Economics Commons^™

The Value Of Arbitrage, Eduardo Dávila, Daniel Graves, Cecilia Parlatore

Cowles Foundation Discussion Papers

This paper studies the social value of closing price differentials in financial markets. We show that arbitrage gaps (price differentials between markets) exactly correspond to the marginal social value of executing an arbitrage trade. We further show that arbitrage gaps and measures of price impact are sufficient to compute the total social value from closing an arbitrage gap. Theoretically, we show that, for a given arbitrage gap, the total social value of arbitrage is higher in more liquid markets. We apply our framework to compute the welfare gains from closing arbitrage gaps in the context of covered interest parity violations …

Paso Del Norte Economic Indicator Review, February, Hunt Institute For Global Competitiveness

Technical Reports

No abstract provided.

Optimal Inter-Release Time Between Sequentially Released Products, Jackie Luan, K. Sudhir

Cowles Foundation Discussion Papers

Marketers routinely use timing as a segmentation device through sequential product releases. While there has been much theoretical research on the optimal introduction strategy of sequential releases, there is little empirical research on this problem. This paper develops an econometric model to empirically solve the inter-release timing problem: it involves (1) developing and estimating a structural model of consumers’ choice for sequentially released products and (2) using the estimates of the structural model to solve for the optimal inter-release time. The empirical application focuses on the movie industry, where we specifically address the issue of the inter-release time between a …

Essays On Empirical Asset Pricing Models, Somayeh Ahmadi

Dissertations, Theses, and Capstone Projects

This thesis examines co-movement across industry return and value and momentum asset price anomalies through a new perspective and uses machine learning and spatial econometrics approaches. The first chapter examines the main approaches developed in the cross-section asset pricing literature for finding risk variables. The second chapter focuses on spatial co-movement across US industry returns. We show that spatial co-movement explains the variance in US industry returns after accounting for exposure to common variables, serial dynamics, and industry sector-specific characteristics using a dynamic spatial panel data model. The results show that an investment strategy that buys industry portfolios with high …

Hudson Yards: Hybrid Capital's New Home, Massimo D. Scoditti

Dissertations, Theses, and Capstone Projects

This thesis focuses on the material and metaphysical aspects of the Hudson Yards, the largest private development in US History. With its roots in the administration of Michael Bloomberg, the site is representative of neoliberal ideology. It is also one in which cultural production is central. This is in terms of the rationalization and mythos of the building of the space itself and the dreamworlds created to obscure the mechanisms of extraction and accumulation that make such a complex possible. The Hudson Yards is particularly interesting because, as Cindi Katz might suggest, topography lines connect it to transnational capital. And …

Liquidity Commonality With Factor Models, Ernesto Garcia Iii

Dissertations, Theses, and Capstone Projects

Market microstructure research has recently devoted attention to a phenomenon called commonality in liquidity. In this dissertation, I will analyze commonality in liquidity using a novel factor model approach and a generalized definition of commonality in liquidity. This analysis will show that commonality in liquidity is rarely a marketwide phenomenon and is mostly restricted to stocks with a large market capitalization. Additionally, commonality in liquidity is a very recent phenomenon whose appearance coincides with a rise in passive investing after the Dotcom Bubble burst and, more so, after the 2008 Financial Crisis. I will present evidence that suggests commonality in …

Slices Of The Big Apple: A Visual Explanation And Analysis Of The New York City Budget, Joanne Ramadani

Dissertations, Theses, and Capstone Projects

As a component of government, budgets are fundamental not only to improving the quality of a shared society, but also to understanding what our government officials consider to be their priorities. However, most budgets can be difficult to understand, using terms that are not familiar to people who have not studied finance or economics. To that end, Slices of the Big Apple is an interactive, centralized narrative website that uses visualizations at its core in order to: 1) facilitate a holistic understanding of the New York City government budget for NYC residents; and 2) conduct a five-year analysis of Community …

Essays In Development Macroeconomics, Miguel Orozco Vazquez

Dissertations, Theses, and Capstone Projects

This dissertation consists of three chapters that cover topics on development macroeconomics.

