Management Engineering & Technology of Statistics

Proceedings 2012 IEEE 5th International Conference on

Management Engineering & Technology of Statistics

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Proceedings 2012 IEEE 5th International Conference on

Management Engineering & Technology of Statistics JUL.20-25, 2012 Qingdao, China

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Proceedings 2012 IEEE 5th International Conference on Management Engineering & Technology Statistics

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CFP 1251T -ART 978-1-4673-2612-4 CFP 1251T-CDR 978-1-4673-2611-7 CFP 1251T -PRT 978-1-4673-2610-0

Publisher: Institute of Electrical and Electronics Engineers, Inc. Printed in Beijing, China

2012 IEEE 5th International Conference on Management Engineering & Technology of Statistics ICMETS2012 JUL.20-25, 2012 Qingdao, China

Co-sponsors: - IEEE Beijing Section - Information Center of Ministry of Industry and Information Technology of the People’s Republic of China - Statistical Comprehensive Evaluation Branch of Chinese Association of Applied Statistics - University of Jinan, China

Organized by: - Shandong Association of Applied Statistics, China

Technical Co-sponsors: - School of Management of University of Jinan - College of Economic and Management of Dalian University - Mathematical Statistics and Management - Statistics and Information Forum

Welcome Message from the General Chair

It is my great pleasure to present this proceeding of the 2012 5th International Conference on Management Engineering & Technology of Statistics (ICMETS 2012), which is held from July 20th to 25th, 2012, in Qingdao, China. I would like to take this opportunity to thank all the authors and participants for their support to our conference. With the development of technology, a great variety of research results are emerging. Following the rapid development trend, ICMETS 2012 serves as forum for the academic professionals and researchers to exchange the research results and address open issues in Financial Engineering and Risk Control, Information Systems and Industrial Control, Logistics Engineering and Supply Chain Management, Innovative Engineering and Strategic Management, Socio-economic Systems and Its Management and Decision-making Technology and Its Applications. On behalf of the organizing committee, I would like to express our gratitude to our sponsors: IEEE Beijing Section, Information Center of Ministry of Industry and Information Technology of the People’s Republic of China, the Statistical Comprehensive Evaluation Branch of Chinese Association of Applied Statistics and University of Jinan; organizer: Shandong Association of Applied Statistics and co-sponsors: School of Management of University of Jinan, College of Economic and Management of Dalian University, Mathematical Statistics and Management, Statistics and Information Forum and some English periodicals and so on. At the same time, we appreciate the contributions from our paper reviewers and the committee members. It is your efforts that make the conference success. The proceedings provide a concise but timely medium for the dissemination of recent research results. I hope that you find the proceedings interesting, exciting and informative. Thanks again for your attention and support to our conference. We are looking forward to seeing you again next year.

Prof. Yang Zhenhai General Chair of ICMETS 2012

Conference Committees General Chair Prof. Yang Zhenhai, The former chairman of Chinese Association of Applied Statistics, the editor of Mathematical Statistics and Management, China

Program Committee Chair Prof. Wu Nong, Dean of Information Center of Ministry of Industry and Information Technology of the People’s Republic of China Vice Chairs Prof. Han Jingxuan, Dean of School of Management, University of Jinan, China Prof. Wang Xikui, Dept of Statistics, University of Manitoba, Canada Prof. Fang Yue, University of Oregon, USA

Organizing Committee Chair Prof. Han Hong, Headmaster of University of Jinan, China Vice Chairs Prof. Cheng Weihu, Secretary-General of Chinese scene statistical institute, China Prof. Ik Ki Kim, Dongguk University, Korea Prof. Jin Mingzhe, Doshisha University, Japan Secretary-General Prof. Zhu Konglai, University of Jinan, China

Publication Committee Chair Prof. Zhou Mengqi, IEEE Beijing Section

Table of Contents Financial Engineering and Risk Control 001-0059

Empirical Study on the Fractal Behavior of the Chinese Stock Markets by R/S Analysis: More Data Yan Zhang,Yang Li

1

002-0118

An Overview of Markov Regime Switching Model and Its Applications Dongmei Li,Qunying Zhang,Dongsheng Li

5

003-0142

A Novel Approach To CAPM Song-Tao Qin

9

004-0223

Research of Impact of financial crisis on China's stock market base on Hurst index LI Shuangcheng, Cui Xia

12

005-0287

The Two Pricing Comparisons of Mortgage Common LI Chen

16

006-0288

The Innovation and Evaluation of Mortgage Insurance under O-U Process CHEN Li-ping

19

007-0350

Analysis of Portfolio VaR using a Copula-GARCH Model WANG Fei, SONG Jiali,MA Mingwei

22

008-0438

A Self-Organizing Model of Shareholders in a Securities Market Cao Zhan

27

009-0454

An Empirical Analysis of Quantile Regression Based Risk Measurement in the Chinese Stock Markets Chen Hua,Kang Yixue

30

010-0464

Analysis on effects of monetary policy on stock market returns in China Shaofang Ding,Tian Tian,Yingchao Hou

35

011-0540

State space model for learning about time-varying beta and the conditional CAPM Tang Liang

39

012-0560

Ranking of Credit Risk Using VIKOR with Synthesized Weight Wang Honghai,Chen Guohua

42

013-0753

The Quantitative Relationships Between VaR, ES and Beta Coefficient, Duration Zhou Decai, He Yiqing, Yang Yi

46

014-0763

Generalized cumulative residual entropy model for measuring tail risk Lijuan Yang

50

015-0805

The Optimal Investment Portfolio Model based on CVaR Baiyi Zhang,Shushan Li,Qingsong Li

55

016-0806

The Application of Improved Mixed-copula Model in Portfolio VaR Measurement Qingsong Li,Shushan Li,Baiyi Zhang

61

017-0989

Portfolio Selection Based on MSF Model

65

Home 1

Insurance

Ding Yuan-Yao, Yu Wen-Zhen 018-0868

Market Liquidity Transmission Mechanism based on MGARCH-BEKK Model Wang Ling-zhi

69

019-0775

A Mathematical Model for the Income Forecasting,in Venture Capital based on Markov Chain Ouyang Bin

