Greater Downside Risk Aversion

Although investors are concerned foremost with mean and variance, they are also sensitive to downside risk. In this paper, we introduce an index of downside risk aversion to distinguish risk aversion from higher-order aspects of risk preference, including prudence. We show that the index of downside risk aversion S increases with monotonic downside risk averse transformations of utility, thereby directly linking S to the definition of downside risk aversion introduced by Menezes et al. (American Economic Review, 70, 921–932, 1980). Although the index S applies equally to risk averse and risk loving decision makers, for a given positive degree of risk aversion, S is greater when the index of prudence is greater and vice versa.     

Who Is Hispanic? Hispanic Identity among African Americans,Asian Americans,Others, and Whites*

Hispanics are now the largest minority group in the United States and their presence is likely to continue to expand. Little is known, however, about the correlates of Hispanic identity or the processes that are involved in its maintenance. We investigate these issues by ascertaining and then seeking to understand the various associations between reported racial identities and Hispanic ethnicity using data from the Current Population Surveys. Restricting the sample to individuals who are known to have demographic origins in Latin America, our results indicate that persons with African or Asian racial identifications are substantially less likely than whites or Others to also identify as Hispanic. Relative to the first generation, Hispanic identification declines and the racial differences increase in the second generation. The exceptions in this regard are Others for whom racial and Hispanic identifications are the most highly associated for both the first and second generations. These findings are interpreted as reflecting various social processes that are involved in the development and maintenance of racial and ethnic identities. Our results provide insight into the complex, social nature of Hispanic identification in modern America.     

Testing hypotheses about the common mean of normal distributions

An overview of hypothesis testing for the common mean of independent normal distributions is given. The case of two populations is studied in detail. A number of different types of tests are studied. Among them are a test based on the maximum of the two available t-tests, Fisher's combined test, a test based on Graybill–Deal's estimator, an approximation to the likelihood ratio test, and some tests derived using some Bayesian considerations for improper priors along with intuitive considerations. Based on some theoretical findings and mostly based on a Monte Carlo study the conclusions are that for the most part the Bayes-intuitive type tests are superior and can be recommended. When the variances of the populations are close the approximate likelihood ratio test does best.