The Informational Content of Prices When Policy Makers React to Financial Markets

When can policy makers use policy-relevant information from financial market prices and how does policy affect price informativeness? I analyze a novel setting with noise where a policy maker tries to infer information about a state variable from prices to improve policy decisions, and policy in turn affects asset values. I derive a necessary and sufficient condition for the possibility of information revelation in equilibrium, which might not be possible if the policy reaction to prices punishes traders for revealing their information. If the policy maker is uninformed, then policy objectives do not change price informativeness, but they do if the policy maker has independent information about the state. I also analyze policy maker transparency, and find that policy makers with objectives having a large impact on asset values should publish their information before trading to make prices more informative. In other cases, intransparency can be optimal

Why prediction markets work : The role of information acquisition and endogenous weighting

In prediction markets, investors trade assets whose values are contingent on the occurrence of future events, like election outcomes. Prediction market prices have been shown to be consistently accurate forecasts of these outcomes, but we don't know why. I formally illustrate an information acquisition explanation. Traders with more wealth to invest have stronger incentives to acquire information about the outcome, thus tend to have better forecasts. Moreover, their trades have larger weight in the market. The interaction implies that a few well-endowed traders can move the asset price toward the true value. One implication for institutions aggregating information is to put more weight on votes of agents with larger stakes, which improves on equal weighting, unless prior distribution accuracy and stakes are negatively related

Does social interaction make bad policies even worse? Evidence from renewable energy subsidies

Minimum prices above the market level can lead to ineffcient production and oversupply. We investigate whether this effect is even more pronounced when decision makers are influenced by their social environment. Using data of minimum prices for renewable energy production in Germany, we analyze if individual decisions to install solar panels are affected by the investment decisions of others. We implement a propensity score matching routine on municipality level and estimate that existing panels in the municipality increase the probability and number of further installations considerably, even in areas with minimal solar potential. This social effect is stronger in areas with more solar potential and less unemployment. A higher number of existing panels and more concentrated installations increase the social effect further. We discuss policy implications of these social effects

On information aggregation in financial markets

This dissertation consists of three self-contained chapters, which are ordered from oldest to youngest project. The common theme is information aggregation in financial markets. In chapter 1 (job market paper), traders possess information about a state variable that both affects an asset value and an outcome that a policy maker cares about. Information aggregation in the financial market may not be achieved because the policy reaction to prices---which affects asset values---de facto punishes the informed for trading on information. In chapter 2 (joint work with Hans Peter Grüner), traders possess information about their own preferences regarding novel consumption products, and the return on investment in new firms depends on the future aggregate demand for those firms' products. Information aggregation about the preference distribution may not be achieved due to wealth constraints of consumers, so that the capital allocation reflects the preferences of the wealthy but not necessarily future demand. Chapter 3 (joint work with Lionel Page) is an experimental project, testing whether information acquired by traders is aggregated and incorporated into financial market prices

Minimum Prices and Social Interactions: Evidence from the German Renewable Energy Program

Minimum prices above the competitive level can lead to allocative inefficiencies. We investigate whether this effect is more pronounced when decision makers are influenced by their social environment. Using data of minimum prices for renewable energy production in Germany, we test if individual decisions to install photovoltaic systems are affected by the investment decisions of others in the area. We implement a propensity score matching routine on municipality level and estimate that existing panels in the municipality increase the probability and number of further installations considerably, even in areas with minimal solar radiation. Thus, social interaction can add secondary inefficiencies to the known allocative problems of minimum prices. The social interaction effect is stronger in areas with more solar radiation and less unemployment. A larger number of existing systems and more concentrated installations increase the social effect further

Economics Peer-Review: Problems, Recent Developments, and Reform Proposals

This article contributes to the debate in the economics profession on reforming the peer-review process. It examines the current state of peer-review in economics, surveys the relevant literature, and identifies several problems and solutions. Problems to be discussed are referee overreach and excessive revisions, strategic refereeing and conflicts of interest, prestige bias and other discrimination, and the noisy outcome of peer-review. It recommends several solutions for reform. First, enforce referee guidelines that reports must explicitly separate their suggestions into essential and optional, with 3 essential maximum. Second, let authors award the best referee report. Third, adopt conflict of interest policies for referees and punish non-disclosure. Fourth, use double-blind refereeing. Fifth, make better use of prior reports from other journals. Sixth, pay referees for prompt reports. A discussion of the role of editors highlights additional issues that deserve a debate in the profession

Ending Wasteful Year-End Spending: On Optimal Budget Rules in Organizations

What can organizations do to minimize wasteful year-end spending before the annual budget expires? I introduce a two-period model to derive the optimal budget rollover and audit rules. A principal tasks an agent with using their budget to fulfill the organization's spending needs, which are private information of the agent. The agent can misuse funds for private benefit at the principal's expense. The principal decides upfront which share of unused funds the agent can roll over to next year, and which spending amounts to audit in order to punish fund misuse. The optimal rules are to allow the agent to roll-over a share of the unused funds, but not necessarily the full share, in most cases to audit only suffciently large spending, and to exert maximum punishment if fund misuse is detected. An extension with endogenous budget levels shows that strategically underfunding the agent can be optimal

When can decision makers learn from financial market prices?

I analyze a general setting where a policy maker needs information that financial market traders have in order to implement her optimal policy, and market prices can potentially reveal this information. Policy decisions, in turn, affect asset values, hence forward looking traders may have incentives to withhold information. I derive a necessary and suffcient condition for the existence of fully revealing equilibria in competitive financial markets, which identifies all situations where learning from prices for policy purposes works, and where it does not. Full revelation may be impossible because the pricing problem is a self-defeating prophecy. Using the result, I demonstrate that some corporate prediction markets are ill-designed and punish traders for revealing their information, and show how to fix it. I also discuss the possibility of using market information for banking supervision and central banking, and the general problem of asset design

A Field Experiment in Motivating Employee Ideas

__Abstract__ We study the effects of a field experiment designed to motivate employee ideas, at a large technology company. Employees were encouraged to submit ideas on process and product improvements via an online system. In the experiment, the company randomized 19 account teams into treatment and control groups. Employees in treatment teams received rewards if their ideas were approved. Nothing changed for employees in control teams. Our main finding is that rewards substantially increased the quality of ideas submitted. Further, rewards increased participation in the suggestion system, but decreased the number of ideas per participating employee, with zero net effect on the total quantity of ideas. The broader participation base persisted even after the reward was discontinued, suggesting habituation. We find no evidence for motivational crowding out. Our findings suggest that rewards can improve innovation and creativity, and that there may be a tradeoff between the quantity and quality of ideas

Das Vorkommen von Erzmineralen im Kupferberggreisen am Nordostrand des Ramberges im Harz

Im Kupferberggreisen konnten die Erzminerale Bismut, Chalkopyrit, Löllingit, Arsenopyrit, Molybdänit und Ferberit mittels EDX-Spektren und Erzmikroskopie identifiziert werden. Ihre Verwachsungen werden mitgeteilt.The ore minerals bismuth, chalcopyrite, löllingite, arsenopyrite, molybdenite and ferberite could be identified within the Kupferberggreisen by using EDX spectra and ore microscopy