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Social and Behavioral Sciences Commons™
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- Extremum estimator (3)
- Generalized method of moments estimator (3)
- Maximum likelihood estimator (3)
- Asymptotics (2)
- Block bootstrap (2)
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- Brownian local time (2)
- Brownian motion (2)
- Discrete Fourier transform (2)
- Edgeworth expansion (2)
- Gauss-Newton (2)
- Integrated time series (2)
- K -step bootstrap (2)
- Local to unity (2)
- Newton-Raphson (2)
- Non-expected utility (2)
- Parametric bootstrap (2)
- T statistic (2)
- Agent-normal form games (1)
- Akaike information criterion (1)
- Anxiety (1)
- Asymptotic distribution (1)
- Bayesian information criterion (1)
- Betweenness (1)
- Bias (1)
- Binary choice model (1)
- Bipartite graphs (1)
- Boundary (1)
- Collusion (1)
- Common knowledge (1)
- Computation (1)
Articles 1 - 30 of 41
Full-Text Articles in Social and Behavioral Sciences
Coordination Risk And The Price Of Debt, Stephen Morris, Hyun Song Shin
Coordination Risk And The Price Of Debt, Stephen Morris, Hyun Song Shin
Cowles Foundation Discussion Papers
Creditors of a distressed borrower face a coordination problem. Even if the fundamentals are sound, fear of premature foreclosure by others may lead to pre-emptive action, undermining the project. Recognition of this problem lies behind corporate bankruptcy provisions across the world, and it has been identified as a culprit in international financial crises, but has received scant attention from the literature on debt pricing. The apparent multiplicity of equilibria is a barrier to development of this issue in asset pricing, but this multiplicity is only apparent. Without common knowledge of fundamentals, the incidence of failure is uniquely determined provided that …
Maximum Likelihood Estimation In Panels With Incidental Trends, Hyungsik Roger Moon, Peter C.B. Phillips
Maximum Likelihood Estimation In Panels With Incidental Trends, Hyungsik Roger Moon, Peter C.B. Phillips
Cowles Foundation Discussion Papers
It is shown that the maximum likelihood estimator of a local to unity parameter can be consistently estimated with panel data when the cross section observations are independent. Consistency applies when there are no deterministic trends or when there is a homogeneous deterministic trend in the panel model. When there are heterogeneous deterministic trends the panel MLE of the local to unity parameter is inconsistent. This outcome provides a new instance of inconsistent ML estimation in dynamic panels, and, unlike earlier results of this type, applies when both T approaches infinity and N approaches infinity.
Discrete Fourier Transforms Of Fractional Processes, Peter C.B. Phillips
Discrete Fourier Transforms Of Fractional Processes, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Discrete Fourier transforms (dft’s) of fractional processes are studied and an exact representation of the dft is given in terms of the component data. The new representation gives the frequency domain form of the model for a fractional process, and is particularly useful in analyzing the asymptotic behavior of the dft and periodogram in the nonstationary case when the memory parameter d > 1/2. Various asymptotic approximations are suggested. It is shown that smoothed periodogram spectral estimates remain consistent for frequencies away from the origin in the nonstationary case provided the memory parameter d < 1. When d = 1, the spectral estimates are inconsistent and converge weakly to random variates. Applications of the theory to log periodogram regression and local Whittle estimation of the memory parameter are discussed and some modified versions of these procedures are suggested.
Unit Root Log Periodogram Regression, Peter C.B. Phillips
Unit Root Log Periodogram Regression, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Log periodogram (LP) regression is shown to be consistent and to have a mixed normal limit distribution when the memory parameter d = 1. Gaussian errors are not required. Tests of d = 1 based on LP regression are consistent against d < 1 alternatives but inconsistent against d > 1 alternatives. A test based on a modified LP regression that is consistent in both directions is provided.
