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Purpose – Accounting research has long shown the effect of subjectivity in performance evaluation. This study investigates one form of subjectivity in performance evaluation: flexibility in weighting performance measures examining decisions made by supervisors about weighting. Empirical studies show that the performance-measure weights are only partially consistent with the predictions of the agency theory and they are a still outstanding issue.

Methodology/approach – We develop an experiment to analyse supervisor decision-making, manipulating two factors: internal organisational interdependence and the level of managerial performance. We derive hypotheses along with both economic and behavioural approaches. The economic approach is based on agency theory predictions and the controllability principle while the behavioural approach is drawn on the organisational justice theory. We argue that in low interdependence contexts the supervisor's decision confirms the agency theory predictions, while in high interdependence conditions weighting decisions could be driven by behavioural considerations of fairness perceptions of the evaluation process and the level of managerial performance.

Findings – We find that in low interdependence contexts the supervisor's decision confirms the agency theory predictions, while in high interdependence contexts it does not. The results indicate that the supervisor's decision stems from the integration of economic and behavioural perspectives.

Research and social implications – The theoretical framework can be useful for interpreting the supervisor decision-making and the weighting process.

Originality – The economic and behavioural approaches allow us to understand flexibility in weighting performance measures suggesting that, in addition to economic considerations, a behavioural perspective may also be relevant in explaining subjective weighting.

We take Cumulative Prospect Theory (CPT) seriously by rigorously estimating structural models using the full set of CPT parameters. Much of the literature only estimates a subset of CPT parameters, or more simply assumes CPT parameter values from prior studies. Our data are from laboratory experiments with undergraduate students and MBA students facing substantial real incentives and losses. We also estimate structural models from Expected Utility Theory (EUT), Dual Theory (DT), Rank-Dependent Utility (RDU), and Disappointment Aversion (DA) for comparison. Our major finding is that a majority of individuals in our sample locally asset integrate. That is, they see a loss frame for what it is, a frame, and behave as if they evaluate the net payment rather than the gross loss when one is presented to them. This finding is devastating to the direct application of CPT to these data for those subjects. Support for CPT is greater when losses are covered out of an earned endowment rather than house money, but RDU is still the best single characterization of individual and pooled choices. Defenders of the CPT model claim, correctly, that the CPT model exists “because the data says it should.” In other words, the CPT model was borne from a wide range of stylized facts culled from parts of the cognitive psychology literature. If one is to take the CPT model seriously and rigorously then it needs to do a much better job of explaining the data than we see here.

The author presents new estimates of the probability weighting functions found in rank-dependent theories of choice under risk. These estimates are unusual in two senses. First, they are free of functional form assumptions about both utility and weighting functions, and they are entirely based on binary discrete choices and not on matching or valuation tasks, though they depend on assumptions concerning the nature of probabilistic choice under risk. Second, estimated weighting functions contradict widely held priors of an inverse-s shape with fixed point well in the interior of the (0,1) interval: Instead the author usually finds populations dominated by “optimists” who uniformly overweight best outcomes in risky options. The choice pairs used here mostly do not provoke similarity-based simplifications. In a third experiment, the author shows that the presence of choice pairs that provoke similarity-based computational shortcuts does indeed flatten estimated probability weighting functions.

The recent development of the European debt sovereign crisis showed that sovereign debt is not “risk free.” The traditional index bond management used during the last two decades such as the market-capitalization weighting scheme has been severely called into question. In order to overcome these drawbacks, alternative weighting schemes have recently prompted attention, both from academic researchers and from market practitioners. One of the key developments was the introduction of passive funds using economic fundamental indicators.

In this chapter, the authors introduced models with economic drivers with an aim of investigating whether the fundamental approaches outperformed the other models on risk-adjusted returns and on other terms.

