mixed integer programming approaches for index tracking and enhanced indexation we consider the problem of reproducing the performance of a stock market index but without purchasing all of the stocks that make up the index index tracking we also consider the problem of out performing the index enhanced indexation we present mixed integer linear programming formulations of these problems our formulations include transaction costs a constraint limiting the number of stocks that can be purchased and a limit on the total transaction cost that can be incurred as our formulations of these problems are mixed integer linear programs we can use a standard solver cplex numeric results are presented for eight data sets drawn from major markets the largest of these data sets involves over 2000 stocks

allocating between active and passive management with the recent difficulty in beating the s p 500 index the debate over active versus passive investing has risen to a new level of importance we provide a framework for analyzing the trade off the typical pension fund faces in deciding how much to index our analysis gets at the root of active performance stock picking skill after analyzing the performance associated with various degrees of skill in various equity styles for the 1985 97 period we found that a modest amount of stock picking skill goes a long way and that the optimal amount of allocation to indexing declines as skill increases for most risk categories however some allocation to indexing is appropriate

a public choice model of trade union behaviour and membership it is commonly assumed in the microeconomic literature concerned with trade union behaviour that the union maximises an aggregate utility function defined over homogeneous individuals and that the level of membership is fixed the purpose of this paper is to relax these two assumptions it is suggested below that trade unions may usefully be treated as political organisations comprising heterogeneous individuals and that the effects of union wage policies on the level of membership should be explicitly incorporated into the model consider first the assumption that the union is a homogeneous organisation this is often a convenient simplification but observation of the behaviour and government of trade unions suggests it is hardly realistic trade unions in the united kingdom are large groups based on a complex organisational structure comprising an executive a shop steward system and a body of rank and file members once the union is considered as a complex organisation the question arises as to how members preferences are transmitted through the hierarchical levels each of which may have conflicting aims there are two polar theoretical approaches to this question in the industrial relations literature clegg i980 at one extreme unions are seen as oligarchies unresponsive to members wishes full time officials it is argued secure a monopoly of power to stay in office with the assistance of low membership participation and apathy at the other extreme unions are regarded as organisations which are quasi democratic due to the presence of informal parties or factions the growth of workplace organisation and the existence of voting and postal or workplace balloting these two polar approaches to trade unions as large organisations may be linked up to parallel economic analyses of organisations if it is believed that trade unions are oligarchies then it may be enlightening to apply to unions economic models of bureaucracy or models of the firm comprising both shareholders and management alternatively if it is believed that trade unions are democratic organisations then public choice behavioural models may be enlightening the public choice model is chosen in this paper in preference to modern theories of the firm or of bureaucracies because it is believed that the public choice model represents a closer first approximation to trade union behaviour in the united kingdom although of course some particular unions may better fit the oligarchic model the second major concern of this paper is to relax the assumption of a fixed level of union membership the use of a fixed membership assumption in the

miners wages in post war britain an application of a model of trade union behavior the paper studies the determination of wages in the british coal industry a utility maximising model of a trade union is used to represent the behaviour of the national union of mineworkers a non linear structural model is derived and is estimated by full information maximum likelihood the results are quite encouraging there is support for a neo classical demand curve for miners labour and a significant estimate of workers relative risk aversion

strategic hiring to deter entry by unions abstract this paper presents a model of firms engaging in defensive investments designed to increase the elasticity of their demand for labor before hiring workers this allows them to lower the wage at which unionization of their workers is prevented product differentiation is given as an example of a strategy by which workers are deterred from forming unions

us business credit sources demand deposits and the missing money abstract this study accounts for much of the missing money in the us through compensating balances business lending by banks affects demand deposit growth standard money demand models include variables that likely pick up income and interest rate effects on the transactions demand for demand deposits and on compensating balance requirements provided that bank lending to firms is stable however during the missing money period business shifted toward nonbank sources of short term credit causing a decline in compensating balances empirical finding support this hypothesis as a partial explanation for the missing money using the federal reserve board s demand deposit model

oil shocks and oil stocks evidence from the 1970s the present paper examines the returns to 29 oil companies listed on the new york stock exchange during the period surrounding the oil shock of 1973 the returns are decomposed into production refining foreign and domestic operations the hypothesis that domestic price controls benefitted refiners is tested finally the hypothesis that oil price risk was priced in the sense of the arbitrage pricing theory is tested

