Measures Of Diversification Research Articles

Revisiting the diversification and insurance relationship: Differences between on– and off-farm strategies

Crop insurance is an important instrument for farmers to cope with climate risks. Yet, also, diversification plays a crucial role. The use of crop insurance and diversification is interrelated. For example, an increasing support and uptake of insurance solutions may discourage farmers to take diversification measures on the farm, given that they now have an insurance dealing with risks. This may have unintended consequences, such as biodiversity decline.We examine the relationships between seven different kinds of income diversification and the uptake of crop insurance. Theoretically, both substitutive and complementary relationships are possible. The reason is that, depending on their preferences and constraints, farmers choose income bundles that optimally balance profits and risks. Here we provide the first systematic empirical examination of this issue. Our analysis is based on our own survey data from 1176 Swiss fruit growers. We consider on– and off-farm diversification strategies, namely inter-varietal diversity, agro-tourism, processing and direct marketing of products, creation of financial reserves for bad times, forestry work, off-farm investment, off-farm income and their association with insurance uptake. In line with our theoretical reasoning, we do indeed find both substitutive and complementary relationships. In general, on-farm diversification is associated with positive insurance demand, whereas off-farm diversification has a negative association.

Does Energy Diversification Cause an Economic Slowdown? Evidence from a Newly Constructed Energy Diversification Index

Countries have made considerable efforts to diversify their energy sources from fossil fuels to renewables in the last two decades to achieve sustainable economic development. However, it is widely argued that the countries may experience sluggish economic development during the energy transition period due to structural and functional changes in the economic system. Given this backdrop, this study introduces a new measure of energy diversification. It explores its impact on economic development across the panels of low-income, high-income, European Union (EU), the Organization for Economic Co-operation and Development (OECD), and G20 countries. The study uses data from 1995 to 2018 and utilizes Nonlinear Panel Autoregressive Distributed Lag (NPARDL) method. Our findings confirm that the major economies (including G20) realize positive economic growth with increasing long-run energy diversification. However, some countries (OECD and G20) experience negative economic growth due to energy diversification in the short term. The results also disclosed that energy diversification does not favor economic growth in low-income economies in both the short and long term. Therefore, more precautionary measures to be taken into account while diversifying energy sources.

ENABLING CROP DIVERSIFICATION TO SUPPORT TRANSITIONS TOWARD MORE SUSTAINABLE EUROPEAN AGRIFOOD SYSTEMS

European cropping systems are often characterized by short rotations or even monocropping, leading to environmental issues such as soil degradation, water eutrophication, and air pollution including greenhouse gas emissions, that contribute to climate change and biodiversity loss. The use of diversification practices (i.e., intercropping, multiple cropping including cover cropping and rotation extension), may help enhance agrobiodiversity and deliver ecosystem services while developing new value chains. Despite its benefits, crop diversification is hindered by various technical, organizational, and institutional barriers along value chains (input industries, farms, trading and processing industries, retailers, and consumers) and within sociotechnical systems (policy, research, education, regulation and advisory). Six EU-funded research projects have joined forces to boost crop diversification by creating the European Crop Diversification Cluster (CDC). This Cluster aggregates research, innovation, commercial and citizen-focused partnerships to identify and remove barriers across the agrifood system and thus enables the uptake of diversification measures by all European value-chain stakeholders. The CDC will produce a typology of barriers, develop tools to accompany actors in their transition, harmonize the use of multicriteria assessment indicators, prepare policy recommendations and pave the way for a long-term network on crop diversification.

