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MEASURING PATH DEPENDENCY

UTMS Journal of Economics. 2017;8(1):29-37

 

Journal Homepage

Journal Title: UTMS Journal of Economics

ISSN: 1857-6974 (Print); 1857-6982 (Online)

Publisher: University of Tourism and Management

Society/Institution: University of Tourism and Management

LCC Subject Category: Social Sciences: Economic theory. Demography: Economics as a science

Country of publisher: North Macedonia

Language of fulltext: English

Full-text formats available: PDF

 

AUTHORS


Peter Juhasz

Kata Varadi

Agnes Vidovics-Dancs

Janos Szaz

EDITORIAL INFORMATION

Double blind peer review

Editorial Board

Instructions for authors

Time From Submission to Publication: 10 weeks

 

Abstract | Full Text

While risk management gained popularity during the last decades even some of the basic risk types are still far out of focus. One of these is path dependency that refers to the uncertainty of how we reach a certain level of total performance over time. While decision makers are careful in accessing how their position will look like the end of certain periods, little attention is given how they will get there through the period. The uncertainty of how a process will develop across a shorter period of time is often “eliminated” by simply choosing a longer planning time interval, what makes path dependency is one of the most often overlooked business risk types. After reviewing the origin of the problem we propose and compare seven risk measures to access path. Traditional risk measures like standard deviation of sub period cash flows fail to capture this risk type. We conclude that in most cases considering the distribution of the expected cash flow effect caused by the path dependency may offer the best method, but we may need to use several measures at the same time to include all the optimisation limits of the given firm