74

020-0890

Impact of Interest Rate Adjustments on the Volatility of Overnight Return in China’s Stock Market Jiping YANG ,Zhen LIU,Xiaoxuan CHEN

77

021-0993

The Discounted Penalty Function of Sparre Andersen Risk Model with a Constant Dividend Barrier HUANG Yujuan,YU Wenguang

83

022-1027

The Non-rational Behavior in the Private Placement Pricing of the Chinese Listed Companies Jun Yu,Li Daofang,Cao Zhonghong

87

023-1064

Research on Application of Combination Forecasting Model in Markowitz Model ZHENG Hong,LING Shen

95

024-1034

The 30-Day CHIBOR Forecast by Combining Regression and ARIMA Model Linchang Pu,Daoping Chen

100

025-0666

Study on The Control Model of The Enterprise Financial Risk ——Based on the Multi-Agent System GUO Xianying

104

026-0230

The Relative Vulnerability of Agriculture and the Asymmetric Financial Crisis Impact on Agricultural Product Trade of the Trading Partner Bo Fu, Yunsheng Mi,Haiying Zou

108

027-0357

Research about the Crisis Early-warning for China’s Stock Market with Back Propagation Neural Network Xiaoyan LI,Pei HU

113

028-0602

Study on a perturbed dependent risk model Xia Zheng,Chunwei Wang

120

029-0638

Does Systematic Risk Affect A-H Price Spread ? Ran Zhang

124

030-0703

Project Risk Evaluation Method Based on Fuzzy Linguistic Value Xudong Sun,Yuncai Ning,Hongmei Chen

128

031-0876

Study on Mechanism and Precaution of Debt Risk of Local Government in China Xiao Gan,Li Jing

132

032-0975

A Study on the Risk Valuation of Animation Industry Park Construction Project : Linyi International Animation Industry Park as an example

143

2

Su Weidong 033-1076

Study on the Investment Decision and Strategy Adjustment of Venture Capital Zhu Konglai,Liu Xiaofeng,Zhang Xiao

148

034-1078

The Study on the Approaches of Policy Introduced Fund of Venture Investment Based on the Enterprise Life Cycle Theory Zhu Konglai,Liu Xiaofeng ,Zhang Linna ,Li Junjie

156

035-1216

Underwriting Cycle in China’s Property-liability Insurance Yiting FU,Chunyang PANG

162

036-0646

Communication Management for Risk Control during Project Construction Process Dou Zhi,Guo Yanting

167

037-0845

Risk Premium Allocation Study for BOT Project Based on CAPM Wu Xiao Ling,Wang Jining

171

Information Systems and Industrial Control 038-0001

Decoupling E-Commerce from Access Points in Semaphores MA Jinzhu,LIANG Wei

176

039-0766

A Prediction Study on the daily number of E-commerce orders Based on Site Search Data Na Li, Geng Peng,Hang Chen, Jaxing Bao

180

040-0990

Application of Data Mining Technology in Face Recognition Based on Support Vector Machine Lei Liu ,Yongzhuo Wu ,Xiaoling Song

186

041-1007

Analysis and Design of Quality Management Information System Based on UML and BPR Yang Xiaoying,Zheng Huabing

190

042-1028

A Study of Knowledge Management System Model Based on ERP Ji-yu Lai

194

043-1084

Research on Application of Data Mining Technology in CRM Hong Yan,Ying Gao

199

044-0909

The Software Design Idea of Total Quality Management System for Tourism Wang Xiaopei

204

045-0606

Application of Genetic Algorithm into the SEO of Intranet Liyamei

210

046-0133

Research on the application of ABC to the optimization and control of project QIAO Cui,WANG Heng-shan

213

047-0191

Considering Reliability in the Design of Incremental Manufacturing Cells Chih-Ping Chiang

219

048-0194

Research on the Optimum Burden Mathematical Model for Forest-Pulp-Paper Enterprise

224

3

Guohua Zhang 049-0991

Application of Business Intelligence System of the Tobacco Business Enterprise Based on Data Warehouse ZHANG Bingfeng

227

050-0208

The application of control charts in controlling of the cigarette physical measurement index (circle and weight) ZENG Sheng,HU Yanguang

231

051-0259

Chemical process modeling based on support vector machine with flexible kernel function Zheng Qifu, Shen Xiaoli

235

052-0261

The Study of Rock Burst Forecasting in Coal Mining BIAN Pingyong,SHI Yongkui，ZHU zhuwu

239

053-0301

Average Failure Rate Estimation of Exponential Distribution Data Situation Ji Zhirong,HeDongjin

054-0388

An Improved Genetic Algorithm to Solve Reliability Redundancy Allocation Problem Wu Jing, Hu Yan-guang

247

055-0389

The method of the flaps of C919 aircraft manufacturing quality control Yin Zimeng,Hu Yanguang,Dai Ying

252

056-0425

Reliability Study of Complex Repairable Systems Xu Dongyang,Dong Qiuxian

256

057-0492

Study on a New Project Management System for Large-scale Construction Industry Hou Xueliang,Liu Ziming

261

058-0521

Research on Coal Mine Enterprise Technical Staff’s Counterproductive Work Behavior Motivation Mechanism Model Based on the Self-Determination Theory Sun Meng-Jiao,Li Nai-Wen

264

059-0559

Accelerated Life Model and statistical Analysis of Accelerated Test Yi Dangxiang, Zhao Shaoping ,Zhang Shinian

269

060-0578

The solution of the delay of water shortage in System dynamics modeling for water management Mao Jianhua,Yuan Ruhua

274

061-0711

Research on the factors influencing the accuracy of of military equipment Zhang Jing,Yang Yong-wei,Xu Qing-feng

278

062-0994

Application of SPC Technology in compressor manufacture process Cui Jingwei,Ye xuming

282

063-1023

Optimization of Energy Saving in Design Process of Pump Station Wang Zhaohan ,Xuan Changguo,FU Qiang

286

4

under Zero-Failure

simulation of the transportability

243

064-1071

Visualization Analysis of International ASCM Study YIN Lichun ,Yang Chaoyun

289

Logistics Engineering and Supply Chain Management 065-0039

A Parking Lot Site Selection Model Based on the Method of Exhaustion Gangcheng Cao ,Yangfan Li