ІННОВАЦІЙНІ ТЕХНОЛОГІЇ В УПРАВЛІННІ БІЗНЕС-ПРОЦЕСАМИ ПІДПРИЄМСТВ СФЕРИ ГОТЕЛЬНО-РЕСТОРАННИХ ТА ТУРИСТИЧНИХ ПОСЛУГ

The article reveals the features of the use of innovative technologies in the management of business processes of enterprises in the sphere of hotel and restaurant, and tourist services. It has been established that in today's conditions, the innovative development of enterprises in the field of temporary accommodation and catering, travel agencies, tourist operators, enterprises providing other services, in particular for booking and related to this activity, is of particular importance. It was found that it is advisable to explain this trend by the fact that the owners of this type of business want to master various innovative technologies of management activities, which will allow them in the future to modernize and significantly increase the level of efficiency of such enterprises. It was found that the innovative development of business processes of enterprises in the field of temporary accommodation and catering, travel agencies, travel operators, enterprises providing other services, in particular, booking and related to this activity, is the result of an integral set of new and at the same time highly effective approaches to the management process, as a result of which a high level of competitiveness of such enterprises is ensured in the course of prospective functioning. It has been proved that the main purpose of the use of innovative technologies in the activities of enterprises in the field of temporary accommodation and catering, travel agencies, travel operators, enterprises providing other services, in particular for booking and related activities, is to increase their share in the market for such services, increase the level of quality of service provision, improvement of services based on the implementation of diversification measures. It was determined that the practical significance of the results obtained indicates the special value of the business process management model at enterprises in the field of temporary accommodation and catering, travel agencies, tourist operators, enterprises for the provision of other services, in particular for booking and related activities, in the context of the application of innovative technologies. It is noted that the prospects for further research in this direction are the improvement of the organizational and legal mechanism for the introduction and regulation of innovative technologies in the management of business processes of enterprises in the service sector.

Loan portfolio diversification and bank returns: Do business models and market power matter?

The paper examines how loan portfolio diversification drives bank returns, mainly focusing on the conditioning roles of business models and market power in this nexus. We employ a sample of Vietnamese commercial banks from 2008 to 2019 to perform regressions in the dynamic panel models with the two-step system generalized method of moments (GMM) estimator. We find that increased sectoral loan portfolio diversification reduces bank returns, but not all banks are equally affected. Banks that adopted a business model towards non-interest activities are hurt less from loan portfolio diversification, and bank market power may mitigate the detrimental effects of loan portfolio diversification on bank returns. When such asymmetric effects are sizeable, neglecting them could miscalculate the choice of loan portfolio diversification. Our findings are robust to a rich set of bank return indicators and alternative loan portfolio diversification measures based on the Herfindahl-Hirschman (HHI)/Shannon Entropy (SE) indexes with different sectoral exposure profiles. Thus, both regulators and commercial banks should take the disadvantage of portfolio diversification into account when encouraging/pursuing a diversified strategy, which must be accompanied by the crucial caveat that the damage is most pronounced for banks with lower shares of non-interest income and less market power.

How does economic policy uncertainty affect corporate diversification?

Economic policy uncertainty (EPU) is positively associated with corporate diversification in China between 2001 and 2007. EPU’s positive impact on diversification is significant only for large and medium cap firms. High EPU is associated with higher diversification; the effect of EPU on diversification by state-owned enterprises (SOEs) is greater than for non-SOEs. Diversification of firms with a high number of equity analysts and equity reports increases during high EPU. Diversification actively mitigates economic policy-related risks, enhancing firm performance. Our results are robust to different measures of EPU and corporate diversification and remain significantly unchanged when dealing with endogeneity.

Geographical and social isolation drive the evolution of Austronesian languages.

The origins of linguistic diversity remain controversial. Studies disagree on whether group features such as population size or social structure accelerate or decelerate linguistic differentiation. While some analyses of between-group factors highlight the role of geographical isolation and reduced linguistic exchange in differentiation, others suggest that linguistic divergence is driven primarily by warfare among neighbouring groups and the use of language as marker of group identity. Here we provide the first integrated test of the effects of five historical sociodemographic and geographic variables on three measures of linguistic diversification among 50 Austronesian languages: rates of word gain, loss and overall lexical turnover. We control for their shared evolutionary histories through a time-calibrated phylogenetic sister-pairs approach. Results show that languages spoken in larger communities create new words at a faster pace. Within-group conflict promotes linguistic differentiation by increasing word loss, while warfare hinders linguistic differentiation by decreasing both rates of word gain and loss. Finally, we show that geographical isolation is a strong driver of lexical evolution mainly due to a considerable drift-driven acceleration in rates of word loss. We conclude that the motor of extreme linguistic diversity in Austronesia may have been the dispersal of populations across relatively isolated islands, favouring strong cultural ties amongst societies instead of warfare and cultural group marking.

