Principal components (PC) are fundamentally feasible for the estimation of large factor models because consistency can be achieved for any path of the panel dimensions. The PC method is however inefficient under cross-sectional dependence with unknown structure. The approximate factor model of Chamberlain and Rothschild [1983] imposes a bound on the amount of dependence in the error term. This article proposes a constrained principal components (Cn-PC) estimator that incorporates this restriction as external information in the PC analysis of the data. This estimator is computationally tractable. It doesn't require estimating large covariance matrices, and is obtained as PC of a regularized form of the data covariance matrix. The paper develops a convergence rate for the factor estimates and establishes asymptotic normality. In a Monte Carlo study, we find that the Cn-PC estimators have good small sample properties in terms of estimation and forecasting performances when compared to the regular PC and to the generalized PC method (Choi [2012]).
{"title":"Constrained Principal Components Estimation of Large Approximate Factor Models","authors":"Rachida Ouysse","doi":"10.2139/ssrn.2956211","DOIUrl":"https://doi.org/10.2139/ssrn.2956211","url":null,"abstract":"Principal components (PC) are fundamentally feasible for the estimation of large factor models because consistency can be achieved for any path of the panel dimensions. The PC method is however inefficient under cross-sectional dependence with unknown structure. The approximate factor model of Chamberlain and Rothschild [1983] imposes a bound on the amount of dependence in the error term. This article proposes a constrained principal components (Cn-PC) estimator that incorporates this restriction as external information in the PC analysis of the data. This estimator is computationally tractable. It doesn't require estimating large covariance matrices, and is obtained as PC of a regularized form of the data covariance matrix. The paper develops a convergence rate for the factor estimates and establishes asymptotic normality. In a Monte Carlo study, we find that the Cn-PC estimators have good small sample properties in terms of estimation and forecasting performances when compared to the regular PC and to the generalized PC method (Choi [2012]).","PeriodicalId":23435,"journal":{"name":"UNSW Business School Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82011531","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 document provides additional materials and data analysis that complement the laboratory experiment described in the following article: "Karaenke, P.; Leukel, J.; Sugumaran, V. 2016. “Using Domain Ontology for Service Replacement Tasks: An Empirical Evaluation,” Proceedings of the 37th International Conference on Information Systems (ICIS 2016), Dublin, Ireland." This supplement consists of the following parts: Tutorial pages and tasks, service descriptions used in the service replacement tasks, test of hypothesis 1 per task, and test for learning effects. The purpose of the supplement is to enable researchers to replicate our experiment. Furthermore, the additional data analysis may help researchers better comprehend the results reported in the main article.
{"title":"Supplement to the Article: Using Domain Ontology for Service Replacement Tasks: An Empirical Evaluation","authors":"Paul Karänke, J. Leukel, V. Sugumaran","doi":"10.2139/SSRN.2946016","DOIUrl":"https://doi.org/10.2139/SSRN.2946016","url":null,"abstract":"This document provides additional materials and data analysis that complement the laboratory experiment described in the following article: \"Karaenke, P.; Leukel, J.; Sugumaran, V. 2016. “Using Domain Ontology for Service Replacement Tasks: An Empirical Evaluation,” Proceedings of the 37th International Conference on Information Systems (ICIS 2016), Dublin, Ireland.\" This supplement consists of the following parts: Tutorial pages and tasks, service descriptions used in the service replacement tasks, test of hypothesis 1 per task, and test for learning effects. The purpose of the supplement is to enable researchers to replicate our experiment. Furthermore, the additional data analysis may help researchers better comprehend the results reported in the main article.","PeriodicalId":23435,"journal":{"name":"UNSW Business School Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-04-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81632290","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}
The amendment of the Article 507 of the CRR, Capital Requirements Regulation, proposed by the European Commission, would expose member States of European Union to immediate failure for debt interest sudden rise, but would also expose to a higher risk of failure some national banking systems as a whole.