mean var portfolio optimization a nonparametric approach portfolio optimization involves the optimal assignment of limited capital to different available financial assets to achieve a reasonable trade off between profit and risk we consider an alternative markowitz s mean variance model in which the variance is replaced with an industry standard risk measure value at risk var in order to better assess market risk exposure associated with financial and commodity asset price fluctuations realistic portfolio optimization in the mean var framework is a challenging problem since optimizing var leads to a non convex np hard problem which is computationally intractable in this work an efficient learning guided hybrid multi objective evolutionary algorithm mode gl is proposed to solve mean var portfolio optimization problems with real world constraints such as cardinality quantity pre assignment round lot and class constraints a learning guided solution generation strategy is incorporated into the multi objective optimization process to promote efficient convergence by guiding the evolutionary search towards promising regions of the search space the proposed algorithm is compared against the non dominated sorting genetic algorithm nsga ii and the strength pareto evolutionary algorithm spea2 experimental results using historical daily financial market data from s p 100 and s p 500 indices are presented experimental results shows that mode gl outperforms two existing techniques for this important class of portfolio investment problems in terms of solution quality and computational time the results highlight that the proposed algorithm is able to solve the complex portfolio optimization without simplifications while obtaining good solutions in reasonable time and has significant potential for use in practice

l investissement francais dans les colonies 1876 1940 une autre analyse de l enquete de gouvernement de vichy 1943 this paper presents an econometric model of trade union membership in the united kingdom the empirical model utilizes cyclical variables in the explanation of membership changes and separates the short and long run dynamics explicitly it proves to be a superior specification to previous business cycle models estimated for the united kingdom and predicts satisfatorily the recent decline in membership the inclusion of a dummy variable reflecting the political complexion of the government is the only secular variable which significantly improves equation performance but the composition of changes in employment plays no part in explaining the recent decline in membership copyright 1988 by the london school of economics and political science

wage dispersion and decentralization of wage bargaining this article studies how decentralization of wage bargaining from sector to firm level influences wage levels and wage dispersion we use detailed panel data covering a period of decentralization in the danish labor market the decentralization process provides variation in the individual worker s wage setting system that facilitates identification of the effects of decentralization we find a wage premium associated with firm level bargaining relative to sector level bargaining and that the return to skills is higher under the more decentralized wage setting systems using quantile regression we also find that wages are more dispersed under firm level bargaining compared to more centralized wage setting systems

structural changes and the us money demand function previous literature on the stability of the us money demand function suggests mixed results in this article we study the stability of the money demand function from the standpoint of structural changes in the function we first investigate if a stable money demand function can be found for the us for the period from the first quarter of 1959 to the fourth quarter of 2000 the results show that a stable long run money demand function does not exist for the sample period under consideration we then estimate unknown structural break points in the variables of the money demand function using bai and perron s 1998 method and test if there is a stable relationship in each sub sample period of the break points the results show that a stable relationship exists for each sub sample period the estimated income elasticity and interest rate semi elasticity are relatively smaller than ball s 2001 estimates but consistent with his argument

on the effectiveness of scenario generation techniques in single period portfolio optimization in single period portfolio selection problems the expected value of both the risk measure and the portfolio return have to be estimated historical data realizations used as equally probable scenarios are frequently used to this aim several other parametric and non parametric methods can be applied when dealing with scenario generation techniques practitioners are mainly concerned on how reliable and effective such methods are when embedded into portfolio selection models in this paper we survey different techniques to generate scenarios for the rates of return we also compare the techniques by providing in sample and out of sample analysis of the portfolios obtained by using these techniques to generate the rates of return evidence on the computational burden required by the different techniques is also provided as reference model we use the worst conditional expectation model with transaction costs extensive computational results based on different historical data sets from london stock exchange market ftse are presented and some interesting financial conclusions are drawn

optimal portfolio selection and dynamic benchmark tracking abstract this paper analyzes different approaches to portfolio selection when the requirement to portfolio performance is formulated relative to a given benchmark for example it may be desirable to track a market index as closely as possible we develop several portfolio selection algorithms based on different perceptions of risk and different risk target measures ranging from the traditional variance to the more modern value at risk in a dynamic setting we address the issue of optimal portfolio rebalancing we develop an algorithm for determining whether or not to rebalance a given portfolio based on transaction costs and new information about market conditions our approaches are tested on a set of stock data from the oslo stock exchange

