Loukia Meligkotsidou, Elias Tzavalis, Ioannis D. Vrontos
A Bayesian approach is suggested for inferring stationary autoregressive models allowing for possible structural changes (known as breaks) in both the mean and the error variance of economic series occurring at unknown times. Efficient Bayesian inference for the unknown number and positions of the structural breaks is performed by using filtering recursions similar to those of the forward–backward algorithm. A Bayesian approach to unit root testing is also proposed, based on the comparison of stationary autoregressive models with multiple breaks to their counterpart unit root models. In the Bayesian setting, the unknown initial conditions are treated as random variables, which is particularly appropriate in unit root testing. Simulation experiments are conducted with the aim to assess the performance of the suggested inferential procedure, as well as to investigate if the Bayesian model comparison approach can distinguish unit root models from stationary autoregressive models with multiple structural breaks in the parameters. The proposed method is applied to key economic series with the aim to investigate whether they are subject to shifts in the mean and/or the error variance. The latter has recently received an economic policy interest as improved monetary policies have also as a target to reduce the volatility of economic series.
{"title":"On Bayesian Analysis and Unit Root Testing for Autoregressive Models in the Presence of Multiple Structural Breaks","authors":"Loukia Meligkotsidou, Elias Tzavalis, Ioannis D. Vrontos","doi":"10.2139/ssrn.965419","DOIUrl":"https://doi.org/10.2139/ssrn.965419","url":null,"abstract":"A Bayesian approach is suggested for inferring stationary autoregressive models allowing for possible structural changes (known as breaks) in both the mean and the error variance of economic series occurring at unknown times. Efficient Bayesian inference for the unknown number and positions of the structural breaks is performed by using filtering recursions similar to those of the forward–backward algorithm. A Bayesian approach to unit root testing is also proposed, based on the comparison of stationary autoregressive models with multiple breaks to their counterpart unit root models. In the Bayesian setting, the unknown initial conditions are treated as random variables, which is particularly appropriate in unit root testing. Simulation experiments are conducted with the aim to assess the performance of the suggested inferential procedure, as well as to investigate if the Bayesian model comparison approach can distinguish unit root models from stationary autoregressive models with multiple structural breaks in the parameters. The proposed method is applied to key economic series with the aim to investigate whether they are subject to shifts in the mean and/or the error variance. The latter has recently received an economic policy interest as improved monetary policies have also as a target to reduce the volatility of economic series.","PeriodicalId":11485,"journal":{"name":"Econometrics: Applied Econometrics & Modeling eJournal","volume":"37 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76505296","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A firm’s customers and suppliers make relationship-specific investments (RSI) whose value reduces if the firm undertakes risky investments. We hypothesize that the risk-taking incentives in the firm CEO’s compensation will lower the RSI by firms up and down in the vertical channel. We provide significant evidence that customer/supplier RSI declines with the risk-taking incentives of the firm’s CEO. Moreover, we find that RSI is more sensitive to the CEO’s risk-taking incentives when they are more likely to increase the firm’s cash flow volatility. Our findings are robust to correcting for endogeneity and several measures for RSI and risk taking.
{"title":"The Effect of CEO’s Risk-Taking Incentives on Relationship-Specific Investments by Customers and Suppliers","authors":"Jayant R. Kale, Simi Kedia, Ryan Williams","doi":"10.2139/ssrn.1787113","DOIUrl":"https://doi.org/10.2139/ssrn.1787113","url":null,"abstract":"A firm’s customers and suppliers make relationship-specific investments (RSI) whose value reduces if the firm undertakes risky investments. We hypothesize that the risk-taking incentives in the firm CEO’s compensation will lower the RSI by firms up and down in the vertical channel. We provide significant evidence that customer/supplier RSI declines with the risk-taking incentives of the firm’s CEO. Moreover, we find that RSI is more sensitive to the CEO’s risk-taking incentives when they are more likely to increase the firm’s cash flow volatility. Our findings are robust to correcting for endogeneity and several measures for RSI and risk taking.","PeriodicalId":11485,"journal":{"name":"Econometrics: Applied Econometrics & Modeling eJournal","volume":"17 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89780456","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In data mining applications, the availability of data is often a serious problem. For instance, elementary customer information resides in customer databases, but market survey data are only available for a subset of the customers or even for a different sample of customers. Data fusion provides a way out by combining information from different sources into a single data set for further data mining. While a significant amount of work has been done on data fusion in the past, most of the research has been performed outside of the data mining community. In this paper, we provide an overview of data fusion, introduce basic terminology and the statistical matching approach, distinguish between internal and external evaluation, and we conclude with a larger case study.
