Mahyar A. Amouzegar

Khosrow Moshirvaziri

Roger Z. Ríos-Mercado

The 10th anniversary special issue

Meyer (1987) extended the theory of mean-variance criterion to include the comparison among distributions that differ only by location and scale parameters and to include general utility functions with only convexity or concavity restrictions. In this paper, we make some comments on Meyer&#39;s paper and extend the results from Tobin (1958) that the indifference curve is convex upwards for risk averters, concave downwards for risk lovers, and horizontal for risk neutral investors to include the general conditions stated by Meyer  (1987). We also provide an alternative proof for the theorem. Levy (1989) extended Meyer&#39;s results by introducing some inequality relationships between the stochastic-dominance and the mean-variance efficient sets. In this paper, we comment on Levy&#39;s findings and show that these relationships do not hold in certain situations. We further develop some properties among the first- and second-degree stochastic dominance efficient sets and the mean-variance efficient set.

Wing-Keung  Wong

Stochastic dominance theory for location-scale family

One of the most controversial issues in the aftermath ofthe Asian financial crisis has been the appropriate response ofmonetary policy to a sharp decline in the value of some currencies.In this paper, we empirically examine the effects on Asianexchange rates of sharply higher interest rates during the Asianfinancial crisis. Taking account of the currency contagion effect,our results indicate that sharply higher interestrates helped to support the exchange rates of South Korea,the Philippines, and Thailand. For Malaysia, no significant causalrelation is found from the rate of interest to exchange rates,as the authorities in Malaysia did not actively adopt a high interestrate policy to defend the currency.

Tim  Brailsford

Jack H. W. Penm

Chin Diew Lai

Effectiveness of high interest rate policy on exchange rates: A reexamination of the Asian financial crisis

One not-so-intuitive result in auction theory is the revenueequivalence theorem, which states that as long as an auctioncomplies with some conditions, it will on average generate thesame revenue to an auctioneer as the revenue generated by anyother auction that complies with them. Surprisingly, the conditionsare not defined on the payment rules to the bidders but on thefact that the bidders do not bid below a reserve value&#8212;set bythe auctioneer&#8212;the winner is the one with the highest bidding andthere is a common equilibrium bidding function used by all bidders. Inthis paper, we verify such result using extensive simulation of abroad range of auctions and focus on the variability orfluctuations of the results around the average. Such fluctuationsare observed and measured in two dimensions for each type ofauction: as the number of auctions grows and as the number ofbidders increases.

Fernando  Beltr&#225;n

Natalia  Santamar&#237;a

A measure of the variability of revenue in auctions: A look at the revenue equivalence theorem

Some limited analytical derivation for networked queue models hasbeen proposed in the literature, but their solutions are often ofa great mathematical challenge. To overcome such limitations,simulation tools that can deal with general networked queuetopology must be developed. Despite certainlimitations, simulation algorithms provide a mechanism to obtaininsight and good numerical approximation to parameters ofnetworked queues. This paper presents a closed stochasticsimulation network model and several approximation and boundingschemes for G/G/c systems. The analysis was originally conductedto verify the integrity of simulation models used to developalternative policy options conducted on behalf of the US AirForce. We showed that the theoretical bounds could be used toapproximate mean capacities at various queues. In this paper, wepresent results for a G/G/8 system though similar results havebeen obtained for other networks of queues as well.

Mahyar  Amouzegar

Khosrow  Moshirvaziri

A simulation framework for networked queue models: Analysis of queue bounds in a G/G/c supply chain

This paper addresses the problem of estimating the ratio of themeans of independent normal variables in agricultural research.The first part of the research examines the distributionalproperties of the ratio of independent normal variables, boththeoretically and using simulation. The second part of theresearch evaluates the relative merits of two common estimators ofthe ratio of the means of independent normal variables inagricultural research, an arithmetic average and a weightedaverage, via simulation experiments using normal distributions.The results are then tested using research data from rice breedingmulti-environment trials in Jilin Province, China, in 1994. Thesedata are used to demonstrate the diagnostic approach developed forassessing the &#8220;safe&#8221; use of the arithmetic and the weightedaverage methods for estimating the ratio of the means ofindependent normal variables.

C. G. Qiao

G. R. Wood

C. D. Lai

D. W. Luo

Comparison of two common estimators of  the ratio of the means of independent normal variables in agricultural research

This paper examines the convergence of genetic algorithms using acluster-analytic-type procedure. The procedure is illustrated witha hybrid genetic algorithm applied to the quadratic assignmentproblem. Results provide valuable insight into how populationmembers are selected as the number of generations increases and howgenetic algorithms approach stagnation after many generations.

Zvi  Drezner

George A. Marcoulides

Mapping the convergence of genetic algorithms

Pairs trading is a comparative-value form of statistical arbitrage designedto exploit temporary random departures from equilibrium pricing between two shares.However, the strategy is not riskless. Market events as well as poor statistical modeling and parameter estimation may all erode potential profits. Since conventional losslimiting trading strategies are costly, a preferable situation is to integrate loss limitationwithin the statistical modeling itself. This paper uses cointegration principles to developa procedure that embeds a minimum profit condition within a pairs trading strategy.We derive the necessary conditions for such a procedure and then use them to define andimplement a five-step procedure for identifying eligible trades. The statistical validity ofthe procedure is verified through simulation data. Practicality is tested through actualdata. The results show that, at reasonable minimum profit levels, the protocol doesnot greatly reduce trade numbers or absolute profits relative to an unprotected tradingstrategy.

Yan-Xia  Lin

Michael  McCrae

Chandra  Gulati

Loss protection in pairs trading through minimum profit bounds: Acointegration approach

We consider two Gaussian measures. In the &#8220;initial&#8221;measure the state variable is Gaussian, with zero drift andtime-varying volatility. In the &#8220;target measure&#8221; the statevariable follows an Ornstein-Uhlenbeck process, with a free set ofparameters, namely, the time-varying speed of mean reversion. Welook for the speed of mean reversion that minimizes the varianceof the Radon-Nikodym derivative of the target measure with respectto the initial measure under a constraint on the time integral ofthe variance of the state variable in the target measure. We showthat the optimal speed of mean reversion follows a Riccatiequation. This equation can be solved analytically when thevolatility curve takes specific shapes. We discuss an applicationof this result to simulation, which we presented in an earlierarticle.

Henry  Schellhorn

An analytical characterization for an optimal change of Gaussian measures

Nonparametric analysis for general block designs can be given byusing the Cochran-Mantel-Haenszel (CMH) statistics. We demonstratethis with four examples and note that several well-knownnonparametric statistics are special cases of CMH statistics.

D. J. Best

J. C. W. Rayner

O.  Thas

Nonparametric analysis of blocked ordered categories data:some examples revisited

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Advances in Decision Sciences | Hindawi

Advances in Decision Sciences

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Advances in Decision Sciences

10th Anniversary Special Issue

10th Anniversary Special Issue

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