Coordination Risk And The Price Of Debt, Stephen Morris, Hyun Song Shin
Coordination Risk And The Price Of Debt, Stephen Morris, Hyun Song Shin
Cowles Foundation Discussion Papers
Creditors of a distressed borrower face a coordination problem. Even if the fundamentals are sound, fear of premature foreclosure by others may lead to pre-emptive action, undermining the project. Recognition of this problem lies behind corporate bankruptcy provisions across the world, and it has been identified as a culprit in international financial crises, but has received scant attention from the literature on debt pricing. Without common knowledge of fundamentals, the incidence of failure is uniquely determined provided that private information is precise enough. This affords a way to price the coordination failure. Comparative statics on the unique equilibrium provides several …
Political Correctness, Stephen Morris
Political Correctness, Stephen Morris
Cowles Foundation Discussion Papers
An informed advisor wishes to convey her valuable information to an uninformed decision maker with identical preferences. Thus she has a current incentive to truthfully reveal her information. But if the decision maker thinks the advisor might be biased in favor of one decision, and the advisor does not wish to be thought to be biased, the advisor has a reputational incentive to lie. If the advisor is sufficiently concerned about her reputation, no information is conveyed in equilibrium. In a repeated version of this game, the advisor will care.
Nonlinear Econometric Models With Cointegrated And Deterministically Trending Regressors, Yoosoon Chang, Joon Y. Park, Peter C.B. Phillips
Nonlinear Econometric Models With Cointegrated And Deterministically Trending Regressors, Yoosoon Chang, Joon Y. Park, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper develops an asymptotic theory for a general class of nonlinear nonstationary regressions, extending earlier work by Phillips and Hansen (1990) on linear cointegrating regressions. The model considered accommodates a linear time trend and stationary regressors, as well as multiple I(1) regressors. We establish consistency and derive the limit distribution of the nonlinear least squares estimator. The estimator is consistent under fairly general conditions but the convergence rate and the limiting distribution are critically dependent upon the type of the regression function. For integrable regression functions, the parameter estimates converge at a reduced n 1 /4 rate and have …
Repeated Games With Almost-Public Monitoring, George J. Mailath, Stephen Morris
Repeated Games With Almost-Public Monitoring, George J. Mailath, Stephen Morris
Cowles Foundation Discussion Papers
In repeated games with imperfect public monitoring, players can use public signals to coordinate their behavior perfectly, and thus support cooperative outcomes with the threat of punishments. But with even a small amount of private monitoring, players’ private histories may lead them to have sufficiently different views of the world that such coordination on punishments is no longer possible (we describe a simple strategy profile that is a perfect public equilibrium of a repeated prisoner’s dilemma with imperfect public monitoring, and yet is not an equilibrium for arbitrarily close games with private monitoring). If a perfect public equilibrium has players’ …
World Income Components: Measuring And Exploiting Risk-Sharing Opportunities, Stefano G. Athanasoulis, Robert J. Shiller
World Income Components: Measuring And Exploiting Risk-Sharing Opportunities, Stefano G. Athanasoulis, Robert J. Shiller
Cowles Foundation Discussion Papers
We provide a method for decomposing the variance of changes in incomes in the world into components, world income components (WICs), in such a way as to indicate the most important risk-sharing opportunities among people of the world. We develop a constant absolute risk premium model, an intertemporal general equilibrium model of the world that facilitates consideration of optimal contract design. We show that for a contract designer maximizing a social welfare function, the optimal risk-management contracts maximize the equilibrium world real interest rate. That is the contract designer achieves the risk-optimal interest rate. We show that these WIC securities …
Strategic Buyers And Privately Observed Prices, Dirk Bergemann, Juuso Välimäki
Strategic Buyers And Privately Observed Prices, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
A model of repeated price competition with large buyers is analyzed. The sellers are allowed to offer different prices to different buyers and the buyers act strategically. The set of subgame perfect Equilibria is investigated under public and private monitoring. With public monitoring the equilibrium set with large buyers expands relative to the standard model where each buyer is small and behaves myopically. With private monitoring, where prices are not observable to the competing sellers, the set of equilibrium payoffs shrinks . In the finitely repeated game with private monitoring, all sales are made by the efficient seller. In the …
Survey Of Multifractality In Finance, Benoit Mandelbrot
Survey Of Multifractality In Finance, Benoit Mandelbrot
Cowles Foundation Discussion Papers
No abstract provided.
