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Singapore Management University

Research Collection School Of Economics

2017

Articles 1 - 30 of 78

Full-Text Articles in Social and Behavioral Sciences

Identifying Latent Group Structures In Nonlinear Panels, Wuyi Wang, Liangjun Su Dec 2017

Identifying Latent Group Structures In Nonlinear Panels, Wuyi Wang, Liangjun Su

Research Collection School Of Economics

We propose a procedure to identify latent group structures in nonlinear panel data models where some regression coefficients are heterogeneous across groups but homogeneous within a group and the group number and membership are unknown. To identify the group structures, we consider the order statistics for the preliminary unconstrained consistent estimators of the regression coefficients and translate the problem of classification into the problem of break detection. Then we extend the sequential binary segmentation algorithm of Bai (1997) for break detection from the time series setup to the panel data framework. We demonstrate that our method is able to identify …

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Cultural Preferences In International Trade: Evidence From The Globalization Of Korean Pop Culture, Pao-Li Chang, Iona Hyojung Lee Dec 2017

Cultural Preferences In International Trade: Evidence From The Globalization Of Korean Pop Culture, Pao-Li Chang, Iona Hyojung Lee

Research Collection School Of Economics

The Korean pop culture (TVdramas and K-pop music) has grown immensely popular across the globe over thepast two decades. This paper analyzes its impacts on international trade. We compilea cross-country panel dataset of South Korea's TV show exports to over 150countries for the period of 1998{2014. These variations in exposure to Koreanpop cultures are used to identify changes in consumer preferences for Koreanmerchandise across time, countries, and products (at the HS 4-digit level).First, we find that more Korean TV show exports significantly increase Koreanexports of goods for women, while the effects are much smaller on men'smerchandise. This strongly supports the …

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Inference In Continuous Systems With Mildly Explosive Regressors, Ye Chen, Peter C. B. Phillips, Jun Yu Dec 2017

Inference In Continuous Systems With Mildly Explosive Regressors, Ye Chen, Peter C. B. Phillips, Jun Yu

Research Collection School Of Economics

New limit theory is developed for co-moving systems with explosive processes, connecting continuous and discrete time formulations. The theory uses double asymptotics with infill (as the sampling interval tends to zero) and large time span asymptotics. The limit theory explicitly involves initial conditions, allows for drift in the system, is provided for single and multiple explosive regressors, and is feasible to implement in practice. Simulations show that double asymptotics deliver a good approximation to the finite sample distribution, with both finite sample and asymptotic distributions showing sensitivity to initial conditions. The methods are implemented in the US real estate market …

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Business Time Sampling Scheme With Applications To Testing Semi-Martingale Hypothesis And Estimating Integrated Volatility, Yingjie Dong, Yiu Kuen Tse Dec 2017

Business Time Sampling Scheme With Applications To Testing Semi-Martingale Hypothesis And Estimating Integrated Volatility, Yingjie Dong, Yiu Kuen Tse

Research Collection School Of Economics

We propose a new method to implement the Business Time Sampling (BTS) scheme for high-frequency financial data. We compute a time-transformation (TT) function using the intraday integrated volatility estimated by a jump-robust method. The BTS transactions are obtained using the inverse of the TT function. Using our sampled BTS transactions, we test the semi-martingale hypothesis of the stock log-price process and estimate the daily realized volatility. Our method improves the normality approximation of the standardized business-time return distribution. Our Monte Carlo results show that the integrated volatility estimates using our proposed sampling strategy provide smaller root mean-squared error.

