Roger Bowden

Roger Bowden
Kiwicap Research Ltd · Economics and Finance

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131
Publications
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Publications

Publications (131)
Book
This book finds a broad domain of relevance in statistics and the social sciences. Its conceptual development is supported by applications to economics and income distribution, finance, education, demographics and actuarial science, political studies, psychology, and general statistics. Fresh perspectives on directional complexity have generated an...
Preprint
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Public concern with artificial intelligence, as to its precise meaning, social impacts and potential employment displacement, has become a significant policy issue. A redefinition of human capital should highlight a real option component as a form of risk management against occupational displacement. Implications for immigration are raised.
Preprint
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In the long history of technological milestones, just a few stand out as transformative of the way that society functions, from social as well as economic perspectives. Whether AI has thus far displaced occupation groupings is an active concern, while legislation is in progress to try and limit the potentially harmful social impact. The evidence th...
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Underlining the intensive political stress points associated with aging of the domestic population are three interlinked focal points: Demography and the contingent funding gap for the transfers needed to support the aging populace; whether technological progress can create an augmented taxation base sufficient for the required public finance suppo...
Preprint
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Media attention devoted to investment, together with the popularity of social media and online investor sites, have been instrumental in modifying investor behaviour at all ages and levels of wealth. Investors remain sensitive to a loss; but for many, their utility function is no longer globally concave, but convex on the upside, with a point of in...
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Recent pessimism about the employment effect of AI has not taken into account major ongoing changes in the economy itself. Two such are the aging population, with its effect on the demand side for labour; and immigration, on the supply side. In developed countries caring for the old has become a growth industry with its own set of specific skills,...
Preprint
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Our opinions are often weighted by feedback as to the views of others. A structured context is where the communal opinions are those of a panel of experts, with each view influenced by the panel peers. The issue of superior private information and its influence on the communal report can be structured with entropy. More informative views correspond...
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Raised immigration targets in a number of countries reflects an aging domestic population and longer life expectancy. Occupational replacement is required, ideally together with enhanced human capital to generate GDP growth in per capita terms. Occupational obsolescence resulting from artificial intelligence and automation calls for a redefinition...
Preprint
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Enumeration or 'guessing' games come in multiple formats and contexts. They can be 'exact', or 'best guess' where a prize is awarded for the closest, perhaps with further constraints such as within specified error bounds. Participant guesses invoke subjective probabilities as to competitor strategies and potential gains from their conjectured dista...
Preprint
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Artificial intelligence is here to stay, with multiple issues as consequential: social, educational, economic, political and more. The particular concern taken up in the present contribution is the employment impact. The neoclassical growth model is a convenient starting point for whether AI is likely to be labour enhancing or labour displacing, wi...
Preprint
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The economic and social impact of Covid and the Ukraine war can conveniently be divided into three phases. Policy reactions have raised issues as to the respective roles of central bank and government, spanning reliance on market support for government debt and whether both parties should be more anticipative in policy responses. A further issue is...
Preprint
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Online internet viewing immersion extending to augmented reality and virtual reality has become marketed as the Metaverse, with cryptocurrency backing. Economic consequences are noted. Property rights in particular will become an issue, with economic development consequences arising from virtual tourism during times of pandemics.
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Motivation for the present contribution is to focus attention on the disequilibrium consequences of the policy response to the Covid crisis. Price and quantity controls set in place to limit social interaction have as a consequence not only impacts on production but also on the way in which what amount to compulsory saving diverts wealth, notably i...
Article
The entropic measure of distributional spread, representing the total binary code complexity of the probability distribution, is equal to the area under the partition entropy function. A conjugate dual, obtained as a simple internal sign change from the partition entropy function, can be employed to indicate the relative complexity to the right of...
Preprint
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Dynamic optimisation based in control theory is utilised to develop a framework to resolve conflicting imperatives in the economics of epidemics. More severe controls impact negatively on current private welfare but they also diminish the rate of transmission. If the shadow price of infection is high, then it will be worthwhile for the government t...
Preprint
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In recent years, large scale immigration flows in a number of countries have resulted in major problems of economic and social integration. Immigration policy therefore needs to be forward looking, leading to an optimal intertemporal profile for desired outcomes. The shadow cost of incomplete social integration is a key dual variable, requiring in...
Preprint
Full-text available
In the years following recovery from the global financial crisis, market impacts arising from demographics and government retirement funding policies have been vectored by professional funds management. The competitive nature of the industry, asymmetric between portfolio gains and losses relative to peers, can result in convergent behaviour on the...