Chapter 1 - Misallocation of Resources and Total Factor Productivity: Evidence from Mexico. This paper aims to measure the gross output loss due to misallocation of resources in the manufacturing and service sectors in Mexico during 2008-2018 and identify the inputs of production related to it. To do so, I use Mexican Economic Censuses and an extension of Hsieh and Klenow (2009). I also include resource misallocation computations using data processed with a Bayesian model for editing and imputing data to correct for measurement error (MEC data), which …

Essays In Monetary And Macroprudential Policies, Mikheil Dvalishvili

Dissertations, Theses, and Capstone Projects

Chapter 1 Using a medium scale general equilibrium New Keynesian business cycle model with macroprudential policy and news shocks I study the effectiveness of various combinations of the monetary and macroprudential policies. I incorporate defaults both in the banking sector and households. The results show that out of the policy strategies considered the standard Taylor rule combined with the LTV requirement that reacts countercyclically to the deviation of house prices from the steady state yields higher welfare as compared with all the other strategies considered. Additionally, the standard Taylor rule combined with either of the countercyclical LTV requirements mitigates the …

How Receiving A Pell Grant Affects Students’ Work Hours, Michael S. Kofoed

Upjohn Institute Policy and Research Briefs

No abstract provided.

The Efficiency Of Occupational Licensing During The Gilded And Progressive Eras: Evidence From Judicial Reviews, Mark T. Kanazawa

Department of Economics Working Paper Series

No abstract provided.

Essays On Labor Economics, Gabriel Movsesyan

Dissertations, Theses, and Capstone Projects

In the first chapter, I evaluate the wage impacts from exogenous and endogenous peer effects within different metropolitan areas. I construct comparison groups for workers within the same industry and Public Use Microdata Area (PUMA) residence based on support from existing literature on social networks, and estimate peer and network effects in a spatial auto-regressive model with a network structure that in- corporates group fixed effects. Inclusion of these effects reveals that both observed and unobserved factors within each network have significant effects on individual outcomes. This is the first attempt to estimate the social effects on wages using the …

A Multilevel Analysis Of Political Risk, Marlon J. Guzman Valdera

Dissertations, Theses, and Capstone Projects

This essay aims to diminish the conceptual fragmentation that exists, in relation to political risk, by introducing a multilevel approach to assess risk. While traditional approaches understand political risk to be a result of the political action of host-states against multinationals, this essay shows that there are other actors, like the host-nation civil society and the international community, that also play a role in the production of political risk. Although traditional approaches assert that political risk can solely target multinationals individually, this paper states that risk can affect a firm at an industrial and country level. I claim that political …

Borderplex Business Barometer, Volume 6, Number 2, Thomas M. Fullerton Jr., Steven L. Fullerton

Border Region Modeling Project

No abstract provided.

Borderplex Economic Outlook To 2023, Thomas M. Fullerton Jr., Steven L. Fullerton

Border Region Modeling Project

No abstract provided.

Spatial Wage Curves For Formal And Informal Workers In Turkey, Badi H. Baltagi, Yusuf Soner Başkaya

Center for Policy Research

This paper estimates spatial wage curves for formal and informal workers in Turkey using individual level data from the Turkish Household Labor Force Survey (THLFS) provided by TURKSTAT for the period 2008-2014. Unlike previous studies on wage curves for formal and informal workers, we extend the analysis to allow for spatial effects. We also consider household characteristics that would affect the selection into formal employment, informal employment, and non-employment. We find that the spatial wage curve relation holds both for formal and informal workers in Turkey for a variety of specifications. In general, the wages of informal workers are more …

Bayesian Estimation Of Multivariate Panel Probits With Higher-Order Network Interdependence And An Application To Firms' Global Market Participation In Guangdong, Badi H. Baltagi, Peter H. Egger, Michaela Kesina

Center for Policy Research

This paper proposes a Bayesian estimation framework for panel-data sets with binary dependent variables where a large number of cross-sectional units is observed over a short period of time, and cross-sectional units are interdependent in more than a single network domain. The latter provides for a substantial degree of flexibility towards modelling the decay function in network neighborliness (e.g., by disentangling the importance of rings of neighbors) or towards allowing for several channels of interdependence whose relative importance is unknown ex ante. Besides the flexible parameterization of cross-sectional dependence, the approach allows for simultaneity of the equations. These features should …

Transitioning To A Circular Economy: A Systematic Review Of Its Drivers And Barriers, Jovan Tan, Fabien Jianwei Tan, Seeram Ramakrishna

