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Full-Text Articles in Econometrics

Bubbly Booms And Welfare, Feng Dong, Yang Jiao, Haoning Sun Jul 2024

Bubbly Booms And Welfare, Feng Dong, Yang Jiao, Haoning Sun

Research Collection School Of Economics

We show the competing effects of a housing bubble on the real economy by developing a multi-sector dynamic model with housing production. On the one hand, firms can sell or collateralize their housing, so a housing bubble helps firms obtain credit to finance their investment and expand production. On the other hand, a boom in the housing sector crowds out labor in the non-housing sector. We show that housing booms can reduce social welfare both in the steady state and in the transitional dynamics only when the production externalities in the non-housing sector are sufficiently large. We quantitatively evaluate our …


Cooperation In Temporary Partnerships, Gabriele Camera, Alessandro Gioffré Apr 2024

Cooperation In Temporary Partnerships, Gabriele Camera, Alessandro Gioffré

ESI Working Papers

The literature on cooperation in infinitely repeated Prisoner’s Dilemmas covers the extreme opposites of the matching spectrum: partners, a player’s opponent never changes, and strangers, a player’s opponent randomly changes in every period. Here, we extend the analysis to settings where the opponent changes, but not in every period. In these temporary partnerships, players can deter some deviations by directly sanctioning their partner. Hence, relaxing the extreme assumption of one-period matchings can support some cooperation also off equilibrium because a class of strategies emerges that are less extreme than the typical “grim” strategy. We establish conditions supporting full …


Who Helps Tsimane Children And Adults?, Eric Schniter, Daniel K. Cummings, Paul L. Hooper, Maguin Gutierrez Cayuba, Jonathan Stieglitz, Benjamin C. Trumble, Hillard S. Kaplan, Michael D. Gurven Apr 2024

Who Helps Tsimane Children And Adults?, Eric Schniter, Daniel K. Cummings, Paul L. Hooper, Maguin Gutierrez Cayuba, Jonathan Stieglitz, Benjamin C. Trumble, Hillard S. Kaplan, Michael D. Gurven

ESI Working Papers

We consider several forms of helping behavior among Tsimane Amerindians of Bolivia, including provision of shelter, childcare, food, sickcare, loans, advice, and cultural influence. While kin selection theory is traditionally invoked to explain nepotistic nurturing of youngsters by closely related kin, much less attention has been given to understanding the help provided to children and adults by individuals without close genetic relatedness. To explain who provides the various forms of help that we consider, we evaluate support for several predictions derived from kin selection theory: that helpers are most often closely related and from an older generation, provide more help …


Wild Bootstrap Inference For Instrumental Variables Regressions With Weak And Few Clusters, Wenjie Wang, Yichong Zhang Apr 2024

Wild Bootstrap Inference For Instrumental Variables Regressions With Weak And Few Clusters, Wenjie Wang, Yichong Zhang

Research Collection School Of Economics

We study the wild bootstrap inference for instrumental variable regressions under an alternative asymptotic framework that the number of independent clusters is fixed, the size of each cluster diverges to infinity, and the within cluster dependence is sufficiently weak. We first show that the wild bootstrap Wald test controls size asymptotically up to a small error as long as the parameters of endogenous variables are strongly identified in at least one of the clusters. Second, we establish the conditions for the bootstrap tests to have power against local alternatives. We further develop a wild bootstrap Anderson–Rubin test for the full-vector …


Housing Markets Since Shapley And Scarf, Mustafa Oguz Afacan, Gaoji Hu, Jiangtao Li Apr 2024

Housing Markets Since Shapley And Scarf, Mustafa Oguz Afacan, Gaoji Hu, Jiangtao Li

Research Collection School Of Economics

Shapley and Scarf (1974) appeared in the first issue of the Journal of Mathematical Economics, and is one of the journal’s most impactful publications. As we approach the remarkable milestone of the journal’s 50th anniversary (1974–2024), this article serves as a commemorative exploration of Shapley and Scarf (1974) and the extensive body of literature that follows it.