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Bayesian Analysis Of Bubbles In Asset Prices, Andras Fulop, Jun Yu Dec 2017

Bayesian Analysis Of Bubbles In Asset Prices, Andras Fulop, Jun Yu

Research Collection School Of Economics

We develop a new asset price model where the dynamic structure of the asset price, after the fundamental value is removed, is subject to two different regimes. One regime reflects the normal period where the asset price divided by the dividend is assumed to follow a mean-reverting process around a stochastic long run mean. This latter is allowed to account for possible smooth structural change. The second regime reflects the bubble period with explosive behavior. Stochastic switches between two regimes and non-constant probabilities of exit from the bubble regime are both allowed. A Bayesian learning approach is employed to jointly …

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Inference In Continuous Systems With Mildly Explosive Regressors, Ye Chen, Peter C. B. Phillips, Jun Yu Dec 2017

Inference In Continuous Systems With Mildly Explosive Regressors, Ye Chen, Peter C. B. Phillips, Jun Yu

Research Collection School Of Economics

New limit theory is developed for co-moving systems with explosive processes, connecting continuous and discrete time formulations. The theory uses double asymptotics with infill (as the sampling interval tends to zero) and large time span asymptotics. The limit theory explicitly involves initial conditions, allows for drift in the system, is provided for single and multiple explosive regressors, and is feasible to implement in practice. Simulations show that double asymptotics deliver a good approximation to the finite sample distribution, with both finite sample and asymptotic distributions showing sensitivity to initial conditions. The methods are implemented in the US real estate market …

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Dynamic Poverty Decomposition Analysis: An Application To The Philippines, Tomoki Fujii Dec 2017

Dynamic Poverty Decomposition Analysis: An Application To The Philippines, Tomoki Fujii

Research Collection School Of Economics

In this paper, we propose a new method of poverty decomposition. Our method remedies the shortcomings of existing methods and has some desirable properties such as time-revision consistency and subperiod additivity. It integrates the existing methods of growth-redistribution decomposition and sector based decomposition, because it allows us to decompose poverty change into growth and redistribution components for each group (e.g., regions or sectors) in the economy. We extend out method to have six components and provide empirical application to the Philippines for the period of 1985 to 2009.

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Volatility Spillovers And Linkages In Asian Stock Markets, Hwee Kwan Chow Dec 2017

Volatility Spillovers And Linkages In Asian Stock Markets, Hwee Kwan Chow

Research Collection School Of Economics

Diebold–Yilmaz spillover indexes are computed for weekly return volatilities based on daily benchmark stock indexes of the US, the UK, and 10 Asian countries. We found (i) the strengthening of overall volatility spillovers is not a temporary surge but persisted after the crisis; (ii) the susceptibility of individual Asian stock markets to inward volatility transfers is linked to its degree of openness; and (iii) the Asian bourses are becoming more important emitters of financial shocks since the crisis. Rolling regressions on volatility linkages reveal the relative dominance of the US over the Japanese and Chinese bourses, and the level of …

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Determining The Number Of Groups In Latent Panel Structures With An Application To Income And Democracy, Xun Lu, Liangjun Su Nov 2017

Determining The Number Of Groups In Latent Panel Structures With An Application To Income And Democracy, Xun Lu, Liangjun Su

Research Collection School Of Economics

We consider a latent group panel structure as recently studied by Su, Shi, and Phillips (2014), where the number of groups is unknown and has to be determined empirically. We propose a testing procedure to determine the number of roups. Our test is a residualbased LM-type test. We show that after being appropriately standardized, our test is asymptotically normally distributed under the null hypothesis of a given number of groups and has power to detect deviations from the null. Monte Carlo simulations show that our test performs remarkably well in finite samples. We apply our method to study the effect …

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Urban Rail Transit Ppps: Lessons From East Asian Cities, Zheng Chang, Sock Yong Phang Nov 2017

Urban Rail Transit Ppps: Lessons From East Asian Cities, Zheng Chang, Sock Yong Phang

Research Collection School Of Economics

Private sector participation in urban rail transit has proliferated in the past two decades. The large metropolises of East Asia have had decades of experience with private sector participation in the provision of heavy metro services. The design of these public–private partnerships (PPP) are varied. The diverse experiences of Tokyo, Hong Kong, Singapore and Beijing contain valuable lessons for other cities. Using a case study approach, this paper discusses three features of urban rail transitdevelopments in the context of East Asian cities, viz., farebox recovery, land value capture mechanisms, and vertical structure of the industry. Super vertical integration between rail …