293

066-0137

Research on Express Enterprise Distribution Model Considering the Time Satisfaction Degree Zhao Hong-qing, Yang-bin

298

067-0519

Study on “Land Port” and regional logistics hub construction——Empirical study on Shenzhen “Land Port” Liunian

303

068-0525

The Process Model of Green Supply Chain Management for Chinese Automobile Manufacturing Industry——Take Company W for Example Liu Lu

313

069-0585

Research on Financial Supply Chain from View of Stability ZHOU Xiaolu,XIE Ruhe

317

070-0670

Traffic Congestion Charge Estimating Model Shanshan Chen ,Zefeng Tao

321

071-0760

Research on Strategies of Logistic Operations Based on Transport Service MaFeiXiong

325

072-0938

On Value-added Services Designed for Third-party Logistics Enterprises in China Hu Mingming,Xu Shu

328

073-1022

Loose Constraint Transportation Problems and Its Convertibility Method Wan Baocheng,Wang Tiane

332

074-1044

ON OPTIMIZED LOGISTICS AND DISTRIBUTION PATH MODEL BASED ON THE ERP PLATFORM Ningjie Liu,Tian Qi,Yu Chen

335

075-0992

An Important Source of Corporate Value: Supply Chain Management SUI Min,ZHAO Xueqiang

339

076-0998

RS-QF Combined Contract Coordinate Three-Level Supply Chain DeQiang Zhong ,XiuLi Li

343

077-0625

An Application of Random Effects Panel Logit Model on Location Choices: Evidence from Value Chain of Automobile TNCs in China Shanshan Liu ,Zedong Fu ,Qian Wang

348

Innovative Engineering and Strategic Management 078-0202

Inter-industry Mergers & Acquisition、spillovers and firm innovation Renzhong Zhou

354

079-0632

The applied research of process innovation management in manufacturing enterprises

359

5

ChengTian 080-0253

Research on Knowledge Innovation Path of High-Tech Industrial Cluster Based on Network Organization Structure LUO Fuzhou，ZHAO Peng,

364

081-0649

Research on Formation Mechanism of Agricultural S&T Innovation Capability in Beijing Hu Baogui,Fang Hui,Deng Rong

368

082-0859

Study on Photovoltaic Enterprise Technology Innovation Strategy Based on Evolutionary Game Geng Hejiang

376

083-0926

Research on Emerging Mechanism of Dynamic Fit- Effect about Organizational Innovation and Technological Innovation in Enterprise Mei-li Zhang,Chun-sheng Shi

383

084-0999

Research on the effect of technological innovation on industry vertical specialization---an empirical analysis of China’s 22 industries based on panel data model LiWeili,DongGuangmao,ZhangXiaotang

388

085-0557

The researches on Enterprise’s Strategic Cost Management Chen Fang

392

086-0564

Study on influence of different research fund-raising channels on China's high-tech industrial technological innovation efficiency Duan xiaohua , Yin zhongmin

396

087-0185

Customer Value Reseach based on Integrated Dependent Functions Li Xiaomei ,Yang Chunyan,Li Weihua

400

088-0459

Financing channels for small and medium-sized enterprises—— based on the third party payment solutions Nie Zhiping,Luo Ming

405

089-0397

The Impact of Top Management Team Attention on Diversification Strategy of Firms Jianzu Wu,Ying Zhao

409

090-0611

Internationalization of family SMEs: the impact of ownership, governance, and top management team GE MEI

414

091-0758

The Symbiotic and Interactive Relationship Between Stakeholder Management and Working Capital Management XI Longsheng

418

092-0795

The dynamic evolution of competitive advantage Ming Chen ,Cong Kuang ,Shenglei Pi

425

093-0908

A RESEARCH ABOUT THE DIVIDEND POLICY OF THE LISTED COMPANY Xu Fengfu, Chi Mingyun

429

6

094-0977

Empirical Study on the Relationship between Organizational Commitment and Turnover Intention of Middle Level Managers in Sino-foreign Joint Ventures in Dalian Nanshun-Jin, Luning-Chen, Yunpeng-Ding

432

095-0997

Study of the Financial Management Pattern for Business Conglomerates under the Informationization Environment CAI Yonghong

437

096-1046

The Study on the Influence of Corporate Governance Structure of Listed Companies to Quality of Internal Control in China Hu Huaxia,Guo Chunfei

446

097-0792

An Empirical Research On The Factors Of Development Of Noninterest Activities Of China’s Joint-equity Commercial Banks Sun Xiufeng ,Cong Jinping

451

098-1061

A Study on the Time-lag Effect of Competitive Strategy on the Enterprise Performance LEI Hui,OUYANG Liping

456

099-0720

Study on supplier alliance’s investment behavior in collaboration R&D with R&D spillovers Xiong lin ,Lu ruoyu

461

100-0527

Study on Green-construction Objectives Integrated Management of Large-scale Project Based on FA ZHOU Xiaojun

466

101-0423

Integrating Low Carbon Management and Value Chain Strategies Zhang Caixia

470

102-0489

Research on transferable mechanism of reducing energy consumption Task Nong zhuoen ,Wangling,Chen Yuhang

474

Socio-economic Systems and Its Management 103-0332

Empirical study on the coordinated development of energy-economy-environment in Henan province Xiongyi Li,Jingmin Xue

478

104-0810

Beijing Industry’s changing energy intensity trend:A decomposition analysis Qin Yang,Yongke Yuan

485

105-0864

Assessing the Yong Li

492

106-0418

The sewage system arrangement based on Reducing transaction costs---the role of government and the boundary Liu Ningjie ,Chen Yuhang ,Wei jiajia

498

107-0456

Empirical Study of the Relationship between Engergy Prices,Inflation and Economic Growth Shang Xiaoqian

503

Financial Support System for SME

7

108-0825

Further Discussion of the Relationship between Environmental Pollution and Economic Growth Yanping Yu,Min Yang,Zhengming Qian

507

109-0647

Thinking of Energy before Money EROI of a biodiesel project in China Yan Hu, Lianyong Feng,Chao Qi