Ambiguity And Ambiguity Attitudes Across Auctions, Cary Deck, Paan Jindapon, Tigran Melkonyan, Mark Schneider Mar 2024

Ambiguity And Ambiguity Attitudes Across Auctions, Cary Deck, Paan Jindapon, Tigran Melkonyan, Mark Schneider

ESI Working Papers

Studies of ambiguity perceptions and attitudes are moving beyond the Ellsberg urn to examine people’s responses to ambiguity in naturally occurring events, games, and financial markets. In this study, we measure ambiguity perceptions and attitudes for market prices and allocations in four classical auction formats (first-price and second-price sealed bid auctions, English and Dutch clock auctions). We find ambiguity attitudes, representing individual preferences, are stable across auctions. However, the perceived ambiguity surrounding auction prices is lowest for English clock auctions which are obviously strategyproof (OSP), followed by second-price auctions which are strategyproof (SP), followed by a tie between first-price and …


Optimal Inference For Spot Regressions, Tim Bollerslev, Jia Li, Yuexuan Ren Mar 2024

Optimal Inference For Spot Regressions, Tim Bollerslev, Jia Li, Yuexuan Ren

Research Collection School Of Economics

Betas from return regressions are commonly used to measure systematic financial market risks. "Good" beta measurements are essential for a range of empirical inquiries in finance and macroeconomics. We introduce a novel econometric framework for the nonparametric estimation of time-varying betas with high-frequency data. The "local Gaussian" property of the generic continuous-time benchmark model enables optimal "finite-sample" inference in a well-defined sense. It also affords more reliable inference in empirically realistic settings compared to conventional large-sample approaches. Two applications pertaining to the tracking performance of leveraged ETFs and an intraday event study illustrate the practical usefulness of the new procedures.


Bootstrap Inference For Quantile Treatment Effects In Randomized Experiments With Matched Pairs, Liang Jiang, Xiaobin Liu, Peter C B Phillips, Yichong Zhang Mar 2024

Bootstrap Inference For Quantile Treatment Effects In Randomized Experiments With Matched Pairs, Liang Jiang, Xiaobin Liu, Peter C B Phillips, Yichong Zhang

Research Collection School Of Economics

This paper examines methods of inference concerning quantile treatment effects (QTEs) in randomized experiments with matched-pairs designs (MPDs). Standard multiplier bootstrap inference fails to capture the negative dependence of observations within each pair and is therefore conservative. Analytical inference involves estimating multiple functional quantities that require several tuning parameters. Instead, this paper proposes two bootstrap methods that can consistently approximate the limit distribution of the original QTE estimator and lessen the burden of tuning parameter choice. Most especially, the inverse propensity score weighted multiplier bootstrap can be implemented without knowledge of pair identities.


Robust Inference On Correlation Under General Heterogeneity, Liudas Giraitis, Yuefei Li, Peter C. B. Phillips Mar 2024

Robust Inference On Correlation Under General Heterogeneity, Liudas Giraitis, Yuefei Li, Peter C. B. Phillips

Research Collection School Of Economics

Considerable evidence in past research shows size distortion in standard tests for zero autocorrelation or zero cross-correlation when time series are not independent identically distributed random variables, pointing to the need for more robust procedures. Recent tests for serial correlation and cross-correlation in Dalla, Giraitis, and Phillips (2022) provide a more robust approach, allowing for heteroskedasticity and dependence in uncorrelated data under restrictions that require a smooth, slowly-evolving deterministic heteroskedasticity process. The present work removes those restrictions and validates the robust testing methodology for a wider class of innovations and regression residuals allowing for heteroscedastic uncorrelated and non-stationary data settings. …


Panel Data Models With Time-Varying Latent Group Structures, Yiren Wang, Peter C. B. Phillips, Liangjun Su Mar 2024

Panel Data Models With Time-Varying Latent Group Structures, Yiren Wang, Peter C. B. Phillips, Liangjun Su

