Uncertainty Hypothesis Research Articles

An experimental test on the hypothesis of strategic uncertainty

AbstractThis study tests the influential hypothesis of strategic uncertainty (HSU) on the topic of bubble formation. We argue that if HSU holds, it shall apply to a stricter situation in which subjects in the market are rational, but none of them know the rationality distribution of others. The research strategies of exclusion and analogy are adopted to create a market that satisfies the two prerequisites of HSU. Briefly, a cohort of 24 participants in the same group is separated equally into three small groups using a pre‐determined rule within a 20‐period treatment. Group #1 is our primary concern, and its members comprise participants whose units of assets are zero with an auxiliary criterion by subjects' performance at the end of Period 5. Across sessions, we determine whether the regrouping criteria and group tags are displayed to subjects to control how hard it is for a trader to judge the distribution of others in his/her group. We observe that mispricing generally vanishes in both the experimental and control groups. This result delivers a negative judgement of HSU at the aggregate level. Observations at the individual level and the robustness experiments deliver the same judgement.

Kin investment biases of aunts and uncles: associations with phenotypic resemblance and sociodemographic characteristics.

Higher investment in maternal than paternal aunts and uncles is explained by the "paternity uncertainty hypothesis". Regardless of laterality, however, aunts show a greater degree of investment than uncles, which is attributed to sex-specific reproductive strategies. Resemblance cues can be used as indicators of genetic relatedness. The central hypothesis of the current study was that perceived phenotypic resemblance between aunts/uncles and niblings would be associated with aunts' and uncles' investment. The association was predicted to be stronger with respect to patrilateral than matrilateral aunts and uncles and stronger with respect to patrilateral aunts than patrilateral uncles. 243 Iranians aged between 15 and 50 participated in a retrospective analysis and filled out a 52-item questionnaire focusing on the solicitude, emotional closeness, and contact frequency between aunts/uncles and their nephews/nieces. In addition, the participants had to rate their phenotypic resemblance with their aunts and uncles. Aunts' and uncles' solicitude, emotional closeness, and contact frequency were differentially expressed according to sex and laterality. Maternal aunts showed the significantly highest emotional closeness, contact frequency, and investment, while the opposite was true for paternal uncles. Moreover, investment was correlated with phenotypic resemblance. Such association was stronger for patrilateral than matrilateral aunts and uncles, and concerning solicitude it was stronger for patrilateral aunts than patrilateral uncles. The resemblance-based kin recognition mechanism among aunts and uncles was self- rather than family-referent. In conclusion, phenotypic similarity can be used as a cue to genetic kinship and is correlated with the investment of aunts and uncles. However, such associations also depend on the degree of genetic relatedness and the differential kin investment provided by each sex.

Uncertain quantile autoregressive model

The propose of uncertain time series is to explore the relationship between response variables and explanatory variables over time based on the imprecise observations. In order to more comprehensively describe the overall picture of the relationship between variables under the time series, a new uncertain quantile autoregressive model is proposed. By studying the uncertain quantile autoregressive model, the estimated method under different quantiles of its unknown parameters is proposed. Based on the fitted uncertain quantile autoregressive model, the residual is analyzed. Furthermore, uncertainty hypothesis testing are used to verify the reasonableness and accuracy of the estimates under different quantiles. Moreover, the point estimate and interval estimate of the predicted value are presented. Finally, the rationality and validity of the model are verified by two examples.

New officials, fresh outlooks on policy uncertainty: Leadership turnover in environmental protection bureaus and additional corporate environmental reporting

Whereas prior research has explored the corporate environmental reporting (CER) effects of policy uncertainty caused by political turnover, little attention has been paid to the impact of environmental protection bureaus (EPBs). The recent top-down environmental management institutional reform has substantially enhanced the discretion and authority of EPBs and led to EPB heads exerting increasing effects on environmental enforcement in Chinese localities. Enlightened by this institutional change, in this research we investigate the degree to which policy uncertainty caused by leadership turnover in EPBs changes the level of CER. The results show that the turnover of an EPB head has increasingly caused additional CER activity and that this impact is more pronounced in politically embedded firms and in those whose affiliated cities are under intense environmental pressure. Further analyses reveal that corporations exhibit better CER performance if former EPB heads are promoted to superior political levels or if newly appointed EPB heads have not been promoted locally. The findings suggest that environmental management reform has led CER practices in China to be increasingly related to local EPBs, and the turnover of EPB heads could have strong policy implications, which sheds new light on the conventional policy uncertainty hypothesis.

