The Effects Of Borrowing Rates On Intra-Firm Disequilibria Between Equity Prices And Cds Premiums – Evidence From Dynamic Panel Analysis.,
2016
University of Warwick
The Effects Of Borrowing Rates On Intra-Firm Disequilibria Between Equity Prices And Cds Premiums – Evidence From Dynamic Panel Analysis., Robert J. Brown
Undergraduate Economic Review
Cointegration techniques are used to estimate the long run equilibrium relationship between a firm’s CDS premium and its equity price, for a panel of large-cap US firms. From these results, the estimated disequilibrium in daily CDS premiums, with respect to equity prices, is constructed. Dynamic panel methods are employed to show the importance of lagged changes in libor rates as determinants of the estimated disequilibrium. Evidence is found that the extent to which the markets deviate from equilibrium will increase as one-month libor rates rise, but, counter-intuitively, will decrease (return towards equilibrium) as longer term libor rates rise.
Rhode Island Current Conditions Index -- October 2016,
2016
University of Rhode Island
Rhode Island Current Conditions Index -- October 2016, Leonard Lardaro
The Rhode Island Current Conditions Index
No abstract provided.
Estimating The Volatility Occupation Time Via Regularized Laplace Inversion,
2016
Singapore Management University
Estimating The Volatility Occupation Time Via Regularized Laplace Inversion, Jia Li, Viktor Todorov, Tauchen
Research Collection School Of Economics
We propose a consistent functional estimator for the occupation time of the spot variance of an asset price observed at discrete times on a finite interval with the mesh of the observation grid shrinking to zero. The asset price is modeled nonparametrically as a continuous-time Itô semimartingale with nonvanishing diffusion coefficient. The estimation procedure contains two steps. In the first step we estimate the Laplace transform of the volatility occupation time and, in the second step, we conduct a regularized Laplace inversion. Monte Carlo evidence suggests that the proposed estimator has good small-sample performance and in particular it is far …
A Practical Test For Strict Exogeneity In Linear Panel Data Models With Fixed Effects,
2016
Singapore Management University
A Practical Test For Strict Exogeneity In Linear Panel Data Models With Fixed Effects, Liangjun Su, Yonghui Zhang, Jie Wei
Research Collection School Of Economics
This paper provides a practical test for strict exogeneity in linear panel data models with fixed effects when the number of individuals N goes to infinity while the number of time periods T is fixed. The test is based on the supremum of a sequence of Wald test statistics. Under suitable conditions, we establish the asymptotic distribution of the test statistic and consistency of the test. A bootstrap procedure is proposed to improve the finite sample performance and the validity of the procedure is justified. We investigate the finite sample performance of the test via a small set of Monte …
Robust Forecast Comparison,
2016
Singapore Management University
Robust Forecast Comparison, Sainan Jin, Valentina Corradi, Norman R. Swanson
Research Collection School Of Economics
Forecast accuracy is typically measured in terms of a given loss function. However, as a consequence of the use of misspecified models in multiple model comparisons, relative forecast rankings are loss function dependent. In order to address this issue, a novel criterion for forecast evaluation that utilizes the entire distribution of forecast errors is introduced. In particular, we introduce the concepts of general-loss (GL) forecast superiority and convex-loss (CL) forecast superiority; and we develop tests for GL (CL) superiority that are based on an out-of-sample generalization of the tests introduced by Linton, Maasoumi, and Whang (2005, Review of Economic Studies …
On The Robustness Of Higher Order Risk Preferences,
2016
Chapman University
On The Robustness Of Higher Order Risk Preferences, Cary Deck, Harris Schlesinger
ESI Working Papers
Economists have begun to recognize the role that higher order risk preferences play in a variety of settings. As such, several experiments have documented the degree of prudence, temperance, and to a lesser extent, edginess and bentness that laboratory subjects exhibit. More recently, researchers have argued that higher order risk preferences generally conform to mixed risk averse and mixed risk loving patterns that arise from a preference for disaggregating or aggregating harms, respectively. This paper examines the robustness of this pattern in three ways. First, it attempts to directly replicate previous results with compound lotteries over monetary outcomes. Second, it …
Dual Process Utility Theory: A Model Of Decisions Under Risk And Over Time,
2016
Chapman University
Dual Process Utility Theory: A Model Of Decisions Under Risk And Over Time, Mark Schneider
ESI Working Papers
