Open Access. Powered by Scholars. Published by Universities.®

Social and Behavioral Sciences Commons

Open Access. Powered by Scholars. Published by Universities.®

2009

Finance

Institution
Keyword
Publication
Publication Type
File Type

Articles 1 - 30 of 130

Full-Text Articles in Social and Behavioral Sciences

Prediction Markets To Forecast Electricity Demand, Peter Cramton, Luciano De Castro Mar 2010

Prediction Markets To Forecast Electricity Demand, Peter Cramton, Luciano De Castro

Luciano I. de Castro

Forecasting electricity demand for future years is an essential step in resource planning. A common approach is for the system operator to predict future demand from the estimates of individual distribution companies. However, the predictions thus obtained may be of poor quality, since the reporting incentives are unclear. We propose a prediction market as a form of forecasting future demand for electricity. We describe how to implement a simple prediction market for continuous variables, using only contracts based on binary variables. We also discuss specific issues concerning the implementation of such a market.


Executive Incentives And Corporate Decisions: The Risk Management Channel, Jeremy O. Skog Dec 2009

Executive Incentives And Corporate Decisions: The Risk Management Channel, Jeremy O. Skog

Publicly Accessible Penn Dissertations

This paper provides evidence that insurance executives respond to their compensation incentives by adjusting observable risk-management policy variables – the reinsurance purchase decision, type of business conducted, and firm leverage. Executive incentives are modeled by the executive sensitivity of wealth to stock price (Delta) and stock volatility (Vega). Firms respond to increased executive incentives to bear risk by purchasing less reinsurance, but also conducting less business in long-tailed lines – a change which rewards the executive through increased market volatility. The cost of altering executive incentives to effect firm policy is much less than a similar change in firm structural variables.


Event Studies In Finance: Discussion, Carlo Drago Dec 2009

Event Studies In Finance: Discussion, Carlo Drago

Carlo Drago

No abstract provided.


Ceo Compensation And Performance In Family Firms By Barontini And Bozzi: Discussion, Carlo Drago Dec 2009

Ceo Compensation And Performance In Family Firms By Barontini And Bozzi: Discussion, Carlo Drago

Carlo Drago

No abstract provided.


A Pitch For Microfinance: Using An Animation To Promote An Economic Movement, Yelena Kozlova Dec 2009

A Pitch For Microfinance: Using An Animation To Promote An Economic Movement, Yelena Kozlova

Art and Design

Microfinance refers to the idea of providing financial services to low-income clients. The purpose of this project was to create an animation using Adobe Flash that could be published online to inform the public about microfinance and to encourage the viewers to take part in this movement.


A Crop Yield Expectation Stochastic Process With Beta Distribution As Limit, David A. Hennessy Nov 2009

A Crop Yield Expectation Stochastic Process With Beta Distribution As Limit, David A. Hennessy

CARD Working Papers

The modeling of price risk in the theory and practice of commodity risk management has been developed far beyond that of crop yield risk. This is in large part due to the use of plausible stochastic price processes. We use the Pólya urn to identify and develop a model of the crop yield expectation stochastic process over a growing season. The process allows a role for agronomic events, such as growing degree days. The model is internally consistent in adhering to the martingale property. The limiting distribution is the beta, commonly used in yield modeling. By applying binomial tree analysis ...


Dating The Timeline Of Financial Bubbles During The Subprime Crisis, Peter C. B. Phillips, Jun Yu Nov 2009

Dating The Timeline Of Financial Bubbles During The Subprime Crisis, Peter C. B. Phillips, Jun Yu

Research Collection School Of Economics

A new recursive regression methodology is introduced to analyze the bubble characteristics of various financial time series during the subprime crisis. The methods modify a technique proposed in Phillips, Wu, and Yu (2011) and provide a technology for identifying bubble behavior with consistent dating of their origination and collapse. The tests serve as an early warning diagnostic of bubble activity and a new procedure is introduced for testing bubble migration across markets. Three relevant financial series are investigated, including a financial asset price (a house price index), a commodity price (the crude oil price), and one bond price (the spread ...