Differential grandparental investment when maternal grandmothers are living versus deceased.

Grandparents can increase their inclusive fitness by investing time and resources in their grandchildren. However, not all grandparents make such investments equally, and between-grandparent differences in this regard can be predicted based on paternity uncertainty, lineage and grandparents' sex. Using population-based data for English and Welsh adolescents (n = 1430), we examined whether the death of the most important grandparent (in terms of investment), the maternal grandmother (MGM), changes relative support for existing hypotheses predicting differential grandparental-investment patterns. To contrast the predictions of the grandparental investment hypotheses, we used generalized order-restricted information criterion approximation. We consequently found that, when MGMs are alive, the most-supported hypothesis is 'discriminative grandparental solicitude', which ranks grandparental investment as MGMs > maternal grandfathers (MGFs) > paternal grandmothers (PGMs) > paternal grandfathers (PGFs). However, when MGMs are deceased, the paternity uncertainty hypothesis (MGFs = PGMs > PGFs) receives the most support; this is due to increased investment by PGMs. Thus, when the heaviest investors (i.e. MGMs) are deceased, PGM investments are closer to-but do not exceed-MGF investments.

Stock returns and inflation expectations: Evidence from 20 major countries

<abstract> <p>We examine the relation between stock market returns and inflation expectations using data for 20 advanced countries. Evidence reveals that a negative relation presents in each of 18 countries; the exceptions are Brazil and Russia. The uncertainty hypothesis is established via evidence that U.S. inflation positively increases equity market volatility (EMV), which has a negative impact on U.S. and global stock returns. Evidence leads to the conclusion that both expected domestic inflation and EMV have adverse impacts on stock returns. The model is robust with different formations of inflation expectations and whether the test equations are examined using nominal or real stock returns.</p> </abstract>

Real stock market returns and inflation: Evidence from uncertainty hypotheses

This paper presents uncertainty hypotheses to explain the negative relationship between real stock returns and inflation. Testing the real stock return−inflation relationship based on data from 12 advanced countries indicates that real stock returns are negatively correlated with equity market volatility, which is positively correlated with inflation. These findings jointly support a negative correlation between real stock returns and inflation in the US and 11 other global markets. We reach comparable qualitative results using US monetary policy uncertainty innovation as an instrument to link real stock returns and inflation. One implication is that in addition to domestic inflation, the US inflation-induced equity volatility or change in monetary policy uncertainty reveals an incremental efficiency, providing new elements that modify Fama's (1981) hypothesis. The evidence suggests that US inflation-induced volatility or monetary policy uncertainty innovation profoundly impacts global stock markets.

Municipal bond sectoral risk and information intermediation in uncertain times: Evidence from the Covid‐19 pandemic

AbstractThe municipal bond market is not homogeneous but consists of varying credits supporting different governmental activities. In this paper we discuss how sectors form and how they are differentially subject to market risks, using the Covid‐19 pandemic as a case study. The pandemic has disrupted all financial markets, particularly some municipal bond sectors supported by nongeneral obligation credits, such as health care, arts, and transportation. By comparing the sectors that face a greater increase in risk with others, we empirically examine the market uncertainty hypothesis that intermediation provides stronger certification value when sectoral risk increases. We find an increased use of insurance among high‐risk‐elevation bonds. Bond insurance, nevertheless, is not associated with larger reductions in offering yields in the high‐risk‐elevation sectors on average, but only for issuers consistently insuring all issuances. The yield difference between unrated and rated bonds expands more in the high‐risk‐elevation sectors; for an average unrated bond in such sectors, receiving any investment‐grade rating is associated with yield reductions.

