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William W. Cooper, Vedran Lelas and David W. Sullivan
This paper provides a theoretical framework for application of Chance-Constrained Programming (CCP) in situations where the coefficient matrix is random and its elements are not…
Abstract
This paper provides a theoretical framework for application of Chance-Constrained Programming (CCP) in situations where the coefficient matrix is random and its elements are not normally distributed. Much of the CCP literature proceeds to derive deterministic equivalent in computationally implementable form on the assumption of “normality”. However, in many applications, such as air pollution control, right skewed distributions are more likely to occur. Two types of models are considered in this paper. One assumes an exponential distribution of matrix coefficients, and another one uses an empirical approach. In case of exponential distributions, it is possible to derive exact “deterministic” equivalent to the chance-constrained program. Each row of the coefficient matrix is assumed to consist of independent, exponentially distributed random variables and a simple example illustrates the complexities associated with finding a numerical solution to the associated deterministic equivalent. In our empirical approach, on the other hand, simulated data typically encountered in air pollution control are provided, and the data-driven (empirical) solution to the implicit form of deterministic equivalent is obtained. Post-optimality analyses on model results are performed and risk implications of these decisions are discussed. Conclusions are drawn and directions for future research are indicated.
Oswald A. J. Mascarenhas, Munish Thakur and Payal Kumar
All of us seek truth via objective inquiry into various human and nonhuman phenomena that nature presents to us on a daily basis. We are empirical (or nonempirical) decision…
Abstract
Executive Summary
All of us seek truth via objective inquiry into various human and nonhuman phenomena that nature presents to us on a daily basis. We are empirical (or nonempirical) decision makers who hold that uncertainty is our discipline, and that understanding how to act under conditions of incomplete information is the highest and most urgent human pursuit (Karl Popper, as cited in Taleb, 2010, p. 57). We verify (prove something as right) or falsify (prove something as wrong), and this asymmetry of knowledge enables us to distinguish between science and nonscience. According to Karl Popper (1971), we should be an “open society,” one that relies on skepticism as a modus operandi, refusing and resisting definitive (dogmatic) truths. An open society, maintained Popper, is one in which no permanent truth is held to exist; this would allow counter-ideas to emerge. Hence, any idea of Utopia is necessarily closed since it chokes its own refutations. A good model for society that cannot be left open for falsification is totalitarian and epistemologically arrogant. The difference between an open and a closed society is that between an open and a closed mind (Taleb, 2004, p. 129). Popper accused Plato of closing our minds. Popper's idea was that science has problems of fallibility or falsifiability. In this chapter, we deal with fallibility and falsifiability of human thinking, reasoning, and inferencing as argued by various scholars, as well as the falsifiability of our knowledge and cherished cultures and traditions. Critical thinking helps us cope with both vulnerabilities. In general, we argue for supporting the theory of “open mind and open society” in order to pursue objective truth.
Sabina Alkire and Yangyang Shen
Most poverty research has explored monetary poverty. This chapter presents and analyzes the global multidimensional poverty index (MPI) estimations for China. Using China Family…
Abstract
Most poverty research has explored monetary poverty. This chapter presents and analyzes the global multidimensional poverty index (MPI) estimations for China. Using China Family Panel Studies (CFPS), we find China’s global MPI was 0.035 in 2010 and decreased significantly to 0.017 in 2014. The dimensional composition of MPI suggests that nutrition, education, safe drinking water, and cooking fuel contribute most to overall non-monetary poverty in China. Such analysis is also applied to subgroups, including geographic areas (rural/urban, east/central/west, provinces), as well as social characteristics such as gender of the household heads, age, education level, marital status, household size, migration status, ethnicity, and religion. We find the level and composition of poverty differs significantly across certain subgroups. We also find high levels of mismatch between monetary and multidimensional poverty at the household level, which highlights the importance of using both complementary measures to track progress in eradicating poverty.
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Alexander Chudik, M. Hashem Pesaran and Kamiar Mohaddes
This chapter contributes to the growing global VAR (GVAR) literature by showing how global and national shocks can be identified within a GVAR framework. The usefulness of the…
Abstract
This chapter contributes to the growing global VAR (GVAR) literature by showing how global and national shocks can be identified within a GVAR framework. The usefulness of the proposed approach is illustrated in an application to the analysis of the interactions between public debt and real output growth in a multicountry setting, and the results are compared to those obtained from standard single country VAR analysis. We find that on average (across countries) global shocks explain about one-third of the long-horizon forecast error variance of output growth, and about one-fifth of the long-run variance of the rate of change of debt-to-GDP. Evidence on the degree of cross-sectional dependence in these variables and their innovations are exploited to identify the global shocks, and priors are used to identify the national shocks within a Bayesian framework. It is found that posterior median debt elasticity with respect to output is much larger when the rise in output is due to a fiscal policy shock, as compared to when the rise in output is due to a positive technology shock. The cross-country average of the median debt elasticity is 1.45 when the rise in output is due to a fiscal expansion as compared to 0.76 when the rise in output follows from a favorable output shock.
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In this chapter, we first examine the distribution characteristics of firm performance across different competitive industry contexts and periodic economic conditions of growth…
Abstract
In this chapter, we first examine the distribution characteristics of firm performance across different competitive industry contexts and periodic economic conditions of growth, recession, and recovery. There is mounting evidence that the contours of accounting-based economic returns consistently display (extreme) left-skewed leptokurtic distributions with negative risk-return relationships, which implies the existence of many negative performance outliers and some positive outliers. We note how negative skewness, excess kurtosis, and inverse risk-return relationships prevail in industries with more intense competition and in economic growth scenarios where more innovative initiatives compete. As the study of outliers typically is ignored in mainstream management studies, we extract a total of 23 extreme performers using a conventional winsorization technique that identifies 16 negative and 7 positive outliers. We study the performance trajectories of these firms over the full period and find that negative performers typically operate in capital-intensive innovative industries whereas positive performers operate in activities that cater to prevailing demand conditions and expand the business in a balanced manner. The firms that under- and over-perform as measured by the financial return ratio both constitute smaller firms compared to the total sample and show how relative movements in the ratio numerator and denominator affect the recorded return measure. However, the negative outliers generally use their public listing to access capital for investment in more risky development efforts that require a certain scale to succeed and thereby limits their flexibility. The positive outliers appear to expand their business activities in incremental responses to evolving market demands as a way to enhance maneuverability and secure competitive advantage by honing their unique firm-specific capabilities.
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