Characterizing the Structure of Optimal Stopping Policies

This paper studies a stochastic model of optimal stopping processes, which arise frequently in operational problems (e.g., when a manager needs to determine an optimal epoch to stop a process). For such problems, we propose an effective method of characterizing the structure of the optimal stopping policy for the class of discrete‐time optimal stopping problems. Using this method, we also derive a set of metatheorems that can help identify when a threshold or control‐band type stopping policy is optimal. We show that our proposed method can determine the structure of the optimal policy for some stopping problems that conventional methods fail to do so. In some cases, our method also simplifies the analysis of some existing results. Moreover, the metatheorems we propose help identify sufficient conditions that yield simple optimal policies when such policies are not generally optimal. We demonstrate these benefits by applying our method to several optimal stopping problems frequently encountered in, for example, the operations, marketing, finance, and economics literatures. We note that with structural results, optimal‐stopping policies are easier to follow, describe, and compute and hence implement. They also help determine how a stopping policy should be adjusted in response to changes in the operational environment. In addition, as structural results are critical for the development of efficient algorithms to solve optimal stopping problems numerically, we hope that the method and results provided in the study will contribute to that effort.     

Longitudinal trajectories of maternal parenting stress in Korean families: Children's executive function and school adjustment

A majority of mothers experience parenting stress in daily life; however high levels of maternal stress have been recognized as a risk factor for children's developmental outcomes. We examined trajectories of maternal parenting stress across childhood, and their longitudinal relations to children's executive function and school adjustment. Data were drawn from the Panel Study on Korean Children (PSKC), which included 1754 mothers across five waves measured at children ages 3, 4, 5, 6, and 7 (boys = 51%). Results of Latent Growth Curve Modeling (LGCM) revealed that, on average, maternal parenting stress decreased over time, but there were significant variabilities in the initial levels at age 3 and changes across early through middle childhood. High initial levels of stress and an increase in maternal parenting stress over time were associated with lower executive function at age 7 in planning-organizing and attention concentration. An increment in maternal parenting stress over time was related to poorer school adjustment at age 7, measured by classroom behavior, positive approach to learning, and child-peer and child-teacher relationships. These findings support cultural commonality and may contribute to the instantiation of culturally universal, early preventions and interventions to support mothers’ mental health. Efforts aimed at reducing maternal parenting stress early in development may promote better long-term developmental outcomes, including executive functioning and school adjustment of children in their first year of elementary school.     

On score vector- and residual-based CUSUM tests in ARMA–GARCH models

In this study, we consider the problem of testing for a parameter change in ARMA–GARCH models. We suggest two types of cumulative sum (CUSUM) tests, namely, score vector- and residual-based CUSUM tests. It is shown that under regularity conditions, their limiting null distributions are the sup of Brownian bridges. A simulation study and real data analysis are conducted for illustration.     

Modeling Dependence in High Dimensions With Factor Copulas

This article presents flexible new models for the dependence structure, or copula, of economic variables based on a latent factor structure. The proposed models are particularly attractive for relatively high-dimensional applications, involving 50 or more variables, and can be combined with semiparametric marginal distributions to obtain flexible multivariate distributions. Factor copulas generally lack a closed-form density, but we obtain analytical results for the implied tail dependence using extreme value theory, and we verify that simulation-based estimation using rank statistics is reliable even in high dimensions. We consider “scree” plots to aid the choice of the number of factors in the model. The model is applied to daily returns on all 100 constituents of the S&P 100 index, and we find significant evidence of tail dependence, heterogeneous dependence, and asymmetric dependence, with dependence being stronger in crashes than in booms. We also show that factor copula models provide superior estimates of some measures of systemic risk. Supplementary materials for this article are available online.     

Shipping Fees or Shipping Free? A Tale of Two Price Partitioning Strategies in Online Retailing

In this article, we study the price partitioning decisions of online retailers regarding shipping and handling (S&H) fees. Specifically, we analyze two partitioning formats used by retailers in this context. In the first scenario, retailers present customers with a price that is partitioned into a product price and a separate S&H surcharge (the PS strategy); in the second, customers are offered free shipping through a non‐partitioned format where the product price already includes the shipping cost (the ZS strategy). We first develop a stylized game‐theoretic model that captures the competitive dynamics between (and within) these two formats. Analysis of the model provides insights into how both firm and product level characteristics drive a retailer's strategic choice regarding which partitioning format to adopt and, hence, determines the equilibrium market structure in terms of proportion of ZS and PS retailers. Subsequently, we conduct empirical analyses, based on product and S&H prices data for two different product categories (digital cameras and printers) collected from online retailers, to validate all the results of our theoretical model. We establish that PS retailers charge lower product prices than ZS ones, but the total price (product + S&H) charged is higher for the first group. The S&H charge for PS retailers can be significant—it is, on average, 5.4% (printers) and 3.0% (digital cameras) for our two product categories. Furthermore, retailers which are popular and/or face risky cost environment are more likely to opt for the ZS strategy, while retailers whose portfolio mostly includes large or heavy products with high cost (S&H)‐to‐price ratios usually choose the PS strategy. Lastly, our empirical study also illustrates that the price adjustment behavior of retailers is affected by their shipping‐fee policies—for example, ZS retailers change their product prices almost 1.5 times more frequently than PS ones.     