Research Collection Lee Kong Chian School Of Business

Advancing societal's progress to achieve circularity is imperative as our linear (take, make, waste) economic model is highly unsustainable. It depletes our natural resources and substantially contributes to pollution and global greenhouse gas emissions. Our continued participation in the linear economy will also expose businesses to volatile resource prices and supply disruptions resulting from the scarcity of critical materials and geopolitical factors. Hence, there are compelling reasons for businesses to transit and participate in the circular economy. However, anecdotal evidence suggests limited practical implementations. Therefore, this systematic review aims to determine the most significant drivers and barriers that influence business …

Domains For Well Behaved Monotonic Social Choice Functions, Salles Paulo Daniel Ramos

Research Collection School Of Economics

We present here a set of necessary and sufficient conditions for an MD-Connected Domain to support a Well Behaved Monotonic Social Choice Function. We require the domain to have a minimal number of preferences in which a pair of alternatives flips their relation, and these reversals must occurr in accordance to a tree graph. While this condition cannot be sum-marized by a set of restrictions on individual preferences, we provide two alternative characterizations that can, one that is necessary and another that is sufficient.

Risk Price Variation: The Missing Half Of Empirical Asset Pricing, Andrew John Patton, Brian M. Weller

Research Collection School Of Economics

Equal compensation across assets for the same risk exposures is a bedrock of asset pricing theory and empirics. Yet real-world frictions can violate this equality and create apparently high Sharpe ratio opportunities. We develop new methods for asset pricing with cross-sectional heterogeneity in compensation for risk. We extend k-means clustering to group assets by risk prices and introduce a formal test for whether differences in risk premiums across market segments are too large to occur by chance. We find significant evidence of cross-sectional variation in risk prices for almost all combinations of test assets, factor models, and time periods considered.

Securing Repo: Counterparty Risk And Collateral Supply Effects In The Tri-Party Repo Market, Stephen H. Frank

Doctoral Dissertations (DBA)

I examine the co-variance between tri-party repurchase agreement (repo) spreads and proxies for collateral values and counterparty risk. Since the Global Financial Crisis of 2008 (GFC), the Federal Reserve (Fed) has taken measures to mitigate repo market instability. These measures have collectively placed the Fed astride repo markets as ongoing borrower, lender and purchaser of US Treasury and Agency securities. By analyzing the relationships between repo spreads, the US 10-year yield and the TED spread, I assess the effectiveness of Fed measures to mitigate repo market instability. Using multiple breakpoint Bai-Perron regression and Markov Switching tests, I find that these …

Investing In Low-Trust Countries: On The Role Of Social Trust In The Global Mutual Fund Industry, Massimo Massa, Chengwei Wang, Hong Zhang, Jian Zhang

Research Collection Lee Kong Chian School Of Business

We hypothesize that social trust, in mitigating contracting incompleteness, may have an important effect on the activeness and effectiveness of delegated portfolio management. Using a complete sample of worldwide open-end mutual funds, we find that trust is positively associated with the activeness of funds and that trust-related active share delivers superior performance (e.g., approximately 2% per year for cross-border investments). Moreover, "trust in the market" and "trust in managers" play important yet different roles for different types of cross-border delegated portfolio management. Our results suggest that trust acts as a fundamental building block for delegated portfolio management.

The No-Arbitrage Hypothesis And Inertia In Forward Markets, José Luis Ferreira, Praveen Kujal, Stephen Rassenti

ESI Working Papers

Allaz (1992) showed that the no-arbitrage condition in forward markets is obtained as a feature of the equilibrium if the model allows for strategic behavior on the part of the buyers. He showed that having active buyers is equivalent to passive buyers plus the no-arbitrage hypothesis. We test this experimentally in a forward market by allowing for active buyer’s under exogenously or endogenously determined market closure. We further test an inertia hypothesis that looks at whether past participation in a spot-market results in quantities being limited in the forward market stage. Importantly, the no-arbitrage condition can only be tested with …

Pell Grants And Labor Supply: Evidence From A Regression Kink, Michael S. Kofoed

Upjohn Institute Working Papers

A concern in higher education policy is that students are taking longer to graduate. One possible reason for this observation is an increase in off-campus labor market participation among college students. Financial aid may play a role in the labor/study choice of college students—as college becomes more affordable, students my substitute away from work and toward increased study. I use data from the National Postsecondary Student Aid Study (NPSAS) to exploit nonlinearity in the Pell Grant formula to estimate a regression kink and regression discontinuity designs. I find that conditional on receiving the minimum of $550, students reduce their labor …