contractual wages and the wage cushion under different bargaining settings how does a typically european bargaining system with collective bargaining and national minimum wage coexist with low unemployment and high wage flexibility a unique data set on workers firms and collective bargaining contracts in portugal is used to analyze the determinants of both the contractual wage and the wage cushion difference between contractual and actual wages the results indicate that the wage cushion stretches the returns to worker and firm attributes whereas it shrinks the returns to union power therefore firm specific arrangements partly offset collective bargaining granting firms certain freedom when setting wages contractual wages reflect trade unions egalitarian policy

an evolutionary heuristic for the index tracking problem abstract index tracking is a popular form of passive fund management the index tracking problem is the problem of reproducing the performance of a stock market index but without purchasing all of the stocks that make up the index our formulation of the problem explicitly includes transaction costs associated with buying or selling stocks and a limit on the total transaction cost that can be incurred our formulation also includes a constraint limiting the number of stocks that can be purchased an evolutionary heuristic population heuristic is presented for the solution of the index tracking problem reduction tests are also presented computational results are presented for five data sets drawn from major world markets these data sets are made publicly available for use by other workers

unions power collective bargaining and optimal monetary policy we study ramsey policies and optimal monetary policy rules in a model with sticky prices and unionized labour markets collective wage bargaining and unions monopoly power dampen wage uctuations and amplify employment uctuations relatively to a dnk model the optimal

the demand for money and non gdp transactions abstract this paper argues that transactions in non gdp items have an important influence on the level of money demand the paper provides empirical estimates of models of both m 1 and m 2 money demand that include variables proxying for the volume of transactions in real estate and financial assets these variables have the theoretically predicted positive sign and are statistically significant their inclusion also improves out of sample forecasts

on union preferences and labour market models insiders and outsiders this paper constructs a model of trade union behavior in which there is a distinction between insiders and outsiders this is used to examine one of the most troublesome issues in macroeconomic theory namely the extent to which a rise in aggregate demand might generate wage increases rather than growth in employment a generalization of the most widely used union utility function is presented the analysis reveals the conditions under which insiders will agree to let outsiders into employment derives two step wage preferences and proves a new result on wage rigidity copyright 1987 by royal economic society

modelling energy spot prices empirical evidence from nymex this paper investigates the behaviour of spot prices in eight energy markets that trade futures contracts on nymex we consider two types of models a mean reverting model and a spike model with mean reversion that incorporates two different speeds of mean reversion one for the fast mean reverting behaviour of prices after a jump occurs and another for the slower mean reversion rate of the diffusive part of the model we also extend these models to incorporate time varying volatility in their specification modelled as a garch and an egarch process we compare the relative goodness of fit of the different modelling variations both in sample using monte carlo simulations as well as out of sample in a value at risk var setting our results indicate the presence of a leverage effect for wti heating oil and heating oil wti crack spread whereas for the remaining energy markets we find the presence of an inverse leverage effect also the addition of the egarch specification for the volatility process improves both the in sample fit as well as the out of sample var performance for most energy markets that we examine

the impact of mortgage activity on recent demand deposit growth abstract this study quantifies the substantial effects of mortgage activity on recent demand deposit growth and finds that estimates and forecasts of recent demand deposit growth are considerably more accurate using data adjusted for mortgage activity

a dynamic model of trade union behaviour this paper constructs a dynamic model of trade union behavior in which union membership is endogenous unemployed workers are assumed to leave their union as they seem to in reality and the union must therefore solve an intertemporal optim ization problem the results imply that conventional static models ov erstate the distortions caused by monopoly unionism and that the rece nt empirical mod els of union behavior may be misspecified the paper s analysis can be seen as an attempt to construct a model of the pos t entry closed shop copyright 1987 by the review of economic studies limited

money as a medium of exchange in an economy with artificially intelligent agents abstract we study the exchange economies of kiyotaki and wright 1989 in which agents must use a commodity or fiat money as a medium of exchange if trade is to occur our agents are artificially intelligent and are modeled as using classifier systems to make decisions in the assignment of credit within the classifier systems we introduce some innovations designed to study sequential decision problems in a multi agent environment for most economies that we have simulated trading and consumption patterns converge to a stationary nash equilibrium even if agents start with random rules in economies with multiple equilibria the only equilibrium that emerges in our simulations is the one in which goods with low storage costs play the role of medium of exchange i e the fundamental equilibrium of kiyotaki and wright

