Roengchai Tansuchat and Olga Kosheleva
In user-oriented websites, e.g. in news websites or in seller websites, it is important to take the user’s preferences into account when deciding which items to place in…
Abstract
Purpose
In user-oriented websites, e.g. in news websites or in seller websites, it is important to take the user’s preferences into account when deciding which items to place in higher-exposure locations. The traditional approach to solving this problem, based on maximizing the average user utility, leads to unfair solutions, and this eventually hurts the company’s bottom line. Because of this, researchers have proposed complex schemes that explicitly add fairness to the formulation of this problem. But since utilities already describe human preferences, it is strange that it is necessary to add something beyond utilities.
Design/methodology/approach
In this paper, the authors analyze the problem of selecting exposure level for different items from the viewpoint of decision theory, the basic theory underlying all our activities, including economic ones.
Findings
The authors show that a more adequate use of utilities, namely, taking into account that Nash’s bargaining solution is a proper way to make group decisions, not maximizing average utility, already leads to fair solutions.
Originality/value
The idea to apply Nash’s bargaining solution to the problem of assigning exposure level to different items is new, as well as the analysis that shows that this application restores the fairness, which is missing in the current solutions.
Details
Keywords
The purpose of the paper is to analyze the impact of quantitative easing (QE) performed in the USA on relationship between assets mainly from mining and oil industries. Based on…
Abstract
Purpose
The purpose of the paper is to analyze the impact of quantitative easing (QE) performed in the USA on relationship between assets mainly from mining and oil industries. Based on the empirical results, the method of diversified portfolio creation has been proposed.
Design/methodology/approach
Nine DCC-GARCH-type models have been estimated for each group centered around a main asset: a company from the oil or mining industry, the appropriate currency pair for its market of origin, commodities which could be used for the diversification of risk involved in investing in a portfolio containing the company, and the largest company from the same industry listed on the US market. Each series of conditional correlations was analyzed with regard to the changes that occurred during the various stages of QE.
Findings
The correlations are shown to be stabilizing in the successive stages of QE. The most significant changes in the distribution of correlations can be observed after the first stage of QE. The effects of QE are evident not only in the USA but also in other countries; however, the level of its influence varies between different markets and assets. It is possible to diversify the inflation, currency and market portfolio risk by appropriately chosen asset decomposition.
Research limitations/implications
The DCC model is limited, so to provide more precise results, more sophisticated models can be estimated and compared.
Practical implications
The paper investigate the fact of stabilization in financial markets relations. The findings may prove the validity of continuation of QE. A portfolio creation method has been proposed – it has been stated that including commodity in portfolio is more appropriate then only-bond–equity mix.
Originality/value
The new approach of analyzing financial stability has been proposed – the control for stability of conditional correlation.