Analysing causality among oil prices and, in general, among financial and economic variables is of central relevance in applied economics studies. The recent contribution of Lu et al. (2014) proposes a novel test for causality— the DCC-MGARCH Hong test. We show that the critical values of the test statistic must be evaluated through simulations, thereby challenging the evidence in papers adopting the DCC-MGARCH Hong test. We also note that rolling Hong tests represent a more viable solution in the presence of short-lived causality periods.
在应用经济学研究中，分析油价之间的因果关系，以及总体上分析金融和经济变量之间的因果关系，具有核心意义。Lu et al.(2014)最近的贡献提出了一种新的因果关系检验——DCC-MGARCH Hong检验。我们表明检验统计量的临界值必须通过模拟来评估，从而挑战采用DCC-MGARCH Hong检验的论文中的证据。我们还注意到，滚动Hong检验在存在短暂因果期的情况下是一种更可行的解决方案。
{"title":"Time-Varying Granger Causality Tests for Applications in Global Crude Oil Markets: A Study on the DCC-MGARCH Hong Test","authors":"M. Caporin, Michele Costola","doi":"10.2139/ssrn.3941778","DOIUrl":"https://doi.org/10.2139/ssrn.3941778","url":null,"abstract":"Analysing causality among oil prices and, in general, among financial and economic variables is of central relevance in applied economics studies. The recent contribution of Lu et al. (2014) proposes a novel test for causality— the DCC-MGARCH Hong test. We show that the critical values of the test statistic must be evaluated through simulations, thereby challenging the evidence in papers adopting the DCC-MGARCH Hong test. We also note that rolling Hong tests represent a more viable solution in the presence of short-lived causality periods.","PeriodicalId":158556,"journal":{"name":"Leibniz Institute for Financial Research SAFE Working Paper Series","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-10-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122533044","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}
Ignazio Angeloni, Johannes Kasinger, Chantawit Tantasith
We present new statistical indicators of the structure and performance of US banks from 1990 to today, geographically disaggregated at the level of individual counties. The constructed data set (20 indicators for some 3150 counties over 31 years, for a total of about 2 million data points) conveys a detailed picture of how the geography of US banking has evolved in the last three decades. We consider the data as a stepping stone to understand the role banks and banking policies may have played in mitigating, or exacerbating, the rise of poverty and inequality in certain US regions.
{"title":"The Geography of Banks in the United States (1990-2020)","authors":"Ignazio Angeloni, Johannes Kasinger, Chantawit Tantasith","doi":"10.2139/ssrn.3925588","DOIUrl":"https://doi.org/10.2139/ssrn.3925588","url":null,"abstract":"We present new statistical indicators of the structure and performance of US banks from 1990 to today, geographically disaggregated at the level of individual counties. The constructed data set (20 indicators for some 3150 counties over 31 years, for a total of about 2 million data points) conveys a detailed picture of how the geography of US banking has evolved in the last three decades. We consider the data as a stepping stone to understand the role banks and banking policies may have played in mitigating, or exacerbating, the rise of poverty and inequality in certain US regions.","PeriodicalId":158556,"journal":{"name":"Leibniz Institute for Financial Research SAFE Working Paper Series","volume":"85 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117277257","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, theoretically and empirically, the effects of incentives on the self-selection and coordination of motivated agents to produce a social good. Agents join teams where they allocate effort to either generate individual monetary rewards (selfish effort) or contribute to the production of a social good with positive effort complementarities (social effort). Agents differ in their motivation to exert social effort. Our model predicts that lowering incentives for selfish effort in one team increases social good production by selectively attracting and coordinating motivated agents. We test this prediction in a lab experiment allowing us to cleanly separate the selection effect from other effects of low incentives. Results show that social good production more than doubles in the low- incentive team, but only if self-selection is possible. Our analysis highlights the important role of incentives in the matching of motivated agents engaged in social good production.