Limited Income Mobility: Empirical Evidence from Korea

Longitudinal child cohort studies collect large amounts of information about children’s families and the types of activities they participate in. With such a broad array of information to select from, researchers investigating aspects of the family environment may be overwhelmed by the choices available if they only need summary measures reflecting domains of the family environment. Using data from the Longitudinal Study of Australian Children, this study aimed to derive and assess summary indices of three domains of the family environment, including a Family Stress Index, Home Education Index and Parenting Index. Indices were derived by identifying a set of candidate indicators, dichotomising the indicators to determine elements of risk, then averaging across the dichotomised items to create measures that captured cumulative risk. Assessments of the three indices suggest that the measures are consistent across time, and have good predictive validity with socioeconomic measures and assessments of children’s social-emotional wellbeing and learning outcomes. Structural equation models estimating children’s outcomes suggested that models using the indices had comparable model fit to models using the broader array of variables used to construct the indices, but the Parenting Index in particular explained less variation in children’s problem behaviour outcomes. Overall, the family environment indices derived in this study may be useful for researchers wishing to simplify complex models or explore the circumstances of children exposed to multiple risks, but less useful in analyses where the primary goal is to explain variance in children’s developmental outcomes.     

Assessing the Social Bonds of Elderly Neighbors: The Roles of Length of Residence, Crime Victimization, and Perceived Disorder

Starting from the rationale that elderly urban residents tend to be “neighborhood‐bound,” this study examines the relationship between age or aging and local social bonds (friendship, social cohesion and trust, informal social control, and participation in local organizations). Specifically, is the level of local bonding among elderly urban residents (age 65 and over) greater than that of the younger cohorts (17–35, 34–49, and 50–64)? Additionally, two specific hypotheses are constructed to examine the determinants of local social bonds among elderly urban residents: the systemic approach, regarding length of residence; and the social‐disorganization approach, regarding crime victimization and perceived disorder. Using Chicago data collected in 1995, the analysis found a substantial difference between the elderly cohort and each of the younger cohorts in only the friendship category of local social bonds. The other results show that in a sample of elderly urban residents, length of residence is the only significant, positive factor in local friendship, and that the two disorder predictors, physical and social, play a substantial role in weakening two types of local social bonds, social cohesion and trust and informal social control.     

“Crowding in” or “crowding out”? An examination of the impact of the welfare state on generalized social trust

Generalized social trust is correlated with increased levels of civic engagement, lower crime rates, and greater economic growth. Many scholars believe that equality provides the conditions in which social trust can flourish. Thus, welfare programs might be one way to generate social trust. However, the relationship between social spending and trust is contested: Some argue it is negative, while others argue it is positive. This study examined the effects of total social welfare expenditures on social trust in 18 OECD countries, holding constant individual characteristics, country characteristics, and country and year effects. Fixed effects analyses indicate that every additional percent of gross domestic product spent on social expenditures 5 years prior is associated with a 4.7 percent increased likelihood that respondents of that country will endorse trusting other people. Further testing for reverse causality found no significant association between trust and later social expenditures, supporting the claim that expenditures drive trust instead of the reverse.     

Social Bonds and the Migration Intentions of Elderly Urban Residents: The Mediating Effect of Residential Satisfaction

Under the incorporation of social bonds within the residential satisfaction model, this study has attempted to examine why the elderly living in neighborhoods consider moving. The main hypothesis proposed in this study is that the four social bonds (friendship, social cohesion and trust, informal social control, and neighborhood activities), combined with residential satisfaction, affect the mobility intentions of elderly urban residents. This hypothesis is tested by survey data collected in 1995 from 1123 Chicago residents age 65 and over. The results support the hypothesis that strong social bonds, combined with residential satisfaction, are working as important factors when the mobility intentions of elderly urban residents are deterred.     

Regional source apportionment of PM2.5 in Seoul using Bayesian multivariate receptor model

Seoul, the capital city of Korea with over 10 million residents, has been experiencing serious air pollution problems. Previous studies on source apportionment of PM2.5 in Seoul are based on measurements of chemical compositions of PM2.5 from a single monitoring site. In this paper, we analyse PM2.5 concentration data collected from multiple sites in 24 districts of Seoul and estimate regional source profiles using Bayesian multivariate receptor model. The regional source profiles provide information for the identification of major PM2.5 sources as well as the regions relatively more seriously affected by each source than other regions. These regional characteristics relevant to PM2.5 can help establish effective, customised, region-specific PM2.5 control strategies for each region rather than general strategies that apply to every region of Seoul.