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Articles 1 - 30 of 51
Full-Text Articles in Social and Behavioral Sciences
Maximum Likelihood And Gaussian Estimation Of Continuous Time Models In Finance, Peter C. B. Phillips, Jun Yu
Maximum Likelihood And Gaussian Estimation Of Continuous Time Models In Finance, Peter C. B. Phillips, Jun Yu
Research Collection School Of Economics
This paper overviews maximum likelihood and Gaussian methods of estimating continuous time models used in finance. Since the exact likelihood can be constructed only in special cases, much attention has been devoted to the development of methods designed to approximate the likelihood. These approaches range from crude Euler-type approximations and higher order stochastic Taylor series expansions to more complex polynomial-based expansions and infill approximations to the likelihood based on a continuous time data record. The methods are discussed, their properties are outlined and their relative finite sample performance compared in a simulation experiment with the nonlinear CIR diffusion model, which …
Global Analysis Of An Expectations Augmented Evolutionary Dynamics, Angelo Antoci, Antonio Gay, Massimiliano Landi, Pier Luigi Sacco
Global Analysis Of An Expectations Augmented Evolutionary Dynamics, Angelo Antoci, Antonio Gay, Massimiliano Landi, Pier Luigi Sacco
Research Collection School Of Economics
We consider a deterministic evolutionary model where players form expectations about future play. Players are not fully rational and have expectations that change over time in response to current payoffs and feedback from the past. We provide a complete characterization of the qualitative dynamics so induced for a two strategy population game, and relate our findings to standard evolutionary dynamics and equilibrium selection when agents have rational forward looking expectations.
Testing For Parameter Stability In Quantile Regression Models, Liangjun Su, Zhijie Xiao
Testing For Parameter Stability In Quantile Regression Models, Liangjun Su, Zhijie Xiao
Research Collection School Of Economics
We propose a test for structural change of conditional distribution in dynamic regression models. The test is constructed based on time series regression quantile estimates and complements conventional parameter instability tests in least-square type regression models. Asymptotic distribution for our test under the null hypothesis is derived.
Can A Representative Agent Model Represent A Heterogeneous Agent Economy?, Sungbae An, Yongsung Chang, Sun-Bin Kim
Can A Representative Agent Model Represent A Heterogeneous Agent Economy?, Sungbae An, Yongsung Chang, Sun-Bin Kim
Research Collection School Of Economics
Accounting for observed fluctuations in aggregate employment, consumption, and real wage using the optimality conditions of a representative household requires preferences that are incompatible with economic priors. In order to reconcile theory with data, we construct a model with heterogeneous agents whose decisions are difficult to aggregate because of incomplete capital markets and the indivisible nature of labor supply. If we were to explain the model-generated aggregate time series using decisions of a stand-in household, such a household must have a nonconcave or unstable utility as is often found with the aggregate US data.
Future Fiscal And Budgetary Shocks, Hian Teck Hoon, Edmund S. Phelps
Future Fiscal And Budgetary Shocks, Hian Teck Hoon, Edmund S. Phelps
Research Collection School Of Economics
We study the effects of future tax and budgetary shocks in a non-monetary and possibly non-Ricardian economy. An (unanticipated) temporary labor tax cut to be effective on a given future date—a delayed “debt bomb”—causes at once a drop in the (unit) value placed on the firms' business asset, the customer, with the result that share prices, the hourly wage, and employment drop in tandem. This paradox of reduced activity through announcement of future “stimulus” does not hinge on an upward jump of long interest rates. A future tax-rate cut lacking a “sunset” provision has the same negative effects.