{"title":"Incentives, Self-Selection, and Coordination of Motivated Agents for the Production of Social Goods","authors":"Kevin Bauer, M. Kosfeld, Ferdinand A. von Siemens","doi":"10.2139/ssrn.3890904","DOIUrl":"https://doi.org/10.2139/ssrn.3890904","url":null,"abstract":"We study, theoretically and empirically, the effects of incentives on the self-selection and coordination of motivated agents to produce a social good. Agents join teams where they allocate effort to either generate individual monetary rewards (selfish effort) or contribute to the production of a social good with positive effort complementarities (social effort). Agents differ in their motivation to exert social effort. Our model predicts that lowering incentives for selfish effort in one team increases social good production by selectively attracting and coordinating motivated agents. We test this prediction in a lab experiment allowing us to cleanly separate the selection effect from other effects of low incentives. Results show that social good production more than doubles in the low- incentive team, but only if self-selection is possible. Our analysis highlights the important role of incentives in the matching of motivated agents engaged in social good production.","PeriodicalId":158556,"journal":{"name":"Leibniz Institute for Financial Research SAFE Working Paper Series","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-07-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130491878","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}
This paper explores the interplay of feature-based explainable AI (XAI) tech- niques, information processing, and human beliefs. Using a novel experimental protocol, we study the impact of providing users with explanations about how an AI system weighs inputted information to produce individual predictions (LIME) on users’ weighting of information and beliefs about the task-relevance of information. On the one hand, we find that feature-based explanations cause users to alter their mental weighting of available information according to observed explanations. On the other hand, explanations lead to asymmetric belief adjustments that we inter- pret as a manifestation of the confirmation bias. Trust in the prediction accuracy plays an important moderating role for XAI-enabled belief adjustments. Our results show that feature-based XAI does not only superficially influence decisions but re- ally change internal cognitive processes, bearing the potential to manipulate human beliefs and reinforce stereotypes. Hence, the current regulatory efforts that aim at enhancing algorithmic transparency may benefit from going hand in hand with measures ensuring the exclusion of sensitive personal information in XAI systems. Overall, our findings put assertions that XAI is the silver bullet solving all of AI systems’ (black box) problems into perspective.
{"title":"Expl(Ai)Ned: The Impact of Explainable Artificial Intelligence on Cognitive Processes","authors":"Kevin Bauer, Moritz von Zahn, O. Hinz","doi":"10.2139/ssrn.3872711","DOIUrl":"https://doi.org/10.2139/ssrn.3872711","url":null,"abstract":"This paper explores the interplay of feature-based explainable AI (XAI) tech- niques, information processing, and human beliefs. Using a novel experimental protocol, we study the impact of providing users with explanations about how an AI system weighs inputted information to produce individual predictions (LIME) on users’ weighting of information and beliefs about the task-relevance of information. On the one hand, we find that feature-based explanations cause users to alter their mental weighting of available information according to observed explanations. On the other hand, explanations lead to asymmetric belief adjustments that we inter- pret as a manifestation of the confirmation bias. Trust in the prediction accuracy plays an important moderating role for XAI-enabled belief adjustments. Our results show that feature-based XAI does not only superficially influence decisions but re- ally change internal cognitive processes, bearing the potential to manipulate human beliefs and reinforce stereotypes. Hence, the current regulatory efforts that aim at enhancing algorithmic transparency may benefit from going hand in hand with measures ensuring the exclusion of sensitive personal information in XAI systems. Overall, our findings put assertions that XAI is the silver bullet solving all of AI systems’ (black box) problems into perspective.","PeriodicalId":158556,"journal":{"name":"Leibniz Institute for Financial Research SAFE Working Paper Series","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-06-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127023563","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 conducted a large-scale household survey in November 2020 to study how altering the time frame of a message (temporal framing) regarding an imminent positive income shock affects consumption plans. The income shock derives from the abolishment of the German solidarity surcharge on personal income taxes, effective in January 2021. We randomize across survey participants whether their extra disposable income is presented in Euros per month, Euros per year, or Euros per ten year-period. Our main findings are as follows: In General, we find our respondents’ intended Marginal Propensity to Consume (MPC) is 28.2%. Across all three treatments, the MPC is a positive function of age and being female while it is a negative function of the income increase’s size, self- control, and being unemployed. Temporal framing effects are statistically and economically highly significant as we find the monthly treatment groups’ average MPC 5.6 and 8.7 percentage points higher compared to the yearly and 10-yearly treatment groups. We will be able to analyze the real consumption behavior of households throughout 2021 based on re-surveying the participants as well as by using transaction-based bank data.