{"title":"Unsustainable Europe: How Will Explode the Banking System and Public Debt","authors":"Danilo Stentella","doi":"10.2139/SSRN.2933601","DOIUrl":"https://doi.org/10.2139/SSRN.2933601","url":null,"abstract":"The amendment of the Article 507 of the CRR, Capital Requirements Regulation, proposed by the European Commission, would expose member States of European Union to immediate failure for debt interest sudden rise, but would also expose to a higher risk of failure some national banking systems as a whole.","PeriodicalId":23435,"journal":{"name":"UNSW Business School Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78561844","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}
I propose a method of moments estimator of revealed comparative advantage based on a flexible specification of trade flows that is consistent with a large class of gravity models of international trade. I show that this estimator has many desirable properties. It is theoretically consistent with the classical notion of Ricardian comparative advantage and is easily computed, even for very large samples. Statistical inference is straightforward, and it is closely related to a commonly-used estimator in the gravity literature that is known to be robust to various forms of heteroskedasticity and measurement error common to trade data.
{"title":"A Gravity-Based Revealed Comparative Advantage Estimator","authors":"S. French","doi":"10.2139/ssrn.2925591","DOIUrl":"https://doi.org/10.2139/ssrn.2925591","url":null,"abstract":"I propose a method of moments estimator of revealed comparative advantage based on a flexible specification of trade flows that is consistent with a large class of gravity models of international trade. I show that this estimator has many desirable properties. It is theoretically consistent with the classical notion of Ricardian comparative advantage and is easily computed, even for very large samples. Statistical inference is straightforward, and it is closely related to a commonly-used estimator in the gravity literature that is known to be robust to various forms of heteroskedasticity and measurement error common to trade data.","PeriodicalId":23435,"journal":{"name":"UNSW Business School Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-02-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78492556","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}
Gravity estimation based on sector-level trade data is generally misspecified because it ignores the role of product-level comparative advantage in shaping the effects of trade barriers on sector-level trade flows. Using a model that allows for arbitrary patterns of product-level comparative advantage, I show that sector-level trade flows follow a generalized gravity equation that contains an unobservable, bilateral component that is correlated with trade costs and omitted by standard sector-level gravity models. I propose and implement an estimator that uses product-level data to account for patterns of comparative advantage and find the bias in sector-level estimates to be significant. I also find that, when controlling for product-level comparative advantage, estimates are much more robust to distributional assumptions, suggesting that remaining biases due to heteroskedasticity and sample selection are less severe than previously thought.
{"title":"Comparative Advantage and Biased Gravity","authors":"S. French","doi":"10.2139/ssrn.2913921","DOIUrl":"https://doi.org/10.2139/ssrn.2913921","url":null,"abstract":"Gravity estimation based on sector-level trade data is generally misspecified because it ignores the role of product-level comparative advantage in shaping the effects of trade barriers on sector-level trade flows. Using a model that allows for arbitrary patterns of product-level comparative advantage, I show that sector-level trade flows follow a generalized gravity equation that contains an unobservable, bilateral component that is correlated with trade costs and omitted by standard sector-level gravity models. I propose and implement an estimator that uses product-level data to account for patterns of comparative advantage and find the bias in sector-level estimates to be significant. I also find that, when controlling for product-level comparative advantage, estimates are much more robust to distributional assumptions, suggesting that remaining biases due to heteroskedasticity and sample selection are less severe than previously thought.","PeriodicalId":23435,"journal":{"name":"UNSW Business School Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78204924","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 applies a widely-used class of quantitative trade models to evaluate the usefulness of measures of revealed comparative advantage (RCA) in academic and policy analyses. I find that, while commonly-used indexes are generally not consistent with theoretical notions of comparative advantage, certain indexes can be usefully employed for certain tasks. I explore several common uses of RCA indexes and show that different indexes are appropriate when attempting to (a) uncover countries' fundamental patterns of comparative advantage, (b) evaluate the differential effect of changes in trade barriers across producers of different products, or (c) identify countries who are relatively close competitors in a given market.
