553 research outputs found

    Partial Knowledge Restrictions on theTwo-Stage Threshold Model of Choice

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    In the context of the two-stage threshold model of decision making, with the agent’s choices determined by the interaction Of three “structural variables,” we study the restrictions on behavior that arise when one or more variables are xogenously known. Our results supply necessary and sufficient conditions for consistency with the model for all possible states of partial Knowledge, and for both single- and multivalued choice functions

    Co-Movement, Spillovers and Excess Returns in Global Bond Markets

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    This paper investigates global term structure dynamics using a Bayesian hierarchical factor model augmented with macroeconomic fundamentals. More than half of the variation in bond yields of seven advanced economies is due to global co-movement, which is mainly attributed to shocks to non-fundamentals. Global fundamentals, especially global inflation, affect yields through a ‘policy channel’ and a ‘risk compensation channel’, but the effects through two channels are offset. This evidence explains the unsatisfactory performance of fundamentals-driven term structure models. Our approach delineates asymmetric spillovers in global bond markets connected to diverging monetary policies. The proposed model is robust as identified factors has significant explanatory power of excess returns. The finding that global inflation uncertainty is useful in explaining realized excess returns does not rule out regime changing as a source of non-fundamental fluctuations

    Policy initiatives and firms’ access to external finance: Evidence from a panel of emerging Asian economies

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    This paper analyses the impact of policy initiatives co-ordinated by Asian national governments on firms' access to external finance, using a unique firm-level database of eight Asian countries- Hong Kong SAR, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand over the period of 1996-2012. Using a difference-indifferences approach and controlling for firm-level and macroeconomic factors, the results show a significant impact of policy on firms' access to external finance. After splitting firms into constrained and unconstrained, using several criteria, the results document that unconstrained firms benefited significantly in obtaining external finance, compared to their constrained counterparts. Finally, we show that the increase in access to external finance after the policy initiative helped firms to raise their investment spending, especially for unconstrained firms

    Modelling Housing Prices using a Present Value State Space Model

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    This paper introduces a State Space approach to explain the dynamics of rent growth, expected returns and Price-Rent ratio in housing markets. According to the present value model, movements in price to rent ratio should be matched by movements in expected returns and expected rent growth. The state space framework assume that both variables follow an autoregression process of order one. The model is applied to the US and UK housing market, which yields series of the latent variables given the behaviour of the Price-Rent ratio. Resampling techniques and bootstrapped likelihood ratios show that expected returns tend to be highly persistent compared to rent growth. The filtered expected returns is considered in a simple predictability of excess returns model with high statistical predictability evidence for the UK. Overall, it is found that the present value model tends to have strong statistical predictability in the UK housing markets

    Modeling Dependence Structure and Forecasting Market Risk with Dynamic Asymmetric Copula

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    We investigate the dynamic and asymmetric dependence structure between equity portfolios from the US and UK. We demonstrate the statistical significance of dynamic asymmetric copula models in modelling and forecasting market risk. First, we construct “high-minus-low" equity portfolios sorted on beta, coskewness, and cokurtosis. We find substantial evidence of dynamic and asymmetric dependence between characteristic-sorted portfolios. Second, we consider a dynamic asymmetric copula model by combining the generalized hyperbolic skewed t copula with the generalized autoregressive score (GAS) model to capture both the multivariate non-normality and the dynamic and asymmetric dependence between equity portfolios. We demonstrate its usefulness by evaluating the forecasting performance of Value-at-Risk and Expected Shortfall for the high-minus-low portfolios. From back-testing, e find consistent and robust evidence that our dynamic asymmetric copula model provides the most accurate forecasts, indicating the importance of incorporating the dynamic and asymmetric dependence structure in risk management

    Factors Affecting the Financial Success of Motion Pictures: What is the Role of Star Power?

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    In the mid-1940s, American film industry was on its way up to its golden era as studios started mass-producing iconic feature films. The escalating increase in popularity of Hollywood stars was actively suggested for its direct links to box office success by academics. Using data collected in 2007, this paper carries out an empirical investigation on how different factors, including star power, affect the revenue of ‘home-run’ movies in Hollywood. Due to the subjective nature of star power, two different approaches were used: (1) number of nominations and wins of Academy Awards by the key players, and (2) average lifetime gross revenue of films involving the key players preceding the sample year. It is found that number of Academy awards nominations and wins was not statistically significant in generating box office revenue, whereas star power based on the second approach was statistically significant. Other significant factors were critics’ reviews, screen coverage and top distributor, while number of Academy awards, MPAA-rating, seasonality, being a sequel and popular genre were not statistically significant

    Fiscal multipliers in a two-sector search and matching model

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    This paper evaluates the effects of policy interventions on sectoral labour markets and the aggregate economy in a business cycle model with search and matching frictions. We extend the canonical model by including capital-skill complementarity in production, labour markets with skilled and unskilled workers and on-the-job-learning (OJL) within and across skill types. We first find that, the model does a good job at matching the cyclical properties of sectoral employment and the wage-skill premium. We next find that vacancy subsidies for skilled and unskilled jobs lead to output multipliers which are greater than unity with OJL and less than unity without OJL. In contrast, the positive output effects from cutting skilled and unskilled income taxes are close to zero. Finally, we find that the sectoral and aggregate effects of vacancy subsidies do not depend on whether they are financed via public debt or distorting taxes

    Multiple Objectives in Monetary Policy: A de Facto Analysis for ‘Advanced’ Countries

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    A statistical methodology is developed by which realised outcomes can be used to identify, for calendar years between 1974 and 2012, when policy makers in ‘advanced’ economies have successfully pursued single objectives of different kinds, or multiple objectives. A simple criterion is then used to distinguish between multiple objectives pure and simple and multiple objectives subject to a price stability constraint. The overall and individual country results which this methodology produces seem broadly plausible. Unconditional and conditional analyses of the inflation and growth associated with different types of objectives reveal that multiple objectives subject to a price stability constraint are associated with roughly as good economic performance as the single objective of inflation. A proposal is then made as to how the remit of an inflation-targeting central bank could be adjusted to allow it to pursue other objectives in extremis without losing the credibility effects associated with inflation targeting

    Prior selection for panel vector autoregressions

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    There is a vast literature that specifies Bayesian shrinkage priors for vector autoregressions (VARs) of possibly large dimensions. In this paper I argue that many of these priors are not appropriate for multi-country settings, which motivates me to develop priors for panel VARs (PVARs). The parametric and semi-parametric priors I suggest not only perform valuable shrinkage in large dimensions, but also allow for soft clustering of variables or countries which are homogeneous. I discuss the implications of these new priors for modelling interdependencies and heterogeneities among different countries in a panel VAR setting. Monte Carlo evidence and an empirical forecasting exercise show clear and important gains of the new priors compared to existing popular priors for VARs and PVARs

    The Extent and Cyclicality of Career Changes: Evidence for the UK

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    Using quarterly data for the U.K. from 1993 through 2012, we document that the extent of worker reallocation across occupations or industries (a career change, in the parlance of this paper) is high and procyclical. This holds true after controlling for workers' previous labour market status and for changes in the composition of who gets hired over the business cycle. Our evidence suggests that a large part of this reallocation reflect excess churning in the labour market. We also find that the majority of career changes come with wage increases. During the economic expansion wage increases were typically larger for those who change careers than for those who do not. During the recession this is not true for career changers who were hired from unemployment. Our evidence suggests that understanding career changes over the business cycle is important for explaining labour market ows and the cyclicality of wage growth


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