{"title":"The Impact of Temporal Framing on the Marginal Propensity to Consume","authors":"T. Pauls","doi":"10.2139/ssrn.3790603","DOIUrl":"https://doi.org/10.2139/ssrn.3790603","url":null,"abstract":"We conducted a large-scale household survey in November 2020 to study how altering the time frame of a message (temporal framing) regarding an imminent positive income shock affects consumption plans. The income shock derives from the abolishment of the German solidarity surcharge on personal income taxes, effective in January 2021. We randomize across survey participants whether their extra disposable income is presented in Euros per month, Euros per year, or Euros per ten year-period. Our main findings are as follows: In General, we find our respondents’ intended Marginal Propensity to Consume (MPC) is 28.2%. Across all three treatments, the MPC is a positive function of age and being female while it is a negative function of the income increase’s size, self- control, and being unemployed. Temporal framing effects are statistically and economically highly significant as we find the monthly treatment groups’ average MPC 5.6 and 8.7 percentage points higher compared to the yearly and 10-yearly treatment groups. We will be able to analyze the real consumption behavior of households throughout 2021 based on re-surveying the participants as well as by using transaction-based bank data.","PeriodicalId":158556,"journal":{"name":"Leibniz Institute for Financial Research SAFE Working Paper Series","volume":"65 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130694639","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}
Monica Billio, A. Lo, L. Pelizzon, Mila Getmansky Sherman, A. Zareei
The centrality of the United States in the global financial system is taken for granted, but its response to recent political and epidemiological events has suggested that China now holds a comparable position. Using minute-by-minute data from 2012 to 2020 on the financial performance of twelve country-specific exchange-traded funds, we construct daily snapshots of the global financial network and analyze them for the centrality and connectedness of each country in our sample. We find evidence that the U.S. was central to the global financial system into 2018, but that the U.S.-China trade war of 2018–2019 diminished its centrality, and the Covid-19 outbreak of 2019–2020 increased the centrality of China. These indicators may be the first signals that the global financial system is moving from a unipolar to a bipolar world.
{"title":"Global Realignment in Financial Market Dynamics: Evidence from ETF Networks","authors":"Monica Billio, A. Lo, L. Pelizzon, Mila Getmansky Sherman, A. Zareei","doi":"10.2139/ssrn.3779127","DOIUrl":"https://doi.org/10.2139/ssrn.3779127","url":null,"abstract":"The centrality of the United States in the global financial system is taken for granted, but its response to recent political and epidemiological events has suggested that China now holds a comparable position. Using minute-by-minute data from 2012 to 2020 on the financial performance of twelve country-specific exchange-traded funds, we construct daily snapshots of the global financial network and analyze them for the centrality and connectedness of each country in our sample. We find evidence that the U.S. was central to the global financial system into 2018, but that the U.S.-China trade war of 2018–2019 diminished its centrality, and the Covid-19 outbreak of 2019–2020 increased the centrality of China. These indicators may be the first signals that the global financial system is moving from a unipolar to a bipolar world.","PeriodicalId":158556,"journal":{"name":"Leibniz Institute for Financial Research SAFE Working Paper Series","volume":"74 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133977621","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}
Decisions under ambiguity depend on the beliefs regarding possible scenarios and the attitude towards ambiguity. This paper exclusively focuses on beliefs, and beliefs are measured independently from attitudes, in contrast to many previous studies. We use laboratory experiments to estimate the subjective belief formation and belief updating process in an ambiguous environment. As a main contribution, we recover the entire be- lief distribution of individual subjects and scrutinize how beliefs are updated in response to new information. For 70% of the subjects, we can reject the objective equality hypothe- sis that one’s initial prior follows a uniform distribution. A further investigation of biases in initial beliefs reveals that 66% of the subjects display neither pessimism nor optimism in initial beliefs. Overall, the unbiased belief hypothesis cannot be rejected. The recovered belief updating rules reveal that the Bayesian updating hypothesis can be rejected for 84% of the subjects. Among them, most subjects under-react to new information compared to what Bayes’ rule implies. Finally, we find that beliefs are heterogeneous and cannot be characterized by a single distribution that fits for all subjects.
{"title":"Belief Formation and Belief Updating Under Ambiguity: Evidence from Experiments","authors":"Wenhui Li, C. Wilde","doi":"10.2139/ssrn.3399983","DOIUrl":"https://doi.org/10.2139/ssrn.3399983","url":null,"abstract":"Decisions under ambiguity depend on the beliefs regarding possible scenarios and the attitude towards ambiguity. This paper exclusively focuses on beliefs, and beliefs are measured independently from attitudes, in contrast to many previous studies. We use laboratory experiments to estimate the subjective belief formation and belief updating process in an ambiguous environment. As a main contribution, we recover the entire be- lief distribution of individual subjects and scrutinize how beliefs are updated in response to new information. For 70% of the subjects, we can reject the objective equality hypothe- sis that one’s initial prior follows a uniform distribution. A further investigation of biases in initial beliefs reveals that 66% of the subjects display neither pessimism nor optimism in initial beliefs. Overall, the unbiased belief hypothesis cannot be rejected. The recovered belief updating rules reveal that the Bayesian updating hypothesis can be rejected for 84% of the subjects. Among them, most subjects under-react to new information compared to what Bayes’ rule implies. Finally, we find that beliefs are heterogeneous and cannot be characterized by a single distribution that fits for all subjects.","PeriodicalId":158556,"journal":{"name":"Leibniz Institute for Financial Research SAFE Working Paper Series","volume":"212 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-08-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123314822","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 experimental design, I test how the exposure to information about a group's relative performance causally affects the members' level of identification and thereby their propensity to harm aliates of comparison groups. I find that both, being informed about a high and poor relative performance of the ingroup similarly fosters identification. Stronger ingroup identification creates increased hostility against the group of comparison. In cases where participants learn about poor relative performance, there appears to be a direct level effect additionally elevating hostile discrimination. My findings shed light on a specific channel through which social media may contribute to intergroup fragmentation and polarization.