Explosive Behavior In The 1990s Nasdaq: When Did Exuberance Escalate Asset Values?, Peter C. B. Phillips, Yangru Wu, Jun Yu Nov 2009

Explosive Behavior In The 1990s Nasdaq: When Did Exuberance Escalate Asset Values?, Peter C. B. Phillips, Yangru Wu, Jun Yu

Research Collection School Of Economics

A recursive test procedure is suggested that provides a mechanism for testing explosive behavior, date-stamping the origination and collapse of economic exuberance, and providing valid confidence intervals for explosive growth rates. The method involves the recursive implementation of a right-side unit root test and a sup test, both of which are easy to use in practical applications, and some new limit theory for mildly explosive processes. The test procedure is shown to have discriminatory power in detecting periodically collapsing bubbles, thereby overcoming a weakness in earlier applications of unit root tests for economic bubbles. Some asymptotic properties of the Evans ...


Credit Derivatives: Systemic Risks And Policy Options, John Kiff, Jennifer Elliott, Elias Kazarian, Jodi Scarlata, Carolyne Spackman Oct 2009

Credit Derivatives: Systemic Risks And Policy Options, John Kiff, Jennifer Elliott, Elias Kazarian, Jodi Scarlata, Carolyne Spackman

John Kiff

Credit derivative markets are largely unregulated, but calls are increasingly being made for changes to this "hands off" stance, amidst concerns that they helped to fuel the current financial crisis, or that they could be a cause of the next one. The purpose of this paper is to address two basic questions: (i) do credit derivative markets increase systemic risk; and (ii) should they be regulated more closely, and if so, how and to what extent? The paper begins with a basic description of credit derivative markets and recent events, followed by an assessment of their recent association with systemic ...


Are U.S. Corn And Soybeans Becoming More Drought Tolerant?, Tian Yu, Bruce A. Babcock Oct 2009

Are U.S. Corn And Soybeans Becoming More Drought Tolerant?, Tian Yu, Bruce A. Babcock

CARD Working Papers

An objective drought index that measures the dry and hot conditions adversely affecting crop yields is used in a regression analysis to test whether corn and soybeans have become more drought tolerant. Results indicate that corn yield losses from a drought of a given severity, whether measured in quantity terms or as a percentage of mean yield, have decreased over time. The null hypothesis that the absolute level of soybean yield losses due to drought has not changed cannot be rejected. But soybean yield losses in percentage terms have decreased over time. Because drought is the primary cause of yield ...


Foreign Direct Investment And Foreign Portfolio Investment Under Asymmetric Information, Ruanjai Suwantaradon Oct 2009

Foreign Direct Investment And Foreign Portfolio Investment Under Asymmetric Information, Ruanjai Suwantaradon

Research Collection School Of Economics

This paper develops a model of international capital flows when there is asymmetric information between foreign investors and domestic managers. Direct investors have a direct influence on the management, thus overcoming agency and information problems. This information advantage, however, comes at the cost of having to acquire management expertise. The tradeoff between management costs and the costs of asymmetric information consequently determines the level and composition of a country’s international capital flows. Analyzing how this tradeoff changes with economic conditions in a country, the model can qualitatively capture the experiences of many crisis countries during the 1990s. Specifically, the ...


Monetary Policy And Asset Prices In A Small Open Economy: A Factor-Augmented Var Analysis For Singapore, Hwee Kwan Chow, Keen Meng Choy Oct 2009

Monetary Policy And Asset Prices In A Small Open Economy: A Factor-Augmented Var Analysis For Singapore, Hwee Kwan Chow, Keen Meng Choy

Research Collection School Of Economics

The ongoing global financial turmoil has revived the question of whether central bankers ought to tighten monetary policy preemptively in order to head off asset price misalignments before a sudden crash triggers financial instability. This study explores the issue of the appropriate monetary policy response to asset price swings in the small open economy of Singapore. Empirical analysis of monetary policy based on standard VAR models, unfortunately, is often hindered by the use of sparse information sets. To better reflect the extensive information monitored by Singapore’s central bank, including global economic indicators, we augment a monetary VAR model with ...


The Emerging Global Financial Architecture: Tracing And Evaluating New Patterns Of The Trilemma Configuration, Joshua Aizenman, Menzie David Chinn, Hiro Ito Oct 2009

The Emerging Global Financial Architecture: Tracing And Evaluating New Patterns Of The Trilemma Configuration, Joshua Aizenman, Menzie David Chinn, Hiro Ito

Economics Faculty Publications and Presentations

This paper investigates how the trilemma policy mix affects economic performance in developing countries. We find that greater monetary independence can dampen output volatility, while greater exchange rate stability is associated with greater output volatility, which can be mitigated by reserve accumulation; greater monetary autonomy is associated with higher inflation, while greater exchange rate stability and greater financial openness is linked with lower inflation; pursuit of exchange rate stability can increase output volatility when financial development is at an intermediate stage. Greater financial openness, when accompanied by a high level of financial development, reduces output volatility.