How diversification affects bank performance: The role of human capital

Previous studies have examined the effects of diversification on bank performance without taking into account the role of human capital. The aim of this paper is to make an attempt to investigate whether bank human capital efficiency has moderating effects on the relationships between diversification and bank performance. Using a sample of 400 commercial banks operating in 34 African countries over the 2005–2015 period, we find that higher diversification reduces bank performance while higher levels of human capital efficiency are positively associated with bank performance. We also find that the performance-reducing effects of diversification decrease as bank human capital efficiency improves. These results are consistent regardless of different alternative measures of diversification and performance. Our findings provide valuable insights into the importance of the development of human capital to the diversification of banking activities.

A Risk-Return Analysis of Loan Portfolio Diversification in the Vietnamese Banking System

The study empirically examines the effects of loan portfolio diversification on bank risk and return in the nascent banking market of Vietnam. Loan portfolio diversification is captured through the Hirschman-Herfindahl index and the Shannon Entropy with sectoral exposures. We access each bank's financial reports to collect the required data, especially the breakdown of sectoral loan portfolios, thus constituting a unique dataset. To compute bank return, we use the traditional accounting indicators, including return-on-assets, return-on-equity, and net-interest margin. For bank risk, we utilize the loan-loss provisions and non-performing loans relative to gross customer loans. Using a sample of 30 commercial banks over the period from 2008 to 2019 and the system generalized method of moments estimator for the dynamic panel, we indicate the downsides of portfolio diversification. Concretely, we observe that all diversification measures exhibit significantly negative signs in all regressions across different bank return proxies. At the same time, the estimates display the significant and positive impact of diversification on the non-performing loan ratio. Hence, sectoral loan portfolio diversification significantly hampers bank performance in both aspects of lower return and higher credit risk. The results are robust across a rich set of bank performance and portfolio diversification measures.

Determinants of Diversification in Relation to Farm Size and other Socio-economic Characteristics for Sustainable Hill Farming in Himachal Pradesh

Crop diversification is an important issue for agricultural development in the Himalayan region, where an abundant amount of natural resources are available. Diversification is a frequently used risk management strategy that involves participation in more than one activity. It has the advantage of mitigating diseases problem, weeds problem, insect-pest problems and price risk as well as fluctuations in output. The present investigation was an attempt to identify the empirical relationship within a static framework, between crop diversification and selected socio-economic variables and these relationships were sensitive to different diversification measures used. The study is based on primary data collected from the selected respondents with the help of multistage random sampling technique. The acreage and gross income diversification Index i.e., index of maximum proportion (0.45, 0.58), Herfindahl index (0.30, 0.42) and entropy index (0.64, 0.52) showed that farms were diversified. For determining the effect of different factors on diversification, a censored Tobit regression model was used. The results showed that distance from the market (Km), experience (years), cropping intensity, crop yield index, literacy rate, literacy index, farm size and dependency ratio the to family size was significantly affecting the diversification index. It is the present need to motivate the farmers to diversify farming through providing facilities such as price policy, proper market and disseminating market information at the appropriate time and providing low-cost agricultural technology, etc. in order to get benefited by diversifying the farm.

Diversification and the Distribution of Portfolio Variance, Part 2: Volatility Stability as a Measure of Diversification

We introduce a new framework for understanding portfolio diversification that provides a coherent basis for comparing methodologies and offers a new approach to portfolio construction. The primary argument is that measures of diversification based only on a covariance matrix are ambiguous because in such a risk setting only the overall portfolio variance is of any import. To resolve this we propose that the purpose of diversification is most helpfully viewed as reducing the variance of portfolio variance itself, which in turn is only meaningful when one accounts for excess kurtosis. Connecting diversification and the variance of variance provides a natural extension to the ubiquitous mean-variance approach. Examples are provided to demonstrate the intuitive nature of portfolios that maximize diversification through minimizing kurtosis. Furthermore, we introduce portfolio dimensionality as a transformation of kurtosis that allows us to interpret diversification in terms of an equivalent number of assets with independent and identically distributed (IID) returns.