Directed Altruism And Enforced Reciprocity In Social Networks, Stephen Leider, Markus M. Mobius, Tanya S. Rosenblat, Quoc-Anh Do
Directed Altruism And Enforced Reciprocity In Social Networks, Stephen Leider, Markus M. Mobius, Tanya S. Rosenblat, Quoc-Anh Do
Research Collection School Of Economics
We conducted online field experiments in large real-world social networks in order to decompose prosocial giving into three components: (1) baseline altruism toward randomly selected strangers, (2) directed altruism that favors friends over random strangers, and (3) giving motivated by the prospect of future interaction. Directed altruism increases giving to friends by 52% relative to random strangers, whereas future interaction effects increase giving by an additional 24% when giving is socially efficient. This finding suggests that future interaction affects giving through a repeated game mechanism where agents can be rewarded for granting efficiency-enhancing favors. We also find that subjects with …
Endogenous Transaction Cost, Specialization, And Strategic Alliance, Juyuan Zhang, Yi Zhang
Endogenous Transaction Cost, Specialization, And Strategic Alliance, Juyuan Zhang, Yi Zhang
Research Collection School Of Economics
In property rights theory, firm is an organizational response to reduce transaction cost associated with hold-up of using market mechanism. We claim that strategic alliance { without changing firm boundaries or asset ownership { is another type of organizational response. We construct a model to investigate individual firms' strategic choice on specialization or diversification when producing intermediate products and their further choice of organizational form: autarchy or forming strategic alliance. We introduce fixed learning costs as an indicator of scales of economy and show that only if fixed learning costs are large enough, will firms have incentive to be specialization …
Unpacking Sources Of Comparative Advantage: A Quantitative Approach, Davin Chor
Unpacking Sources Of Comparative Advantage: A Quantitative Approach, Davin Chor
Research Collection School Of Economics
This paper develops an approach for quantifying the relative importance of different sources of comparative advantage for country welfare in a global trade equilibrium. To explain the pattern of specialization, I present a multi-country, perfectly-competitive Ricardian model that extends Eaton and Kortum (2002) to predict industry trade flows. In this framework, comparative advantage is determined by the interaction of country and industry characteristics, with countries specializing in industries whose specific production needs they are best able to meet with their factor endowments, institutional environment, and technological strengths. I estimate the model parameters using a large dataset of bilateral trade flows, …
The Labor Market Of Italian Politicians, Antonio Merlo, Vincenzo Galasso, Massimiliano Landi, Andrea Mattozzi
The Labor Market Of Italian Politicians, Antonio Merlo, Vincenzo Galasso, Massimiliano Landi, Andrea Mattozzi
Research Collection School Of Economics
We analyze the career profiles of Italian legislators in the post-war period. Using a unique, newly collected dataset that contains detailed information on all the politicians who have been elected to the Italian Parliament between 1948 and 2008, we address a number of important issues that pertain to their career paths prior to election to Parliament, their parliamentary careers, and their post-Parliament employment. Our data span two institutional regimes: Italy's First Republic (1948-1994) and the Second Republic (1994-present), characterized by different electoral rules and party structures. We first present a brief overview of the Italian political system. We then provide …
Utility Functions, Future Consumption Targets And Subsistence Thresholds, Ashok Guha, Brishti Guha
Utility Functions, Future Consumption Targets And Subsistence Thresholds, Ashok Guha, Brishti Guha
Research Collection School Of Economics
If the consumer’s risk aversion behavior varies intertemporally and if the risk aversion coefficient on future consumption becomes very large, the consumer tends to aim at a fixed future consumption target. A by-product is a reinterpretation of subsistence theories of consumption.
The More Kids, The Less Mom's Divvy: Impact Of Childbirth On Intrahousehold Resource Allocation, Tomoki Fujii, Ryuichiro Ishikawa
The More Kids, The Less Mom's Divvy: Impact Of Childbirth On Intrahousehold Resource Allocation, Tomoki Fujii, Ryuichiro Ishikawa
Research Collection School Of Economics
We investigate how the impact of childbirth on intrahousehold allocation for married Japanese couples. We developed reduced‐form and structural‐form specifications from a unified theoretical framework. Under a weak set of assumptions, we can focus on private goods to track the changes in intrahousehold resource allocation. Our estimation results show that that allocation of resources within household tend to move to the disadvantage of women after a childbirth. One additional child is associated with a reduction in the wife's private expenditure share. Our estimation results reject the income-pooling hypothesis, and show that women are more risk averse than men.
How Well Can We Target Aid With Rapidly Collected Data? Empirical Results For Poverty Mapping From Cambodia, Tomoki Fujii
How Well Can We Target Aid With Rapidly Collected Data? Empirical Results For Poverty Mapping From Cambodia, Tomoki Fujii
Research Collection School Of Economics
We compare commune-level poverty rankings in Cambodia based on three different methods: small-area estimation, principal component analysis using aggregate data, and interviews with local leaders. While they provide reasonably consistent rankings, the choice of the ranking method matters. In order to assess the potential losses from moving away from census-based poverty mapping, we used the concentration curve. Our calculation shows that about three-quarters of the potential gains from geographic targeting may be lost by using aggregate data. The usefulness of aggregate data in general would depend on the cost of data collection.