Restarting Securitization Markets: Policy Proposals And Pitfalls, John Kiff, Andy Jobst, Jodi Scarlata, Michael Kisser Sep 2009

Restarting Securitization Markets: Policy Proposals And Pitfalls, John Kiff, Andy Jobst, Jodi Scarlata, Michael Kisser

John Kiff

This chapter tracks the rise and fall of securitization markets, and evaluates the various initiatives aimed at restarting them on a sounder footing, focusing on the markets for securities not backed by governments or government-sponsored enterprises. The analysis attempts to discern how securitization can positively contribute to financial stability and sustainable economic growth. While most of the current proposals are unambiguously positive for securitization markets and financial stability, some proposals—such as those designed to improve the alignment of securitizer and investor interests and accounting changes that will result in more securitized assets remaining on balance sheets—may be combined ...


On Some Covariance Inequalities For Monotonic And Non-Monotonic Functions, Martin Egozcue, Luis Fuentes García, Wing Keung Wong Sep 2009

On Some Covariance Inequalities For Monotonic And Non-Monotonic Functions, Martin Egozcue, Luis Fuentes García, Wing Keung Wong

Martin Egozcue

No abstract provided.


Liaisons Dangereuses: Increasing Connectivity, Risk Sharing, And Systemic Risk By Battiston, Delli Gatti, Gallegati, Greenwald And Stiglitz: Discussion, Carlo Drago Sep 2009

Liaisons Dangereuses: Increasing Connectivity, Risk Sharing, And Systemic Risk By Battiston, Delli Gatti, Gallegati, Greenwald And Stiglitz: Discussion, Carlo Drago

Carlo Drago

No abstract provided.


Mergers And Ceo Power, Felipe Balmaceda Assoc Prof. Sep 2009

Mergers And Ceo Power, Felipe Balmaceda Assoc Prof.

Felipe Balmaceda

In this paper I propose a model of mergers in which synergies and CEO power play a crucial role. A merger is modeled as a bargaining game between the acquiring and target board of directors with the gains from a merger divided according to the generalized Nash-bargaining solution. The model's implications are consistent with the available empirical evidence on stock returns, and yield some new untested implications that are mainly related to the relationship between CEO power, cor- porate governance and mergers. Finally, the model sheds light on the relationship between aggregate merger activity, synergies and CEO power. (JEL ...


Dynamics Of Biofuel Stock Prices: A Bayesian Approach, Xiaodong Du, Dermot J. Hayes, Cindy L. Yu Sep 2009

Dynamics Of Biofuel Stock Prices: A Bayesian Approach, Xiaodong Du, Dermot J. Hayes, Cindy L. Yu

CARD Working Papers

We use Bayesian Markov Chain Monte Carlo methods to investigate the linkage between the volatility of ethanol security prices and the uncertainty surrounding the profitability of ethanol production and the price variations of non-ethanol energy securities. The joint evolution of return and volatility is modeled as a stochastic process that incorporates jumps in both return and volatility. While a strong and significant correlation is found between the volatility of ethanol securities and profit uncertainty from June 2005 to July 2008, the dynamic pattern of ethanol stock volatility is strikingly similar to that of the S&P 500 energy sector index ...


The Impact Of Biofuels Policy On Agribusiness Stock Prices, Fatma Sine Tepe, Xiaodong Du, David A. Hennessy Sep 2009

The Impact Of Biofuels Policy On Agribusiness Stock Prices, Fatma Sine Tepe, Xiaodong Du, David A. Hennessy

CARD Working Papers

Corn markets are important for many industries, including the seed, fertilizer, meat production/processing and agricultural machinery sectors, all of which are highly concentrated. Oligopoly theory suggests that corn input and field equipment suppliers likely benefit from policies that support corn markets, such as U.S. biofuels policy, while meat companies are likely adversely affected. Employing a linear two-factor (S&P 500 and corn prices) equilibrium asset pricing model, this study investigates the impact of biofuels policy on U.S. agribusiness and food processing firm stock prices. Conditional heteroskedasticity in stock returns is accounted for using a GARCH(1,1 ...