Stationary Multi Choice Bandit Problems, Dirk Bergemann, Juuso Välimäki
Stationary Multi Choice Bandit Problems, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
This note shows that the optimal choice of k simultaneous experiments in a stationary multi-armed bandit problem can be characterized in terms of the Gittins index of each arm. The index characterization remains equally valid after the introduction of switching costs.
Contractual Intermediaries, Garey Ramey, Joel Watson
Contractual Intermediaries, Garey Ramey, Joel Watson
Cowles Foundation Discussion Papers
This paper analyzes the role of third party intermediaries, such as courts and arbitrators, in contract enforcement. In our model, intermediaries compel contracted transfers and resolve disputes when requested to do so by the contracting agents. When the verifiability of information is limited, successful enforcement requires that dispute resolution costs be sufficiently great. Optimal enforcement systems economize on dispute resolution and information costs, and may involve establishment of specific systems tailored to particular groups. We show further that the “holdup problem” may be resolved via an appropriately designed dispute resolution system.
Consistent Model And Moment Selection Criteria For Gmm Estimation With Application To Dynamic Panel Data Models, Donald W.K. Andrews, Biao Lu
Consistent Model And Moment Selection Criteria For Gmm Estimation With Application To Dynamic Panel Data Models, Donald W.K. Andrews, Biao Lu
Cowles Foundation Discussion Papers
This paper develops consistent model and moment selection criteria for GMM estimation. The criteria select the correct model specification and all correct moment conditions asymptotically. The selection criteria resemble the widely used likelihood-based selection criteria BIC, HQIC, and AIC. (The latter is not consistent.) The GMM selection criteria are based on the J statistic for testing over-identifying restrictions. Bonus terms reward the use of fewer parameters for a given number of moment conditions and the use of more moment conditions for a given number of parameters. The paper applies the model and moment selection criteria to dynamic panel data models …
On Minsky's Agenda For Reform, James Tobin
On Minsky's Agenda For Reform, James Tobin
Cowles Foundation Discussion Papers
No abstract provided.
Vertical Integration, Networks, And Markets, Rachel E. Kranton, Deborah F. Minehart
Vertical Integration, Networks, And Markets, Rachel E. Kranton, Deborah F. Minehart
Cowles Foundation Discussion Papers
The organization of supply relations varies across industries. This paper builds a theoretical framework to compare three alternative supply structures: vertical integration, networks, and markets. The analysis considers the relationship between uncertainty in demand for specific inputs, investment costs, and industrial structure. It shows that network structures are more likely when productive assets are expensive and firms experience large idiosyncratic shocks in demand. The analysis is supported by existing evidence and provides empirical predictions as to the shape of different industries.
Testing When A Parameter Is On The Boundary Of The Maintained Hypothesis, Donald W.K. Andrews
Testing When A Parameter Is On The Boundary Of The Maintained Hypothesis, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper considers testing problems where several of the standard regularity conditions fail to hold. We consider the case where (i) parameter vectors in the null hypothesis may lie on the boundary of the maintained hypothesis and (ii) there may be a nuisance parameter that appears under the alternative hypothesis, but not under the null. The paper establishes the asymptotic null and local alternative distributions of quasi-likelihood ratio, rescaled quasi-likelihood ratio, Wald, and score tests in this case. The results apply to tests based on a wide variety of extremum estimators and apply to a wide variety of models. Examples …
Higher-Order Improvements Of A Computationally Attractive K-Step Bootstrap For Extremum Estimators, Donald W.K. Andrews
Higher-Order Improvements Of A Computationally Attractive K-Step Bootstrap For Extremum Estimators, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper establishes the higher-order equivalence of the k -step bootstrap, introduced recently by Davidson and MacKinnon (1999a), and the standard bootstrap. The k -step bootstrap is a very attractive alternative computationally to the standard bootstrap for statistics based on nonlinear extremum estimators, such as generalized method of moment and maximum likelihood estimators. The paper also extends results of Hall and Horowitz (1996) to provide new results regarding the higher-order improvements of the standard bootstrap and the k -step bootstrap for extremum estimators (compared to procedures based on first-order asymptotics). The results of the paper apply to Newton-Raphson (NR), default …