optimal monetary policy in economies with dual labor markets abstract we present a dynamic stochastic general equilibrium dsge new keynesian model with indivisible labor and a dual labor market a walrasian one where wages are fully flexible and a unionized one characterized by real wage rigidity we show that the negative effect of a productivity shock on inflation and the positive effect of a cost push shock are crucially determined by the proportion of firms that belong to the unionized sector the larger this number the larger are these effects consequently the larger the union coverage the larger should be the optimal response of the nominal interest rate to exogenous productivity and cost push shocks the optimal inflation and output gap volatility increases as the number of the unionized firms in the economy increases

optimal construction and rebalancing of index tracking portfolios abstract index funds aim to track the performance of a financial index such as e g the standard poor s 500 index index funds have become popular because they offer attractive risk return profiles at low costs the index tracking problem considered in this paper consists of rebalancing the composition of the index fund s tracking portfolio in response to new market information and cash deposits and withdrawals from investors such that the index fund s tracking accuracy is maximized in a frictionless market maximum tracking accuracy is achieved by investing the index fund s entire capital in a tracking portfolio that has the same normalized value development as the index in the presence of transaction costs which reduce the fund s capital one has to manage the trade off between transaction costs and similarity in terms of normalized value developments existing mathematical programing formulations for the index tracking problem do not optimize this trade off explicitly which may result in substantial transaction costs or tracking portfolios that differ considerably from the index in terms of normalized value development in this paper we present a mixed integer linear programing formulation with a novel optimization criterion that directly considers the trade off between transaction costs and similarity in terms of normalized value development in an experiment based on a set of real world problem instances the proposed formulation achieves a considerably higher tracking accuracy than state of the art formulations

performance replication of the spot energy index with optimal equity portfolio selection evidence from the uk us and brazilian markets abstract this paper reproduces the performance of a geometric average spot energy index by investing only in a subset of stocks from the dow jones composite average the ftse 100 and bovespa composite indexes and in two pools that include only energy sector stocks from the us and the uk respectively daily data are used and the index tracking problem for passive investment is addressed with two evolutionary algorithms the differential evolution algorithm and the genetic algorithm the performance of the suggested investment strategy is tested under three different scenarios buy and hold quarterly and monthly rebalancing accounting for transaction costs where necessary

tournaments with prize setting agents in some tournaments it is the contestants themselves who determine reward allocation union members bargain over wage distribution and some firms allow self managed teams to freely determine internal resource allocation incentive structure and division of labor we analyze and test experimentally a tournament where heterogeneous agents determine the spread between winner prize and loser prize we investigate the relationship between prize spread uncertainty heterogeneity and effort we find that a large prize spread is associated with a low degree of uncertainty and a high degree of heterogeneity and that heterogeneity triggers effort by and large our real effort experiment supports the theoretical predictions

a markov regime switching approach for hedging energy commodities abstract this paper estimates constant and dynamic hedge ratios in the new york mercantile exchange oil futures markets and examines their hedging performance we also introduce a markov regime switching vector error correction model with garch error structure this specification links the concept of disequilibrium with that of uncertainty as measured by the conditional second moments across high and low volatility regimes overall in and out of sample tests indicate that state dependent hedge ratios are able to provide significant reduction in portfolio risk

modeling u s households demands for liquid wealth in an era of financial change money demand models overpredicted m2 growth in the united states from 1990 to 1993 the authors examine this overprediction using a model of households demands for liquid wealth the model is a dynamic generalization of the aids model of angus deaton and john muellbauer 1980 the authors find that the own price elasticity of money rose substantially after 1990 they also find important cross price elasticities of money with respect to other liquid financial assets notably with respect to mutual funds incorporating these and other features helps explain nearly 50 percent of the shortfall in m2 growth over the period in question

customer markets trade unions and stagflation customer market analysis combined with trade union wage setting is shown to yield a range of equilibrium levels of employment only when employment is forced outside this range can the disequilibrium acceleration or d eceleration of the price level be expected to operate numerical calc ulations suggest that this range is quite large implying that the ma ximum level of unemployment consistent with nondecelerating inflation is way above the minimum level of unemployment consistent with nonac celerating inflation a range of equilibrium employment levels appear s to be in closer agreement with empirical experience than a unique natural rate of unemployment copyright 1987 by the review of economic studies limited

a dynamic model of union membership and employment that it recognizes some link between present wage and employment levels and future membership and that it has an interest in the level of membership attained we model membership decisions with stochastic demand and a differential layoff rate for union and non union workers membership dynamics are behavioural in that membership increases when the utility of being a member exceeds the utility of not being a member the model permits a variety of possible relationships between employment and membership in the adjustment to steady state