Personal Attributes And The Financial Well-Being Of Older Adults: The Effects Of Control Beliefs, Karen A. Zurlo Sep 2009

Personal Attributes And The Financial Well-Being Of Older Adults: The Effects Of Control Beliefs, Karen A. Zurlo

PARC Working Paper Series

As the baby-boom population ages, adults are expected to take greater responsibility and control of their financial situation, but often are not equipped to assume that responsibility. This lack of control of one's finances exposes individuals to financial risk, potentially resulting in a reduced standard of living in retirement. This study explores the relationship between the personal attributes of older adults and their financial well-being, measured as financial satisfaction, while focusing on the mediating effects of control beliefs, defined as general sense of control and domain-specific levels of control related to work, health, and finances.

Responses from two components ...


Simulation-Based Estimation Of Contingent-Claims Prices, Peter C. B. Phillips, Jun Yu Sep 2009

Simulation-Based Estimation Of Contingent-Claims Prices, Peter C. B. Phillips, Jun Yu

Research Collection School Of Economics

A new methodology is proposed to estimate theoretical prices of financial contingent claims whose values are dependent on some other underlying financial assets. In the literature, the preferred choice of estimator is usually maximum likelihood (ML). ML has strong asymptotic justification but is not necessarily the best method in finite samples. This paper proposes a simulation-based method. When it is used in connection with ML, it can improve the finite-sample performance of the ML estimator while maintaining its good asymptotic properties. The method is implemented and evaluated here in the Black-Scholes option pricing model and in the Vasicek bond and ...


A Nation In Dilemma, Professor Issam A.W. Mohamed Aug 2009

A Nation In Dilemma, Professor Issam A.W. Mohamed

Professor Issam A.W. Mohamed

following the Global financial Crisis there were economic collapses in all the world. Sudan officials claimed that the country was immune from that epidemic. Such declaration were truly weird as it has been deeply affected from the first instant. That article presented many questions about the economic and social conditions and the eminent southern Sudan, Darfur crises.


Alternative Estimators Of Cointegrating Parameters In Models With Non-Stationary Data: An Application To Us Export Demand (Working Paper), James J. Forest, Paul Turner Aug 2009

Alternative Estimators Of Cointegrating Parameters In Models With Non-Stationary Data: An Application To Us Export Demand (Working Paper), James J. Forest, Paul Turner

James J Forest

This paper presents Monte Carlo simulations which compare the empirical performance of two alternative single equation estimators of the equilibrium parameters in a dynamic relationship. The estimators considered are Stock and Watson’s dynamic ordinary least squares (DOLS) estimator and Bewley’s transformation of the general autoregressive distributed lag model. The results indicate that the Bewley transformation produces a lower mean-square error as well as superior serial correlation properties even with lower truncation lags for the lagged variables included in the estimation equation. An application is then provided which examines the nature of the equilibrium relationship between aggregate US exports ...


Biofuels: Potential Production Capacity, Effects On Grain And Livestock Sectors, And Implications For Food Prices And Consumers, Dermot J. Hayes, Bruce Babcock, Jacinto F. Fabiosa, Simla Tokgoz, Amani Elobeid, Tun-Hsiang E. Yu, Fengxia Dong, Chad Hart, Eddie Chavez, Suwen Pan, Miguel Carriquiry, Jerome Dumortier Aug 2009

Biofuels: Potential Production Capacity, Effects On Grain And Livestock Sectors, And Implications For Food Prices And Consumers, Dermot J. Hayes, Bruce Babcock, Jacinto F. Fabiosa, Simla Tokgoz, Amani Elobeid, Tun-Hsiang E. Yu, Fengxia Dong, Chad Hart, Eddie Chavez, Suwen Pan, Miguel Carriquiry, Jerome Dumortier

Economics Publications

We examined four evolution paths of the biofuel sector using a partial equilibrium world agricultural sector model in CARD that includes the new RFS in the 2007 EISA, a two-way relationship between fossil energy and biofuel markets, and a new trend toward corn oil extraction in ethanol plants. At one extreme, one scenario eliminates all support to the biofuel sector when the energy price is low, while the other extreme assumes no distribution bottleneck in ethanol demand growth when the energy price is high. The third scenario considers a pure market force driving ethanol demand growth because of the high ...