{"title":"Data Fusion Through Statistical Matching","authors":"P. van der Putten, J. Kok, Amarjeet R. Gupta","doi":"10.2139/ssrn.297501","DOIUrl":"https://doi.org/10.2139/ssrn.297501","url":null,"abstract":"In data mining applications, the availability of data is often a serious problem. For instance, elementary customer information resides in customer databases, but market survey data are only available for a subset of the customers or even for a different sample of customers. Data fusion provides a way out by combining information from different sources into a single data set for further data mining. While a significant amount of work has been done on data fusion in the past, most of the research has been performed outside of the data mining community. In this paper, we provide an overview of data fusion, introduce basic terminology and the statistical matching approach, distinguish between internal and external evaluation, and we conclude with a larger case study.","PeriodicalId":11485,"journal":{"name":"Econometrics: Applied Econometrics & Modeling eJournal","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-08-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86135439","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study how the U.S. Catholic clergy abuse scandals affected religious participation, religious beliefs, and pro-social behavior. To estimate the causal effects of the scandals on various outcomes, we conduct an event-study analysis that exploits the fine distribution of the scandals over space and time. First, a scandal causes a significant and long-lasting decline in religious participation in the zip code where it occurs. Second, the decline in religious participation does not generate a statistically significant decline in religious beliefs, pro-social beliefs, and some commonly used measures of pro-social behavior. This evidence is consistent with the view that changes in religious participation during adulthood may have limited or no effect on deep beliefs and values. Third, the scandals cause a long-lasting decline in charitable contributions. Indeed, the decline in charitable giving is an order of magnitude larger than the direct costs of the scandals to the Catholic churches (e.g., lawsuits). If we assume that the scandals affect charitable giving only through the decline in religious participation, our estimates would suggest that the strong cross-sectional correlation between religious participation and charitable giving has the presumed direction of causality.
{"title":"Losing My Religion: The Effects of Religious Scandals on Religious Participation and Charitable Giving","authors":"Nicolas L. Bottan, Ricardo Perez-Truglia","doi":"10.2139/ssrn.1922950","DOIUrl":"https://doi.org/10.2139/ssrn.1922950","url":null,"abstract":"We study how the U.S. Catholic clergy abuse scandals affected religious participation, religious beliefs, and pro-social behavior. To estimate the causal effects of the scandals on various outcomes, we conduct an event-study analysis that exploits the fine distribution of the scandals over space and time. First, a scandal causes a significant and long-lasting decline in religious participation in the zip code where it occurs. Second, the decline in religious participation does not generate a statistically significant decline in religious beliefs, pro-social beliefs, and some commonly used measures of pro-social behavior. This evidence is consistent with the view that changes in religious participation during adulthood may have limited or no effect on deep beliefs and values. Third, the scandals cause a long-lasting decline in charitable contributions. Indeed, the decline in charitable giving is an order of magnitude larger than the direct costs of the scandals to the Catholic churches (e.g., lawsuits). If we assume that the scandals affect charitable giving only through the decline in religious participation, our estimates would suggest that the strong cross-sectional correlation between religious participation and charitable giving has the presumed direction of causality.","PeriodicalId":11485,"journal":{"name":"Econometrics: Applied Econometrics & Modeling eJournal","volume":"27 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81185313","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using a novel data set that covers individual debt claims against 136 bankrupt US companies and includes information on a subset of claims transfers, we provide new empirical insight regarding how a firm’s debt ownership relates to bankruptcy outcomes. Firms with higher debt concentration at the start of the case are more likely to file prearranged bankruptcy plans, to move quickly through the restructuring process, and to emerge successfully as independent going concerns. Moreover, higher ownership concentration within a debt class is associated with higher recovery rates to that class. Trading of claims during bankruptcy concentrates ownership further, but this trading is not associated with subsequent improvements in bankruptcy outcomes and could, at the margin, increase the likelihood of liquidation.
