Latent class models for financial data analysis: some statistical developments

I exploit the potential of latent class models for proposing an innovative framework for financial data analysis. By stressing the latent nature of the most important financial variables, expected return and risk, I am able to introduce a new methodological dimension in the analysis of financial phenomena. In my proposal, (i) I provide innovative measures of expected return and risk, (ii) I suggest a financial data classification consistent with the latent risk-return profile, and (iii) I propose a set of statistical methods for detecting and testing the number of groups of the new data classification. The results lead to an improvement in both risk measurement theory and practice and, if compared to traditional methods, allow for new insights into the analysis of financial data. Finally, I illustrate the potentiality of my proposal by investigating the European stock market and detailing the steps for the appropriate choice of a financial portfolio.     

The Interplay Between Employee and Firm Customer Orientation: Substitution Effect and the Contingency Role of Performance‐Related Rewards

This paper identifies and explains a potential tension between a firm's emphasis on customer orientation (CO) and the extent to which employees value CO as a success factor for individual performance. Based on self‐determination theory and CO implementation research, the authors propose that firm CO may represent both autonomous and controlled motivations for CO, but that employees’ CO is more strongly linked to individual performance when employees experience solely autonomous motivation. Hence, the authors expect a substitution effect whereby the link between employees’ CO and their performance is weaker when firm CO is high. Furthermore, the authors examine a boundary condition for the previous hypothesis and propose that performance‐contingent rewards have a positive effect on the internalization of the extrinsic motivation stemming from firm CO. Two multilevel studies with 979 employees and 201 top management team members from 132 firms support these hypotheses. Against previous research, these findings offer a new perspective on the effectiveness of CO initiatives, propose employees’ motivational states as the theoretical explanation for the heterogeneity in the link between employee CO and performance, and reappraise the role of performance‐contingent rewards in CO research. Managerial implications for the effective implementation of customer‐oriented initiatives within firms are provided.     

Improvising Prescription: Evidence from the Emergency Room

Global medical practice is increasingly standardizing through evidence‐based approaches and quality certification procedures. Despite this increasing standardization, medical work in emergency units necessarily involves sensitivity to the individual, the particular and the unexpected. While much medical practice is routine, important improvisational elements remain significant. Standardization and improvisation can be seen as two conflicting logics. However, they are not incompatible, although the occurrence of improvisation in highly structured and institutionally complex environments remains underexplored. The study presents the process of improvisation in the tightly controlled work environment of the emergency room. The authors conducted an in situ ethnographic observation of an emergency unit. An inductive approach shows professionals combining ostensive compliance with protocols with necessary and occasional ‘underlife’ improvisations. The duality of improvisation as simultaneously present and absent is related to pressures in the institutional domain as well as to practical needs emerging from the operational realm. The intense presence of procedures and work processes enables flexible improvised performances that paradoxically end up reinforcing institutional pressures for standardization.     

Happiness in Italy: Translation,Factorial Structure and Norming of the Subjective Happiness Scale in a Large Community Sample

The Subjective Happiness Scale (SHS) is one of the most commonly used measures of happiness. Many translations and validation studies have been carried out in different countries and languages. The aim of the current paper was to investigate the psychometric properties of the Italian translation of the SHS and to provide normative data. The SHS was administered with life satisfaction items, anxiety and depression scales to a community sample of 993 participants, aged 18–85 years, living in different parts of Italy. Age and gender distributions were stratified according to the population pyramid. Confirmatory Factor Analysis supported the unidimensionality of the SHS, with acceptable fit indexes (NNFI = .96; CFI = .99; RMSEA = .08; 95 % C.I. [.04–.12]). Multi-group analyses supported total invariance of the SHS measurement model for males and females, and partial invariance for younger (i.e., 18–44 years old) and older (i.e., 45–85 years old) participants. Significant correlations with satisfaction items, anxiety and depression provided evidence for concurrent validity. These findings showed that the Italian SHS translation is a reliable and valid tool, which adds to existing translations and validation studies in different countries and languages.     