union leaders as experts wage bargaining and strikes with union wide ballot requirements to avoid strikes and to curb labour militancy some governments have introduced legislation stating that union leadership as well as wage offers should be decided through union wide ballots this paper shows that members still have incentives to appoint militant union leaders if these leaders have access to information critical for the members voting decisions furthermore conflicts may arise in equilibrium even though the contract zone is never empty and there is an option to resolve any incomplete information ballot requirements hence preclude neither militant union bosses nor inefficient conflicts

risk aversion and trade union membership if trade unions provide only their members with insurance against income variations as a private good this insurance will provide a stronger incentive for more risk averse employees to become union members using data from the german socio economic panel soep and various direct measures of individual risk attitudes we find robust evidence of a positive relationship between risk aversion and the likelihood of union membership for full time employees this association is particularly strong for males and in west germany

trade unions v statistical discrimination theory and application to post apartheid south africa a simple model of statistical discrimination is analyzed which captures some stylized facts of the south african labor market it shows that this type of discrimination disappears when the wage rates are determined by efficient bargaining between a representative firm and a union with endogenous membership this may explain why the wage gap between black and white workers in post apartheid south africa is smaller among unionized workers than among non unionized ones

money and velocity during financial crises from the great depression to the great recession abstract this study models the demand for a broad monetary aggregate m2 from the great depression through the great recession key to the model is the interaction between a measure of time variation in economic agents perceived financial risk and an index of the cost of portfolio adjustment the finding of a useful money demand relationship suggests that skepticism regarding the indicator role of a broad liquid money aggregate as a policy guide may be exaggerated further our model provides some guidance for policymakers who face the challenge of unwinding large balance sheets as risk premia return to normal and velocity adjusts

revisiting the role of labor worker solidarity employer opposition and the development of old age pensions in the netherlands and the united kingdom the purpose of this article is to emphasize the importance of the organizational blueprint of labor unions for welfare state outcomes as a result of the tendency of scholars to view labor as a homogenous and disadvantaged class the existing literature has paid little attention to this many scholars have simply taken labor union support for welfare state development for granted and consequently have focused only on labor union strength this article argues rather that labor union support for welfare state development cannot be taken for granted it shows that labor unions support or oppose welfare state development depending on their organizational blueprint this new approach highlights the importance of the labor union movement s organizational structure as opposed to its organizational strength for welfare state outcomes the article also explores how the organizational structure of the labor union movement shapes the stance of employer interest groups toward welfare state development the empirical findings are based on a comparison of british and dutch postwar old age pension development

trade union behaviour and inter regional variations in unemployment rates an important problem in the political economy of the uk is that the disparity of unemployment rates across its regions is much more marked than the corresponding dispersion of wage rates one possibility is that this is due to the attitude of trade unions to their members in different regions if unions wish to preserve parity between members in different regions then they will value wage equality between regions over and above wage levels this may then persuade them to overlook inter regional productivity differences in setting wages the price that low efficiency regions will then pay for this desire for wage equality is higher unemployment rates

deep time series forecasting for enhanced index tracking we consider the problem of enhanced index tracking whose objective is to construct a portfolio that maximizes the excess return and minimizes the tracking error between the returns of the tracking

why unions reduce wage inequality a theory of domino effects numerous empirical studies show that unions reduce wage differences i demonstrate that their motive might be a mix of fairness and strategy maximizing the use of union bargaining power in the presence of efficiency wages unions can push primarily for raising the lowest wages and still not sacrifice higher wages much if the employers themselves increase higher wages to protect efficiency enhancing wage differences if these domino effects are strong enough then an egalitarian wage policy might even increase the median wage

a linear model for tracking error minimization abstract this article investigates four models for minimizing the tracking error between the returns of a portfolio and a benchmark due to linear performance fees of fund managers we can argue that linear deviations give a more accurate description of the investors risk attitude than squared deviations all models have in common that absolute deviations are minimized instead of squared deviations as is the case for traditional optimization models linear programs are formulated to derive explicit solutions the models are applied to a portfolio containing six national stock market indexes usa japan uk germany france switzerland and the tracking error with respect to the msci morgan stanley capital international index world stock market index is minimized the results are compared to those of a quadratic tracking error optimization technique the portfolio weights of the optimized portfolio and its risk return properties are different across the models which implies that optimization models should be targeted to the specific investment objective finally it is shown that linear tracking error optimization is equivalent to expected utility maximization and lower partial moment minimization