{"title":"The Ownership and Trading of Debt Claims in Chapter 11 Restructurings","authors":"V. Ivashina, Benjamin Iverson, David C. Smith","doi":"10.2139/ssrn.1573311","DOIUrl":"https://doi.org/10.2139/ssrn.1573311","url":null,"abstract":"Using a novel data set that covers individual debt claims against 136 bankrupt US companies and includes information on a subset of claims transfers, we provide new empirical insight regarding how a firm’s debt ownership relates to bankruptcy outcomes. Firms with higher debt concentration at the start of the case are more likely to file prearranged bankruptcy plans, to move quickly through the restructuring process, and to emerge successfully as independent going concerns. Moreover, higher ownership concentration within a debt class is associated with higher recovery rates to that class. Trading of claims during bankruptcy concentrates ownership further, but this trading is not associated with subsequent improvements in bankruptcy outcomes and could, at the margin, increase the likelihood of liquidation.","PeriodicalId":11485,"journal":{"name":"Econometrics: Applied Econometrics & Modeling eJournal","volume":"85 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-06-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85613854","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We employ a semi-parametric estimation approach to analyse observed and unobserved heterogeneity in the value of savings in travel time and schedule delay. Our econometric approach allows for the estimation of unobserved and observed heterogeneity in preferences in a flexible way, meaning that we do not put any structure on how individual characteristics (such as income and age) relate to the value of savings in travel time and schedule delay. Using data from a stated choice experiment, we illustrate the estimation approach and find that there is substantial heterogeneity in the value of savings in travel time and schedule delay. For our data, we find that unobserved heterogeneity is more important than heterogeneity related to individual characteristics.
{"title":"Commuters' Preferences for Fast and Reliable Travel: A Semi-Parametric Estimation Approach","authors":"P. Koster, H. Koster","doi":"10.2139/ssrn.2270571","DOIUrl":"https://doi.org/10.2139/ssrn.2270571","url":null,"abstract":"We employ a semi-parametric estimation approach to analyse observed and unobserved heterogeneity in the value of savings in travel time and schedule delay. Our econometric approach allows for the estimation of unobserved and observed heterogeneity in preferences in a flexible way, meaning that we do not put any structure on how individual characteristics (such as income and age) relate to the value of savings in travel time and schedule delay. Using data from a stated choice experiment, we illustrate the estimation approach and find that there is substantial heterogeneity in the value of savings in travel time and schedule delay. For our data, we find that unobserved heterogeneity is more important than heterogeneity related to individual characteristics.","PeriodicalId":11485,"journal":{"name":"Econometrics: Applied Econometrics & Modeling eJournal","volume":"10 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-04-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80371548","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the mutual fund literature, it is an established fact that investors “chase past performance”. However, the opposite impact of flows on performance is widely discussed. Mainly, liquidity costs are held responsible for short-term erosion of performance, while high inflows enhance performance over longer horizons. I investigate this relation for various groups of equity, bond, and money market funds and find significant outperformance in high inflow funds over several months, especially for specific bond fund groups. In addition, I test whether this information can be exploited using simple investment strategies but find that the abnormal returns are too low to offset associated costs.
{"title":"The Relation between Past Flows and Future Performance: Simple Investment Strategies in the Mutual Fund Sector","authors":"M. Rohleder","doi":"10.2139/ssrn.1881509","DOIUrl":"https://doi.org/10.2139/ssrn.1881509","url":null,"abstract":"In the mutual fund literature, it is an established fact that investors “chase past performance”. However, the opposite impact of flows on performance is widely discussed. Mainly, liquidity costs are held responsible for short-term erosion of performance, while high inflows enhance performance over longer horizons. I investigate this relation for various groups of equity, bond, and money market funds and find significant outperformance in high inflow funds over several months, especially for specific bond fund groups. In addition, I test whether this information can be exploited using simple investment strategies but find that the abnormal returns are too low to offset associated costs.","PeriodicalId":11485,"journal":{"name":"Econometrics: Applied Econometrics & Modeling eJournal","volume":"82 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-02-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80543173","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Laws governing the foreclosure process can have direct consequences for the costs of foreclosure and, therefore could affect lending decisions. We exploit the heterogeneity in judicial requirements across US states to examine their impact on banks’ lending decisions in a sample of urban areas straddling state borders. A key feature of our study is the way it exploits an exogenous cutoff in loan eligibility to government-sponsored enterprises (GSEs) guarantees, which shift the burden of foreclosure costs onto the GSEs. We find that judicial requirements reduce the supply of credit only for jumbo loans, which are ineligible for GSE guarantees, i.e., in the nonsubsidized segment of the market. Thus, while we find a significant effect on credit supply, the aggregate impact is muted by the indirect cross-subsidy by the GSEs to borrower-friendly states.
