A Hausman test for Brownian motion

New tests are proposed for the specification of the intraday price process of a risky asset, based on open, high, low, and close prices. Under the null of a Brownian process we derive two stochastically independent, unbiased volatility estimators. For a Hausman specification test we prove its equivalence with an F-test, consider its robustness against variation in drift and volatility, and analyze the power against an Ornstein–Uhlenbeck process, as well as a random walk with alternative distributions.     

Modeling Values for Anti-Terrorism Analysis

Decisions are made to achieve objectives. A qualitative list of the objectives for a decision is the foundation for a value model that unambiguously represents objectives in a quantitative manner. The objectives guide thinking and the value model provides a basis for analyzing alternatives to best meet the desired objectives. This article illustrates the usefulness of clearly identifying objectives and developing value models to support anti-terrorism analysis. It outlines procedures to develop value models for the Department of Homeland Security and for terrorist organizations. The later is useful to both design anti-terrorism alternatives and suggest possible terrorist priorities and actions. An example that develops a terrorist value model for the theft and misuse of plutonium is presented. Several uses of value models for anti-terrorist activities are discussed and suggestions for developing such value models are outlined.     

Managing Nuclear Waste from Power Plants

National strategies to manage nuclear waste from commercial nuclear power plants are analyzed and compared. The current strategy is to try to operate a repository at Yucca Mountain, Nevada, to dispose of high-level nuclear waste underground. The main alternatives involve temporary above-ground storage at a centralized facility or next to nuclear power plants. If either of these is pursued now, the analysis assumes that a repository will be built in 2100 for waste not subsequently put to use. The analysis treats various uncertainties: whether a repository at Yucca Mountain would be licensed, possible theft and misuse of the waste, innovations in repository design and waste management, the potential availability of a cancer cure by 2100, and possible future uses of nuclear waste. The objectives used to compare alternatives include concerns for health and safety, environmental and socioeconomic impacts, and direct economic costs, as well as equity concerns (geographical, intergenerational, and procedural), indirect economic costs to electricity ratepayers, federal government responsibility to manage nuclear waste, and implications of theft and misuse of nuclear waste. The analysis shows that currently building an underground repository at Yucca Mountain is inferior to other available strategies by the equivalent of $10,000 million to $50,000 million. This strongly suggests that this policy should be reconsidered. A more detailed analysis using the framework presented would help to define a new national policy to manage nuclear waste.     

A SEMI-PARAMETRIC MODEL FOR ASYMMETRIC INFORMATION IN HEALTH PLAN MARKETS

Two sources of asymmetric information in health markets are adverse selection where only individuals know their illness probability and their preventive effort to reduce illness probabilities. This effort is not observed by insurers, and thus individuals cannot be adequately compensated for their effort. I investigate whether asymmetric information plays a role in health care markets through a semi-parametric model that allows both adverse selection and preventive effort. I find that preventive effort plays a role in illness probabilities. If the United States implements universal health coverage, the currently uninsured population will exert less preventive effort, and their illness probabilities will increase. (JEL I11 , C14 )     

Constructing the Transition to Parenthood*

How is the transition to parenthood constructed in a context in which fatherhood and motherhood are therapeutically defined? Relying on ethnographic observations of 66 expectant and new parent couples assigned to 13 different parent educator‐led groups, we show how, with the arrival of a baby, a sense of transition is crafted and often amplified. Our analysis suggests that just as the overall life course is constructed through language and meaningful gesture, so also the transition to parenthood is constructed through verbal and nonverbal signification. Using a vocabulary of contrast and change, parent edu‐cators and expectant and new parents create a collective feeling that they are witnessing a transformation of major proportions. By emphasizing the idea that things are no longer the same, parent educators also establish themselves as authorities whose job it is to steer fathers and mothers through unfamiliar terrain. For their part, expectant and new parents not only listen to but often also replicate the parent educators’ vocabularies and, in so doing, further magnify distinctions between before parenthood and after, and between one stage of parenthood and another. Childbirth stands uncomfortably at the junction of the two worlds of nature and culture. Like death and disease it is a biological event, but the defining feature of biological events in human life is their social character. Ann Oakley (1980:7)     

ALTRUISM, MATCHING, AND NONMARKET INSURANCE

Incomplete market insurance gives rise to nonmarket arrangements for coinsurance. We find that the effort altruistically linked individuals take to avoid an accident increases with the degree of altruism. If the degree of altruism is sufficiently high, an economy with nonmarket insurance yields higher social welfare than an economy without nonmarket insurance. As altruism increases, the equilibrium level of effort approaches the second-best solution without the need for costly monitoring. Coinsurance is above (below) the socially optimal level if individuals place greater weight (less weight) on their own utility than on that of their partners.     

Change and continuity in British voluntary organisations, 1976 to 1988

A cohort of twenty British national voluntary agencies serving handicapped people was studied in 1976 and again in 1989 after a decade of major shifts in public policy. Changes and continuities were identified in income, structure, governance, management, programme, interorganisation relations and advocacy. A consistent pattern of growth, bureaucratisation and professionalisation was found, with relatively little change in the dominant mode of financing, statutory or philanthropic. A three-stage model is proposed to describe the development of British voluntary agencies since the 1970s, and some of the organisational implications of current policies for the 1990s are noted.This research is part of a Fulbright, Western European Regional Research Grant for 1989 and also received support from the University of California, Institute for International Studies and the Committee for Research at Berkeley. I wish to thank Marilyn Taylor and Stuart Etherington in London, and my colleagues Neil Gilbert, Bart Grossman and Paul Terrell for their helpful comments on an earlier draft. The assistance of David Billis, Director, and the staff of the Centre for Voluntary Organisation, London School of Economics, is also gratefully acknowledged.     

Understanding Life-Threatening Risks

Modern science and medicine, and increasing prosperity, have brought many benefits to our society, but not without costs. One cost is that some of the technological innovations and new activities bring with them different and perhaps greater risks that threaten our lives. Any problem involving life-threatening risks is complex, so it is difficult to think through all the implications of the alternatives proposed to address it. This paper presents a number of "facts" to guide constructive thinking about decisions concerning life-threatening risks. The intent is to help us appraise alternatives, design public policy and laws, and communicate about specific risk problems.     

Comment: Housing Policy and Health

We summarize and comment on the policy sections of the articles in this issue concerned with the health effects of residential environments. We review the implications in the context of public policies implemented over at least the last century to improve the least, as well as most, expensive housing. We make the argument that public policy can reduce but not eliminate the contribution of housing to the differences in health between the wealthy and poor. We conclude that the applied value of work such as that presented in this issue arises from its contribution to sustaining the improvements in health enjoyed over the last century, not from whether it helps eliminate the gap in health between the poor and wealthy .