Research Collection School Of Economics

This paper considers a linear panel model with interactive fixed effects and unobserved individual and time heterogeneities that are captured by some latent group structures and an unknown structural break, respectively. To enhance realism, the model may have different numbers of groups and/or different group memberships before and after the break. With preliminary nuclear norm regularized estimation followed by row- and column-wise linear regressions, we estimate the break point based on the idea of binary segmentation and the latent group structures together with the number of groups before and after the break by sequential testing K-means algorithm simultaneously. It is …


Cognitive Abilities And Individual Earnings In Hybrid Continuous Double Auctions, Yan Peng, Jason Shachat, Lijia Wei, S. Sarah Zhang Feb 2024

Cognitive Abilities And Individual Earnings In Hybrid Continuous Double Auctions, Yan Peng, Jason Shachat, Lijia Wei, S. Sarah Zhang

ESI Working Papers

We study the influence of cognitive abilities, in particular reaction time, trader intuition (Theory of Mind), and cognitive reflection abilities, on human participants’ individual earnings when competing alongside algorithmic traders in continuous double auctions. In balanced markets, where each human trader has an algorithmic trader clone with the same valuations or costs, faster human reaction time significantly improves trading performance, while Theory of Mind can be detrimental to human trading performance, particularly for sellers. For unbalanced markets with humans and algorithmic traders on opposite sides of the market, the effects of cognitive abilities depend on trader role as well as …


One-Half Heuristic In Overconfidence Research, Vojtěch Zíka Feb 2024

One-Half Heuristic In Overconfidence Research, Vojtěch Zíka

ESI Working Papers

This laboratory experiment (N=120) explored the possibility that overconfidence research concerning overestimation and overplacement may be affected by the one-half heuristic, a tendency of individuals to estimate quantities with unknown distributions at half of the maximum value. The data from multiple rounds of the computerized hand game Rock–Paper–Scissors provide convincing evidence that half of the maximum is the most popular estimate and that manipulating the game’s average score can affect the direction and magnitude of estimation, averaging, and placement levels. The resulting methodological proposal is that the score participants estimate should have an expected value equal to half of the …


How Does Passive Investing Effect The Informational Efficiency Of Prices?, Brice Corgnet, Mark Desantis, Yan Peng, David Porter, Jason Shachat Feb 2024

How Does Passive Investing Effect The Informational Efficiency Of Prices?, Brice Corgnet, Mark Desantis, Yan Peng, David Porter, Jason Shachat

ESI Working Papers

We investigate the causal effects of passive investing on informational efficiency and market quality metrics by developing a novel laboratory experiment that introduces Index trackers with exogenous passive investment flows. We find that, while improving liquidity, Index tracking hurts informational efficiency, confirming our main hypothesis. Furthermore, we observe violations of the law of one price, leading to widespread and persistent arbitrage opportunities. Additionally, our research uncovers that Active traders, particularly those with private information about asset values and high cognitive ability, reap benefits from the introduction of Index tracking.


Representation And Bracketing In Repeated Games, Mouli Modak Feb 2024

Representation And Bracketing In Repeated Games, Mouli Modak

ESI Working Papers

In this experimental paper, the author investigates the framing effect of different representations of multiple strategic settings or games on a player’s strategic behavior. Two representations of the same environment are employed, wherein a player engages in two infinitely repeated prisoner’s dilemma games. In the first representation (termed Split), the stage games are shown separately. In contrast, the second representation (termed Linked) displays a combined stage game. The choice bracketing, distinguishing between Narrow and Broad bracketing, is considered a potential cause behind any disparity in behavior between the two representations. The Split representation does not necessitate broad bracketing, whereas the …


How Personalized Networks Can Limit Free Riding: A Multi-Group Version Of The Public Goods Game, Aaron S. Berman, Laurence R. Iannaccone, Mouli Modak Jan 2024

How Personalized Networks Can Limit Free Riding: A Multi-Group Version Of The Public Goods Game, Aaron S. Berman, Laurence R. Iannaccone, Mouli Modak