The authors did this by constructing five portfolios composed of the Eurozone sovereigns bonds. The models are the Market-Capitalization RP, GDP model RP, Ratings RP model, Fundamental-Ranking RP, and Fundamental-Weighted RP models. These models were created exclusively for this chapter. Both Fundamental models are using a range of 10 country fundamentals. A variation from other studies is that this dissertation applied the risk parity concept which is an allocation technique that aims to equalize risk across different assets. This concept has been applied by assuming the credit default swap as proxy for sovereign credit risk. The models were run using the Generalized Reduced Gradient (GRG) method as the optimization model, together with the Lagrange Multipliers as techniques and the Karush–Kuhn–Tucker conditions. This led to the comparison of all the models mentioned above in terms of performance, risk-adjusted returns, concentration, and weighted average ratings.

By analyzing the whole period between 2006 and 2014, it was found that both the fundamental models gave very appealing results in terms of risk-adjusted returns. The best results were returned by the Fundamental-Ranking RP model followed by the Fundamental-Weighting RP model. However, better results for the mixed performance and risk-adjusted returns were achieved on a yearly basis and when sub-dividing the whole period in three equal periods. Moreover, the authors concluded that over the long term, the fundamental bond indexing triumphed over the other approaches by offering superior return and risk characteristics. Thus, one can use the fundamental indexation as an alternative to other traditional models.

This chapter investigates the relative magnitude of the benefits of global diversification from the viewpoint of domestic investors in various countries by forming time-rolling efficient frontiers. To enhance feasibility of asset allocation strategies, the constraints of short-sales and over-weighting investments are taken into account. The empirical results suggest that local investors in less developed countries, particularly in Latin America, East Asia, and Southern Europe, comparatively benefit more from global diversification. Investors in the countries of civic-law origin tend to benefit more from global investment than the ones in the common-law states. Although the global market has become more integrated over the past decades, diversification benefits for domestic investors declined but did not vanish. The results of this chapter are useful for asset management professionals to determine target markets to promote the sales of international funds.

We examine sample characteristics and elicited survey measures of two studies, the Health and Retirement Study (HRS), where interviews are done either in person or by phone, and the Understanding America Study (UAS), where surveys are completed online and a replica of the HRS core questionnaire is administered. By considering variables in various domains, our investigation provides a comprehensive assessment of how Internet data collection compares to more traditional interview modes. We document clear demographic differences between the UAS and HRS samples in terms of age and education. Yet, sample weights correct for these discrepancies and allow one to satisfactorily match population benchmarks as far as key socio- demographic variables are concerned. Comparison of a variety of survey outcomes with population targets shows a strikingly good fit for both the HRS and the UAS. Outcome distributions in the HRS are only marginally closer to population targets than outcome distributions in the UAS. These patterns arise regardless of which variables are used to construct post-stratification weights in the UAS, confirming the robustness of these results. We find little evidence of mode effects when comparing the subjective measures of self-reported health and life satisfaction across interview modes. Specifically, we do not observe very clear primacy or recency effects for either health or life satisfaction. We do observe a significant social desirability effect, driven by the presence of an interviewer, as far as life satisfaction is concerned. By and large, our results suggest that Internet surveys can match high-quality traditional surveys.

We review the experimental evidence on risk aversion in controlled laboratory settings. We review the strengths and weaknesses of alternative elicitation procedures, the strengths and weaknesses of alternative estimation procedures, and finally the effect of controlling for risk attitudes on inferences in experiments.

Internet + and Electronic Business in China is a comprehensive resource that provides insight and analysis into E-commerce in China and how it has revolutionized and continues to revolutionize business and society. Split into four distinct sections, the book first lays out the theoretical foundations and fundamental concepts of E-Business before moving on to look at internet+ innovation models and their applications in different industries such as agriculture, finance and commerce. The book then provides a comprehensive analysis of E-business platforms and their applications in China before finishing with four comprehensive case studies of major E-business projects, providing readers with successful examples of implementing E-Business entrepreneurship projects.

Internet + and Electronic Business in China is a comprehensive resource that provides insights and analysis into how E-commerce has revolutionized and continues to revolutionize business and society in China.