Enhancing stock movement prediction with market index and curriculum learning

Stock movement prediction is a complex and challenging task, because the real stock market system is sophisticated and noisy. There are two obstacles with directly using historical trading data to predict stock price movement: (1) the stock market is time-varying, resulting in the mismatch between training and test data and poor generalization performance; (2) the stock market is a noisy system in which price moving signal is difficult to capture. To overcome these two challenges, we propose a method enhancing stock movement prediction with market index and curriculum learning. We consider the impact of the market movement on individual stock movement, and propose to use market index to split the impacts of market movement and intrinsic individual stock movement. In response to the noise issue, we propose two hypotheses: the trading mode deviation hypothesis and the price prediction uncertainty hypothesis. Based on these two hypotheses, we separately use autoencoder and Mixture Density Network (MDN) to obtain Trading Mode Deviation (TMD) and Price Prediction Uncertainty (PPU) of samples. TMD and PPU are correlated with the difficulty of samples and can be used to assess the uncertainty of price movement. Then, we propose to use curriculum learning algorithm to train model. The experimental results of the CSI Smallcap 500 index (CSI500) stock trading data show that the Micro-F1 of our method has been improved and our method effectively alleviates the class imbalance.

Resemblance Reporting on Children: Sisters Are More Proactive than Brothers

The asymmetric grandparental investment in humans may ultimately be explained by the paternity uncertainty hypothesis. The proximate mechanisms leading to grandparental bias in investment in grandchildren are, however, unclear. In a study of 233 males and females with an opposite sexed sibling, we examined whether comments on resemblance regarding one’s own child, or one’s sibling’s child, changed in frequency after both siblings became parents. We found that comments among siblings on resemblance of children occurred more frequently after both became parents, compared to when only one of the siblings had children, suggesting that resemblance descriptions may become more important after both siblings have children. Furthermore, and in line with the suggestion that mothers may mentally exploit the alloparenting environment by holding a stronger belief about resemblance, brothers reported that their sisters commented on resemblance concerning their own child more often and more intensely. Additionally, sisters corroborated this finding by self-reporting that they were the most proactive during resemblance descriptions of their brothers’ child. Thus, sisters might, through more frequent voicing of stronger opinions on parent–child resemblance than their brothers, influence alloparents’ perception of resemblance to their children and thus influence alloparental investments.

Rottenberg at Sixty-Five: In Honor of the 20th Anniversary of the Journal of Sports Economics

Sports economics is now 65 years old, since Rottenberg's “The Baseball Players’ Labor Market”. This milestone coincides with the 20th anniversary of the Journal of Sports Economics. Rottenberg's two main offerings, the match outcome uncertainty hypothesis and the invariance principle, are reviewed, including empirical verdicts from other recent literature reviews. In addition, perhaps less well-known issues in the literature suggest further investigation of these crucial hypotheses, and others that arise. Finally, the place of the Journal of Sports Economics in the evolution of sports economics is offered.

Does grandpa care, too? - Discriminative grandparental investment is associated with phenotypic resemblance and sociodemographic parameters in an Austrian sample.

Typical patterns of discriminative grandparental investment i.e. high investment provided by the maternal grandmother and low investment provided by the paternal grandfather, are mainly interpreted based on the "paternity uncertainty hypothesis". Accordingly, especially paternal grandfathers are confronted with a double risk of investing in genetically unrelated grandchildren. The present study focuses on the impact of phenotypic resemblance between parents and grandparents on grandparental investment. 94 female and 83 male participants aged 19 to 40 years (x = 27.4; SD = 5.8) were enrolled in the retrospective analysis. An online questionnaire, specifically developed for this study, was used for data collection. In line with predictions, the highest investment, contact frequency and best relationship were found for maternal grandmothers, while paternal grandfathers showed the lowest investment patterns. Phenotypic resemblance between parents and grandfathers enhanced grandfathers' investment significantly, but resemblance had no effect in the case of maternal grandmothers. We conclude that phenotypic similarities can be interpreted as indicators of genetic relatedness and therefore increase grandparental investment among those grandparents, who are confronted with paternity uncertainty, i.e. paternal grandmother and maternal as well as paternal grandfather.