512

110-0904

Resource Curse and Low-Carbon Economy Liu Jing,Niu Xiaozi

516

111-0550

Government Consumption and Private Consumption: Keynesian effects and NonKeynesian effects Dai Yingjie,Deng Mengshi ,Zhang Hongbo

520

112-0600

GVC-drive Industrial Upgrading Effect: A Case of China’s Industrial Sector CUI Huanjin

526

113-0664

The Study of Regional Industrial Capital Drift Based on the Stochastic Model DU Wen-zhong,TANG Sheng-da

530

114-0727

The Symbiotic Relationship between Producer services and Equipment Manufacturing Industry based on Coupling Degree: Evidence from Chongqing Liu Junyue,Li Junfeng, Zhong Sheng

534

115-0802

Applying Bayesian Network Approach to Scenario Analysis of Economic Policy: A case study on the High-tech Zone in China Liu Xiao ,Li Yuanyuan

539

116-0781

International Comparison of Reverse Technological Spillover Effect of China’s Outward Direct Investment: Based on Nine Economies Yi Qiu ,Jian-jun Wu ,You Wu

545

117-0953

A system dynamics modeling approach for Corporate Profit with Product reliability Chang Wenbing ,Jin Jing ,Zhou Shenghan

549

118-0974

Analysis on Influence of Financial Constraints on Enterprise's Investment --Empirical Analysis of Listed Companies in Manufacturing Industry GUO Jianqiang,WANG Huan,ZHAO Sicong

553

119-1012

The Research for a Hybrid Contract with Return Policies and Quantity Discount Zhao Lin ,Shi Kuiran

558

120-0918

The Empirical Research of the Relationships between the Development of Insurance Industry and Economic Growth in China HAN Chun-lei,WANG Xin-jun

563

121-0347

Empirical Analysis of the New Value of Patent Assets: Tax Benefit Value and Financial and Economic Policies Support Value--Taking Chinese Hi-tech Enterprises as an Example Ji Yicheng,Liu Yunhua, Hu Zhuojuan

569

122-0353

Research of factors affecting individual donation intention based on ELM Lanying Du,Qiongying Lu,Ling Qian

573

8

123-1211

Credit Spreads and Business Cycle Ran Zhang , Cheng Liu , Yujie Wu

578

124-0693

Discussion on the Application and Construction of Data Center for the Public Management Liu Renbao,Zou Jingxia

582

125-0924

Formation and Evolution of Dissipative Structure of Higher Education Industry System Zhang Fusong,Diao Zhaofeng

586

Decision-making Technology and Its Applications 126-0226

The Performance Evaluation of Innovation Methods in Enterprise Based on DEA PI Chenggong,HOU guangming

591

127-0227

The Research of Community Partition Based on Motif Modularity and Effectiveness Evaluation Hua Han ,Wanlu Liu

598

128-0238

A Empirical Analysis on Performance Evaluation of Science and Technology Innovation Based on DEA Method Li Chengju

602

129-0281

Social Regulation Performance in China:Evaluation and Evolution Li Zhen

607

130-0310

Dynamic Stochastic Multi-criteria Decision Making Method Based on Prospect Theory and Conjoint Analysis Jun-hua Hu, Peng Chen, Liu Yang

612

131-0313

The Impact of Total Rewards on Animation Employee’s Engagement Huang Zhi-jian,Ning Tian-shu

620

132-0335

Research of Chinese Region Sci-tech Output Performance Comprehensive Evaluation Qingfeng Wang,,Jingmin Xue

626

133-0349

Analysis on the Income Satisfaction of Farmers Based on Decision Tree--Take Hebei Province As an Example Li Chunlin,Liang Yan

630

134-0420

The Airfield Ground Support Equipment Renewal Strategy Based on Multiple Attribute Decision-making Zhang Tao,Xue Zhengyu,Xu Yunyun

635

135-0421

The Optimum Tactics of Rapid Repairing Airfield Based on Multiple Attribute Group Decision-making Xue Zhengyu,Zhang Tao,Cheng Yanrong

639

136-0514

Application and Research of the strategic map in the performance evaluation of the vocational colleges Ma Zhongliang ,Du Gang

643

9

137-0538

Study on the Appraisal the Influence of Commercial Real Estate Projects Location to the Project Competitiveness ZhanShe Yang,JinLu Niu

650

138-0591

The score test of non-inferiority for relative risk in stratified matched-pair studies Zuo Yan-fang,Zhang Bo

655

139-0613

The evaluation of post-supporting policiesfor resettlement of large and middle reservoirs based on RAGA-based projection pursuit method ZhangLi ,YaoKai,Wen Jiang ,GaoXia

659

140-0633

Evaluation Index System Based On The Technological Innovation Of Large Enterprise Groups Of The External Governance Hong ZHU,Jun-qing WU

664

141-0639

Research on the Selection and Evaluation of Chain Enterprises in the Eco-industrial Chain Network Li Ji-Hong ,Zhao Tao

670

142-0767

Accessing patent values in patent infringement lawsuits: a case of Chinese study Qin Xi ,Wang Guangqiu,Yang Xinjun , Tu Kai

675

143-0791

The Application of Grey superior analysis in Evaluating the Impact of Chemical Compositions to Sensory Quality of Cigarette Li Li, Dong-liang Li, Guang-lin Feng

679

144-1015

The Estimation on the Innovation Performance of Manufacture of Medicines of China Based on the DEA-Benchmarking Model Chong ZHANG,Qinliang TAN

684

145-1017

Complex System Modeling for Coal Demand in Electricity Industry TAN Ling-ling

690

146-1033

Donation, Subsidy and Demand for Catastrophe Insurance Chong ZHANG Qinliang TAN

696

147-1035

Effectiveness Evaluation of Algal Blooms Emergency Treatment Based on Profit Function Theory Wang Xiaoyi, Sheng Lu, Xu Jiping, Xu Xin

699

148-1040

Study on Coal-mine Safety Management Evaluation Based on Artificial Neural Network Zhang Xuemu, Yao Qingguo, Zhang Lizhu