ESI Working Papers

People belong to many different groups, and few belong to the same network of groups. Moreover, people routinely reduce their involvement in dysfunctional groups while increasing involvement in those they find more attractive. The net effect can be an increase in overall cooperation and the partial isolation of free-riders, even if free-riders are never punished, excluded, or recognized. We formalize and test this conjecture with an agent-based social simulation and a multi-good extension of the standard repeated public goods game. Our initial results from three treatments suggest that the multi-group setting indeed raises overall cooperation and dampens the impact of …


Personal Lies, Gary Charness, Ismael Rodriguez-Lara Jan 2024

Personal Lies, Gary Charness, Ismael Rodriguez-Lara

ESI Working Papers

Using the mind game, we provide experimental evidence that people are more likely to lie when they disclose non-personal information (e.g., reporting a number they thought of) compared with personal information (e.g., reporting the last digit of their birth year). Our findings suggest that the type of information is an important factor for lying behavior.


A Conditional Linear Combination Test With Many Weak Instruments, Dennis Lim, Wenjie Wang, Yichong Zhang Jan 2024

A Conditional Linear Combination Test With Many Weak Instruments, Dennis Lim, Wenjie Wang, Yichong Zhang

Research Collection School Of Economics

We consider a linear combination of jackknife Anderson-Rubin (AR) and orthogonalized Lagrangian multiplier (LM) tests for inference in IV regressions with many weak instruments and heteroskedasticity. We choose the weight in the linear combination based on a decision-theoretic rule that is adaptive to the identification strength. Under both weak and strong identifications, the proposed linear combination test controls asymptotic size and is admissible. Under strong identification, we further show that our linear combination test is the uniformly most powerful test against local alternatives among all tests that are constructed based on the jackknife AR and LM tests only and invariant …


How Likely Is It That Omitted Variable Bias Will Overturn Your Results?, Deepankar Basu Jan 2024

How Likely Is It That Omitted Variable Bias Will Overturn Your Results?, Deepankar Basu

Economics Department Working Paper Series

Building on a recently developed methodology for sensitivity analysis that parametrizes omitted variable bias in terms of partial R-Squared measures, I propose a simple statistic to capture the severity of omitted variable bias in any observational study: the probability of omitted variable bias overturning the reported result. The central element of my proposal is formal covariate benchmarking, whereby researchers choose an observed regressor (or a group of observed regressors) to benchmark the relative strength of association of the omitted regressor with the outcome variable and with the treatment variable. These relative strengths of association function as the two sensitivity parameters …


The Estimation Of Production Functions With Monetary Values, Jesus Felipe, John Mccombie, Aashish Mehta Jan 2024

The Estimation Of Production Functions With Monetary Values, Jesus Felipe, John Mccombie, Aashish Mehta

Angelo King Institute for Economic and Business Studies (AKI)

For decades, the literature on the estimation of production functions has focused on the elimination of endogeneity biases through different estimation procedures to obtain the correct factor elasticities and other relevant parameters. Theoretical discussions of the problem correctly assume that production functions are relationships among physical inputs and output. However, in practice, they are most often estimated using deflated monetary values for output (value added or gross output) and capital. This introduces two additional problems—an errors-invariables problem, and a tendency to recover the factor shares in value added instead of their elasticities. The latter problem derives from the fact that …


National Integration And Institution Building, Haiwen Zhou Jan 2024

National Integration And Institution Building, Haiwen Zhou

Economics Faculty Publications

The mutual dependence between national integration and institution building is established in a formal model. It is shown that a decrease in transportation costs, but not necessarily an increase in population size, reduces the equilibrium number of states and the adoption of rule-based institutions. With endogenous transportation costs or endogenous population size, the unification process can feed on itself. The model is illustrated by the state of Qin's unification of China in 221 BC. During this process of national integration, transformations from relation-based governance to rule-based governance happened.