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Volatility Spillovers And Linkages In Asian Stock Markets, Hwee Kwan Chow-Tan Nov 2017

Volatility Spillovers And Linkages In Asian Stock Markets, Hwee Kwan Chow-Tan

Research Collection School Of Economics

Diebold-Yilmaz spilloverindexes are computed for weekly return volatilities based on daily benchmarkstock indexes of US, UK and ten Asian countries. We found (i) the strengthening ofoverall volatility spillovers is not a temporary surge but persisted after thecrisis; (ii) the susceptibility ofindividual Asian stock markets to inward volatility transfers is linked to itsdegree of openness; and (iii) the Asian bourses are becoming more importantemitters of financial shocks since the crisis. Rolling regressions on volatilitylinkages reveal the relative dominance of the US over the Japanese and Chinesebourses, and the level of influence on Asian stock markets from the Chinesebourse has risen to …

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The Weekend Effect In Television Viewership And Prime-Time Scheduling, Jung Won Yeo Nov 2017

The Weekend Effect In Television Viewership And Prime-Time Scheduling, Jung Won Yeo

Research Collection School Of Economics

The observed drops in the ratings of television programs on Fridays and Saturdays are likely a result of two factors: intrinsic contraction in demand for television watching and endogenous scheduling. I decompose the observed weekend effect into the effects from these two factors. To this end, I estimate a viewer choice model that uses aggregate Nielsen ratings data for prime-time network television shows over 11 years. The long span of the data enables me to control for television series qualities. The estimation results reveal that the estimated weekend effect is dampened as the empirical model accounts for variation in the …

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The Role Of Macroeconomic, Policy, And Forecaster Uncertainty In Forecast Dispersion, You Li, Anthony S. Tay Nov 2017

The Role Of Macroeconomic, Policy, And Forecaster Uncertainty In Forecast Dispersion, You Li, Anthony S. Tay

Research Collection School Of Economics

We explore the role of uncertainty in explaining dispersion in professional forecasters’ density forecasts of real output growth and inflation. We consider three separate notions of uncertainty: general macroeconomic uncertainty (the fact that macroeconomic variables are easier to forecast at some times than at others), policy uncertainty, and forecaster uncertainty. We find that dispersion in individual density forecasts is related to overall macroeconomic uncertainty and policy uncertainty, while forecaster uncertainty (which we define as the average in the uncertainty expressed by individual forecasters) appears to have little role in forecast dispersion.

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Does "America First" Help America? The Impact Of Country Image On Exports And Welfare, Pao-Li Chang, Tomoki Fujii, Wei Jin Nov 2017

Does "America First" Help America? The Impact Of Country Image On Exports And Welfare, Pao-Li Chang, Tomoki Fujii, Wei Jin

Research Collection School Of Economics

This paper estimates the effects of bilateral and time-varying preference bias on trade flows and welfare. We use a unique dataset from the BBC World Opinion Poll that surveys (annually during 2005-2017 with some gaps) the populations from a wide array of countries on their views of whether an evaluated country is having a mainly positive or negative influence in the world. We identify the effects on bilateral preference parameters due to shifts in these country image perceptions, and quantify their general equilibrium effects on bilateral exports and welfare (each time for an evaluated exporting country, assuming that the exporting …

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Estimating Finite-Horizon Life-Cycle Models: A Quasi-Bayesian Approach, Xiaobin Liu Nov 2017

Estimating Finite-Horizon Life-Cycle Models: A Quasi-Bayesian Approach, Xiaobin Liu

Research Collection School Of Economics

This paper proposes a quasi-Bayesian approach for structural parameters in finite-horizon life-cycle models. This approach circumvents the numerical evaluation of the gradient of the objective function and alleviates the local optimum problem. The asymptotic normality of the estimators with and without approximation errors is derived. The proposed estimators reach the semiparametric eciency bound in the general methods of moment (GMM) framework. Both the estimators and the corresponding asymptotic covariance are readily computable. The estimation procedure is easy to parallel so that the graphic processing unit (GPU) can be used to enhance the computational speed. The estimation procedure is illustrated using …

