Economics Letters
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#1Andreas Klümper (University of Bonn)
#2Matthias Kräkel (University of Bonn)H-Index: 17
Abstract We modify the Holmstrom-Milgrom model by letting the agent neglect the correlation between performance measures. Whenever true and perceived correlation are sufficiently low, correlation neglect enhances material welfare and expected profit. Otherwise, material welfare diminishes, and the agent may benefit.
Abstract In this paper we examine the finite sample bias of sample skewness estimator for financial returns. We show that the bias of conventional sample skewness comes from two sources: the covariance between past return and future volatility, known as the leverage effect, and the covariance between past volatility and future return, commonly referred to as the volatility feedback effect. We derive explicit expressions for this bias and propose a nearly unbiased skewness estimator under mild as...
#1Hang Cao (Jiangxi University of Finance and Economics)
#2Leonard F.S. Wang (ZUEL: Zhongnan University of Economics and Law)H-Index: 14
Abstract We revisit the social desirability of entry in a vertical structure by showing that, if the input supplier has market power, social desirability of entry of downstream producers depends on the asymmetric marginal costs among competing firms. Under constant returns to scale, entry in the final goods market can be socially insufficient when entrants are inefficient, but it can be socially excessive if the cost of entrants is sufficiently low compared to the incumbents.
#1Youhong Ben (Jiangsu University)
#2Feiyu Jiang (THU: Tsinghua University)
Abstract We derive the asymptotic distribution of autocorrelation of squared residuals for a wide class of conditional heteroscedastistic models when some parameters lie on the boundary. The limiting distribution of the portmanteau test statistic is no longer chi-square but taking a quadratic form of a normally distributed random variable which is projected onto a convex cone. Simulations are conducted and they reveal that using conventional chi-square asymptotics may lead to erroneous decisions...
#1Daiki Kishishita (Ridai: Tokyo University of Science)H-Index: 1
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Abstract Various collective action problems can be described as a discrete public goods game with a threshold. In this game, players may be reluctant to contribute to the provision of public goods when the threshold value is uncertain. We derive equilibria when players face ambiguity (i.e., Knightian uncertainty) on the threshold value by using Choquet expected utility. Furthermore, we show that in a class of neo-additive capacities, an increase in ambiguity decreases the equilibrium maximal num...
#1Lubomir Cingl (University of Economics, Prague)H-Index: 3
#2Vaclav Korbel (Charles University in Prague)
Abstract Evidence of external validity of laboratory measures of the propensity to cheat is scarce. We conduct a lab-in-the-field experiment with 303 youths incarcerated in juvenile detention centers in the Czech Republic to study whether a laboratory measure of cheating correlates with their field behavior. We combine two complementary field-behavior measures: current (mis-)behavior reported by detention center staff as a short-term individual characteristic, and a sum of the types of delinquen...
#1Shaoping Wang (HUST: Huazhong University of Science and Technology)H-Index: 2
Last. Ximing Wu
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Abstract The likelihood cross validation (LCV) and the least square cross validation (LSCV) are two commonly used methods of bandwidth selection in kernel density estimation. The LCV is generally more efficient but sensitive to tail-heaviness; in contrast, the LSCV fares well for heavy-tailed distributions but tends to undersmooth and is generally more variable. In this study, we propose two novel kernel functions that are robust against heavy-tailed distributions and at the same time adaptive w...
#1Jie Wei (HUST: Huazhong University of Science and Technology)H-Index: 1
Last. Hui Chen
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Abstract We propose a data driven determination method of the number of factors by cross validation (CV) in approximate factor models. A K-fold CV is applied along each of the two directions (individual and time) of a panel dataset. We prove the consistency of the proposed twice K-fold CV under mild conditions. Monte Carlo simulations demonstrate superior and robust performance of our selection method in comparison with existing approaches, especially at small panels with moderate units or time ...
#1Deborah Gefang (University of Leicester)
#2Gary Koop (University of Strathclyde)H-Index: 42
Last. Aubrey Poon (University of Strathclyde)H-Index: 2
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Abstract Mixed frequency Vector Autoregressions (MF-VARs) can be used to provide timely and high frequency estimates or nowcasts of variables for which data is available at a low frequency. Bayesian methods are commonly used with MF-VARs to overcome over-parameterization concerns. But Bayesian methods typically rely on computationally demanding Markov Chain Monte Carlo (MCMC) methods. In this paper, we develop Variational Bayes (VB) methods for use with MF-VARs using Dirichlet-Laplace global-loc...
Abstract We study whether nudging can improve payment morale for taxes and dues when enforcement through public institutions is low because of social reasons. In a natural field experiment involving the parents of children who attend lessons in a municipal music school, we find that nudging parents with appeals to children’s education improves the punctual payment of dues by about five percentage points, which is considerable given a base rate of only 48%. The effect persists even when the nudge...
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Mathematical economics