703

149-0906

PROBLEMS AND IMPROVEMENTS FOR THE METHODS OF BRAND VALUATION Chi Mingyun,Fengfu Xu

707

150-0934

Game operating platform’s pricing model and the influencing factors of price - based on the bilateral Market Perspective Na Wang

710

10

151-0218

Definition of Desert Tourism Stakeholders and Development of Decision-making Mechanism ——Take Ningxia Shapotou Scenic for Example LIU Haiyang

715

152-0966

A Model of Optimal Level of Grain Backup Reserve and the Estimation of China FAN Ming；DONG Fang,；AI Jinpeng

719

153-0552

Analyzing Functions of the Influence in Decision by Ballot Using Statistical Methods Duan Wenxi

724

154-0375

Bimatrix Emotional Game Model and Evolutionary Analysis under Non-Expected Utility--Taking for example thief and guard game Guoqiang Xiong , Xi Liu

728

155-0636

A simple algorithm in GMC theory Jia-Lin Wei ,Jian-Feng Yang

732

156-0068

Heavy metal pollution of city surface soil analysis model Liu Wen-bo,Lu Lai-Jun

736

157-0754

The Range Determination kof Cpk in by the Control Charts SUN XiaoSu, NIU JinHu

739

158-0870

The Application of Secure Two-Party Computation in Collaborative Filtering Fei Liang,Hongwei Liu

744

159-0883

The Method of Cost Management in Construction Engineering Project based on Pareto Diagram Analysis Yi Anhai,Xia Weihua

748

160-1011

GIS Technology for Planning Scheme on farmland Returned to Forestland in the Canyon Area XU Xinhui,SONG Qiaoying, FU Kaidao

752

161-0962

TOPSIS Evaluation on Interprovincial Economic Efficiency of Carbon Emission Based on Method of Giving OWA Weights Wang Xuhui,Zhou Jian

756

162-0819

ALM Model using Hierarchical Stochastic Programming GUO Yin , REN Ruoen

761

163-0075

The Application of Generalized Linear Model in Interaction Effect Analysis in Clinical Trials of New Drugs of Traditional Chinese Medicine Wang Jing, Hu Jingqing

766

164-0070

Evaluation on Quality and Reliability Duan Lin-jie,Hu Yan-guang

770

165-1006

The application of ABC Method and adaptive hybrid genetic algorithm in storage area layout CHEN Rong,,LI Chaoqun

775

166-0090

Analysis of Principal Component Cluster Analysis under Extreme Situations

779

11

Information System

Jianping Zhu ,Deqing Wang,Wanchuang Zhu 167-0311

A characterization-based test for the elliptically symmetric distribution SU Yan , GUO Lihong

783

168-0586

Flood frequency analysis and calculation of the Bayesian model and parameters Based on the Pareto distribution Li Xierui ,Zhang Lijie

787

169-0588

Exponentially Weighted Moving Average Control Charts Using Ranked Set Sampling with Errors in Ranking H. A. Muttlak

792

170-0661

Estimation of three-parameter weibull distribution based on censored data Panduan An,Xiaobing Ma,Tingting Wang,Yu Zhao

800

171-0019

The Application of Moran’s I and Neural Network in Evaluating Soil Pollution ZhangHaoyang

804

172-1003

Twice Maximum Likelihood Estimation for Step-stress Accelerated Life Test in the Exponential Distribution Based Type II Censoring Jiang Hui,Liu Ruiyuan

809

173-1004

Application of BP Neural Network in Diseases Diagnosis YUAN Yingying,LIU Hongmei

813

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12

Author Index NAME AI Jinpeng Baiyi Zhang Baiyi Zhang BIAN Pingyong Bo Fu CAI Yonghong Cao Zhan Cao Zhonghong Chang Wenbing Chao Qi Chen Fang Chen Guohua Chen Hua CHEN Li-ping CHEN Rong Chen Yuhang Chen Yuhang Cheng Liu Cheng Yanrong ChengTian Chi Mingyun Chi Mingyun Chih-Ping Chiang Chong ZHANG Chong ZHANG Chun-sheng Shi Chunwei Wang Chunyang PANG Cong Jinping Cong Kuang CUI Huanjin Cui Jingwei Cui Xia Dai Ying Dai Yingjie Daoping Chen Deng Mengshi Deng Rong DeQiang Zhong Deqing Wang Diao Zhaofeng

PAGE 719 55 61 239 108 437 27 87 549 512 392 42 30 19 775 498 474 578 639 359 429 707 219 684 696 383 120 162 451 425 526 282 12 252 520 100 520 368 343 779 586

NAME Ding Yuan-Yao DONG Fang Dong Qiuxian DongGuangmao Dong-liang Li Dongmei Li Dongsheng Li Dou Zhi Du Gang DU Wen-zhong Duan Lin-jie Duan Wenxi Duan xiaohua FAN Ming Fang Hui Fei Liang Fengfu Xu FU Kaidao FU Qiang Gangcheng Cao GaoXia GE MEI Geng Hejiang Geng Peng Guang-lin Feng Guo Chunfei GUO Jianqiang GUO Lihong GUO Xianying Guo Yanting GUO Yin Guohua Zhang Guoqiang Xiong H. A. Muttlak Haiying Zou HAN Chun-lei Hang Chen He Yiqing HeDongjin Hong Yan Hong ZHU

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NAME Hongmei Chen Hongwei Liu HOU guangming Hou Xueliang Hu Baogui Hu Huaxia Hu Jingqing Hu Mingming HU Yanguang Hu Yanguang Hu Yan-guang Hu Yan-guang Hu Zhuojuan Hua Han HUANG Yujuan Huang Zhi-jian Jaxing Bao Ji Yicheng Ji Zhirong Jia-Lin Wei Jian-Feng Yang Jiang Hui Jian-jun Wu Jianping Zhu Jianzu Wu Jin Jing Jingmin Xue Jingmin Xue JinLu Niu Jiping YANG Ji-yu Lai Jun Yu Jun-hua Hu Jun-qing WU Kang Yixue Lanying Du LEI Hui Lei Liu Li Chengju Li Jing LI Chaoqun LI Chen Li Chunlin

