This paper documents a positive relation between internationalization and bank risk. This is consistent with the empirical dominance of the market risk hypothesis – whereby internationalization increases banks’ risk due to market-specific factors – over the diversification hypothesis – whereby internationalization allows banks to reduce risk through increased diversification of their operations...

Healthcare reimbursements in the US have been traditionally based upon a fee-for-service (FFS) scheme, providing incentives for high volume of care, rather than efficient care. The new healthcare legislation tests new payment models that remove such incentives, such as the bundled payment (BP) system. We consider a population of patients (beneficiaries). The provider may reject patients based o...

Information security is a critically important issue in current networked business and work environments. While there is extensive publicity on the increasing incidents of numerous information security breaches and their serious consequences, recent surveys and research on information security repeatedly identify the low levels of user and managerial awareness as a key obstacle to achieving a g...

Once they have observed information, hindsight biased agents fail to remember how ignorant they were initially, “they knew it all along.” We formulate a theoretical model of this bias, providing a foundation for empirical measures, and implying that hindsight biased agents conduct incorrect learning about volatility. In an experiment involving 67 students from Mannheim University, we find that ...

The theory of expected utility maximization (EUM) proposed by Bernoulli explains risk aversion as a consequence of diminishing marginal utility of wealth. However, observed choices between risky lotteries are difficult to reconcile with EUM: for example, in the laboratory, subjects’ responses on individual trials involve a random element, and cannot be predicted purely from the terms offered; a...

Ecological bias is sometimes attributed to confounding by the group variable (ie the variable used to define the ecological groups), or to risk factors associated with the group variable. We show that the group variable need not be a confounder (in the strict epidemiological sense) for ecological bias to occur: effect modification can lead to profound ecological bias, whether or not the group v...

Recidivism prediction instruments (RPIs) provide decision-makers with an assessment of the likelihood that a criminal defendant will reoffend at a future point in time. Although such instruments are gaining increasing popularity across the country, their use is attracting tremendous controversy. Much of the controversy concerns potential discriminatory bias in the risk assessments that are prod...

Introducing extrapolation bias into a standard one-sector production-based real business cycle model with recursive preferences reconciles salient stylized facts about business cycles (low consumption volatility and high investment volatility relative to output) and financial markets (high equity premium, volatile stock returns, and a low and smooth riskfree rate) with low relative risk aversio...

This paper considers estimation of the intercept and slope vector parameters of the simple multivariate linear regression model with Student-t errors in the presence of uncertain prior information on the value of the unknown slope vector. The unrestricted, restricted, preliminary test, shrinkage, and positive-rule shrinkage estimators are defined together with the expressions for the bias, quad...