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Random Coefficient Continuous Systems: Testing For Extreme Sample Path Behaviour, Yubo Tao, Peter C. B. Phillips, Jun Yu Nov 2017

Random Coefficient Continuous Systems: Testing For Extreme Sample Path Behaviour, Yubo Tao, Peter C. B. Phillips, Jun Yu

Research Collection School Of Economics

This paper studies a continuous time dynamic system with a random persistence parameter. The exact discrete time representation is obtained and related to several discrete time random coefficient models currently in the literature. The model distinguishes various forms of unstable and explosive behaviour according to specific regions of the parameter space that open up the potential for testing these forms of extreme behaviour. A two-stage approach that employs realized volatility is proposed for the continuous system estimation, asymptotic theory is developed, and test statistics to identify the different forms of extreme sample path behaviour are proposed. Simulations show that the …

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The Long-Term Health Effects Of Fetal Malnutrition: Evidence From The 1959-1961 China Great Leap Forward Famine, Seonghoon Kim, Belton Fleisher, Jessica Ya Sun Oct 2017

The Long-Term Health Effects Of Fetal Malnutrition: Evidence From The 1959-1961 China Great Leap Forward Famine, Seonghoon Kim, Belton Fleisher, Jessica Ya Sun

Research Collection School Of Economics

We report evidence of long-term adverse health impacts of fetal malnutrition exposure of middle-aged survivors of the 1959-1961 China Famine using data from the China Health and Retirement Longitudinal Study. We find that fetal exposure to malnutrition has large and long-lasting impacts on both physical health and cognitive abilities, including the risks of suffering a stroke, physical disabilities in speech, walking and vision, and measures of mental acuity even half a century after the tragic event. Our findings imply that policies and programs that improve the nutritional status of pregnant women yield benefits on the health of a fetus that …

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Strong Consistency Of Spectral Clustering For Stochastic Block Models, Liangjun Su, Wuyi Wang, Yichong Zhang Oct 2017

Strong Consistency Of Spectral Clustering For Stochastic Block Models, Liangjun Su, Wuyi Wang, Yichong Zhang

Research Collection School Of Economics

In this paper we prove the strong consistency of several methods based on thespectral clustering techniques that are widely used to study the communitydetection problem in stochastic block models (SBMs). We show that under someweak conditions on the minimal degree, the number of communities, and theeigenvalues of the probability block matrix, the K-means algorithm applied tothe Eigenvectors of the graph Laplacian associated with its first few largesteigenvalues can classify all individuals into the true community uniformlycorrectly almost surely. Extensions to both regularized spectral clustering anddegree-corrected SBMs are also considered. We illustrate the performance ofdifferent methods on simulated networks.

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Random Mechanism Design On Multidimensional Domains, Shurojit Chatterji, Huaxia Zeng Oct 2017

Random Mechanism Design On Multidimensional Domains, Shurojit Chatterji, Huaxia Zeng

Research Collection School Of Economics

We study random mechanism design in an environment where the set of alternatives has a Cartesian product structure. We first show that all generalized random dictatorships are strategy-proof on a minimally rich domain if and only if the domain is a top-separable domain. We next generalize the notion of connectedness (Monjardet, 2009) to establish a particular class of top-separable domains: connected domains, and show that in the class of minimally rich and connected domains, the multidimensional single-peakedness restriction is necessary and sufficient for the design of a flexible random social choice function that is unanimous and strategy-proof. Such a flexible …

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Specification Test For Spatial Autoregressive Models, Liangjun Su, Xi Qu Oct 2017

