Superstars without talent? The Yule distribution controversy

Chung and Cox (1994) provided an intuitively appealing stochastic model which indicates that superstars may exist regardless of talent and which gives rise to the Yule distribution. We adopt a different empirical approach and test its goodness-of-fit using a parametric bootstrap and several powerful test statistics. Just like the discrete Pareto distribution, it is overwhelmingly rejected: it is a fairly accurate approximation of the lower quantiles of the superstar distribution, but overestimates the snowball effect that makes consumers purchase records of the most successful artists. In other words, the Yule distribution captures stardom, but not superstardom. A generalization of the Yule distribution provides an excellent fit in two of the three data sets.Superstardom; Yule distribution

Measuring and explaining competition in the financial sector

The first part of this paper provides a systematic discussion of the structural problems of competition on financial markets as observed from the demand and from the supply side, using a diagnostic framework. Potential impediments to competition are concentration, entry barriers, lack of transparency, product complexity, switching and search costs, financial illiteracy, lack of consumer power and weak intermediaries. In response to such financial market failures, we suggest a number of possible policy reactions. The second part of the paper investigates ways to measure competition and provides empirical figures on banking competition in 101 separate countries and assesses the market structure as monopolistic (or a perfect cartel), perfectly competitive or monopolistic competitive. Also, banking competition is explained, using explanatory variables of market structure, contestability, inter-industry competition, and institutional and macro economic conditions. This analysis provides possible instruments for reform in order to help promote competition. Next, the impact of banking consolidation is examined. Finally, developments in competition are observed over time, generally pointing to a downward trend.competition, concentration, entry barriers, transparency, consolidation, contestability, institutional conditions, restrictions on activities or investment, regulation, Panzar-Rosse model.

An empirical analysis of the role of the trading intensity in information dissemination on the NYSE

In this paper, we use high-frequency data on five frequently traded stocks listed on the New York Stock Exchange (NYSE) in the year 1999 to examine the price impact of trades and its relation to the trading intensity. We show that the distribution of the absolute price change with fast trading first-order stochastically dominates the distribution of the absolute price change with slow trading. Moreover, we find significant causality from the trade characteristics to the trading intensity. Large trades significantly increase the speed of trading, while large returns tend to decrease the trading intensity. We show that this feedback has little impact on the distribution of the price impact of trades

Politiek, cultuur, taal en religie. Een analyse van het stemgedrag tijdens het Eurovisie Songfestival

Een econometrische analyse van dertig jaar Eurovisie Songfestival werpt een nieuwe blik op de Europese verhoudingen. Zo hebben een aantal landen een duidelijke voorliefde voor liedjes die afkomstig zijn uit landen met dezelfde religie. Tegelijkertijd hebben veel landen een uitgesproken voorkeur voor de liedjes afkomstig van buurlanden en andere landen in hun nabijheid, zelfs na correctie voor overeenkomsten in taal en cultuur. Het ligt voor de hand dit te interpreteren als bewijs voor vriendjespolitiek. Echter, de veelgehoorde beschuldigen van politiek gekleurd stemgedrag aan het adres van een aantal landengroepen (zoals voormalig Joegoslavië, Scandinavië en Oost-Europa) worden in de meeste gevallen niet ondersteund door de data. Alleen tegen de Baltische staten is er overtuigend bewijs voor het bevoordelen van de wederzijdse liedjes

Are commodity futures a good hedge against inflation

This study assesses the hedging properties of commodity futures across three dimensions: market, investment horizon and time. Measured over the full sample period (1970-2011), commodity futures show significant ability to hedge US inflation, especially for investment horizons of at least one year. Particularly commodity futures in the markets energy, industrial metals, and live cattle have favorable hedging properties. However, the hedging capacity exhibits substantial variation over time. It has been increasing since the early 1980s and reaches an historical high towards the end of the sample period. Although we establish significant hedging ability for commodity futures indices, we observe a trade-off between the reduction in real return portfolio variance realized by adding commodity futures indices to the portfolio and the expected real portfolio return

Measuring multi-product banks' market power using the Lerner index

The aggregate Lerner index is a popular composite measure of multi-product banks’ market power, based on total assets as the single aggregate output factor. We show that the aggregate Lerner index only qualifies as a consistently aggregated Lerner index if three conditions hold. Under these conditions, the aggregate Lerner index reduces to a weighted-average of the product-specific Lerner indices. We test the three conditions for a sample of U.S. banks covering the years 2011–2017. All three conditions are rejected and we show that they may cause an economically relevant bias to the aggregate Lerner index, depending on the economic context. As a general solution, we propose using the always consistently aggregated weighted-average Lerner index whenever a composite Lerner index is needed

Assessing Competition with the Panzar-Rosse Model: The Role of Scale, Costs, and Equilibrium

The Panzar-Rosse test has been widely applied to assess competitive conduct, often in specifcations controlling for firm scale or using a price equation. We show that neither a price equation nor a scaled revenue function yields a valid measure for competitive conduct. Moreover, even an unscaled revenue function generally requires additional information about costs and market equilibrium. Our theoretical findings are confirmed by an empirical analysis of competition in banking, using a sample covering more than 110,000 bank-year observations on almost 18,000 banks in 67 countries during 1986-2004.Panzar-Rosse test, competition, firm size