Determinants of Household Savings: A Cross-Country Analysis

This paper analyses determinants of household savings in a model based on an extension of the disequilibrium savings theory. These extensions follow from the life-cycle and permanent-income theories. Based on panel data for 14 countries spanning the period 2000–2018, fixed-effect least squares and two-stage least squares estimation procedures were used. In line with previous studies, there is strong and robust evidence for the hypotheses of disequilibrium savings theory, specifically, positive effects of unanticipated income changes, unanticipated inflation and the lagged savings rate. There is also robust evidence for the income uncertainty hypothesis that uncertainty has a positive effect on savings. The analysis presents some evidence that social security suppresses savings, but finds no significant effects on the interest rate or old-age dependency ratio. Unexpectedly, the participation rate of the elderly has a significant positive effect in some specifications. These findings contribute to the debate on whether and how governments can influence saving behavior.

More Similar to My Father, Better Academic Performance I Will Have: The Role of Caring Parenting Style.

BackgroundParent-child facial resemblance, as an important cue of paternal uncertainty, may impact fathers’ parenting behaviors and further affect children’s academic performance. However, mothers are almost 100% confident of the blood relationship with their child and care less about the facial resemblance cues.MethodsTo test these hypotheses, the present study recruited 122 junior high school students and measured the perceived facial resemblance with their parents, the parents’ parenting style, academic performance, and demographic variables.ResultsThe results showed that the perceived father-child facial resemblance rather than the mother-child facial resemblance significantly influenced adolescents’ academic performance. Further, fathers’ caring parenting style mediated the relationship between the perceived father-child facial resemblance and academic performance.ConclusionThese findings not only supported the paternal uncertainty hypothesis but also extended the parental investment theory.

Profitability of moving-average technical analysis over the firm life cycle: Evidence from Taiwan

Using a sample of Taiwanese listed firm stocks during 1992–2018, this paper tests the profitability of the moving average (MA) technical analysis over the firm life cycle (FLC). Building on the Dickinson (2011) FLC measure of, the results indicate a U-shape of MA profitability over the FLC—MA abnormal performance is higher in the introduction and shakeout/decline stages but lower in the growth and mature stages. Such a U-shape remains after controlling for various risk factors, such as the Fama–French five factors, the momentum factor, and the liquidity factor. The results of this study are robust to alternative lag length specifications for the MA, life cycle proxy, sub-period selection, equally/valued weighted sorted life-cycle portfolio, and various market stats, such as bullish/bearish market periods, high/low market volatility, and expansion/recession economic cycles. The overall results support the information uncertainty hypothesis and the dynamic resource-based life-cycle theory, postulating that a trend-chasing MA strategy is more profitable for firms in the introduction and shakeout/decline stages that are characterized by greater information uncertainty and, thus, longer underreaction-driven price continuation.

Long-Term Rainfall Trends and Their Variability in Mainland Portugal in the Last 106 Years

This study addresses the long-term rainfall trends, their temporal variability and uncertainty over mainland Portugal, a small country on the most western European coast. The study was based on monthly, seasonal and annual rainfall series spanning for a period of 106 years, between October 1913 and September 2019 (herein after referred to as global period), at 532 rain gauges evenly distributed over the country (c.a. 6 rain gauges per 1000 km2). To understand the rainfall behavior over time, an initial sub-period with 55 years and a final sub-period with 51 years were also analyzed along with the global period. The trends identification and the assessment of their magnitude were derived using the nonparametric Mann-Kendall (MK) test coupled with the Sen’s slope estimator method. The results showed that after the initial sub-period with prevailing increasing rainfall, the trends were almost exclusively decreasing. They were also so pronounced that they counterbalanced the initial rainfall increase and resulted in equally decreasing trends for the global period. The study also shows that approximately from the late 1960s on, the rainy season pattern has changed, with the last months prior to the dry season showing a sustained decrease of their relative contributions to the annual rainfalls. Overall, the results support the hypothesis of less uncertainty on the pronounced decrease of rainfall over mainland Portugal in recent years, which is expected to continue. They also show that the asymmetry between a less wet North, yet still wet, and an arid South is becoming much more marked.

