5,207 research outputs found
Distributed Binary Detection with Lossy Data Compression
Consider the problem where a statistician in a two-node system receives
rate-limited information from a transmitter about marginal observations of a
memoryless process generated from two possible distributions. Using its own
observations, this receiver is required to first identify the legitimacy of its
sender by declaring the joint distribution of the process, and then depending
on such authentication it generates the adequate reconstruction of the
observations satisfying an average per-letter distortion. The performance of
this setup is investigated through the corresponding rate-error-distortion
region describing the trade-off between: the communication rate, the error
exponent induced by the detection and the distortion incurred by the source
reconstruction. In the special case of testing against independence, where the
alternative hypothesis implies that the sources are independent, the optimal
rate-error-distortion region is characterized. An application example to binary
symmetric sources is given subsequently and the explicit expression for the
rate-error-distortion region is provided as well. The case of "general
hypotheses" is also investigated. A new achievable rate-error-distortion region
is derived based on the use of non-asymptotic binning, improving the quality of
communicated descriptions. Further improvement of performance in the general
case is shown to be possible when the requirement of source reconstruction is
relaxed, which stands in contrast to the case of general hypotheses.Comment: to appear on IEEE Trans. Information Theor
When cheaper is better: fee determination in the market for equity mutual funds
In this paper, we develop a model of the market for equity mutual funds that captures three key characteristics of this market. First, there is competition among funds. Second, fund managers' ability is not observed by investors before making their investment decisions. And third, some investors do not make optimal use of all available information. The main results of the paper are that 1) price competition is compatible with positive mark-ups in equilibrium; and 2) worse-performing funds set fees that are greater or equal than those set by better-performing funds. These predictions are supported by available empirical evidence
The Organizational Implications of Creativity: The US Film Industry in Mid-XXth Century
We develop a basic framework to understand the organization of highly creative activities. Management faces a fundamental tradeoff in organizing such activities. On the one hand, since creativity cannot be achieved by command and control or by monetary incentives, internal/contractual production of creative products is plagued by hazards arising from their fundamental characteristics: extremely high input, output and market uncertainty, and the inherent informational advantages of creative talent. Procuring highly creative products in the market place, though, exposes the distributor to a fundamental risk: independently produced creative goods are generic distribution-wise. Thus, in procuring creative products in the marketplace, distributors face the unavoidable winner's curse risk. Since this risk is, to a large extent, independent of the creative nature of the product, the higher the creative content, the higher the relative hazards associated with internal or contractual production. Thus, internal/contractual production of creative goods will tend to be less prevalent the higher the creative content associated with its production. We apply this insight to the evolution of the U.S. film industry in the mid-XXth century. We exploit two simultaneous natural experiments -- the diffusion of TV and the Paramount antitrust decision forcing the separation of exhibitors from distributors and prohibiting the use of block-booking. Both events increased the demand for creative content in movies. We develop empirical implications which we test by analyzing in detail the decision by distributors to produce films internally or to procure then in the market place, in the face of an increase in the demand for creative content.
When cheaper is better: Fee determination in the market for equity mutual funds.
In this paper, we develop a model of the market for equity mutual funds that captures three key characteristics of this market. First, there is competition among funds. Second, fund managers’ ability is not observed by investors before making their investment decisions. Third, some investors do not make optimal use of all available information. The main results of the paper are that (1) price competition is compatible with positive mark-ups in equilibrium, and (2) worse-performing funds set fees that are greater or equal to those set by better-performing funds. These predictions are supported by available empirical evidence.Mutual fund fees; Mutual fund performance; Product quality; Asymmetric information; Bounded rationality;
YET ANOTHER PUZZLE? THE RELATION BETWEEN PRICE AND PERFORMANCE IN THE MUTUAL FUND INDUSTRY
Gruber (1996) drew attention to the puzzle that investors buy actively-managed funds even though, on average, they underperform index funds. We uncover another puzzling fact about the market for actively-managed equity mutual funds: funds with worse before-fee performance charge higher fees. We then conduct a series of robustness checks and find that the apparently anomalous fee-performance relation survives all of them. Finally, we show that this relation may be explained as the outcome of strategic fee setting by mutual funds in the presence of investors with different degrees of sensitivity to performance.
Yet another puzzle? the relation between price and performance in the mutual fund industry
Gruber (1996) drew attention to the puzzle that investors buy actively-managed funds even though, on average, they underperform index funds. We uncover another puzzling fact about the market for actively-managed equity mutual funds: funds with worse before-fee performance charge higher fees. We then conduct a series of robustness checks and find that the apparently anomalous fee-performance relation survives all of them. Finally, we show that this relation may be explained as the outcome of strategic fee setting by mutual funds in the presence of investors with different degrees of sensitivity to performance
WHEN CHEAPER IS BETTER: FEE DETERMINATION IN THE MARKET FOR EQUITY MUTUAL FUNDS
In this paper, we develop a model of the market for equity mutual funds that captures three key characteristics of this market. First, there is competition among funds. Second, fund managers' ability is not observed by investors before making their investment decisions. And third, some investors do not make optimal use of all available information. The main results of the paper are that 1) price competition is compatible with positive mark-ups in equilibrium; and 2) worse-performing funds set fees that are greater or equal than those set by better-performing funds. These predictions are supported by available empirical evidence.
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