Asymmetric Information in Automobile Insurance: Evidence from Driving Behavior

Based on a unique data set of driving behavior we test whether private information in driving characteristics has significant effects on contract choice and risk in automobile insurance. We define a driving factor based on overall distance driven, number of car rides, and speeding. Using local weather conditions, we account for the endogeneity of the driving factor. While this driving factor has an effect on risk, there is no significant evidence for selection effects in the level of third-party liability and first-party insurance coverage

Analyse von Einflussfaktoren auf die Lehrerevaluation durch Lernende im betriebswirtschaftlichen Unterricht

Zur Lehrerevaluation werden häufig die Lernenden gebeten, ihre Lehrenden und deren Lehrverhalten zu beurteilen sowie ihre Zufriedenheit mit dem Unterricht der Lehrkraft anzugeben. Empirische Studien zur Aussagekraft solcher Beurteilungen haben verschiedene potenzielle Einflussfaktoren auf die Beurteilungen der Lernenden untersucht. Wesentliche Fragen wie zum Beispiel jene zum Einfluss des Interesses oder der Noten auf die Evaluationen sind dennoch umstritten und auf Grund der - zum Teil widersprüchlichen - Befunde auch bislang nicht eindeutig zu beantworten. In eigenen empirischen Untersuchungen analysieren wir daher, welche Faktoren die Gesamtbeurteilung von Lehrenden durch Lernende in betriebswirtschaftlichen Fächern in welchem Ausmaß beeinflussen. Der gewählte multivariate Ansatz berücksichtigt potenziell verzerrende Faktoren im Kontext von Lehrverhaltensfaktoren. Neben den üblicherweise überprüften Biasvariablen wird eine Reihe weiterer Faktoren wie beispielsweise die Einstellungen der Lernenden zur Evaluation und zu Lehrenden im Allgemeinen betrachtet. Die Ergebnisse zeigen, dass die Gesamtbeurteilung der Lehrkräfte zwar hauptsächlich von den Lehrverhaltensvariablen abhängt, dass jedoch zusätzlich Faktoren wirksam sind, die in keinem systematischen Zusammenhang mit der Unterrichtsqualität stehen und in der bisherigen Forschung nicht berücksichtigt wurden. (Autorenref.)Series: WU-Jahrestagung 200

Implications of dependence in stock returns for asset allocation

This paper investigates some implications of empirically observed stochastic properties of stock returns for asset allocation problems. For that purpose, decisions of representative investors for different utility functions are compared. Actual returns are assumed to have time-varying first and second order moments. Investors have different (false and correct) assumptions about the stochastic properties of returns. Consequences of their decisions are expressed in terms of ex post utility and converted to monetary units. Two main results are obtained: (a) there are almost no gains when GARCH properties of returns are correctly taken into account. (b) correct assumptions about time-variation in expected returns lead to significant gains for short investment horizons.

The Black-Litterman approach and views from predictive regressions: Theory and implementation

A major attraction of the Black-Litterman approach for portfolio optimization is the potential for integrating subjective views on expected returns. In this article, the authors provide a new approach for deriving the views and their uncertainty using predictive regressions estimated in a Bayesian framework. The authors show that the Bayesian estimation of predictive regressions fits perfectly with the idea of Black-Litterman. The subjective element is introduced in terms of the investors' belief about the degree of predictability of the regression. In this setup, the uncertainty of views is derived naturally from the Bayesian regression, rather than by using the covariance of returns. Finally, the authors show that this approach of integrating uncertainty about views is the main reason this method outperforms other strategies

Estimation of the term structure of interest rates - A parametric approach

Readily available information about the current term structure of interest rates, its level and recent trends in important countries has become a standard tool of monetary policy analysis. Interest rate curves can be used for inflation and output forecasts, they may give useful indications about the differences in regional monetary stance and contain information about market expectations of future changes in interest rates. This information can facilitate the implementation of monetary policy, for example by judging the timing of the central bank's market operations. For comparative purposes it is important to use a common technique to estimate the term structure for all countries. This report presents the results of using parametric estimating models of the term structure for Austria, Germany, UK, USA and Japan over the period 1993 to 1998.term structure of interest rates, estimation, econometric models

Scenario Tree Generation and Multi-Asset Financial Optimization Problems

We compare two popular scenario tree generation methods in the context of financial optimization: Moment matching and scenario reduction. Using a simple problem with a known analytic solution, we find that moment matching - accompanied by a check to ensure absence of arbitrage opportunities - replicates this solution precisely. On the other hand, even if the scenario trees generated by scenario reduction are arbitrage-free, the solutions to the approximate optimization problem represented by the reduced tree are biased and highly variable. These results hold for correlated and uncorrelated asset returns, as well as for normal and non-normal returns. (authors' abstract

Cointegration and exchange market efficiency. An analysis of high frequency data.

A cointegration analysis on a triangle of high frequency exchange rates is presented. Market efficiency requires the triangle to be cointegrated and the cointegration term to be a martingale difference sequence. We find empirical evidence against market efficiency for very short time horizons: The cointegration term does not behave like a martingale difference sequence. In an out-of-sample forecasting study the cointegrated vector autoregressive (VAR) model is found to be superior to the naive martingale. Finally, a simple trading strategy shows that the VAR also has a significant forecast value in economic terms even after accounting for transaction costs. (author's abstract)Series: Working Papers SFB "Adaptive Information Systems and Modelling in Economics and Management Science