Municipal Bond Sectoral Risk and Information Intermediation in Uncertain Times: Evidence from the COVID-19 Pandemic

The municipal bond market is not homogeneous but consists of varying credits supporting different governmental activities. In this paper we discuss how sectors form and how they are differentially subject to market risks, using the COVID-19 pandemic as a case study. The pandemic has disrupted all financial markets, and particularly some municipal bond sectors supported by non-general obligation credits, such as health care, arts, and transportation. By comparing the sectors that face a greater increase in risk with others, we empirically examine the market uncertainty hypothesis that intermediation provides stronger certification value when sectoral risk increases. We find an increased use of insurance among high risk-elevation bonds. Bond insurance, nevertheless, is not associated with larger reductions in offering yield in the high risk-elevation sectors on average, but only for issuers consistently insuring all issuances. The yield difference between unrated and rated bonds expands more in the high risk-elevation sectors; for an average unrated bond in such sectors, receiving any investment-grade rating is associated with yield reductions.

Political Uncertainty and Accounting Conservatism

Political uncertainty leads to greater information asymmetry among contracting parties to the firm, resulting in an increased demand for accounting conservatism. Exploiting the exogenous variation in political uncertainty induced by the U.S. gubernatorial election cycle over the period 1963–2016, we find that the asymmetric timeliness of news recognition increases with political uncertainty. Our political uncertainty hypothesis operates through the contracting demand channel. Accordingly, we find that the political uncertainty effect is more pronounced for firms in states with lower electoral participation, for firms with greater industry exposures to contracting needs, for firms with higher leverage and lower managerial ownership, and for firms with stronger internal corporate governance mechanisms.

Underpricing and market timing in SEOs of European REITs and REOCs

PurposeThe purpose of this paper is to contribute to the literature on seasoned equity offerings (SEOs) by examining the underpricing of European real estate corporations and identifying determinants explaining the phenomenon of setting the offer price at a discount at SEOs.Design/methodology/approachWith a sample of 470 SEOs of European real estate investment trusts (REITs) and real estate operating companies (REOCs) from 2004 to 2018, multivariate regression models are applied to test for theories on the pricing of SEOs. This paper furthermore tests for differences in underpricing for REITs and REOCs as well as specialized and diversified property companies.FindingsSignificant underpricing of 3.06 percent is found, with REITs (1.90 percent) being statistically less underpriced than REOCs (5.08 percent). The findings support the market timing theory by showing that managers trying to time the equity market gain from lower underpricing. Furthermore, underwritten offerings are more underpriced to reduce the risk of the arranging bank, but top-tier underwriters are able to reduce offer price discounts by being more successful in attracting investors. The results cannot support the value uncertainty hypothesis, but they are in line with placement cost stories. In addition, specialized property companies are subject to lower underpricing.Practical implicationsAn optimal issuance strategy taking into account timing, relative offer size and the choice of the underwriter can minimize the amount of “money left on the table” and therefore contribute to the lower cost of raising capital.Originality/valueThis is the first study to investigate SEO underpricing for European real estate corporations, pricing differences of REITs and REOCs in seasoned offerings and the effect of market timing on the pricing of SEOs.

The dependence upon context of project critical success factors: test of the contingency hypothesis and effects of technological uncertainty and collectivism culture

Although the relationship between critical success factors (CSFs) and project performance is established, evidence regarding the dependence on the context of CSFs is patchy. To advance this field, we conduct two complementary studies. Study 1 examines contingency theory regarding managerial CSFs using survey responses (N = 211) of project management professionals from the United Kingdom. Using survey data from projects (N = 336) in the United Kingdom, Study 2 examines the contextual dependence of managerial CSFs in a moderated-moderation, theoretical framework whereby project technological uncertainty moderates the relationship between managerial CSFs and project execution and efficiency, and in-group collectivism culture of the executing organisation moderates the effect of technological uncertainty. Results confirm that external and internal contexts influence managerial CSFs. Managerial CSFs have a greater than expected influence on project execution and efficiency. The positive effect of managerial CSFs is weaker when technological uncertainty is high. When technological uncertainty is high, the effect of managerial CSFs strengthens as levels of in-group collectivism culture increase. However, when technological uncertainty is low, the effect of managerial CSFs weakens as levels of in-group collectivism culture increase. We discuss the managerial and theoretical implications.