Nonignorable Missing Data, Single Index Propensity Score And Profile Synthetic Distribution Function, Xuerong Chen, Denis H. Y. Leung, Jing Qin

Research Collection School Of Economics

In missing data problems, missing not at random is difficult to handle since the response probability or propensity score is confounded with the outcome data model in the likelihood. Existing works often assume the propensity score is known up to a finite dimensional parameter. We relax this assumption and consider an unspecified single index model for the propensity score. A pseudo-likelihood based on the complete data is constructed by profiling out a synthetic distribution function that involves the unknown propensity score. The pseudo-likelihood gives asymptotically normal estimates. Simulations show the method compares favorably with existing methods.

Short Selling Etfs, Frank Weikai Li, Qifei Zhu

Research Collection Lee Kong Chian School Of Business

We provide novel evidence that arbitrageurs use exchange-traded funds (ETFs) as an avenue to circumvent short-sale constraints at the stock level. Using a large sample of U.S. equity ETF holdings, we document that shorting activity on ETFs rises with the difficulty of shorting underlying stocks. Stocks heavily shorted via their holding ETFs underperform those that are lightly shorted. The return predictability of ETF shorting is distinct from stock-level shorting measures and is concentrated among stocks that face severe arbitrage constraints. These findings suggest that ETFs allow arbitrageurs to target overpriced stocks that are otherwise difficult to short.

Subjective Wellbeing And Intergenerational Mobility Of Youths In Singapore, Kong Weng Ho, Solomon Soh

Research Collection School Of Economics

Singapore has been enjoying persistently high real growth rates for the past 6 decades. On average, real per capita Gross Domestic Product (GDP) has grown from S$5603 in 1961 to S$88991 in 2019 with an average annual real per capita growth rate of 4.88%. The mean number of years of schooling for residents aged 25 and over has increased from 3.1 (Barro & Lee, 2001) in 1960 to 11.2 in 2019 while the life expectancy at birth for residents has also increased from 62.9 years in 1960 to 83.6 in 2019 (Department of Statistics, 2019). Although these figures reflect trneds …

Short-Term Impact Of Covid-19 On Consumption Spending And Its Underlying Mechanisms: Evidence From Singapore, Seonghoon Kim, Kanghyock Koh, Xuan Zhang

Research Collection School Of Economics

We examine the short-term impact of COVID-19 on consumption spending and labor market outcomes. Using monthly panel data of individuals mainly aged 50–70 in Singapore, we find that COVID-19 reduced consumption spending and labor market outcomes immediately after its outbreak, and its negative impact quickly evolved. At its peak, the pandemic reduced total household consumption spending by 22.8% and labor income by 5.9% in April. Probability of full-time work also went down by 1.2 pp and 6.0 pp in April and May, respectively, but employment and self-employment were only mildly affected. Our heterogeneity analysis indicates that the reduction in consumption …

Heterogeneous Health Effects Of Medical Marijuana Legalization: Evidence From Young Adults In The United States, Junxing Chay, Seonghoon Kim

Research Collection School Of Economics

Legalizing marijuana for medical purposes is a longstanding debate. However, evidence of marijuana's health effects is limited, especially for young adults. We estimate the health impacts of medical marijuana laws (MML) in the U.S. among young adults aged 18–29 years using the difference-in-differences method and data from the Behavioral Risk Factors Surveillance System. We find that having MMLs with strict regulations generate health gains, but not in states with lax regulations. Our heterogeneity analysis results indicate that individuals with lower education attainments, with lower household income and without access to health insurance coverage gain more health benefits from MML with …

A Panel Clustering Approach To Analyzing Bubble Behavior, Yanbo Liu, Peter C. B. Phillips, Jun Yu

Research Collection School Of Economics

This study provides new mechanisms for identifying and estimating explosive bubbles in mixed-root panel autoregressions with a latent group structure. A post-clustering approach is employed that combines a recursive k-means clustering al-gorithm with panel-data test statistics for testing the presence of explosive roots in time series trajectories. Uniform consistency of the k-means clustering algorithm is established, showing that the post-clustering estimate is asymptotically equivalent to the oracle counterpart that uses the true group identities. Based on the estimated group membership, right-tailed self-normalized t-tests and coefficient-based J-tests, each with pivotal limit distributions, are introduced to detect the explosive roots. The usual …