Higher-Order Improvements Of A Computationally Attractive K-Step Bootstrap For Extremum Estimators, Donald W.K. Andrews
Higher-Order Improvements Of A Computationally Attractive K-Step Bootstrap For Extremum Estimators, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper establishes the higher-order equivalence of the k -step bootstrap, introduced recently by Davidson and MacKinnon (1999a), and the standard bootstrap. The k -step bootstrap is a very attractive alternative computationally to the standard bootstrap for statistics based on nonlinear extremum estimators, such as generalized method of moment and maximum likelihood estimators. The paper also extends results of Hall and Horowitz (1996) to provide new results regarding the higher-order improvements of the standard bootstrap and the k -step bootstrap for extremum estimators (compared to procedures based on first-order asymptotics). The results of the paper apply to Newton-Raphson (NR), default …
Vertical Integration, Networks, And Markets], Rachel E. Kranton, Deborah F. Minehart
Vertical Integration, Networks, And Markets], Rachel E. Kranton, Deborah F. Minehart
Cowles Foundation Discussion Papers
The organization of supply relations varies across industries. This paper builds a theoretical framework to compare three alternative supply structures: vertical integration, networks, and markets. The analysis considers the relationship between uncertainty in demand for specific inputs, investment costs, and industrial structure. It shows that network structures are more likely when productive assets are expensive and firms experience large idiosyncratic shocks in demand. The analysis is supported by existing evidence and provides empirical predictions as to the shape of different industries.
Descriptive Econometrics For Nonstationary Time Series With Empirical Illustrations, Peter C.B. Phillips
Descriptive Econometrics For Nonstationary Time Series With Empirical Illustrations, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Recent work by the author on methods of spatial density analysis for time series data with stochastic trends is reviewed and extended. The methods are illustrated in some empirical applications and simulations. The empirical applications include macroeconomic data on inflation, financial data on exchange rates and political opinion poll data. It is shown how the methods can be used to measure empirical hazard rates for inflation and deflation. Empirical estimates based on historical US data over the last 60 years indicate that the predominant inflation risks are at low levels (2–6%) and low two-digit levels (10–12%), and that there is …
Estimation Of Autoregressive Roots Near Unity Using Panel Data, Hyungsik Roger Moon, Peter C.B. Phillips
Estimation Of Autoregressive Roots Near Unity Using Panel Data, Hyungsik Roger Moon, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Time series data are often well modelled by using the device of an autoregressive root that is local to unity. Unfortunately, the localizing parameter (c) is not consistently estimable using existing time series econometric techniques and the lack of a consistent estimator complicates inference. This paper develops procedures for the estimation of a common localizing parameter using panel data. Pooling information across individuals in a panel aids the identification and estimation of the localising parameter and leads to consistent estimation in simple panel models. However, in the important case of models with concomitant deterministic trends, it is shown that pooled …
Toward A Theory Of Reinsurance And Retrocession, Michael R. Powers, Martin Shubik
Toward A Theory Of Reinsurance And Retrocession, Michael R. Powers, Martin Shubik
Cowles Foundation Discussion Papers
There is a natural tradeoff between the benefits of increasing the number of competitors in an insurance market and the drawback to the weakening of the law of large numbers due to the diminishing of average reserves. In this investigation we consider the possibility for optimal layers of reinsurance and retrocession in the design of the insurance industry. A general question which may be asked of all financial institutions is what factors limit the number of layers of paper which can be constructed?
