Goodness-of-fit Procedures for Copula Models Based on the Probability Integral Transformation

Abstract.  Wang & Wells [ J. Amer. Statist. Assoc. 95 (2000) 62] describe a non-parametric approach for checking whether the dependence structure of a random sample of censored bivariate data is appropriately modelled by a given family of Archimedean copulas. Their procedure is based on a truncated version of the Kendall process introduced by Genest & Rivest [ J. Amer. Statist. Assoc. 88 (1993) 1034] and later studied by Barbe et al . [ J. Multivariate Anal. 58 (1996) 197]. Although Wang & Wells (2000) determine the asymptotic behaviour of their truncated process, their model selection method is based exclusively on the observed value of its L ²-norm. This paper shows how to compute asymptotic p -values for various goodness-of-fit test statistics based on a non-truncated version of Kendall's process. Conditions for weak convergence are met in the most common copula models, whether Archimedean or not. The empirical behaviour of the proposed goodness-of-fit tests is studied by simulation, and power comparisons are made with a test proposed by Shih [ Biometrika 85 (1998) 189] for the gamma frailty family.     

DOES MONITORING INCREASE WORK EFFORT? THE RIVALRY WITH TRUST AND LOYALTY

Principal-agent theory suggests that tighter monitoring will raise an agent's work effort and will be applied provided that transaction costs are low. However, when a psychological contract exists between principals and agents, the agents perceive increased monitoring as an indication of distrust, and this induces them to reduce work effort. This "crowding out effect" is likely to dominate when the relationship between principals and agents is personal, while the "disciplining effect" is likely to dominate when the relationship is abstract, as in a competitive market setting. Empirical evidence from neighbouring sciences and from an econometric study supports this proposition.     

Addressing Concerns Raised by Critics of Business Schools by Teaching Multiple Approaches to Management

As part of the larger discussion of the role of business schools in society, increasing concern is being expressed about the materialist–individualist values that underpin mainstream management. However, relatively little attention has been paid to the mechanisms through which these values are taught through the content of management theory. This study examined what happened when students in an introductory management class were deliberately taught two “ideal type” approaches to management: mainstream management, which seeks to maximize productivity and profitability for shareholders; and multistream management, which seeks to achieve a balance among multiple forms of well‐being (including financial, social, ecological, spiritual, physical, aesthetic) for multiple stakeholders (including owners, employees, customers, suppliers, competitors, neighbors, future generations). Results suggest that compared with students who are taught only one approach to management, students who are taught both a mainstream and a multistream approach place lower emphasis on materialism and individualism, differ in their perception of what constitutes effective management, and may manage differently. Implications for business schools, management theory, and instruction are discussed.