Diversification and bank stability

This paper tests the theory of Wagner (2010) regarding the role of diversification in bank systemic risk and investigates whether this effect is different for bank standalone risk. We innovatively construct a country-level diversification measure to capture the risk distribution among banks. Based on a large dataset consisting of 1,346 international publicly listed banks from 49 countries from 1998 to 2018, our results confirm existing theoretical conclusions that higher diversification leads to more systemic risk and less bank standalone risk.

The effect of global and regional stock market shocks on safe haven assets

This paper examines the fundamental linkages between stock markets and safe haven assets by developing a two-factor, regime-based volatility spillover model with global and regional stock market shocks as risk factors. The risk exposures of safe havens with respect to global and regional stock market shocks are found to display significant time variation and regime-specific features, with the exception of VIX for which consistent negative risk exposures are observed with respect to both global and regional stock market shocks. While traditional safe havens like precious metals exhibit positive risk exposures to both regional and global stock market shocks during high volatility periods, Swiss Franc, Japanese Yen and U.S. Treasuries are found to display either insignificant or negative risk exposures during market stress periods to equity market shocks, implying these assets would serve as more effective hedges (or safe havens) for equity investors. Our findings highlight the importance of dynamic models in assessing the linkages between safe haven assets and stock returns as static models would introduce large biases in diversification measures and optimal hedge ratios.

Financial performance and corporate diversification strategies in professional football – evidence from the English Premier League

PurposeProfessional football clubs have increasingly initiated two corporate diversification strategies to enfold growth opportunities besides traditional income sources: business diversification and international diversification. Empirical findings from management and sport management literature provide inconclusive evidence on these strategies' financial performance effects, necessitating further research. The purpose of this article is therefore to investigate how both corporate diversification strategies affect the financial performance of professional football clubs.Design/methodology/approachA 15-year panel data set of English Premier League (EPL) clubs is examined, many of which have employed corporate diversification strategies. Measures for related business diversification (RBD) and unrelated business diversification (UBD) as well as international diversification are established from management literature. Based on fixed effects regression models, their effects on clubs' revenues and profitability are then examined.FindingsU-shaped effects from RBD on revenues and profitability are found, but no effects from UBD. These findings empirically support the theoretically appealing superiority of RBD over UBD and, with increasing levels of RBD, over a focused strategy in management literature. With international diversification, an inverted U-shaped effect on revenues is identified.Research limitations/implicationsDespite focusing only on the EPL, these findings provide new evidence of non-linear financial performance effects from corporate diversification strategies adding to (sport) management literature and setting the stage for future research on these strategies in professional football.Practical implicationsThese findings have significant implications for club managers' strategic growth opportunities such as new business models or geographic markets.Originality/valueThis is the first study to empirically examine the financial effects of corporate diversification strategies in the football market context.

Income diversification and cost-efficiency of Vietnamese banks

PurposeThe study examines the impact of income diversification on cost efficiency of Vietnamese commercial banks over the period 2005–2017.Design/methodology/approachIncome diversification indicators are designed based on measures of diversifying loan portfolio. Besides the traditional model, we use the Fractional Regression to estimate the model with dependent variables defined on the unit interval.FindingsThrough the two-stage DEA analysis, we find that the income diversification has a positive impact on the cost efficiency of banks. In addition, this impact is stronger for unlisted banks and in the phase of banking system ongoing restructuring.Originality/valueThe use of a variety of income diversification measures and estimation methods for models with bounded dependent variable has provided a reliable empirical evidence of the advantages of implementing a strategy on structural diversity of both interest and non-interest income in the emerging banking markets such as Vietnam.