Preprint
Full-text available
OECD retirement pension systems commonly comprise three tiers: the public pension provision, employer sponsored superannuation, and optional private or personal contributions, administered by professional fund managers. A cost effective rationalisation is proposed that consolidates the first and third tiers. A unifying principle takes the form of a...
Preprint
Full-text available
The entropic measure of distributional spread, representing the total binary code complexity of the probability distribution, is equal to the area under the partition entropy function. A conjugate dual, obtained as a simple internal sign change from the partition entropy function, can be employed to indicate the relative complexity to the right of...
Book
Fresh perspectives on directional complexity have generated an informational theory of ‘more versus less’, with representative polar outcomes as good or bad, or rich or poor. New duality metrics for spread and asymmetry have resulted, motivated by internal perspectives on the part of subjects, such as attitudes to their comparative (dis)advantage....
Chapter
The agenda of this chapter is a nonparametric approach that seeks a conceptual condensation of the partition entropy function, with two agendas in mind. The first continues on from previous themes of finding minimally descriptive measures for location, asymmetry and spread. The second associated agenda seeks a more far reaching decomposition, such...
Chapter
With the passage of time or circumstance, probability distributions change; and as they do so, the allocation of entropic complexity likewise changes. The present chapter develops a systematic way of modelling such developments, with partition entropy as the organising framework. This leads to unit left and right entropic shifts, enabling a calculu...
Chapter
In a single dimension, unit shifts to either left or right at are unequivocal with reference to the single axis. In two or more dimensions, elementary shifts can be defined with reference to each dimension separately, and then recombined with weights according to the desired direction in the plane. The elementary shifts themselves can be obtained w...
Chapter
This chapter elaborates on some of the issues that arise in the theory and practice of distributional comparisons. These range from the nature and scope of probability judgements to the precise nature of the preference functions that may be involved. A recurring theme is that tail probabilities in themselves are not a sufficient guide to decision m...
Chapter
From the practical point of view, many of the statistical measures developed in this book can be read and understood without any formal reference to entropy; they have intuitive or contextual relevance just as they stand. However a fuller understanding of these and other operational outcomes derives from the relationship with the general notion of...
Chapter
With the basic theory of the spread and asymmetry measures now in hand, a range of applications can be explored, some of considerable topical interest in their own right. The first of these is income distribution, in rectifying shortcomings of the classic Gini coefficient. Adopting an internal perspective, where subjects compare their own income wi...
Chapter
Metrics of one kind or another, all potentially important in practice, are the subject of the present chapter. While their substance and usefulness can be established with no specific connection to entropy as such, it turns out that they have a derivational connection with the unit left and right entropic shifts. Based on the conditional left and r...
Article
A more precise differentiation of directional asymmetry and dispersion of income distributions, drawing on an internal contextual perspective is enabled by introducing a new metric for asymmetry and spread. This dual metric can be plotted over time into a phase plane, enabling comparative social welfare perspectives over time and between countries....
Article
Distribution spread as a separation width is formalised using partition entropy, resulting in a metric for dispersion with associated end points. The binary framework resolves interpretive and other limitations of the traditional differential entropy metric, and is robust to distributional shape.
Article
Distribution spread as a separation width is formalised using partition entropy, resulting in a metric for dispersion with associated end points. The binary framework resolves interpretive and other limitations of the traditional differential entropy metric, and is robust to distributional shape.
Article
Full-text available
An assumption of symmetric asset returns, together with globally risk averse utility functions, is unappealing for fund managers and other activist investors, whose preferences switch between risk aversion on the downside and risk seeking on the upside. A performance return criterion is originated that is more consistent with the implicit Friedman-...
Article
Full-text available
Income distribution has been a longstanding focus of social and economic interest, but never more so than in recent times. New metrics for disadvantage and spread enable a more precise differentiation of directional asymmetry and dispersion, drawing on an internal contextual perspective. The dual metrics for asymmetry and spread can be plotted over...
Article
A high Gini coefficient could signal either dispersion or else skewness, often of more social concern. Supplementary metrics such as the Atkinson index diagnose the asymmetry with preassigned parameters that reflect user social values. An alternative is proposed that reflects redistribution aspirations as they might be seen by the subjects themselv...
Article
Kernel smoothing and filtering techniques are undemanding in their data generation assumptions but have limitations where special interest attaches to more recent observations. A methodology is developed that addresses contingencies such as end correction and the kernel term structure within the same technology, namely scale invariant kernel compre...