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NAME MA Mingwei Ma Zhongliang MaFeiXiong Mao Jianhua Mei-li Zhang Min Yang Ming Chen Na Li Na Wang Nanshun-Jin Nie Zhiping Ning Tian-shu Ningjie Liu NIU JinHu Niu Xiaozi Nong zhuoen Ouyang Bin OUYANG Liping Panduan An Pei HU Peng Chen PI Chenggong Qian Wang QIAO Cui Qin Xi Qin Yang Qingfeng Wang Qingsong Li Qingsong Li Qinliang TAN Qinliang TAN Qiongying Lu Qunying Zhang Ran Zhang Ran Zhang REN Ruoen Renzhong Zhou Shang Xiaoqian Shanshan Chen Shanshan Liu Shaofang Ding Shen Xiaoli Sheng Lu

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NAME Shenglei Pi Shi Kuiran SHI Yongkui Shushan Li Shushan Li SONG Jiali SONG Qiaoying Song-Tao Qin Su Weidong SU Yan SUI Min Sun Meng-Jiao SUN XiaoSu Sun Xiufeng AN Ling-ling Tang Liang TANG Sheng-da Tian Qi Tian Tian Tingting Wang Tu Kai Wan Baocheng Wanchuang Zhu WANG Fei Wang Guangqiu WANG Heng-shan Wang Honghai WANG Huan Wang Jing Wang Jining Wang Ling-zhi Wang Tiane Wang Xiaopei Wang Xiaoyi WANG Xin-jun Wang Xuhui Wang Zhaohan Wangling Wanlu Liu Wei jiajia Wen Jiang Wu Jing Wu Xiao Ling

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NAME Xi Liu XI Longsheng Xia Weihua Xia Zheng Xiao Gan Xiaobing Ma Xiaoling Song Xiaoxuan CHEN Xiaoyan LI XIE Ruhe Xiong lin Xiongyi Li XiuLi Li Xu Dongyang Xu Fengfu Xu Jiping Xu Qing-feng Xu Shu Xu Xin XU Xinhui Xu Yunyun Xuan Changguo Xudong Sun Xue Zhengyu Xue Zhengyu Yan Hu Yan Zhang Yang Chaoyun Yang Chunyan Yang Li Yang Xiaoying Yang Xinjun Yang Yi Yang Yong-wei Yang-bin Yangfan Li Yanping Yu Yao Qingguo YaoKai Ye xuming Yi Anhai Yi Dangxiang Yi Qiu

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Portfolio Selection Based on MSF Model Ding Yuan-Yao, Yu Wen-Zhen Faculty of Business, Ningbo University, Ningbo 315211, China [email protected]

the optimal or efficient portflios are given and discussed when the interest rates of borrowing and lending are equal. In Section II, the MSF (modified safety-first) model with riskless borrowing or lending is set up. In Section III, we discuss the MSF model and provide the optimal safety-first strategy in explicit mathematical formula. In Section IV, we give a discussion on the safety-first efficient frontier and compare it with that of MV model. Section V gives a summarization.

Abstract—This paper puts forward a modified safety-first model with equal interest rates of borrowing and lending. The MSF model is an improvement or a combination of the three kinds of classical safety-first models and is better adaptive to management of investment for social security fund. Under normally assumptions, the necessary and sufficient conditions for the MSF model to exist optimal solutions and the corresponding optimal portfolios are given in explicit formula. Finally, comparision between the MSF model and the MV model is discussed.

II.

Keywords- Portfolio Strategy; Safety-First; Efficient Frontier; Social Security Fund; Risk-free Asset; MSF Model

I.

MSF MODEL WITH EQUAL INTEREST RATES OF BORROWING AND LENDING

A. Assumptions Assumption 1 (of capital market). Assume the capital market contains n risky assets Si ( i = 1," , n ) and one riskyfree asset S0 . Short-sell is allowed. There are no taxes and transaction costs. And all the assets can be divided into parcels of any sizes. Assumption 2 (of investment period). Assume an investor want to allocate a fixed amount of money to the assets in the capital market during a single period. As soon as the decision G T of an allocation strategy ω = (ω0 , ω1 , ω2 ," , ωn ) is made at

INTRODUCTION

The idea of safety first was first proposed by Roy (1952) [1]. According to his idea, individuals consider outcomes below a certain value as a “disaster”. He argues that when making decisions about uncertain prospects, the individuals’ first consideration is to minimize the probability of reaching disaster. Since then, the idea of safety first started to appear in various strands of the literature. Telser (1955) [2] gives the first extension and application of the safety first idea and investigates the economic implication on hedging. Kataoka (1963) [3] put forward a safety-first rule which seeks to maximize the acceptable subsistence level of terminal wealth or return subject to a bound on the probability of ruin. Pyle and Turnovsky (1970) [4] study the relationship between Roy’s safety first criteria and standard mean-variance optimization. They find, in the absence of a riskless asset, that a correspondence can be established between the safety first criterion and expected utility maximization when that maximization results in concave indifference curves in the mean-standard deviation space. In addition, Levy and Sarnat (1972) [5] also examine the comparison between expected utility and Roy’s safety first principle. Arzac and Bawa (1977) [6]extend Telser's model by maximizing an objective function defined over expected return and the probability of ruin. Li, Chan and Ng (1998) [7] extend Roy’s safety-first optimization to multi-period case. Chiu and Li [2009] [8] extend Roy’s safety-first principle to the asset-liability management problem. Ding and Zhang (2009) study the properties of Kataoka’s safety-first efficient portfolio frontier [9] and extend Kataoka’s safety-first model to that with mean constraint [10]. Li, Yao and Li (2010) [11] examine and compare the behavior patterns of three popular strategies under Roy’s safety-first rule. Nico Singer (2010) [12] extend Telser’s safety-first model to assumption of random target.