Equal Predictive Ability Tests Based On Panel Data With Applications To Oecd And Imf Forecasts, Oguzhan Akgun, Alain Pirotte, Giovanni Urga, Zhenlin Yang Jan 2024

Equal Predictive Ability Tests Based On Panel Data With Applications To Oecd And Imf Forecasts, Oguzhan Akgun, Alain Pirotte, Giovanni Urga, Zhenlin Yang

Research Collection School Of Economics

We propose two types of equal predictive ability (EPA) tests with panels to compare the predictions made by two forecasters. The first type, S-statistics, focuses on the overall EPA hypothesis, which states that the EPA holds, on average, over all panel units and over time. The second type, C-statistics, focuses on the clustered EPA hypothesis where the EPA holds jointly for a fixed number of clusters of panel units. The asymptotic properties of the proposed tests are evaluated under weak and strong cross-sectional dependence. An extensive Monte Carlo simulation shows that the proposed tests have very good finite sample properties, …


Robust Testing For Explosive Behavior With Strongly Dependent Errors, Yui Lim Lui, Peter C. B. Phillips, Jun Yu Jan 2024

Robust Testing For Explosive Behavior With Strongly Dependent Errors, Yui Lim Lui, Peter C. B. Phillips, Jun Yu

Research Collection School Of Economics

A heteroskedasticity-autocorrelation robust (HAR) test statistic is proposed to test for the presence of explosive roots in financial or real asset prices when the equation errors are strongly dependent. Limit theory for the test statistic is developed and extended to heteroskedastic models. The new test has stable size properties unlike conventional test statistics that typically lead to size distortion and inconsistency in the presence of strongly dependent equation errors. The new procedure can be used to consistently time-stamp the origination and termination of an explosive episode under similar conditions of long memory errors. Simulations are conducted to assess the finite …


Optimal Nonparametric Range-Based Volatility Estimation, Tim Bollerslev, Jia Li, Qiyuan Li Jan 2024

Optimal Nonparametric Range-Based Volatility Estimation, Tim Bollerslev, Jia Li, Qiyuan Li

Research Collection School Of Economics

We present a general framework for optimal nonparametric spot volatility estimation based on intraday range data, comprised of the first, highest, lowest, and last price over a given time-interval. We rely on a decision-theoretic approach together with a coupling-type argument to directly tailor the form of the nonparametric estimator to the specific volatility measure of interest and relevant loss function. The resulting new optimal estimators offer substantial efficiency gains compared to existing commonly used range-based procedures.


High-Dimensional Iv Cointegration Estimation And Inference, Peter C. B. Phillips, Igor L. Kheifets Jan 2024

High-Dimensional Iv Cointegration Estimation And Inference, Peter C. B. Phillips, Igor L. Kheifets

Research Collection School Of Economics

A semiparametric triangular systems approach shows how multicointegrating linkages occur naturally in an I(1) cointegrated regression model when the long run error variance matrix in the system is singular. Under such singularity, cointegrated I(1) systems embody a multicointegrated structure that makes them useful in many empirical settings. Earlier work shows that such systems may be analyzed and estimated without appealing to the associated I(2) system but with suboptimal convergence rates and potential asymptotic bias. The present paper develops a robust approach to estimation and inference of such systems using high dimensional IV methods that have appealing asymptotic properties like those …


Financial Contagion And Financial Lockdowns, Gabriele Camera, Alessandro Gioffré Dec 2023

Financial Contagion And Financial Lockdowns, Gabriele Camera, Alessandro Gioffré

ESI Working Papers

Extreme financial shocks often elicit extraordinary policy interventions that preclude financial activity on a large scale, for example as the 1933 U.S. “bank holiday.” We study these interventions using a random matching framework where the financial contagion process is explicit and the diffusion of the initial shock can be analytically characterized. The study suggests that there is scope for forced closures of individual firms or even economy-wide financial lockdowns only when firms are financially vulnerable and policy institutions are not well-functioning. Here, ordinary policy alone cannot prevent or sufficiently mitigate contagion, while complementing it with a lockdown or individual closures …


Evolution Of Primate Vocal Repertoires: Vocalization Systems As Embodied Capital For Mediating Within-Group Conflict, Eric Schniter, Mateo Peñaherrera-Aguirre Dec 2023

Evolution Of Primate Vocal Repertoires: Vocalization Systems As Embodied Capital For Mediating Within-Group Conflict, Eric Schniter, Mateo Peñaherrera-Aguirre

