Models for time-varying moments using maximum entropy applied to a generalized measure of volatility

We use an information-theoretic approach to interpret Engle's (1982) and Bollerslev's (1986) GARCH model as a model for the motion in time of the expected conditional second power moment. This interpretation is used to show how these models may be generalized, if we use alternative measures of volatility. We choose one feasible alternative and derive a generalized volatility model. Applying this model to some exemplary market indices, we are able to give some empirical evidence for our method. --Information Theory,Maximum Entropy,GARCH,Volatility

Non-Extensitivity versus informative moments for financial models: a unifying framework and empirical results

Information-theoretic approaches still play a minor role in financial market analysis. Nonetheless, there have been two very similar approaches evolving during the last years, one in so-called econophysics and the other in econometrics. Both generalize the notion of GARCH processes in an information-theoretic sense and are able to capture skewness and kurtosis better than traditional models. In this article we present both approaches in a more general framework and compare their performance in some illustrative data sets. --Entropy density,Skewness,Kurtosis,GARCH

A note on conditional arbitrage-free maximum entropy densities for simulative option pricing

In this note we present a simple method to include the no-arbitrage condition into the derivation of conditional densities using the principle of maximum entropy. For the case of identically and independently distributed returns, we easily derive that the whole process estimated that way is arbitrage free. Such a process may be directly used for simulative derivation of option prices. --Maximum Entropy density,No Arbitrage Condition

Volatility models with innovations from new maximum entropy densities at work

Generalized autoregressive conditional heteroskedasticity (GARCH) processes have become very popular as models for financial return data because they are able to capture volatility clustering as well as leptokurtic unconditional distributions which result from the assumption of conditionally normal error distributions. In contrast, Bollerslev (1987) and several follow-ups provided evidence that starting with leptokurtic and possibly skewed (conditional) error distributions will achieve better results. Parallel to these exible but to some extend arbitrary chosen parametric distributions, recent years saw a rise in suggestions for maximum entropy distributions (e.g. Rockinger and Jondeau, 2002, Park and Bera, 2009 or Fischer and Herrmann, 2010). Within this contribution we provide a comprehensive comparison between both different ME densities and their parametric competitors within different generalized GARCH models such as APARCH and GJR-GARCH. --GARCH,APARCH,Entropy density,Skewness,Kurtosis

Inter-Group Conflict and Intra-Group Punishment in an Experimental Contest Game

We study how conflict in a contest game is influenced by rival parties being groups and by group members being able to punish each other. Our main motivation stems from the analysis of socio-political conflict. The relevant theoretical prediction in our setting is that conflict expenditures are independent of group size and independent of whether punishment is available or not. We find, first, that our results contradict the independence of group-size prediction: conflict expenditures of groups are substantially larger than those of individuals, and both are substantially above equilibrium. Towards the end of the experiment material losses in groups are 257% of the predicted level. There is, however, substantial heterogeneity in the investment behaviour of individual group members. Second, allowing group members to punish each other after individual contributions to the contest effort are revealed leads to even larger conflict expenditures. Now material losses are 869% of the equilibrium level and there is much less heterogeneity in individual group members? investments. These results contrast strongly with those from public goods experiments where punishment enhances efficiency and leads to higher material payoffs.Laboratory experiments, Rent-seeking, Conflict, Group competitiveness

Natural conditions in agriculture and the regional distribution of EU producer support

The redistributive implications of the Common Agricultural Policy (CAP) of the European Union (EU) have regained a strong interest in recent years since economic and social cohe-sion has become a major goal of European policy. The empirical evidence is surprisingly di-verse and ranges from a clearly positive to a clearly negative regional redistributive impact of the CAP. Therefore, the objectives of this paper are threefold. First, the interregional alloca-tion of EU producer support under the CAP is measured at the NUTS III-level in the period 1986-2002 for 26 regions of the German Bundesland Hesse. Second, the role of the measure-ment concept for the magnitude and distribution of the regional transfers is elaborated. Third, the interregional allocation of EU producer support is explained by natural conditions and farm structure variables within a quantitative analysis. A major result is that the interregional allocation of producer support is unequal, depends on the measure of protection used and is affected by a number of variables characterizing farm structure and natural conditions

Getting better or getting worse? Consumer responses to decreasing, constant, and ascending multi-dimensional price profiles

This research investigates consumer preferences for different multi-dimensional price profiles. Drawing on research on price affect, we investigate whether consumers prefer descending monthly installments (e.g., 40, 30, 20, 10) over constant (e.g., 25, 25, 25, 25), or ascending ones (e.g., 10, 20, 30, 40). Results of a field experiment with a sample of 1,628 German car buyers corroborate the hypothesized profile effect. In the experiment, participants were asked to evaluate different finance offers for a new car that all had the same present value but differed in terms of how the installments unfolded over time. Consistent with the hypotheses, decreasing monthly installments are evaluated more favorably than constant installments, which, in turn are evaluated more favorably than ascending installments. Furthermore, the results provide evidence for the underlying process by showing that the impact of different MDP profiles is mediated by positive affect. Finally, it was hypothesized that consumers' individual differences (i.e., debt aversion, financial expectations, and product category knowledge) would exert a moderating influence on evaluations of different price profiles; these hypotheses, however, were only partially confirmed. Theoretical and managerial implications are discusse

Self-Management – Potentiale, Probleme, Perspektiven

Dieser Beitrag ist mit Zustimmung des Rechteinhabers aufgrund einer (DFG geförderten) Allianz- bzw. Nationallizenz frei zugänglich.This publication is with permission of the rights owner freely accessible due to an Alliance licence and a national licence (funded by the DFG, German Research Foundation) respectively.Gordon Moores Gesetz vom exponentiellen Wachstum der Transistordichte pro Quadrat-Zoll hat seit 1965 die IT-Industrie geprägt. Mit der damit einhergehenden Explosion der Rechnerleistung wurde die Software immer leistungsfähiger, und man ist dazu übergegangen, Rechnersysteme zu vernetzen und Anwendungen zu verteilen. Eine Folge dieser Entwicklungen ist die rapide zunehmende Komplexität der modernen Informationstechnologie. 40 Jahre nach Moores Entdeckung droht eben diese Tatsache, dem bisherigen exponentiellen Wachstum natürliche Grenzen zu setzen. Moderne, vernetzte Rechnersysteme, wie sie in der Industrie weit verbreitet sind, sind schon heute zu komplex als dass sie auf manuellem Wege, d.h., durch menschliche Administratoren, in einem optimalen Betriebszustand gehalten werden können. Die Folgen sind eine unzureichende Ausnutzung vorhandener Ressourcen, wiederkehrende Fehlerzustände und Lücken in der Absicherung gegen mutwillige Angriffe auf die System-Integrität. Dies führt zu erheblichen finanziellen Mehraufwendungen bzw. Verlusten. Ein permanent überfordertes Administrationspersonal, trägt durch eigene Fehler ein Übriges bei.Schenkt man den jüngst aufkeimenden Initiativen von IT-Giganten wie IBM, Microsoft und Sun Glauben, so heißt die Lösung dieser Misere automatisiertes Management. Vernetzte Rechnersysteme sollen sich auf lange Sicht selbst verwalten. Man erhofft sich hiervon ein effektiveres Management und eine Freistellung von Personal, welches sich dann um wichtigere Aufgaben kümmern kann.In diesem Beitrag beleuchten wir den aktuellen Stand und die Perspektiven im Bereich des Self-Managements. Des Weiteren diskutieren wir offene Fragen, welche auf dem Weg zu selbstverwaltenden Systemen zu lösen sind