the initial moment, the investor will hold the portfolio G T ω = (ω0 , ω1 , ω2 ," , ωn ) unchanged until the terminal moment. Here ωi ( i = 0,1," , n ) represents the weight on asset Si ( i = 0,1," , n ). Assumption 3 (of return characteristics). Assume the riskfree asset S0 has a fixed return rate r0 and the risky asset Si ( i = 1," , n ) has a continuous stochastic return rate Ri ( i = 1," , n ) during the investment period. And the stochastic "，Rn ) is elliptically distributed with vector R = ( R1，R2， T

infinite expectation vector r = ( r1，r2， "，rn ) and positively T

definite variance-covariance matrix Σ . The elements of vector

r are not the same and r − r0 e ≥ 0 , where e = (1,1," ,1)T is an n-vector of all ones. Assumption 4 (of investor’s preference). Assume the investor is rational and risk averse. (S)He seeks a higher expected return and a higher minimal acceptable actual return, and dislikes the downside risk or probability of default as well. The investor of this preference is referred to as a “safety-first” investor. Obviously, assumptions of 1 to 3 are the same as that of Markowitz’s Modern Portfolio Theory. Assumption 4 is

In this paper, we shall put forward a modified safety-first model which combines the classical three forms of safety-first model to be an integrated form. Under normally assumptions, This material is based upon work funded by Zhejiang Provincial Natural Science Foundation of China under Grant No. LY12G01006

___________________________________ 978-1-4673-2612-4/12/$31.00 ©2012 IEEE

65

Obviously, while m ≤ r0 , holing none of the risky assets will be an optimal strategy. So we shall assume m > r0 for this model, which makes the set of feasible solutions of model (2) do not inclue ω = 0 and ω0 = 1 .

different from that of the MPT at that an investor in this paper dislikes the ruin probability in stead of the volatility of return. Assumption 4 is also a combination of the “safety-first” assumptions in works of Roy’s, Telser’s and Kataoka’s, it is an extension of the classical safety-first rules in background of investment for social security.

By using the properties of elliptical distributions, the constraint of risk controlling prob ( R p < Rmin ) ≤ α can be

B. Set-up of the MSF Model Under conditions of Assumption 1 and Assumption 2, G T any feasible investment strategy ω = (ω0 , ω1 , ω2 ," , ωn )

simplified as Rmin ≤ rp + zα σ p , where zα is referred to as degree of probability risk which dispends only on α and the function of density generator. And while α > 0.5 it has zα > 0 , while α = 0.5 it has zα = 0 , and while 0 < α < 0.5 it has zα < 0 . For the detail about zα , please refer to Ding and Zhang (2009a, 2009b) or Engles (2004) [13]. Thus, for most of investors with 0 < α < 0.5 , safety-first model (2) can be simplified to be the following convex nonlinear programming model:

should satisfy the constraint of the capital amount:

eT ω + ω0 = 1 where ω = (ω1 , ω2 ," , ωn )

T

. According to

Assumption 3, the return vector R of risky asset is elliptically distributed with expectation vector r and covariance matrix Σ . Noting that the real return of such an investment at the terminal time of the period is R p = ω0 r0 + ω T R , it follows that rp = E ( R p ) = ω0 r0 + ω T r and

σ = var ( R p ) = ω Σω are the expected return and variance

max

ω0 r0 + ω T r + zα ω T Σω

respectively. If Rmin is the minimal target (or acceptable) actual return level that the decision-maker expects to have and it might depend on the decision-maker 's tolerance level to risk α , 0 < α < 1 . For a safety-first investor under Assumption 4, the following MSF model might give a more suitable description on his/her behavior: max Rmin , max E ( Rp )

⎧ s.t. ⎨ ⎩

ω0 r0 + ω T r ≥ m ω0 + ω T e = 1

2 p

T

ω0 ,ω

ω0 ,ω

III.

(1) ⎧⎪ P ( R p < Rmin ) ≤ α s.t. ⎨ eT ω + ω 0 = 1 ⎪⎩ Obviously, model (1) integrates the Telser’s safety-first model and the Kataoka’s safety-first model. Given two feasible portfolios of model (1) with the same downside probability of risk: prob ( R p < Rα ) = α , if they have equal

The Lagrangian function L (ω , λ , γ ) of model (3) is as follows: L (ω0 , ω , λ , β ) = ω0 r0 + ω T r + zα ω T Σω + λ (ω0 + ω T e -1) + β (ω0 r0 + ω T r - m )

expected return, then an α -safety -first investor will prefer that one with higher minimal acceptable acturn return; if they have equal minimal acceptable acturn return, then an α -safety -first investor will prefer that one with higher expected return. The set of all the optimal solutions to model (1) will form an α -safety -first efficient frontier. All the α -safety -first efficient frontiers with different α will form the safety-first efficient frontier. If the investor wants to find an efficient portfolio which has an expected return no less than a given number m , the following safety-first model can be used to instead the MSF model (1).

Rmin

⎧ ⎪ s.t. ⎨ ⎪ ⎩

P (ω R < Rmin − ω0 r0 ) ≤ α

ω0 ,ω

OPTIMAL SAFETY-FIRST PORTFOLIO STRATEGY

A. Solution to Model (3) For ease to state, the following notation will be in used in the rest of this paper: a = r T Σr , b = r T Σe , c = eT Σe , d = ac − b 2 and s = a − 2br0 + cr02 . It is easy to verify that a > 0 , c > 0 , d > 0 and s > 0 .

ω0 ,ω

max

(3)

According to the theory of nolinear programming (Zangwill， 1979) [14], by solving the Kuhn-Tucker conditions (C1)-(C6), if solution

(ω , ω , λ , β ) exists then it will be the global ∗ 0

*

*

*

optimal solution of model (3).