ESI Working Papers

Phylogenetic studies of communication help us understand evolutionary changes that led to human language – a form of primate communication, extraordinarily complex in terms of its varied vocalizations. Here we describe the macro-evolutionary role of life history traits on primate vocalization systems, informing our understanding of the relationships between social complexity and primate vocal repertoire size. We reviewed the primatological literature and collected information on the vocal repertoire size, social conflict, group size, endocranial volume, and maximum longevity of 42 non-human primate species. We conducted a set of analyses to examine the role of these factors on the macroevolution of …


Human-Robot Interactions: Insights From Experimental And Evolutionary Social Sciences, Eric Schniter Dec 2023

Human-Robot Interactions: Insights From Experimental And Evolutionary Social Sciences, Eric Schniter

ESI Working Papers

"Experimental research in the realm of human-robot interactions has focused on the behavioral and psychological influences affecting human interaction and cooperation with robots. A robot is loosely defined as a device designed to perform agentic tasks autonomously or under remote control, often replicating or assisting human actions. Robots can vary widely in form, ranging from simple assembly line machines performing repetitive actions to advanced systems with no moving parts but with artificial intelligence (AI) capable of learning, problem-solving, communicating, and adapting to diverse environments and human interactions. Applications of experimental human-robot interaction research include the design, development, and implementation of …


Enlightenment Ideals And Belief In Progress In The Run-Up To The Industrial Revolution: A Textual Analysis, Ali Almelhem, Murat Iyigun, Austin Kennedy, Jared Rubin Dec 2023

Enlightenment Ideals And Belief In Progress In The Run-Up To The Industrial Revolution: A Textual Analysis, Ali Almelhem, Murat Iyigun, Austin Kennedy, Jared Rubin

ESI Working Papers

Using textual analysis of 173,031 works printed in England between 1500 and 1900, we test whether British culture evolved to manifest a heightened belief in progress associated with science and industry. Our analysis yields three main findings. First, there was a separation in the language of science and religion beginning in the 17th century. Second, scientific volumes became more progress-oriented during the Enlightenment. Third, industrial works—especially those at the science-political economy nexus—were more progress-oriented beginning in the 17th century. It was therefore the more pragmatic, industrial works which reflected the cultural values cited as important for Britain’s takeoff.


Are Bond Returns Predictable With Real-Time Macro Data?, Dashan Huang, Fuwei Jiang, Kunpeng Li, Guoshi Tong, Guofu Zhou Dec 2023

Are Bond Returns Predictable With Real-Time Macro Data?, Dashan Huang, Fuwei Jiang, Kunpeng Li, Guoshi Tong, Guofu Zhou

Research Collection Lee Kong Chian School Of Business

We investigate the predictability of bond returns using real-time macro variables and consider the possibility of a nonlinear predictive relationship and the presence of weak factors. To address these issues, we propose a scaled sufficient forecasting (sSUFF) method and analyze its asymptotic properties. Using both the existing and the new method, we find empirically that real-time macro variables have significant forecasting power both in-sample and out-of-sample. Moreover, they generate sizable economic values, and their predictability is not spanned by the yield curve. We also observe that the forecasted bond returns are countercyclical, and the magnitude of predictability is stronger during …


Financial Crisis And Female Entrepreneurship: Evidence From South Korea, Jungho Lee, Sunha Myong Nov 2023

Financial Crisis And Female Entrepreneurship: Evidence From South Korea, Jungho Lee, Sunha Myong

Research Collection School Of Economics

We document a drastic increase in female-owned manufacturing firms in South Korea after the 1997 financial crisis. During the crisis, a major banking sector reform was conducted, and many underperforming bank branches were forced to close down. Using a geographical variation of bank branch closures during the reform, we show that the banking sector reform resulted in a rise in female entrepreneurship. We present evidence that male-owned firms were preferred by the closeddown bank branches, despite female-owned firms exhibiting lower risks and higher returns. The banking sector reform, although not explicitly aimed at addressing gender disparities, substantially benefited female entrepreneurs …