Article
Full-text available
Security market integration and spanning failures can arise from differential informational access or from administrative barriers to different types of investor, e.g. onshore versus offshore. However, where sufficient motivation exists, a parallel market could arise, where offshore investors can re-engineer domestic payoffs. Non parametric ordered...
Article
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The notion of a stochastic ‘convenience yield’ to explain variations and reversals in the spot -forward premium is a common rationalisation in commodity market research. However, such variations may arise from causes more intrinsically related to the structure and cash flows of the extended commodity markets. An instance is where the market can be...
Article
Data smoothing or regression kernels based on locational entropy embody the principle that observations towards the extremes of the chosen data window should provide less information than those at the midpoint. Weight patterns can be flexible, depending on the choice of prior information density.
Article
Reflexive shifting of a given distribution, using its own distribution function, can reveal information. The shifts are changes in measure such that the separation of the resulting left and right unit shifted distributions reveals the binary entropy of position, called locational or partition entropy. This can be used for spread and asymmetry funct...
Preprint
Full-text available
Too much' sovereign debt helped to precipitate the current economic crises in Europe and elsewhere. But how much is too much? Distinctions between sustainability and super-sustainability are explored with the aid of a benchmark formula that incorporates key parameters of public debate. The benchmark can used to inform remedial action, or in the for...
Book
This book was first published in 1989. Inference and prediction in human affairs are characterised by a cognitive and reactive sample space, the elements of which are aware both of the statistician and of each other. It is therefore not surprising that methodologies borrowed from classical statistics and the physical sciences have yielded disappoin...
Article
Regulatory proposals that seek to limit or govern finance industry bonuses in the interests of systemic stability need to be grounded in the financial economics of producer surplus and its distribution. In this respect, existing treatments of economic agency in justifying large bonus awards are content to accept accounting Profit and Loss (P&L) num...
Article
Full-text available
“Mine is a long and sad tale”, said the Mouse, turning to Alice and sighing. “It is a long tail certainly,” said Alice, looking down with wonder at the Mouse's tail; “but why do you call it sad?” And she kept on puzzling about it while the mouse was speaking … Financial risk management metrics such as value at risk (VaR) can be illuminated by means...
Article
Full-text available
Fund and other investments often exhibit longer run volatility associated with macroeconomic or other dynamics to an extent inconsistent with the efficient market accumulation model. Volatility and performance models or metrics based on one-period returns or simple extensions can fail to pick up this up, resulting in suboptimal investment policies,...
Article
Full-text available
Financial regulators can enhance the credibility of credit ratings if agencies are offered a registration facility that sequesters part of their fee as a performance bond over a designated maturity. Agencies can then signal their private information by choosing whether or not to register and stake part of their fee. The value of the registration re...
Article
Financial regulators can enhance the credibility of credit ratings if agencies are offered a registration facility that sequesters part of their fee as a performance bond over a designated maturity. The margin can be responsive to the rating, the defined credit event, and the registration maturity. Agencies can signal their private information by c...
Article
The leveraging of credit that precipitated the subprime crisis was vectored via a proliferation of investment vehicles and credit derivatives, driven in part by competitive pressures to enhance returns by economising on economic capital. Theoretically, this should have spread risk and improved economic efficiency, but in practice it exposed the sys...
Article
As life tables continue to lengthen, a world-wide paradigm shift to defined contribution has left pensioners exposed to performance, credit, and longevity risk. However, relatively risk-free defined benefit schemes can be designed off the back of high-grade debt issuance programmes by public long-term asset vehicles, as an infrastructure retirement...
Article
Infrastructure growth and its regional concentration can accelerate growth and diversification of international trade, in terms of both commodities and the implied factor content. The origins and mechanism are explored via a model of endogenous growth that internalizes social spending on physical infrastructure, leading to the accumulation of human...
Article
Cyclical exposures of farm profit to the economic environment are a fact of life for farmers. By utilising the farmer terms of trade as a net profit margin metric, we show how wavelet analysis can be used to decompose the cycle and trend, analyse causal influences, and detect structural breaks. With the NZ dairy industry as case study, the wavelet...
Article
The NZ term structure of interest rates is long in liquidity at the short end of maturities, but entirely absent at the long end. This entails market completion and other welfare problems, notably in encouraging long term saving, retirement income support, tax non-neutralities, public sector funding, insurance support, and other exigencies. A possi...