Subnational Credit Rating: A Comparative Review, Lili Liu, Kim Song Tan Aug 2009

Subnational Credit Rating: A Comparative Review, Lili Liu, Kim Song Tan

Research Collection School Of Economics

This paper surveys methodological issues in subnational credit ratings and highlights key challenges for developing countries. Subnational borrowing from capital markets has been on the rise owing to fiscal decentralization and demand for infrastructure investments. A prerequisite for accessing capital markets, subnational credit ratings have also emerged as a part of broader reform for fiscal sustainability. They facilitate a more transparent budgetary and financial management system. The global financial crisis makes subnational credit ratings more relevant, as they contribute to fiscal risk evaluations and fiscal adjustment. In addition to subnationals’ own credit strength, the creditworthiness of the sovereign and the ...


Economic Performance, Creditor Protection, And Labour Inflexibility, Felipe Balmaceda Assoc Prof., Ronald Fischer Full Professor Jul 2009

Economic Performance, Creditor Protection, And Labour Inflexibility, Felipe Balmaceda Assoc Prof., Ronald Fischer Full Professor

Felipe Balmaceda

We present a static general equilibrium model of an open economy where agents are heterogeneous in terms of observable wealth and there are endogenous credit constraints due to imperfect creditor protection. Improved credit protection, harder assets, and more efficient bankruptcy procedures increase output, investment, and credit penetration. Better credit protection and harder assets lead to higher interest rate spreads. In a capital constrained (unconstrained) economy, greater (lower) wealth inequality leads to higher (lower) investment and output. Interest rate spreads are lower in richer and more unequal economies in terms of their wealth distribution. We also show that increased labour protection ...


There Should Be Little Or No Liquidity Discounts For Controlling Interests In Closely Held Businesses, Michael Sack Elmaleh Jul 2009

There Should Be Little Or No Liquidity Discounts For Controlling Interests In Closely Held Businesses, Michael Sack Elmaleh

Michael Sack Elmaleh

The application of liquidity discounts to the appraised values of controlling interests in closely held businesses reflects a failure of the valuation community to fully appreciate the fact that these equity interests belong to a fundamentally different investment class than publicly traded securities. Investors in publicly traded securities have dramatically different expectations about the benefits and sacrifices of such investments, compared to the expectations of benefits and sacrifices of investors in closely held companies. Investors in publicly traded securities expect their minority interest investments to be highly liquid, yield free cash flow, and require no participation in the management of ...


Financial Regulation And Securitization: Evidence From Subprime Mortgage Loans, Benjamin J. Keys, Tanmoy K. Mukherjee, Amit Seru, Vikrant Vig Jul 2009

Financial Regulation And Securitization: Evidence From Subprime Mortgage Loans, Benjamin J. Keys, Tanmoy K. Mukherjee, Amit Seru, Vikrant Vig

Benjamin J. Keys

We examine the consequences of existing regulations on the quality of mortgage loans originations in the originate to distribute (OTD) market. The information asymmetries in the OTD market can lead to moral hazard problems on the part of lenders. We find, using a plausibly exogenous source of variation in the ease of securitization, that the quality of loan originations varies inversely with the amount of regulation: more regulated lenders originate loans of worse quality. We interpret this result as possible evidence that the fragility of lightly regulated originators' capital structure can mitigate moral hazard. In addition, we find that incentives ...


Are Credit Unions In Ecuador Achieving Economies Of Scale?, Nick A. Marchio Jul 2009

Are Credit Unions In Ecuador Achieving Economies Of Scale?, Nick A. Marchio

Economics Honors Projects

This study tests the assertion that membership growth in credit unions is constrained by their unique structural features, such as their non-profit mission and member-based ownership. Although these features enhance inclusiveness, existing theory suggest that they work against efficiency when membership grows too diffuse. To address this issue, this study uses a model that takes into account existing theory on constrained-optimization in credit unions and theory on the adverse effects of diffuse ownership. Using data on 36 public credit unions in Ecuador, the empirical analysis finds evidence that credit unions can achieve economies of scale despite their problematic structural features ...


Asian Currency Baskets: An Answer In Search Of A Question?, Charles Adams, Hwee Kwan Chow Jul 2009

Asian Currency Baskets: An Answer In Search Of A Question?, Charles Adams, Hwee Kwan Chow

Research Collection School Of Economics

This paper considers how a regional currency basket and the associated divergence indicators could be used in official surveillance. Recently, proponents of Asian currency baskets have referred to the role the ECU played in constructing exchange rate divergence indicators in Europe as evidence of the intrinsic usefulness of currency baskets for exchange rate monitoring. We show in this paper a number of problems with the use of regional currency-basket based divergence indicators. First, at a technical level, such indicators involve tracking regional exchange rates against a moving currency basket and can obscure underlying movements in bilateral exchange rates. Second, currency ...