The Discounted Expected Utility model has been a major workhorse for analyzing individual behavior for over half a century. However, it cannot account for evidence that risk interacts with time preference, that time interacts with risk preference, that many people are averse to timing risk and do not discount the future exponentially, that discounting depends on the magnitude of outcomes, that risk preferences are not time preferences, and that risk and time preferences are correlated with cognitive ability. Here we address these issues in a decision model based on the interaction of an affective and a reflective valuation process. The …
Multi-Battle Contests: An Experimental Study,
2016
University of Richmond
Multi-Battle Contests: An Experimental Study, Shakun D. Mago, Roman M. Sheremeta
ESI Working Papers
We examine behavior of subjects in simultaneous and sequential multi-battle contests, where each individual battle is modeled as an all-pay auction with complete information. In simultaneous best-of-three contests, subjects are predicted to make positive bids in all three battles, but we find that subjects often make positive bids in only two battles. In sequential contests, theory predicts sizable bids in the first battle and no bids in the subsequent battles. Contrary to this prediction, subjects significantly underbid in the first battle and overbid in subsequent battles. Consequently, instead of always ending in the second battle, contests often proceeds to the …
Impulsive Behavior In Competition: Testing Theories Of Overbidding In Rent-Seeking Contests,
2016
Chapman University
Impulsive Behavior In Competition: Testing Theories Of Overbidding In Rent-Seeking Contests, Roman M. Sheremeta
ESI Working Papers
Researchers have proposed various theories to explain overbidding in rent-seeking contents, including mistakes, systematic biases, the utility of winning, and relative payoff maximization. Through an eight-part experiment, we test and find significant support for the existing theories. Also, we discover some new explanations based on cognitive ability and impulsive behavior. Out of all explanations examined, we find that impulsivity is the most important factor explaining overbidding in contests.
Rhode Island Current Conditions Index -- September 2016,
2016
University of Rhode Island
Rhode Island Current Conditions Index -- September 2016, Leonard Lardaro
The Rhode Island Current Conditions Index
No abstract provided.
Can Noncompliant Behavior Explain Racial/Ethnic Disparities In The Use Of Force By The Nypd? An Econometric Analysis Of New York's Stop-And-Frisk,
2016
CUNY Hunter College
Can Noncompliant Behavior Explain Racial/Ethnic Disparities In The Use Of Force By The Nypd? An Econometric Analysis Of New York's Stop-And-Frisk, Omari-Khalid Rahman
Theses and Dissertations
This paper seeks to analyze spatiotemporal variations in NYPD policing patterns in an attempt to identify the causal mechanism(s) driving the observed racial/ethnic disparities; specifically, it addresses questions of how changing neighborhood demographics influence the decision-making of NYPD officers/precincts as it relates to their controversial Stop-and-Frisk policy.
Residential Electricity Demand In El Paso: 1977-2014,
2016
University of Texas at El Paso
Residential Electricity Demand In El Paso: 1977-2014, Thomas M. Fullerton Jr., David R. Macias, Adam G. Walke
Border Region Modeling Project
This study analyzes the demand for residential electricity in El Paso, Texas, USA. Annual data are provided by El Paso Electric Company covering the period from 1977 to 2014. This study reports a negative long-run income elasticity for residential electricity demand. Per customer residential electricity usage declines by 0.68 percent for every 1-percent increase in real per capita income over the long run, indicating that electricity is treated as an inferior good by households in this metropolitan economy. That result runs counter to many earlier studies, but corroborates recent empirical evidence for Seattle, Washington and other regions of the United …
Asymptotic Theory For Estimating The Persistent Parameter In The Fractional Vasicek Model,
2016
Zhejiang University
Asymptotic Theory For Estimating The Persistent Parameter In The Fractional Vasicek Model, Weilin Xiao, Jun Yu
Research Collection School Of Economics
This paper develops the asymptotic theory for the least squares (LS) estimator of the persistent parameter in the fractional Vasicek model when a continuous record of observations is available. The fractional Vasicek model is assumed to be driven by the fractional Brownian motion with a known Hurst parameter greater than or equal to one half. It is shown that the asymptotic properties depend on the sign of the persistent parameter, corresponding to the stationary case, the explosive case and the null recurrent case. The strong consistency and the asymptotic distribution are obtained in all three cases.