Article
Mean-variance analysis is constrained to weight the frequency bands in a return time series equally. A more flexible approach allows the user to assign preference weightings to short or longer run frequencies. Wavelet analysis provides further flexibility, removing the need to assume asset returns are stationary and encompassing alternative return...
Article
Full-text available
Reflexive shifting of a given distribution, using its own distribution function, can reveal information. The shifts are changes in measure accomplished via simple Radon-Nikodym derivatives. The separation of the resulting left and right unit shifted distributions reveals the binary entropy of location. Recombining the shifts via convex combinations...
Article
Full-text available
Measuring country exchange rates relative to a common reference basket results in a set of no-arbitrage prices, unlike trade-weighted indexes, the usual method of comparing country exchange rate histories. The reference basket is analogous to a portfolio, and its choice can be resolved by drawing on required economic interpretations or uses. We use...
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Full-text available
Risk management techniques such as value at risk and conditional value at risk focus attention on protecting the downside exposures without penalizing the upside exposures. The implied welfare functions are equivalent to an otherwise risk neutral agent with a put option exposure on the downside. The correspondence can be exploited to design smoothe...
Article
Directional calls are often more successful than precise value prediction, particularly at certain times, when underlying fundamentals suggest a breakout from the stable range. We adapt the categorical directional framework implicit in binomial or trinomial step processes to establish nonhomogeneous multinomial directional probabilities over coarse...
Preprint
Full-text available
Directional calls are often more successful than precise value prediction, particularly at certain times, when underlying fundamentals suggest a breakout from the stable range. We adapt the categorical directional framework implicit in binomial or trinomial step processes to establish nonhomogeneous multinomial directional probabilities over coarse...
Article
Recently concerns have been raised in New Zealand about the effectiveness of monetary policy in controlling inflation while avoiding damage to the economy from high exchange rates. This review examines the basis for concern and identifies the problem as a failure in the primary instrument, namely the Reserve Bank's official cash rate, to adequately...
Article
Full-text available
Decisions to modify the firm's natural exposure by using derivatives should be referenced back to the maximisation of corporate value. Firms typically have a natural exposure to adversity, costs that may start well in advance of a bankruptcy point. The implicit value of the resulting adversity or hazard options extends a long shadow over corporate...
Article
Full-text available
Generalized value at risk (GVaR) adds a conditional value at risk or censored mean lower bound to the standard value at risk and considers portfolio optimization problems in the presence of both constraints. For normal distributions the censored mean is synonymous with the statistical hazard function, but this is not true for fat-tailed distributio...
Article
Full-text available
Designed as a fund performance measure, the ordered mean difference is extended to characterize zero-surplus situations, such as a capital market equilibrium generated by arbitrary risk preferences. This enables nonparametric testing for whether CAPM applies and the detection of pricing inefficiencies or anomalies from historical data, including in...
Article
House prices are both cause and effect of the real exchange rate. In the form of implied rentals or service prices, they are a good proxy for non tradables prices, which in turn are signs of generalised expenditure inflation and hence underlying real exchange rate pressures. The causal impact is because rising house prices suck in offshore funding,...
Article
Full-text available
Both active and passive portfolio enhancement can be analysed within a zero-capital framework, wherein enhancement exposures are reported as an additional or secondary portfolio requiring zero capital. This enables an identification of the economic value added by the enhancement, using two complementary approaches. The first is based on traditional...
Article
The ordered mean difference (OMD) function is a running mean of the difference between returns on a given fund or security and a benchmark such as the market portfolio, ordered by values of the benchmark. The expectation of this function, conditional on the observed series of benchmark returns, can be used as a portfolio performance measure. Such a...
Article
Empirical evidence supports asymmetries in the adjustment of prices, interest rates, and other economic variables. The asymmetry hypothesis, however, is often procedurally difficult to set up and test. This article shows that a wide variety of such mechanisms can be nested within an asymmetry generator, which represents the interactions between the...
Article
The New Zealand Employment Contracts Act 1991 is regarded internationally as a pathbreaking exercise in labour contracting, but internally is often perceived as contrary to prevailing community ideas about job security and tenure. Common law, as provisionally established by recent Employment Court rulings on fixed-term contracts, has rekindled deba...
Article
Conventional (or Fisher-Weil) duration is an ordinary derivative that measures the response of portfolio value to marginal parallel shifts in the term structure, while other proposed measures are generally specific to particular interest rate processes. In this paper, we show that portfolio responses to arbitrary shifts in the term structure may be...