Normal Return Gaps: Dispersion Illuminates Diversification

Despite ever more sophisticated risk management and measurement, investment professionals have generally overlooked a simple but powerful measure of relative performance and portfolio diversification—the normal return gap. The authors develop a generalized specification of the expected difference in returns between two investments based on the folded normal distribution. Even highly correlated investments can have quite large expected return gaps. They then demonstrate the applicability of this dispersion to capital market forecasts, manager selection, performance evaluation, style tilts, sector bets, socially responsible investing, manager combinations, wash sale taxation, and rebalancing. TOPICS:Performance measurement, wealth management, manager selection, ESG investing Key Findings • Even highly correlated investments can produce meaningful diversification; conversely, low correlations can produce small return gaps and, therefore, minimal diversification. • Normal return gaps between investments are often the same magnitude as the expected returns of the underlying assets. • Investors unaware of normal return gaps risk terminating worthy managers; establishing competitive “horse races” between managers is particularly unwise.

RIMS: A new approach to measuring firm internationalization

Understanding the antecedents to, and consequences of, a firm’s degree of internationalization is integral to international business research. In order to be accepted by scholars, empirical research that tests hypotheses regarding drivers and/or consequences of firm internationalization needs to use a valid measure of firm internationalization. In this paper, we develop a new measure, the ratio of international market shares (RIMS); RIMS measures a firm’s degree of conformance to the theoretically grounded characteristics of a maximally internationalized global firm. RIMS is theoretically and empirically compared to three widely used measures of firm internationalization: foreign sales to total sales (FSTS), international diversification, and international scope. Each of the three is shown to have serious limitations while RIMS does not. In addition to being theoretically based, RIMS also has the advantages that it: measures the degree to which a firm has penetrated the rest of the world’s market relative to the degree it has penetrated its primary market; captures the combined effects of the breadth and average depth of internationalization; is easy to calculate; is easy to interpret, and is calculable for more firms than measures of diversification or FSTS. All four measures are tested on a sample of large manufacturing firms.

Развитие инструментария управления предприятиями радиоэлектронной промышленности в условиях их диверсификации

The article presents the results of the research, the relevance of which is determined by the urgent need to improve the management tools of enterprises of the radio–electronic industry at the present time. The subject of the study is this tool used in the conditions of incomplete initial data and uncertainty of the external environment of enterprises due to changes in their production and economic activities during the period of production diversification. Some models describing the analyzed process taking into account its specifics are considered, which allow obtaining probabilistic–time estimates of the development of enterprises in the studied conditions. For this purpose, we used methods that take into account the vibrational component in the analyzed time series, as well as expert methods. The application of the proposed algorithms in practice helps to optimize diversification measures, accelerate the innovative development of radio–electronic industry enterprises and increase its efficiency.

Technological complexity and economic development

AbstractAlthough technological complexity seems to be a crucial determinant of economic development, it remains insufficiently explored. Relying on microinformation stored in individual patent applications and by applying the network view of countries linked to the technologies they develop, we create a global technology space and derive complexity measures that position countries in this space. We use then the measures of technological diversification and the ubiquity of technologies present in a country’s technology portfolio as an input to explain the role of technological complexity in countries’ income and economic development. We show that a country’s position in the global technology space affects its level of income and growth. The main channel through which it happens is the exclusiveness and uniqueness of the technological portfolio a country has, as compared to the remaining countries.

Toward a robust optimal point selection: a multiple-criteria decision-making process applied to multi-objective optimization using response surface methodology

During the multi-objective optimization process, numerous efficient solutions may be generated to form the Pareto frontier. Due to the complexity of formulating and solving mathematical problems, choosing the best point to be implemented becomes a non-trivial task. Thus, this paper introduces a weighting strategy named robust optimal point selection, based on ratio diversification/error, to choose the most preferred Pareto optimal point in multi-objective optimization problems using response surface methodology. Furthermore, this paper proposes to explore a theoretical gap—the prediction variance behavior related to the weighting. The ratios Shannon’s entropy/error and diversity/error and the unscaled prediction variance are experimentally modeled using mixture design and the optimal weights for the multi-objective optimization process are defined by the maximization of the proposed measures. The study could demonstrate that the weights used in the multi-objective optimization process influence the prediction variance. Furthermore, the use of diversification measures, such as entropy and diversity, associated with measures of error, such as mean absolute percent error, was determined to be useful in mapping regions of minimum variance within the Pareto optimal responses obtained in the optimization process.