{"title":"How Did We Do? The Impact of Relative Performance Feedback on Intergroup Hostilities","authors":"Kevin Bauer","doi":"10.2139/ssrn.3630105","DOIUrl":"https://doi.org/10.2139/ssrn.3630105","url":null,"abstract":"Using a novel experimental design, I test how the exposure to information about a group's relative performance causally affects the members' level of identification and thereby their propensity to harm aliates of comparison groups. I find that both, being informed about a high and poor relative performance of the ingroup similarly fosters identification. Stronger ingroup identification creates increased hostility against the group of comparison. In cases where participants learn about poor relative performance, there appears to be a direct level effect additionally elevating hostile discrimination. My findings shed light on a specific channel through which social media may contribute to intergroup fragmentation and polarization.","PeriodicalId":158556,"journal":{"name":"Leibniz Institute for Financial Research SAFE Working Paper Series","volume":"84 6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126082510","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}
This paper studies why investors buy dividend-paying assets and how they time their consumption accordingly. We combine administrative bank data linking customers’ consumption transactions and income to detailed portfolio data and survey responses on financial behavior. We find that private consumption is excessively sensitive to dividend income. Investors across wealth, income, and age distributions increase spending precisely around days of dividend receipt. Importantly, the consumption response is driven by financially prudent investors who select dividend portfolios, anticipate dividend income, and plan consumption accordingly. Our results contribute to the literature on a dividend clientele and provide evidence of ‘planned’ excess sensitivity.
{"title":"Consuming Dividends","authors":"Konstantin Bräuer, A. Hackethal, Tobin Hanspal","doi":"10.2139/ssrn.3466731","DOIUrl":"https://doi.org/10.2139/ssrn.3466731","url":null,"abstract":"This paper studies why investors buy dividend-paying assets and how they time their consumption accordingly. We combine administrative bank data linking customers’ consumption transactions and income to detailed portfolio data and survey responses on financial behavior. We find that private consumption is excessively sensitive to dividend income. Investors across wealth, income, and age distributions increase spending precisely around days of dividend receipt. Importantly, the consumption response is driven by financially prudent investors who select dividend portfolios, anticipate dividend income, and plan consumption accordingly. Our results contribute to the literature on a dividend clientele and provide evidence of ‘planned’ excess sensitivity.","PeriodicalId":158556,"journal":{"name":"Leibniz Institute for Financial Research SAFE Working Paper Series","volume":"30 2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115929354","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}
This paper shows that judicial enforcement has substantial effects on firms’ decisions with regard to their employment policies. To establish causality, I exploit a reorganization of the court districts in Italy involving judicial district mergers as a shock to court productivity. I find that an improvement in enforcement, as measured by a reduction in average trial length, has a large, positive effect on firm employment. The cross-sectional heterogeneity of the results suggest that stronger enforcement reduces financing constraints, boosting employment as a result, especially in firms characterized by higher complementarity between labor and capital. Moreover, in the presence of stronger enforcement, firms can raise more debt to dampen the impact of negative shocks and, in this way, reduce employment fluctuations. Consistent with this result, worker-level evidence shows that strong enforcement reduces the likelihood of unemployment.
{"title":"The Real Effects of Judicial Enforcement","authors":"Vincenzo Pezone","doi":"10.2139/ssrn.3090884","DOIUrl":"https://doi.org/10.2139/ssrn.3090884","url":null,"abstract":"\u0000 This paper shows that judicial enforcement has substantial effects on firms’ decisions with regard to their employment policies. To establish causality, I exploit a reorganization of the court districts in Italy involving judicial district mergers as a shock to court productivity. I find that an improvement in enforcement, as measured by a reduction in average trial length, has a large, positive effect on firm employment. The cross-sectional heterogeneity of the results suggest that stronger enforcement reduces financing constraints, boosting employment as a result, especially in firms characterized by higher complementarity between labor and capital. Moreover, in the presence of stronger enforcement, firms can raise more debt to dampen the impact of negative shocks and, in this way, reduce employment fluctuations. Consistent with this result, worker-level evidence shows that strong enforcement reduces the likelihood of unemployment.","PeriodicalId":158556,"journal":{"name":"Leibniz Institute for Financial Research SAFE Working Paper Series","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123862365","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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