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Articles 1 - 8 of 8
Full-Text Articles in Social and Behavioral Sciences
Different Strokes For Different Folks: Long Memory And Roughness, Shuping Shi, Jun Yu
Different Strokes For Different Folks: Long Memory And Roughness, Shuping Shi, Jun Yu
SMU Economics and Statistics Working Paper Series
The log realized volatility of financial assets is often modeled as an autoregressive fractionally integrated moving average model (ARFIMA) process, denoted by ARFIMA(p, d, q), with p = 1 and q = 0. Two conflicting results have been found in the literature regarding the dynamics. One stream shows that the data series has a long memory (i.e., the fractional parameter d > 0) with strong mean reversion (i.e., the autoregressive coefficient |α1| ≈ 0). The other stream suggests that the volatil-ity is rough (i.e., d < 0) with highly persistent dynamic (i.e., α1 → 1). To consolidate the findings, this paper first examines the finite sample properties of alternative estimation methods employed in the literature for the ARFIMA(1, d, 0) model and then applies the outperforming techniques to a wide range of financial assets. The candidate methods include two parametric maximum likeli-hood (ML) methods (the maximum time-domain modified profile likelihood (MPL) and maximum frequency-domain likelihood) and two semiparametric methods (the local Whittle method and log periodogram estimation method). The two parametric methods work well across all parameter set-tings, with the MPL method outperforming. In contrast, the two semiparametric methods have a very large upward bias for d and an equally large downward bias for α1 when α1 is close to unity. The poor performance of the semiparametric methods in the presence of a highly persistent dynamic might lead to a false conclusion of long memory. In the empirical applications, we find that the log realized volatilities of exchange rate futures over the past decade have a long memory, where the point estimate of d is between 0.4 and 0.5 and the estimate of α1 is near zero. For other finan-cial assets considered (including stock indices and industry indices), we find that they have rough volatility, with the point estimate of d being negative and the point estimates of α1 close to unity.
Efficient Bilateral Trade Via Two-Stage Mechanisms Under One-Sided Asymmetric Information, Takashi Kunimoto, Cuiling Zhang
Efficient Bilateral Trade Via Two-Stage Mechanisms Under One-Sided Asymmetric Information, Takashi Kunimoto, Cuiling Zhang
SMU Economics and Statistics Working Paper Series
This paper considers a bilateral-trade model with one-sided asymmetric information in which one agent (seller) initially owns an indivisible object and is fully informed of its value, while the other agent (buyer) intends to obtain the object whose value is unknown to himself. As Jehiel and Pauzner (2006) show that no mechanisms can generally result in efficient, voluntary bilateral trades, we aim to overturn this impossibility result by employing two-stage mechanisms (Mezzetti (2004)) in which first, the outcome (e.g., allocation of the goods) is determined, then the agents observe their own outcome-decision payoffs, and finally, transfers are made. We show …
Forecast Pooling Or Information Pooling During Crises? Midas Forecasting Of Gdp In A Small Open Economy, Hwee Kwan Chow-Tan, Daniel Han
Forecast Pooling Or Information Pooling During Crises? Midas Forecasting Of Gdp In A Small Open Economy, Hwee Kwan Chow-Tan, Daniel Han
SMU Economics and Statistics Working Paper Series
This study compares two distinct approaches, pooling forecasts from single indicator MIDAS models versus pooling information from indicators into factor MIDAS models, for short-term Singapore GDP growth forecasting with a large ragged-edge mixed frequency dataset. We investigate their relative predictive performance in a pseudo-out-of-sample forecasting exercise from 2007Q4 to 2020Q3. In the stable growth non-crisis period, no substantial difference in predictive performance is found across forecast models. We find factor MIDAS models dominate both the quarterly benchmark model and the forecast pooling strategy by wide margins in the Global Financial Crisis and the Covid-19 crisis. Reflecting the small open nature …
The Missing Middle In Product Price Distribution, Pao-Li Chang, Xin Yi, Haeyeon Yoon
The Missing Middle In Product Price Distribution, Pao-Li Chang, Xin Yi, Haeyeon Yoon
SMU Economics and Statistics Working Paper Series
The IO literature has typically studied the supply-side factors that determine the price structure of products/services competing in a market. This paper pro-poses that the demand-side demographics could play an important role in shaping the product price structure. In particular, we document a “missing middle” phe-nomenon in both the income and the product price distributions in the U.S., based on the IPUMS ACS dataset (2005–2017) and the Nielsen Retail Scanner Data (2006–2017), for a large set of goods sold in the U.S. at the national, state, or commuting-zone level. We show that the lagged population share of the middle-income class …
Latent Local-To-Unity Models, Jun Yu
Latent Local-To-Unity Models, Jun Yu
SMU Economics and Statistics Working Paper Series
This paper proposes a class of state-space models where the state equation is a local-to-unity process. The large sample theory is obtained for the least squares (LS) estimator of the autoregressive (AR) parameter in the AR representation of the model under two sets of conditions. In the first set of conditions, the error term in the observation equation is independent and identically distributed (iid), and the error term in the state equation is stationary and fractionally integrated with memory parameter H ϵ 2 (0; 1). It is shown that both the rate of convergence and the asymptotic distribution of the …
On The Decomposability Of Fractional Allocations, Shurojit Chatterji, Peng Liu
On The Decomposability Of Fractional Allocations, Shurojit Chatterji, Peng Liu
SMU Economics and Statistics Working Paper Series
A common practice in dealing with the allocation of indivisible objects is to treat them as infinitely divisible and specify a fractional allocation, which is then implemented as a lottery on integer allocations that are feasible. The question we study is whether an arbitrary fractional allocation can be decomposed as a lottery on an arbitrary set of feasible integer allocations. The main result is a characterization of decomposable fractional allocations, that is obtained by transforming the decomposability problem into a maximum flow problem. We also provide a separate necessary condition for decomposability.
Local Dominance, Emiliano Catonini, Jingyi Xue
Local Dominance, Emiliano Catonini, Jingyi Xue
SMU Economics and Statistics Working Paper Series
We define a local notion of weak dominance that speaks to the true choice problems among actions in a game tree and does not necessarily require to plan optimally for the future. A strategy is (globally) weakly dominant if and only if it prescribes a locally weakly dominant action at every decision node it reaches, and in this case local weak dominance is characterized by a (wishful-thinking) condition that requires no forward planning. From this local perspective, we identify form of contingent reasoning that are particularly natural, despite the absence of an obviously dominant strategy (Li, 2017). Following this approach, …
Global Value Chains And The Cptpp, Pao-Li Chang, Tran Bao Phuong Nguyen
Global Value Chains And The Cptpp, Pao-Li Chang, Tran Bao Phuong Nguyen
SMU Economics and Statistics Working Paper Series
The CPTPP, or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, is an example of a “mega-regional” free trade agreement, whose provisions on the rules of origin and trade facilitation can have potentially large impacts on the CPTPP-wide supply chains. In this paper, we investigate whether the CPTPP members are key upstream and downstream trade partners to each other in the global value chains. We develop formulas of bilateral upstreamness and downstreamness, based on the gross-export decomposition framework of Koopman, Wang and Wei (2014) and Borin and Mancini (2017). We demonstrate how the decomposition of gross exports can be used …