Testing Of Non-Inferiority And Superiority For Three-Arm Clinincal Studies With Multiple Experimental Treatments,
2016
Singapore Management University
Testing Of Non-Inferiority And Superiority For Three-Arm Clinincal Studies With Multiple Experimental Treatments, Junjiang Zhong, Koon Shing Kwong, Siu Hung Cheung
Research Collection School Of Economics
The purpose of a non-inferiority trial is to assert the efficacy of an experimental treatment compared with a reference treatment by showing that the experimental treatment retains a substantial proportion of the efficacy of the reference treatment. Statistical methods have been developed to test multiple experimental treatments in three-arm non-inferiority trials. In this paper, we report the development of procedures that simultaneously test the non-inferiority and the superiority of experimental treatments after the assay sensitivity has been established. The advantage of the proposed test procedures is the additional ability to identify superior treatments while retaining an non-inferiority testing power comparable …
Asset Pricing With Financial Bubble Risk,
2016
Singapore Management University
Asset Pricing With Financial Bubble Risk, Ji Hyung Lee, Peter C. B. Phillips
Research Collection School Of Economics
This paper characterizes systematic risk stemming from the possible occurrence of price bubbles and measures the impact of this additional risk factor on asset prices. Historical stock market behavior and recent empirical experience have led economists and policy makers to acknowledge that price bubbles in financial markets do occur and need to be accounted for in risk analysis. New econometric tools for analyzing mildly explosive behavior (Phillips and Magdalinos, 2007; Phillips et al., 2011) have made it possible to detect the presence of bubbles in data and to date stamp their origination and collapse, providing empirical confirmation of such episodes …
Modeling Speculative Bubbles With Diverse Investor Expectations,
2016
Singapore Management University
Modeling Speculative Bubbles With Diverse Investor Expectations, Peter C. B. Phillips
Research Collection School Of Economics
We construct a model of asset market exuberance, collapse and recovery using subjective investor-based rational expectations about the impact of fundamentals on the market price. Investors are assumed to have heterogeneous market sentiments, allowing them to be exuberant, cautious, or fundamentalist via boundary conditions that describe their respective views of the market impact of the same economic fundamentals. Equilibrium solution paths of the model take varying forms, depending on the parameter settings that reflect the importance of each type of market participant. This rational expectations model of asset pricing is shown to be consistent with a simple explosive continuous time …
Asset Pricing With Financial Bubble Risk,
2016
Singapore Management University
Asset Pricing With Financial Bubble Risk, Ji Hyung Lee, Peter C. B. Phillips
Research Collection School Of Economics
This paper characterizes systematic risk stemming from the possible occurrence of price bubbles and measures the impact of this additional risk factor on asset prices. Historical stock market behavior and recent empirical experience have led economists and policy makers to acknowledge that price bubbles in financial markets do occur and need to be accounted for in risk analysis. New econometric tools for analyzing mildly explosive behavior (Phillips and Magdalinos, 2007; Phillips et al., 2011) have made it possible to detect the presence of bubbles in data and to date stamp their origination and collapse, providing empirical confirmation of such episodes …
Endogenous Market Formation And Monetary Trade: An Experiment,
2016
Chapman University
Endogenous Market Formation And Monetary Trade: An Experiment, Gabriele Camera, Dror Goldberg, Avi Weiss
ESI Working Papers
The theory of money assumes decentralized bilateral exchange and excludes centralized multilateral exchange. However, endogenizing the exchange process is critical for understanding the conditions that support the use of money. We develop a “travelling game” to study the spontaneous emergence of decentralized and centralized exchange, theoretically and experimentally. Players located on separate “islands” can either trade locally, or pay a cost to trade elsewhere, so decentralized and centralized markets can both emerge in equilibrium. The latter maximize trade meetings and are socially efficient; the former minimize trade costs through the use of money. In the laboratory, centralized exchange more frequently …
Do Economic Inequalities Affect Long-Run Cooperation?,
2016
Chapman University
Do Economic Inequalities Affect Long-Run Cooperation?, Gabriele Camera, Cary Deck, David Porter
ESI Working Papers
Does inequality affect a group’s cohesion and ability to prosper? Participants in laboratory economies played an indefinite sequence of helping games in random, anonymous pairs. A coin flip determined donor and recipient roles in each pair. This random shock ensured equality of opportunity but not of results, because earnings depended on realized shocks. We manipulated the ability to condition choices on this uncontrollable inequality source. In all treatments, uncertain ending supports multiple Pareto-ranked equilibria, including full cooperation. Theoretically, inequalities do not alter the incentives’ structure. Empirically, inequality disclosures altered conduct, weakened norms of mutual support and reduced efficiency.
Focality And Asymmetry In Multi-Battle Contests,
2016
University of East Anglia
Focality And Asymmetry In Multi-Battle Contests, Subhashish M. Chowdhury, Dan Kovenock, David Rojo Arjona, Nathaniel Wilcox
ESI Working Papers
This article examines behavior in two-person constant-sum Colonel Blotto games in which each player maximizes the expected total value of the battlefields won. A lottery contest success function is employed in each battlefield. Recent experimental research on such games provides only partial support for Nash equilibrium behavior. We hypothesize that the salience of battlefields affects strategic behavior (the salient target hypothesis). We present a controlled test of this hypothesis – against Nash predictions – when the sources of salience come from certain asymmetries in either battlefield values or labels (as in Schelling (1960)). In both cases, subjects over-allocate the resource …