Schooling And Political Participation Revisited, Davin Chor, Filipe R. Campante
Schooling And Political Participation Revisited, Davin Chor, Filipe R. Campante
Research Collection School Of Economics
We investigate how the link between individual schooling and political participation is a ected by country characteristics which determine the relative productivity of human capital in political versus production activities. In our model, individuals face an e ort-allocation decision over the use of their human capital. Focusing on the role played by country factor endowments, we show that the abundance of a factor that is used in the least (respectively most) human capital-intensive sector will increase (respectively decrease) both: (i) the level of individual political participation; and (ii) the responsiveness of individual political participation to increases in human capital. We …
Improving Semiparametric Estimation By Using Surrogate Data, Song Xi Chen, Leung, Denis H. Y., Jin Qin
Improving Semiparametric Estimation By Using Surrogate Data, Song Xi Chen, Leung, Denis H. Y., Jin Qin
Research Collection School Of Economics
The paper considers estimating a parameter beta that defines an estimating function U(y, x, beta) for an outcome variable y and its covariate x when the outcome is missing in some of the observations. We assume that, in addition to the outcome and the covariate, a surrogate outcome is available in every observation. The efficiency of existing estimators for beta depends critically on correctly specifying the conditional expectation of U given the surrogate and the covariate. When the conditional expectation is not correctly specified, which is the most likely scenario in practice, the efficiency of estimation can be severely compromised …
Financial Frictions And International Trade, Ruanjai Suwantaradon
Financial Frictions And International Trade, Ruanjai Suwantaradon
Research Collection School Of Economics
This paper studies the effects of financial market imperfections on a firm’s operating and exporting decisions. I introduce financial frictions into a trade model with heterogeneous firms along the line of Melitz (2003). With the presence of financial constraints, even among a group of firms with the same productivity level, firms that are more financially constrained operate on a less efficient scale, and as a result, may no longer find operating and/or exporting profitable. In addition, financial frictions may create a distortion compared to the Melitz (2003) world since operation and export participation may be undertaken by those with better …
Regression Asymptotics Using Martingale Convergence Methods, Rustam Ibragimov, Peter C. B. Phillips
Regression Asymptotics Using Martingale Convergence Methods, Rustam Ibragimov, Peter C. B. Phillips
Research Collection School Of Economics
Weak convergence of partial sums and multilinear forms in independent random variables and linear processes and their nonlinear analogues to stochastic integrals now plays a major role in nonstationary time series and has been central to the development of unit root econometrics. The present paper develops a new and conceptually simple method for obtaining such forms of convergence. The method relies on the fact that the econometric quantities of interest involve discrete time martingales or semimartingales and shows how in the limit these quantities become continuous martingales and semimartingales. The limit theory itself uses very general convergence results for semimartingales …
A Welfare Analysis Of Capital Account Liberalization, Jürgen Von Hagen, Haiping Zhang
A Welfare Analysis Of Capital Account Liberalization, Jürgen Von Hagen, Haiping Zhang
Research Collection School Of Economics
We develop a model of a small open economy with credit market frictions to analyze the consequences of capital account liberalization. We show that financial opening facilitates the inflows of cheap foreign funds and improves production efficiency. Reforms increasing labor market exibility can further improve such efficiency gains. However, capital account liberalization also has important distributional consequences. Specifically, it may be impossible to use public transfers to fully compensate the loss of those negatively affected by capital account liberalization. This explains why financial opening often meets fierce opposition even though it leads to efficiency gains for the economy as a …
A Nonparametric Hellinger Metric Test For Conditional Independence, Liangjun Su, Halbert White
A Nonparametric Hellinger Metric Test For Conditional Independence, Liangjun Su, Halbert White
Research Collection School Of Economics
We propose a nonparametric test of conditional independence based on the weighted Hellinger distance between the two conditional densities, f(y|x,z) and f(y|x), which is identically zero under the null. We use the functional delta method to expand the test statistic around the population value and establish asymptotic normality under β-mixing conditions. We show that the test is consistent and has power against alternatives at distance n−1/2h−d/4. The cases for which not all random variables of interest are continuously valued or observable are also discussed. Monte Carlo simulation results indicate that the test behaves reasonably well in …