{"title":"Borrower Protection and the Supply of Credit: Evidence from Foreclosure Laws","authors":"Jihad Dagher, Yangfan Sun","doi":"10.2139/ssrn.2382975","DOIUrl":"https://doi.org/10.2139/ssrn.2382975","url":null,"abstract":"Laws governing the foreclosure process can have direct consequences for the costs of foreclosure and, therefore could affect lending decisions. We exploit the heterogeneity in judicial requirements across US states to examine their impact on banks’ lending decisions in a sample of urban areas straddling state borders. A key feature of our study is the way it exploits an exogenous cutoff in loan eligibility to government-sponsored enterprises (GSEs) guarantees, which shift the burden of foreclosure costs onto the GSEs. We find that judicial requirements reduce the supply of credit only for jumbo loans, which are ineligible for GSE guarantees, i.e., in the nonsubsidized segment of the market. Thus, while we find a significant effect on credit supply, the aggregate impact is muted by the indirect cross-subsidy by the GSEs to borrower-friendly states.","PeriodicalId":11485,"journal":{"name":"Econometrics: Applied Econometrics & Modeling eJournal","volume":"15 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89913650","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, motivated by existing and growing evidence on multiple macroeconomic volatilities, we extend the long-run risks model by allowing both a long-and a short-run volatility components in the evolution of economic fundamentals. With this extension, the new model not only is consistent with the volatility literature that the stock market is driven by two, rather than one, volatility factors, but also provides significant improvements in fitting various patterns, such as the size of market risk premium, the level of interest rate, degree of dividend yield predictability, and the term structure of variance risk premiums, of both the equity and option data. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1962. This paper was accepted by Jerome Detemple, finance.
{"title":"Macroeconomic Volatilities and Long-Run Risks of Asset Prices","authors":"Guofu Zhou, Yingzi Zhu","doi":"10.2139/ssrn.1403869","DOIUrl":"https://doi.org/10.2139/ssrn.1403869","url":null,"abstract":"In this paper, motivated by existing and growing evidence on multiple macroeconomic volatilities, we extend the long-run risks model by allowing both a long-and a short-run volatility components in the evolution of economic fundamentals. With this extension, the new model not only is consistent with the volatility literature that the stock market is driven by two, rather than one, volatility factors, but also provides significant improvements in fitting various patterns, such as the size of market risk premium, the level of interest rate, degree of dividend yield predictability, and the term structure of variance risk premiums, of both the equity and option data. \u0000 \u0000Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1962. \u0000 \u0000This paper was accepted by Jerome Detemple, finance.","PeriodicalId":11485,"journal":{"name":"Econometrics: Applied Econometrics & Modeling eJournal","volume":"39 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-02-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84055837","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We develop a cointegrating nonlinear autoregressive distributed lag (NARDL) model in which short- and long-run nonlinearities are introduced via positive and negative partial sum decompositions of the explanatory variables. We demonstrate that the model is estimable by OLS and that reliable long-run inference can be achieved by bounds-testing regardless of the integration orders of the variables. Furthermore, we derive asymmetric dynamic multipliers that graphically depict the traverse between the short- and the long-run. The salient features of the model are illustrated using the example of the nonlinear unemployment-output relationship in the US, Canada and Japan.
{"title":"Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework","authors":"Y. Shin, Byungchul Yu, Matthew Greenwood‐Nimmo","doi":"10.2139/ssrn.1807745","DOIUrl":"https://doi.org/10.2139/ssrn.1807745","url":null,"abstract":"We develop a cointegrating nonlinear autoregressive distributed lag (NARDL) model in which short- and long-run nonlinearities are introduced via positive and negative partial sum decompositions of the explanatory variables. We demonstrate that the model is estimable by OLS and that reliable long-run inference can be achieved by bounds-testing regardless of the integration orders of the variables. Furthermore, we derive asymmetric dynamic multipliers that graphically depict the traverse between the short- and the long-run. The salient features of the model are illustrated using the example of the nonlinear unemployment-output relationship in the US, Canada and Japan.","PeriodicalId":11485,"journal":{"name":"Econometrics: Applied Econometrics & Modeling eJournal","volume":"7 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2013-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76967407","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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