Article
This paper establishes a conceptual framework within which questions about both government value and the optimal or prudential public debt can in principle be addressed. Although derived by analogy with private sector corporate finance, the model recognises the public good character of many government projects as a source of economic value added, w...
Article
A standard result in the theory of production under price risk is that if forward cover is available, production is determined in terms of the known, quoted forward or futures price, rather than expectations of future prices. In practice, however, primary production often involves joint or substitutable products, so that a natural hedge may be avai...
Article
Recently developed methods in the analysis and measurement of latent factor models for time series are utilised to study international business cycles and their relationship to international stockmarket price behaviour. An advantage of these methods is that the duality properties between time domain and frequency domain approaches for investigating...
Article
The terms of an investment by venture capitalists are the result of cooperative bargaining between the project originators (owners or entrepreneurs) and the financiers. This study examines conditions under which bargains can be consummated, the nature of the bargains, and the way in which bargains are both influenced by venture fund size and also c...
Article
In recent years there has been a move in New Zealand to convert small, uneconomic orchards to other agricultural uses. Overseas research has demonstrated that copper from fungicide sprays often accumulates in the soils of orchards and can cause certain problems for plant growth and livestock. To date, no assessments appear to have been made of the...
Article
From the statistical point of view, a business cycle may be characterized in terms of a common latent structure assigned to the various indicator series. This may be detected by a component analysis of the spectral density matrix and established as a reference cycle in the time domain. Using this theory, we compare the Australian and United States...
Article
If prices have an allocational role, then in addition to their economic signalling, they may act as a statistical signal for the existence of selection bias in cross-sectional studies with some form of price (wages, rental, yield etc.) as dependent variable. Elements of competitive selection appear in the pricing theory of real or financial assets...
Article
Methods for privacy protection of microdata include grouping and publication of data perturbed with random noise. The authors suggest a variant of the latter in which the noise is generated by bootstrapping from the original empirical distribution. The published data distribution then essentially consists of a convolution of a distribution with its...
Article
The time value function for a vanilla interest rate swap is derived in this note. For monotonic and stationary yield curves, value is zero at the end points and either wholly negative or wholly positive over the life of the swap. But reversals in the term structure of interest rates from inverted to normal produce a swing between positive and negat...
Article
The received theory of efficient capital markets is based on an equilibrium to a predictive game. As such, it does not cope with the observed volatility of many asset markets, or with the evident existence of contingent or actional rules such as chartism. Choosing a simple martingale (random walk) for the fundamental equilibrium model, we show that...
Article
The range and rationales for forecasting schemes involving feedback are surveyed. Classic Delphi schemes involve an iterated exchange of information between a small group of experts in the pursuit of efficiencies arising from the ‘collective mind’. In other applications the event or state to be forecast may itself depend upon the forecast, and feed...
Book
This book was first published in 1989. Inference and prediction in human affairs are characterised by a cognitive and reactive sample space, the elements of which are aware both of the statistician and of each other. It is therefore not surprising that methodologies borrowed from classical statistics and the physical sciences have yielded disappoin...
Article
This paper establishes a convenient set of criteria for the identification of linear simultaneous econometric models with rational expectations. We consider the model with one-period-ahead expectations conditional upon current exogenous or predetermined variables or their forecasts if current values are unavailable. A collection of instrument count...
Article
The generation and public dissemination of information from surveys or polls may be expected to modify or condition the private attitudes or intentions it is hoped to measure. Thus the application of statistics to human affairs is often characterized by a reactivity or reflexivity that may even negate its findings or predictions. Bandwagon, funding...
Book
Recent advances in establishing the nature and scope of estimators in econometrics have shed more light on the importance of instrumental variables. In this book, the authors argue that such methods may be regarded as a strong organizing principle for a wide variety of estimation and hypothesis testing problems in econometrics and statistics. In su...
Article
It is commonly held that even where questionnaire response is poor, correlational studies are affected only by loss of degrees of freedom or precision. We show that this supposition is not true. If the decision to respond is correlated with a substantive variable of interest, then regression or analysis of variance methods based upon the questionna...
Book
Recent advances in establishing the nature and scope of estimators in econometrics have shed more light on the importance of instrumental variables. In this book, the authors argue that such methods may be regarded as a strong organizing principle for a wide variety of estimation and hypothesis testing problems in econometrics and statistics. In su...
Article
In the context of single equation approaches to the estimation of nonlinear simultaneous models, three classes of estimators can be established, using different fitted values established by a stage-one regression. The first uses the Fitted values of the nonlinear function in the second-stage regression. The second, called here the naive instrument,...

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