On The Evaluation Of The Joint Distribution Of Order Statistics, Koon Shing Kwong, Yiu Man Chan
On The Evaluation Of The Joint Distribution Of Order Statistics, Koon Shing Kwong, Yiu Man Chan
Research Collection School Of Economics
Dunnett and Tamhane [Dunnett, C.W., Tamhane, A.C., 1992. A step-up multiple test procedure. J. Amer. Statist. Assoc. 87, 162-170.] proposed a step-up procedure for comparing k treatments with a control and showed that the step-up procedure is more powerful than its counterpart single step and step-down procedures. Since then, several modified step-up procedures have been suggested to deal with different testing environments. In order to establish those step-up procedures, it is necessary to derive approaches for evaluating the joint distribution of the order statistics. In some cases, experimenters may have difficulty in applying those step-up procedures in multiple hypothesis testing …
Limit Theory For Explosively Cointegrated Systems, Peter C. B. Phillips, Tassos Magdalinos
Limit Theory For Explosively Cointegrated Systems, Peter C. B. Phillips, Tassos Magdalinos
Research Collection School Of Economics
A limit theory is developed for multivariate regression in an explosive cointegrated system. The asymptotic behavior of the least squares estimator of the cointegrating coefficients is found to depend upon the precise relationship between the explosive regressors. When the eigenvalues of the autoregressive matrix Θ are distinct, the centered least squares estimator has an exponential Θn rate of convergence and a mixed normal limit distribution. No central limit theory is applicable here, and Gaussian innovations are assumed. On the other hand, when some regressors exhibit common explosive behavior, a different mixed normal limiting distribution is derived with rate of convergence …
Discussion Of Do The Biggest Aisles Serve Brighter Future? Implications Of Global Retail Chains' Presence For Romania, Davin Chor, Beata Javor, Li Xue
Discussion Of Do The Biggest Aisles Serve Brighter Future? Implications Of Global Retail Chains' Presence For Romania, Davin Chor, Beata Javor, Li Xue
Research Collection School Of Economics
No abstract provided.
Numerical Analysis Of Non-Constant Pure Rate Of Time Preference: A Model Of Climate Policy, Tomoki Fujii, Larry Karp
Numerical Analysis Of Non-Constant Pure Rate Of Time Preference: A Model Of Climate Policy, Tomoki Fujii, Larry Karp
Research Collection School Of Economics
When current decisions affect welfare in the far-distant future, as with climate change, the use of a declining pure rate of time preference (PRTP) provides potentially important modeling flexibility. The difficulty of analyzing models with non-constant PRTP limits their application. We describe and provide software (available online) to implement an algorithm to numerically obtain a Markov perfect equilibrium for an optimal control problem with non-constant PRTP. We apply this software to a simplified version of the numerical climate change model used in the Stern Review. For our calibration, the policy recommendations are less sensitive to the PRTP than widely believed. …
A Semiparametric Stochastic Volatility Model, Jun Yu
A Semiparametric Stochastic Volatility Model, Jun Yu
Research Collection School Of Economics
This paper examines how volatility responds to return news in the context of stochastic volatility (SV) using a nonparametric method. The correlation structure in the classical leverage SV model is generalized based on a linear spline. In the new model the correlation between the return innovation and volatility innovation is dependent on the type of news arrived to the market. Theoretical properties of the proposed model are examined. A simulation-based maximum likelihood method is developed to estimate the new model. Simulations show that the estimation method provides reliable parameter estimates. The new model is fitted to daily and weekly data …
Nonparametric Prewhitening Estimators For Conditional Quantiles, Liangjun Su, Aman Ullah
Nonparametric Prewhitening Estimators For Conditional Quantiles, Liangjun Su, Aman Ullah
Research Collection School Of Economics
We define a nonparametric prewhitening method for estimating conditional quantiles based on local linear quantile regression. We characterize the bias, variance and asymptotic normality of the proposed estimator. Under weak conditions our estimator can achieve bias reduction and have the same variance as the local linear quantile estimators. A small set of Monte Carlo simulations is carried out to illustrate the performance of our estimators. An application to US gross domestic product data demonstrates the usefulness of our methodology.
