cost horizon is typically between 5 and 15 years the higher the concession rate or the lower the volatility of the insured portfolio the shorter this peak cost time horizon is thus although a 5 year insurance policy can be much riskier than a 1 year policy it can also be riskier than a 30 year policy

a theory of optimal timing and selectivity abstract we solve an extended optimal portfolio problem in continuous time for any horizon where we allow the mean and variance of returns to be stochastic introduce fund flows to and from the portfolio permit differential investor preferences for dividend versus growth stocks and allow the investor to buy costly information on the random mean and variance of the portfolio to improve his portfolio choice set this model provides analytical results especially useful in understanding the expenditure on timing and selection information a mutual fund undertakes in attempting to improve performance relative to a benchmark we examine this proposition for growth and income funds long and short investment horizons and also account for fund inflows and outflows we also combine our model of costly learning with the traditional model of incomplete information to understand the interaction between costly and costless learning the approach taken is a purely theoretical one and in this regard the paper is normative in spirit we anticipate that the propositions in this paper will provide two byproducts i a framework for fund managers to think about how to allocate information expenses between timing and selection skills and ii give academics especially empirical researchers a theoretical backdrop against which to examine the mutual fund industry

labor supply flexibility and portfolio choice in a life cycle model abstract this paper examines the effect of the labor leisure choice on portfolio and consumption decisions over an individual s life cycle the model incorporates the fact that individuals may have considerable flexibility in varying their work effort including their choice of when to retire given this flexibility the individual simultaneously determines optimal levels of current consumption labor effort and an optimal financial investment strategy at each point in his life cycle we show that labor and investment choices are intimately related the ability to vary labor supply ex post induces the individual to assume greater risks in his investment portfolio ex ante

on the risk of stocks in the long run a familiar proposition is that investing in common stocks is less risky the longer an investor plans to hold them if this proposition were true then the cost of insuring against earning less than the risk free rate of interest should decline as the investment horizon lengthens this paper shows that the opposite is true even if stock returns are mean reverting in the long run the case for young people investing more heavily than older people in stocks cannot therefore rest solely on the long run properties of stock returns for guarantors of money fixed annuities the proposition that stocks in their portfolios are a better hedge the longer the maturity of their obligations is unambiguously wrong

sushi or fish fingers seafood diversity collapsing fish stocks and multispecies fishery management we present a model of a multispecies fishery and we show the following i consumer preferences for seafood diversity can trigger a sequential collapse of fish stocks under open access fishery ii the stronger the preferences are for diversity the higher is the need for coordinated multispecies regulation iii second best optimal management of only one or a few species is less strict than socially optimal management of the same species iv myopic regulation of one species ignoring spillovers to other species can cause depletion of other stocks that would not be depleted under open access

testing for common versus private property comment abstract conceptual confusion over common property persists in the literature an attempt by clark and carlson to test for common property versus private property is flawed by their misspecification of common property they test instead for private property versus nonproperty open access

bioeconomic diversity dynamics of a marine ecosystem this paper models the bio economic diversity dynamics of a marine ecosystem made up by its entire commercial fish species and from the fitted model obtains a quantitative measure of its resilienc