A look at long-term developments in the distribution of income

Developments in the distribution of income have received much attention over the past decade. Several analysts have argued that income gains have gone almost exclusively to the highest paid 20 percent of the population, leaving no gains to the remaining 80 percent. ; Joseph H. Haslag and Lori L. Taylor examine developments in income inequality over the past forty years and estimate which factors account for these changes over time. While some researchers have found that income distribution became more equal during the 1950s and 1960s and then less equal after the mid-1970s, Haslag and Taylor find evidence that an upward trend in income inequality has been occurring since the early 1950s. They also find that movements in the income inequality measure are mostly determined by persistence; that is, income inequality adjusts gradually. Demographic features account for nearly 25 percent of the variation in income inequality, while policy actions explain less than 15 percent.Income distribution

On CAPM and Black-Scholes, differing risk-return strategies

In their path-finding 1973 paper Black and Scholes presented two separate derivations of their famous option pricing partial differential equation (pde). The second derivation was from the standpoint that was Black’s original motivation, namely, the capital asset pricing model (CAPM). We show here, in contrast, that the option valuation is not uniquely determined; in particular, strategies based on the delta-hedge and CAPM provide different valuations of an option although both hedges are instantaneouly riskfree. Second, we show explicitly that CAPM is not, as economists claim, an equilibrium theory.Capital asset pricing model (CAPM); nonequilibrium; financial markets; Black-Scholes; option pricing strategies;

Guidelines for the development of a Project Data Management Plan (PDMP)

The purpose of this document is to assist NASA Project personnel in the preparation of their Project Data Management Plans (PDMP) in accordance with NASA Management Instruction (NMI) 8030.3A. In addition, this report summarizes the scope of a PDMP and establishes important aspects that must be addressed for the long term management and archiving of the data from a NASA space flight investigation

Taking a “Deep Dive”: What Only a Top Leader Can Do

Unlike most historical accounts of strategic change inside large firms, empirical research on strategic management rarely uses the day-to-day behaviors of top executives as the unit of analysis. By examining the resource allocation process closely, we introduce the concept of a deep dive, an intervention when top management seizes hold of the substantive content of a strategic initiative and its operational implementation at the project level, as a way to drive new behaviors that enable an organization to shift its performance trajectory into new dimensions unreachable with any of the previously described forms of intervention. We illustrate the power of this previously underexplored change mechanism with a case study, in which a well-established firm overcame barriers to change that were manifest in a wide range of organizational routines and behavioral norms that had been fostered by the pre-existing structural context of the firm.Strategic Change, Resource Allocation Process, Top-down Intervention

An empirical model of volatility of returns and option pricing

This paper reports several entirely new results on financial market dynamics and option pricing We observe that empirical distributions of returns are much better approximated by an exponential distribution than by a Gaussian. This exponential distribution of asset prices can be used to develop a new pricing model for options (in closed algebraic form) that is shown to provide valuations that agree very well with those used by traders. We show how the Fokker-Planck formulation of fluctuations can be used with a local volatility (diffusion coeffficient) to generate an exponential distribution for asset returns, and also how fat tails for extreme returns are generated dynamically by a simple generalization of our new volatility model. Nonuniqueness in deducing dynamics from empirical data is discussed and is shown to have no practical effect over time scales much less than one hundred years. We derive an option pricing pde and explain why it‘s superfluous, because all information required to price options in agreement with the delta-hedge is already included in the Green function of the Fokker-Planck equation for a special choice of parameters. Finally, we also show how to calculate put and call prices for a stretched exponential returns density.Market instability; market dynamics; finance; option pricing

THE POSSIBILITY OF A PRIVATE CROP INSURANCE MARKET: THE THEORETICAL FOUNDATIONS

The theoretical foundation for risk pooling in insurance has heavily depend on the independence assumption of losses, which is severely violated in crop insurance. A weaker condition, asymptotic nonpositive correlation can also lead to risk pooling and is satisfied by yield losses. Therefore, private insurance and reinsurance markets may work.Risk and Uncertainty,

Martingales, the efficient market hypothesis, and spurious stylized facts

The condition for stationary increments, not scaling, detemines long time pair autocorrelations. An incorrect assumption of stationary increments generates spurious stylized facts, fat tails and a Hurst exponent Hs=1/2, when the increments are nonstationary, as they are in FX markets. The nonstationarity arises from systematic uneveness in noise traders’ behavior. Spurious results arise mathematically from using a log increment with a ‘sliding window’. We explain why a hard to beat market demands martingale dynamics , and martingales with nonlinear variance generate nonstationary increments. The nonstationarity is exhibited directly for Euro/Dollar FX data. We observe that the Hurst exponent Hs generated by the using the sliding window technique on a time series plays the same role as does Mandelbrot’s Joseph exponent. Finally, Mandelbrot originally assumed that the ‘badly behaved second moment of cotton returns is due to fat tails, but that nonconvergent behavior is instead direct evidence for nonstationary increments. Summarizing, the evidence for scaling and fat tails as the basis for econophysics and financial economics is provided neither by FX markets nor by cotton price data

INVESTMENT BEHAVIOR AND ENERGY CONSERVATION

Binary logit and bivariate probit models were used to investigate the investment behavior of farmers relative to two energy-conserving assets, heat-recovery systems and precoolers. The bivariate probit procedure was useful in correcting for self-selectivity bias. Holdout samples and cross-validation procedures were used to develop true model statistics. Farm size, educational level of the operator, and the type of milking system in use were the important factors influencing investment behavior.Farm Management,