Specification Test For Spatial Autoregressive Models, Liangjun Su, Xi Qu

Research Collection School Of Economics

This article considers a simple test for the correct specification of linear spatial autoregressive models, assuming that the choice of the weight matrix Wn is true. We derive the limiting distributions of the test under the null hypothesis of correct specification and a sequence of local alternatives. We show that the test is free of nuisance parameters asymptotically under the null and prove the consistency of our test. To improve the finite sample performance of our test, we also propose a residual-based wild bootstrap and justify its asymptotic validity. We conduct a small set of Monte Carlo simulations to investigate …

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Fair Division With Uncertain Needs, Jingyi Xue Sep 2017

Fair Division With Uncertain Needs, Jingyi Xue

Research Collection School Of Economics

Imagine that agents have uncertain needs and a resource must be divided before uncertainty resolves. In this situation, waste typically occurs when the assignment to an agent turns out to exceed his realized need. How should the resource be divided in the face of possible waste? This is a question out of the scope of the existing rationing literature. Our main axiom to address the issue is no domination. It requires that no agent receive more of the resource than another while producing a larger expected waste, unless the other agent has been fully compensated. Together with conditional strict endowment …

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Non-Separable Models With High-Dimensional Data, Liangjun Su, Takuya Ura, Yichong Zhang Sep 2017

Non-Separable Models With High-Dimensional Data, Liangjun Su, Takuya Ura, Yichong Zhang

Research Collection School Of Economics

This paper studies non-separable models with a continuous treatment when the dimension of the control variables is high and potentially larger than the effective sample size. We propose a three-step estimation procedure to estimate the average, quantile, and marginal treatment effects. In the first stage we estimate the conditional mean, distribution, and density objects by penalized local least squares, penalized local maximum likelihood estimation, and penalized conditional density estimation, respectively, where control variables are selected via a localized method of L1-penalization at each value of the continuous treatment. In the second stage we estimate the average and the marginal distribution …

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Bubble Testing Under Deterministic Trends, Xiaohu Wang, Jun Yu Sep 2017

Bubble Testing Under Deterministic Trends, Xiaohu Wang, Jun Yu

Research Collection School Of Economics

This paper develops the asymptotic theory of the ordinary least squares estimator of the autoregressive (AR) coefficient in various AR models, when data is generated from trend-stationary models in different forms. It is shown that, depending on how the autoregression is specified, the commonly used right-tailed unit root tests may tend to reject the null hypothesis of unit root in favor of the explosive alternative. A new procedure to implement the right-tailed unit root tests is proposed. It is shown that when the data generating process is trend-stationary, the test statistics based on the proposed procedure cannot find evidence of …

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Adaptive Estimation Of Continuous-Time Regression Models Using High-Frequency Data, Jia Li, Viktor Todorov, George Tauchen Sep 2017

Adaptive Estimation Of Continuous-Time Regression Models Using High-Frequency Data, Jia Li, Viktor Todorov, George Tauchen

Research Collection School Of Economics

We derive the asymptotic efficiency bound for regular estimates of the slope coefficient in a linear continuous-time regression model for the continuous martingale parts of two Itô semimartingales observed on a fixed time interval with asymptotically shrinking mesh of the observation grid. We further construct an estimator from high-frequency data that achieves this efficiency bound and, indeed, is adaptive to the presence of infinite-dimensional nuisance components. The estimator is formed by taking optimal weighted average of local nonparametric volatility estimates that are constructed over blocks of high-frequency observations. The asymptotic efficiency bound is derived under a Markov assumption for the …

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Preferences With Changing Ambiguity Aversion, Jingyi Xue Sep 2017

Preferences With Changing Ambiguity Aversion, Jingyi Xue

Research Collection School Of Economics

This paper provides two equivalent representations for thegeneral class of uncertainty averse preferences studied by Cerreia-Vioglio,Maccheroni, Marinacci and Montrucchio (2011). The two representations employrespectively two important extensions of Gilboa and Schmeidler (1989)’s maxmindecision rule. The first is a weighted maxmin representation with anon-constant weight used in mixing the minimum and maximum expected utilities.The second is a variant constraint representation which evaluates a prospect bythe worst expected utility over a neighborhood of approximating priors wherethe size of the neighborhood depends on the prospect. The equivalent representationshave advantage in several respects. In the second part of this paper, we studythe wealth effect …

