135 research outputs found
Hybrid Historical Simulation VaR and ES: Performance in Developed and Emerging Markets
We introduce a new hybrid approach to joint estimation of Value at Risk (VaR) and Expected Shortfall (ES) for high quantiles of return distributions. We investigate the relative performance of VaR and ES models using daily returns for sixteen stock market indices (eight from developed and eight from emerging markets) prior to and during the 2008 financial crisis. In addition to widely used VaR and ES models, we also study the behavior of conditional and unconditional extreme value (EV) models to generate 99 percent confidence level estimates as well as developing a new loss function that relates tail losses to ES forecasts. Backtesting results show that only our proposed new hybrid and Extreme Value (EV)-based VaR models provide adequate protection in both developed and emerging markets, but that the hybrid approach does this at a significantly lower cost in capital reserves. In ES estimation the hybrid model yields the smallest error statistics surpassing even the EV models, especially in the developed markets.value at risk, expected shortfall, hybrid historical simulation, extreme value theory, bootstrapping
Endogenous Pensions and Retirement Behavior
This paper suggests that pension characteristics are simultaneously determined along with workers’ retirement ages. Both the age of pension eligibility and actual retirement age are determined by the productivity and marginal disutility of work, factors that are influenced by worker and job characteristics. This approach differs from previous studies of retirement that treat pensions as exogenous, implying that prior empirical work may have overestimated the responsiveness of retirement age to changes in pension structure, a possibility with obvious policy implications for efforts to raise the age of retirement. We find that, in the conventional single-equation framework, delaying the age of pension eligibility would significantly delay retirement. When treated in a recursive simultaneous system, however, age of pension eligibility retains no explanatory power.social security, early retirement, job characteristics, pension eligibility
Responses of Private and Public Schools to Voucher Funding: The Czech and Hungarian Experience
A state monopoly in schooling followed the collapse of communism in Central Europe. The centrally planned system was abandoned. Systems comparable with educational voucher scheme, also known as school choice system, were introduced in the Czech Republic and Hungary in the early 1990s. The newly established system of school financing allocates public funds according to the number of students enrolled in a school. Accredited non-state schools, private and religious, are also eligible for public subsidies. The scope and the form of these reforms represent a unique opportunity to test conflicting hypotheses of proponents and opponents of the voucher scheme. In this empirical analysis, we test fundamental theoretical predictions of the voucher model. Specifically, we test: i) whether non-state schools are established at locations where the supply of educational opportunities provided by state schools is low or of low quality, ii) whether state and non-state schools in such a system respond to changes in demand for education, and iii) whether state schools respond to competition from non-state schools. We use detailed school level data on the whole population of schools and data on regional conditions. In our econometric model we estimate education value added, instead of relying on absolute quality of school graduates. We find that non-state schools emerge at locations with excess demand and lower quality state schools. We also find that greater competition from non-state schools creates incentives for state schools with the result that state schools slightly improve the quality of educational inputs used and significantly improve their output, quality of graduates. As concerns the technical schools, we find that non-state schools react to regional labor market conditions in terms of technical branch premium and unemployment rate. We do not find such reactions to market signals by state schools. We introduce this analysis with a review of non-state schools' development in the Czech Republic and Hungary during the 1990s.http://deepblue.lib.umich.edu/bitstream/2027.42/39744/3/wp360.pd
Consumers' Opinion of Inflation Bias Due to Quality Improvements
Measurement of quality changes has proven to be an especially difficult aspect of calculating unbiased rates of inflation. We propose a new methodology of capturing quality improvements based on consumer focus groups and apply this methodology in an environment where quality changes might be expected to be especially rapid and extensive, a post-communist transition economy. We find that the methodology indicates a substantial understatement of quality improvements during transition, and, therefore, a substantial overstatement of inflation resulting in a serious downward bias in growth rate estimates for post-communist economies. The move to free markets has apparently improved consumers= welfare more by improving what they can purchase than by increasing how much they can purchase. Overall, mismeasurement of quality changes may have understated Czech growth rates during the first decade after communism by as much as 5 percentage points per year.Inflation Bias, Quality Change, Transition Economies, Czech Republic
Survey-based Estimates of Biases in Consumer Price Indices During Transition: Evidence from Romania
Mismeasurement of inflation is likely to be more severe in a transition economy than in a more stable environment. Comparisons of self-reported changes in economic welfare with changes in incomes suggest that official Romanian inflation measures may be overstated by between 100 and 300 percent at a reported annual inflation rate of 40 per cent.
Lange and Hayek Revisited: Lessons from Czech Voucher Privatization
A fundamental question in economics since the 1930s has been whether an administrative price system could simulate the results of perfect competition even without a true market for the means of production. The theoretical possibility of such a system has been known since the introduction of market socialism by Oskar Lange. We have used the artificial bidding market involved in the Czech voucher privatization process to test whether a sequential process of trial-and-error can set administrative prices close to equilibrium. It would appear from this natural experiment that Robbins and Hayek were correct in doubting the real-world feasibility of market socialism.Bidding scheme, Oskar Lange’s model, Privatization, Price setting, Voucher scheme
Inflationary Bias in Mid to Late Transition Czech Republic
A series of studies confirm results presented Filer and Hanousek (2000) suggesting that mismeasurement of inflation during the transition is a serious problem, on the same relative order of magnitude (and greater in absolute magnitude) as in advanced market economies. Overall, inflation has been overstated by more than 4 percentage points a year during the 1990s in the Czech Republic. By far the largest portion of this bias is due to uncaptured quality changes. In effect, Czech consumers are living considerably better after the fall of communism, but this increase in living standards has manifested itself through better quality rather than greater quantities of goods consumed.Inflation Bias, Transition Economies, Output Fall
Responses of Private and Public Schools to Voucher Funding:The Czech and Hungarian Experience
A state monopoly in schooling followed the collapse of communism in Central Europe. The centrally planned system was abandoned. Systems comparable with educational voucher scheme, also known as school choice system, were introduced in the Czech Republic and Hungary in the early 1990s. The newly established system of school financing allocates public funds according to the number of students enrolled in a school. Accredited non-state schools, private and religious, are also eligible for public subsidies. The scope and the form of these reforms represent a unique opportunity to test conflicting hypotheses of proponents and opponents of the voucher scheme. In this empirical analysis, we test fundamental theoretical predictions of the voucher model. Specifically, we test: i) whether non-state schools are established at locations where the supply of educational opportunities provided by state schools is low or of low quality, ii) whether state and non-state schools in such a system respond to changes in demand for education, and iii) whether state schools respond to competition from non-state schools. We use detailed school level data on the whole population of schools and data on regional conditions. In our econometric model we estimate education value added, instead of relying on absolute quality of school graduates. We find that non-state school emerge at locations with excess demand and lower quality state schools. We also find that greater competition from non-state schools creates incentives for state schools with the result that state schools slightly improve the quality of educational inputs used and significantly improve their output, quality of graduates. As concerns the technical schools, we find that non-state schools react to regional labor market conditions in terms of technical branch premium and unemployment rate. We do not find such reactions to market signals by state schools. We introduce this analysis with a review of non-state schools' development in the Czech Republic and Hungary during the 1990s.educational finance; government expenditures and education; occupational choice; labor productivity
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