Baker (2002) has demonstrated theoretically that the quality of performance measures used in compensation contracts hinges on two characteristics: noise and distortion. These criteria, though, will only be useful in practice as long as the noise and distortion of a performance measure can be...

This paper conducts an empirical analysis of the heterogeneity of recessions in monthly U.S. coincident and leading indicator variables. Univariate Markovswitching models indicate that it is appropriate to allow for two distinct recession regimes, corresponding with ‘mild’ and ‘severe’...

This paper uses the market-standard Gaussian copula model to show that fair spreads on CDO tranches are much higher than fair spreads on similarly-rated corporate bonds. It implies that credit ratings are not sufficient for pricing, which is surprising given their central role in structured...

The focus of this article is using dynamic correlation models for the calculation of minimum variance hedge ratios between pairs of assets. Finding an optimal hedge requires not only knowledge of the variability of both assets, but also of the co-movement between the two assets. For this...

This paper investigates the history of the shift from expert to model based monetary policy analysis at the Dutch Central Bank (DNB) in the postwar period up to the middle of the nineteen-eighties. For reasons that will become clear expert based reasoning at DNB was referred to as normative...

Important choices for efficient and accurate evaluation of marginal likelihoods by means of Monte Carlo simulation methods are studied for the case of highly non-elliptical posterior distributions. We focus on the situation where one makes use of importance sampling or the independence chain...

In a Bayesian analysis, different models can be compared on the basis of the expected or marginal likelihood they attain. Many methods have been devised to compute the marginal likelihood, but simplicity is not the strongest point of most methods. At the same time, the precision of methods is...

A test for serial independence is proposed which is related to the BDS test but focuses on tail event probabilities rather than probabilities near the center of the distribution. The motivation behind this approach is to obtain a test more suitable for detecting structure in the tails, such as...

We study the possibility for international diversification of catastrophe risk by the insurance sector. Adopting the argument that large insurance losses may be a `globalizing factor' for the industry, we study the dependence of geographically distant insurance markets via equity returns. In...

The empirical economic growth literature is criticized for its lack of robustness. For different definitions of robustness, conclusions vary from 'almost every correlation is fragile' to 'a substantial number of explanatory variables are robust.' We re-analyze the empirical results of the...