An Empirical Model Of Inventory Investment By Durable Commodity Intermediaries, George J. Hall, John Rust
An Empirical Model Of Inventory Investment By Durable Commodity Intermediaries, George J. Hall, John Rust
Cowles Foundation Discussion Papers
This paper introduces a new detailed data set of high-frequency observations on inventory investment by a U.S. steel wholesaler. Our analysis of these data leads to six main conclusions: orders and sales are made infrequently; orders are more volatile than sales; order sizes vary considerably; there is substantial high-frequency variation in the firm’s sales prices; inventory/sales ratios are unstable; and there are occasional stockouts. We model the firm generically as a durable commodity intermediary that engages in commodity price speculation. We demonstrate that the firm’s inventory investment behavior at the product level is well approximated by an optimal trading strategy …
Nonstationary Panel Data Analysis: An Overview Of Some Recent Developments, Peter C.B. Phillips, Hyungsik Roger Moon
Nonstationary Panel Data Analysis: An Overview Of Some Recent Developments, Peter C.B. Phillips, Hyungsik Roger Moon
Cowles Foundation Discussion Papers
This paper overviews some recent developments in panel data asymptotics, concentrating on the nonstationary panel case and gives a new result for models with individual effects. Underlying recent theory are asymptotics for multi-indexed processes in which both indexes may pass to infinity. We review some of the new limit theory that has been developed, show how it can be applied and give a new interpretation of individual effects in nonstationary panel data. Fundamental to the interpretation of much of the asymptotics is the concept of a panel regression coefficient which measures the long run average relation across a section of …
Linear Regression Limit Theory For Nonstationary Panel Data, Peter C.B. Phillips, Hyungsik Roger Moon
Linear Regression Limit Theory For Nonstationary Panel Data, Peter C.B. Phillips, Hyungsik Roger Moon
Cowles Foundation Discussion Papers
This paper develops a regression limit theory for nonstationary panel data with large numbers of cross section ( n ) and time series ( T ) observations. The limit theory allows for both sequential limits, wherein T → ∞ followed by n → ∞, and joint limits where T,n → ∞ simultaneously; and the relationship between these multidimensional limits is explored. The panel structures considered allow for no time series cointegration, heterogeneous cointegration, homogeneous cointegration, and near-homogeneous cointegration. The paper explores the existence of long-run average relations between integrated panel vectors when there is no individual time series cointegration and …
Nonstationary Binary Choice, Joon Y. Park, Peter C.B. Phillips
Nonstationary Binary Choice, Joon Y. Park, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper develops an asymptotic theory for time series binary choice models with nonstationary explanatory variables generated as integrated processes. Both logit and probit models are covered. The maximum likelihood (ML) estimator is consistent but a new phenomenon arises in its limit distribution theory. The estimator consists of a mixture of two components, one of which is parallel to and the other orthogonal to the direction of the true parameter vector, with the latter being the principal component. The ML estimator is shown to converge at a rate of n 3 /4 along its principal component but has the slower …
Entry And Innovation In Vertically Differentiated Markets, Dirk Bergemann, Juuso Välimäki
Entry And Innovation In Vertically Differentiated Markets, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
This paper analyzes the optimal entry into experience goods markets with vertically differentiated buyers. We consider the case where the value of the new product is imperfectly known, but common to all buyers (common values) as well as the case where the quality is different across buyers (private values). We distinguish between new products that are improvements to existing products and new products that are substitutes. Different types of products have qualitatively distinct diffusion paths. Improvements are introduced slowly relative to the full information case, while substitutes are introduced more aggressively. The slow entry strategy is associated with increasing supply …
Starting Small And Commitment, Joel Watson
Starting Small And Commitment, Joel Watson
Cowles Foundation Discussion Papers
I study a model of a long-term partnership with two-sided incomplete information. The partners jointly determine the stakes of their relationship and individually decide whether to cooperate with or betray each other over time. I characterize the extremal — interim incentive efficient — equilibria. In these equilibria, the partners generally “start small,” with the level of interaction growing over time. The types of players separate quickly. Further, cooperation between “good” types is viable regardless of how pessimistic the players are about each other initially. The quick nature of separation in an extremal equilibrium contrasts with the outcome selected by a …
Starting Small In An Unfamiliar Environment, James Rauch, Joel Watson
Starting Small In An Unfamiliar Environment, James Rauch, Joel Watson
Cowles Foundation Discussion Papers
Motivated by a characteristic way in which firms in developed countries make their decisions regarding cooperation with potential partners from less developed countries, we design a simple model of a DC firm’s search for an LDC partner/supplier and the subsequent relationship between the two parties. Matched firms can “start small” with a trial order or pilot project of variable size in order to gain information about the ability of the LDC firm to successfully carry out a large project. We derive results relating whether and how the parties start small to the characteristics of the large project and to the …