Time-Varying Incentives In The Mutual Fund Industry, Jacques Olivier, Anthony S. Tay
Time-Varying Incentives In The Mutual Fund Industry, Jacques Olivier, Anthony S. Tay
Research Collection School Of Economics
This paper re-examines the incentives of mutual fund managers arising from investor flows. We provide evidence that the convexity of the flow-performance relationship varies with economic activity. We show that the effect is economically large and is not driven by abnormal years. We test two possible channels through which this pattern may arise. We investigate implications of the timevarying convexity for the incentives of managers to alter strategically the risk of their portfolios. We provide evidence that poor mid-year performers increase the risk of the portfolio only when economic activity is strong. Finally, we briefly discuss some methodological implications.
Gaussian Inference In Ar(1) Time Series With Or Without A Unit Root, Peter C. B. Phillips, Chirok Han
Gaussian Inference In Ar(1) Time Series With Or Without A Unit Root, Peter C. B. Phillips, Chirok Han
Research Collection School Of Economics
This paper introduces a simple first-difference-based approach to estimation and inference for the AR(1) model. The estimates have virtually no finite-sample bias and are not sensitive to initial conditions, and the approach has the unusual advantage that a Gaussian central limit theory applies and is continuous as the autoregressive coefficient passes through unity with a uniform rate of convergence. En route, a useful central limit theorem (CLT) for sample covariances of linear processes is given, following Phillips and Solo (1992, Annals of Statistics, 20, 971–1001). The approach also has useful extensions to dynamic panels.
Inference For General Parametric Functions In Box-Cox-Type Transformation Models, Zhenlin Yang, Eden Ka-Ho Wu, Anthony F. Desmond
Inference For General Parametric Functions In Box-Cox-Type Transformation Models, Zhenlin Yang, Eden Ka-Ho Wu, Anthony F. Desmond
Research Collection School Of Economics
The authors propose a simple but general method of inference for a parametric function of the Box-Cox-type transformation model. Their approach is built upon the classical normal theory but takes parameter estimation into account. It quickly leads to test statistics and confidence intervals for a linear combination of scaled or unscaled regression coefficients, as well as for the survivor function and marginal effects on the median or other quantile functions of an original response. The authors show through simulations that the finite-sample performance of their method is often superior to the delta method, and that their approach is robust to …
Indescribability And Asymmetric Information At The Contracting Stage, Takashi Kunimoto
Indescribability And Asymmetric Information At The Contracting Stage, Takashi Kunimoto
Research Collection School Of Economics
Maskin and Tirole [Maskin, E., Tirole, J., 1999. Unforeseen contingencies and incomplete contracts. Review of Economic Studies, 66, 83–114] show that indescribability does not matter for contractual incompleteness when there is symmetric information both at the contracting stage and at the trading stage. Following their setup, I show that with asymmetric information at both stages, indescribability can matter.
Skilled And Unskilled Wages In A Globlizing World, 1968-1998, Davin Chor
Skilled And Unskilled Wages In A Globlizing World, 1968-1998, Davin Chor
Research Collection School Of Economics
This paper constructs a data set on purchasing-power-parity (PPP) adjusted skilled and unskilled wages in 139 countries for the period 1968-1998, based on the International La- bor Organization's (ILO) annual October Inquiry and the Freeman and Oostendorp (2000) Occupational Wages Around the World (OWW) le. It nds strong evidence for the ex- istence of well-integrated markets for skilled and unskilled labor, justifying the approach of constructing a skilled wage series and an unskilled wage series. Several signi cant re- sults emerged from an analysis of a representative subset of 67 countries which provided unbroken coverage for 1970-1994: (i) there is …
Local Polynomial Estimation Of Nonparametric Simultaneous Equations Models, Liangjun Su, Aman Ullah
Local Polynomial Estimation Of Nonparametric Simultaneous Equations Models, Liangjun Su, Aman Ullah
Research Collection School Of Economics
We define a new procedure for consistent estimation of nonparametric simultaneous equations models under the conditional mean independence restriction of Newey et al. [1999. Nonparametric estimation of triangular simultaneous equation models. Econometrica 67, 565-603]. It is based upon local polynomial regression and marginal integration techniques. We establish the asymptotic distribution of our estimator under weak data dependence conditions. Simulation evidence suggests that our estimator may significantly outperform the estimators of Pinkse [2000. Nonparametric two-step regression estimation when regressors and errors are dependent. Canadian Journal of Statistics 28, 289-300] and Newey and Powell [2003. Instrumental variable estimation of nonparametric models. Econometrica …