∂L | ∗ * * * = (1 + β * )r0 + λ * = 0 ∂ω0 (ω0 ,ω ,λ , β )

(C1)

∂L Σω * | ω∗ ,ω* ,λ * , β * = zα + λ *e + (1 + β * ) r = 0 T * * ( ) 0 ∂ω ω Σω (C2)

T

(2)

ω0 r0 + ω T r ≥ m ω0 + ω T e = 1

66

∂L | ω∗ ,ω* ,λ* , β * = ω0∗ + eT ω * − 1 = 0 ) ∂λ ( 0

(C3)

∂L | ω∗ ,ω* ,λ* , β * = ω0*r0 + r T ω * − m ≥ 0 ) ∂β ( 0

(C4)

β* ≥ 0

(when r0 < m ≤ ( a − br0 ) / ( b − cr0 ) ) or to borrow the risk-

(C5)

b* (ω0*r0 + r T ω * - m ) = 0

free asset (when m > ( a − br0 ) / ( b − cr0 ) )

(C6)

with the ratio of loans to the initial capital below a scale given

by ⎡⎣ m ( b − cr0 ) − ( a − br0 ) ⎤⎦ / s , and to invest the proceeds

Theorem 1.For model (3) with m > r0 , the following results hold:

in the portfolio of risky assets given by ωˆ . If r0 > b / c , then the optimal safety first portfolio strategy is to sell short the portfolio of risky assets given by ωˆ with a propotion of

If zα > − s , then it dose not exist a global optimal solution;

ω0* − 1

If zα = − s , the it exists infinite number of global optimal solutions for any given m , and the optimal objective value * is Rmin = r0 . In special, 1) if r0 = b / c , then each of the global optimal

solution

can

be

expressed

by

ω =1 * 0

and

optimal solution can be expressed by ω = (1 − ω ) ωˆ

ω0* ≤ ⎡⎣ a − br0 − m ( b − cr0 ) ⎤⎦ / s < 1

* 0

portfolio exists if and only if zα < − s and any α -safety -first portfolio

and

r0 > b / c . Here

ωˆ = Σ −1 ( r − r0 e ) / ( b − cr0 ) .

(4)

ω = ( m − r0 ) Σ

(5)

*

−1

( r − r0e ) / s

given by

(6)

σ *p = var ( R*p ) = ( rp* − r0 ) / s

(7)

(

Hence for a given

)

α

satisfying

(8) zα < − s , the

α -safety -first efficient frontier in the spapce { rp , Rmin } of expected return and minimal acceptable acturn return (or security return level, disaster return level) is a radial line emerating from the point ( r0 , r0 ) with a slope of

if r0 ≠ b / c then

(z

( m − r0 )( b − cr0 ) / s = 1 − ⎡⎣ a − br0 − m ( b − cr0 )⎤⎦ / s which follows ω = (1 − ω ) ωˆ . *

*T

rp* = E R*p = r0ω0* + rω * = m

* Rmin = rp* + zα rp* − r0 / s

Since s = a − br0 − r0 ( b − cr0 ) , so we have if r0 = b / c

ω0* = ⎡⎣ a − br0 − m ( b − cr0 ) ⎤⎦ / s = 1 ,

* 0

( )

Optimal Safety First Portfolio Strategy.

then

(ω , ω )

equations (4) and (5), we have

Proof. Since Theorm 1 can be easily proved from the KuhnTucker conditions. So here we omitted the detailed process.

B.

*T

For an α -safety -first portfolio

given by

ω = ⎡⎣ a − br0 − m ( b − cr0 ) ⎤⎦ / s

* 0

B. Safety-First Efficient Frontier

If zα < − s , then it exists a unique global optimal solution for any given m , the corresponding optimal objective value * is Rmin = m + zα ( m − r0 ) / s , and the optimal solution can be * 0

(ω , ω ) can be expressed by equations (4) and (5).

Since when zα = − s , for any portfolio with a given expected return and minimal acceptable acturn return, we can always find another portfolio which has a higer expected return and the same minimal acceptable acturn return.

while r0 < b / c and

ω0* ≥ ⎡⎣ a − br0 − m ( b − cr0 ) ⎤⎦ / s > 1 while

SAFETY-FIRST EFFICIENT FRONTIER

A. Safety-First Efficient Portfolio From Theorem 1, we can easily find that α -safety -first

−1

*

will be going upward along with m . IV.

( r − r0 e ) with the scalar constant l satisfying to l ∈ ⎡⎣( m − r0 ) / s, +∞ ) . 2) if r0 ≠ b / c , then each of the global

ω = lΣ *

from a bank

α

)

+ s / s , which is given by equation (8). Any point

in the α -safety -first efficient frontier corresponds to an efficient portfolio strategy given by equations (4) and (5) with the expected return given by equation (6) and the standard deviation given by equation (7). Thus, in the plane of mean and security return, different investors have different safety-first efficient frontiers.

* 0

According to Theorem 1, any investor with zα ≤ − s who pursue an expected return no less than a given number m can use model (3) to find an optimal safety first portfolio strategy . If r0 = b / c , the optimal safety first portfolio strategy is to lend all the initial capital to a bank in the risk-free asset and hold a self-finacing arbitrage portfolio of the risky assets. If r0 < b / c , then the optimal safety first portfolio strategy is to lend a part of the intial capiatl to a bank in the risk-free asset

C. Comparision With M-V Model

As mentioned above, for a given α satisfying zα < − s , any α -safety -first efficient portfolio has its expected return

67

and standard deviation of the their relationship given by equation (7). It is well-known that the efficient frontier of the classical MV (mean-variance) meodel can be discribed by using equation (7) in the plane of mean and standard deviation. Therefore, in the plane of mean and standard deviation, the efficient frontier of the MSF model and that of the MV model are same straight line. However, the MSF model includes more information than the MV model does. The MV model can tell us the information of mean and standard deviation, but the MSF model can provide to us information of security return level and lower risk control level for an investor except the information of mean and deviation.

REFERENCES [1] [2] [3] [4]

[5]

V. CONCLUSIONS In this paper, we have proposed a modified safety-first model which has objectives of maximizing ruin return level and mean of return and includes riskless borrowing or lending with the same interest rate. This model can be used in the portfolio selection practice for a household or a corporation of safety fund management. Under assumptions of elliptical distribution and others the same as that in the classical meanvariance method, we provide the optimality conditions for existence of global optimal strategy and give the solution to the MSF model, we also express the safety-first efficient frontier mathematically in the plane of mean and securty return level. Finanlly, we give a simple discussion on the difference between the MSF model and the MV model. It indicates that the MSF model can provide more information than the MV model, although the efficient frontiers of the two models are same in the plane of mean and standard deviation.

[6]

[7]

[8]

[9] [10]

[11]

[12]

[13]

ACKNOWLEDGMENT Thanks for the sponsor of K.C.Wong Magna Fund in Ningbo University.

[14]

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