Monetary, Subjective and Quantitative Approaches to Assess Urban Quality of Life and Pleasantness in Cities (Hedonic Price, Willingness-to-Pay, Positional Value, Life Satisfaction, Isobenefit Lines)

The magnitude increase of Urban Quality of Life studies is directly connected with the increase of the urban population in the world. Urban Quality of Life is a hierarchical multi-attribute concept whose attributes can be defined and evaluated by several kinds of methods such as Monetary (Hedonic Price, Willingness-to-pay, Cost-Benefit, Positional Value), Subjective (life satisfaction, subjective wellbeing, ranking/rating evaluation) and Quantitative (how many urban attractions there are in the city, and how they are distributed on its planimetry). As real examples of monetary approaches, 107 empirical literature results are briefly shown, quantifying the increase of property value in relation to urban factors such as green, open space, noise, public transport, pleasant view, etc. The result of a Willingness-to-Pay survey, and the definition of Positional Value are also shown; it is the part of property value coming from the characteristics of the area in which the property is. An analysis of Turin illustrated that the quality of the area (the Positional Value) can change the value of a property up to 143 %. This value is, in a certain way, a monetary mirror of the quality of life of the areas. As a concrete example of subjective approaches two rating method surveys on Turin are rapidly exposed, as well as a recent subjective wellbeing study comparing the life satisfaction in cities and in the countryside. As quantitative approaches are proposed the concepts of Isobenefit Lines and the Isobenefit Orography, both from the spatial urban amenities distribution and quantity.     

On the performances of Nash equilibria in isolation games

We study the performances of Nash equilibria in isolation games, a class of competitive location games recently introduced in Zhao et al. (Proc. of the 19th International Symposium on Algorithms and Computation (ISAAC), pp. 148–159, 2008). For all the cases in which the existence of Nash equilibria has been shown, we give tight or asymptotically tight bounds on the prices of anarchy and stability under the two classical social functions mostly investigated in the scientific literature, namely, the minimum utility per player and the sum of the players’ utilities. Moreover, we prove that the convergence to Nash equilibria is not guaranteed in some of the not yet analyzed cases.     

Quantile hidden semi-Markov models for multivariate time series

Statistics and Computing - Parametric regression, such as linear regression, plays an important role in statistics. The use of parametric regression models typically involves the specification of a...     

Behavioral economics has two ‘souls’: Do they both depart from economic rationality?

In this paper, I argue that behavioral economics, far from being a monolithic theory, consists of two different ‘souls’ and that a fundamental asymmetry exists between them, with regard to the nature of the departures from the economics’ ‘canonical model’ they focus on. While a first class of departures deals with the major cognitive limitations and systematic biases in decision-making affecting economic behavior, a second research area investigates deviations from the classic assumption that economic agents are systematically driven by the pursuit of material self-interest. Even though on methodological grounds the two research areas share a broadly inductive approach – as they both aim at incorporating the major results obtained through several empirical methods (in particular, via experimental work) into formal economic analysis –, I claim that rather different methodological conclusions and regulatory and policy implications can be drawn, depending on the cognitive or social nature of the departures from the standard economic model under study.     

Robust likelihood functions in Bayesian inference

In order to deal with mild deviations from the assumed parametric model, we propose a procedure for accounting for model uncertainty in the Bayesian framework. In particular, in the derivation of posterior distributions, we discuss the use of robust pseudo-likelihoods, which offer the advantage of preventing the effects caused by model misspecifications, i.e. when the underlying distribution lies in a neighborhood of the assumed model. The influence functions of posterior summaries, such as the posterior mean, are investigated as well as the asymptotic properties of robust posterior distributions. Although the use of a pseudo-likelihood cannot be considered orthodox in the Bayesian perspective, it is shown that, also through some illustrative examples, how a robust pseudo-likelihood, with the same asymptotic properties of a genuine likelihood, can be useful in the inferential process in order to prevent the effects caused by model misspecifications.