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Sources Of Health Financing And Health Outcomes: A Panel Data Analysis, Tomoki Fujii Sep 2017

Sources Of Health Financing And Health Outcomes: A Panel Data Analysis, Tomoki Fujii

Research Collection School Of Economics

We study the differential impacts of public and private sources of health spending on health outcomes using a triple difference approach. We find that private health spending has on average a higher health-promoting effect than public health spending. This result is robust with respect to the choice of outcome measure and covariates in the regression and driven primarily by the countries with ineffective governments. Once we restrict our sample to countries with effective governments, private health spending is no better than public health spending for improving the health outcome.

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Domestic Liquidity Conditions And Monetary Policy In Singapore, Hwee Kwan Chow-Tan Sep 2017

Domestic Liquidity Conditions And Monetary Policy In Singapore, Hwee Kwan Chow-Tan

Research Collection School Of Economics

Singapore has an unusual exchange rate-centered monetary policy framework that has served the economy well over the past decades. Monetary policy operations are carried out by the central bank through the management of the Singapore dollar against a currency basket. As is well recognized, such foreign exchange interventions do have an impact on domestic liquidity conditions. However, in the case of Singapore, this tends to be counteracted by the liquidity impact of public sector operations related to the fiscal position and the national pension scheme. The central bank takes into account the net liquidity impact these and other autonomous money …

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Favorite-Longshot Bias In Pari-Mutuel Betting: An Evolutionary Explanation, Atsushi Kajii, Takahiro Watanabe Aug 2017

Favorite-Longshot Bias In Pari-Mutuel Betting: An Evolutionary Explanation, Atsushi Kajii, Takahiro Watanabe

Research Collection School Of Economics

Favorite-longshot bias (FLB) refers to an observed tendency whereby “longshots” are overvalued and favorites are undervalued. We offer an evolutionary explanation for FLB in pari-mutuel betting using a simple market model. A bettor is forced to quit with some probability if his total net gain in one day is negative. Because of a positive track take, the expected returns of any strategy are negative, and so every agent must eventually lose and disappear in the long run. Those who favor longshots have a better chance of getting ahead with rare but large gains, enabling them to survive for longer than …

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On The Relationship Between Household Wealth And Entrepreneurship, Jungho Lee Aug 2017

On The Relationship Between Household Wealth And Entrepreneurship, Jungho Lee

Research Collection School Of Economics

Motivated by a substantial number of startup owners with negative household net worth, I present a model that incorporates credit borrowing into Evans and Jovanovic [1989]. The estimated model generates no relationship between household wealth and the propensity for business entry. Ignoring credit borrowing for potential business owners substantially overstates the efficiency loss from financial constraints in business entry. However, the efficiency loss in investments by the entrants is large even if credit borrowing is allowed. Individuals who start a business once credit borrowing is available are those whose business ideas are of a high-enough quality to compensate high financing …

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Structural Inference From Reduced Forms With Many Instruments, Peter C. B. Phillips, Wayne Yuan Gao Aug 2017

Structural Inference From Reduced Forms With Many Instruments, Peter C. B. Phillips, Wayne Yuan Gao

Research Collection School Of Economics

This paper develops exact finite sample and asymptotic distributions for structural equation tests based on partially restricted reduced form estimates. Particular attention is given to models with large numbers of instruments, wherein the use of partially restricted reduced form estimates is shown to be especially advantageous in statistical testing even in cases of uniformly weak instruments. Comparisons are made with methods based on unrestricted reduced forms, and numerical computations showing finite sample performance of the tests are reported. Some new results are obtained on inequalities between noncentral chi-squared distributions with different degrees of freedom that assist in analytic power comparisons.

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