{"title":"Revealed Comparative Advantage: What Is It Good For?","authors":"S. French","doi":"10.2139/ssrn.2525827","DOIUrl":"https://doi.org/10.2139/ssrn.2525827","url":null,"abstract":"This paper applies a widely-used class of quantitative trade models to evaluate the usefulness of measures of revealed comparative advantage (RCA) in academic and policy analyses. I find that, while commonly-used indexes are generally not consistent with theoretical notions of comparative advantage, certain indexes can be usefully employed for certain tasks. I explore several common uses of RCA indexes and show that different indexes are appropriate when attempting to (a) uncover countries' fundamental patterns of comparative advantage, (b) evaluate the differential effect of changes in trade barriers across producers of different products, or (c) identify countries who are relatively close competitors in a given market.","PeriodicalId":23435,"journal":{"name":"UNSW Business School Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73168221","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}
Empirical evidences on corporate bond found e.g. in Frydman (2005) and Frydman and Schuermann (2008) suggest the facts that the attribution of constant intensity in the credit rating dynamics, represented by finite-state jump Markov processes, is not borne out by actual data. On the other hand, it is known facts that continuous-time finite-state jump Markov processes can be represented by means of Poisson process and embedded discrete-time Markov chains, see, e.g., Ch. 7 of Pardoux (2008), Sec. 5.10 of Resnick (2002) and and Jakubowski and Nieweglowski (2010, 2008). Motivated by the above facts, we consider representation of jump Markov processes in terms of doubly stochastic Poisson process (see e.g. Cox (1955), Kingman (1964), Serfozo (1972), and Bremaud (1981)) whose intensity is driven by observed explanatory covariates. However, we impose weaker conditions than that of specified in Kingman (1964) and Jakubowski and Nieweglowski (2010, 2008) in the construction of such jump Markov process in which the conditional rate of jump arrival in the conditional Poisson process follows the landmarking approach. This approach has been recently introduced in event history analysis by van Houwelingen (2007) and van Houwelingen and Putter (2012). By this approach, we do not require the whole trajectory (dynamics) of the observed covariates. Analogous to Cox (1955) and Jakubowski and Nieweglowski (2010), we call such representation as doubly stochastic jump Markov processes. We derive lifetime distributions until its absorption of doubly stochastic finite state absorbing jump Markov process, and propose generalization of the phase-type distribution introduced in Neuts (1981, 1975). Also, we derive conditional forward intensity of future occurrences of the jump Markov process. The new distribution and intensity are given in closed form and have ability to capture explanatory covariates and heterogeneity. The results can be seen as an alternative structural approach to the reduced-form model of credit default discussed in Duffie et al. (2009, 2007), and Duan et al. (2012). Some numerical examples are discussed to motivate the main results.
在Frydman(2005)和Frydman and Schuermann(2008)中发现的关于公司债券的经验证据表明，信用评级动态中以有限状态跳跃马尔可夫过程为代表的恒定强度的归因并没有得到实际数据的证实。另一方面，已知的事实是，连续时间有限状态跳跃马尔可夫过程可以用泊松过程和嵌入的离散时间马尔可夫链来表示，参见Pardoux(2008)的第7章，Resnick(2002)的第5.10节以及Jakubowski和Nieweglowski(2010, 2008)。基于上述事实，我们考虑用双随机泊松过程来表示跳跃马尔可夫过程(参见Cox(1955)、Kingman(1964)、Serfozo(1972)和Bremaud(1981))，其强度由观察到的解释协变量驱动。然而，在构造这种跳跃马尔可夫过程时，我们施加了比Kingman(1964)和Jakubowski和Nieweglowski(2010、2008)中规定的更弱的条件，其中条件泊松过程中的条件跳跃到达率遵循地标方法。这种方法最近被van Houwelingen(2007)和van Houwelingen and Putter(2012)引入到事件历史分析中。通过这种方法，我们不需要观察到的协变量的整个轨迹(动力学)。与Cox(1955)和Jakubowski和Nieweglowski(2010)类似，我们将这种表示称为双重随机跳跃马尔可夫过程。推导了其吸收双随机有限态跳跃马尔可夫过程之前的寿命分布，并对Neuts(1981,1975)中引入的相型分布进行了推广。此外，我们还推导了跳跃马尔可夫过程未来发生的条件前向强度。新的分布和强度以封闭形式给出，并且能够捕获解释协变量和异质性。研究结果可以被视为Duffie等人(2009、2007)和Duan等人(2012)讨论的信用违约简化模型的另一种结构性方法。文中还讨论了一些数值算例来激励主要结果。
{"title":"Conditional Phase-Type Distribution Under Doubly Stochastic Jump Markov Processes with Observed Covariates","authors":"B. Surya","doi":"10.2139/ssrn.2901525","DOIUrl":"https://doi.org/10.2139/ssrn.2901525","url":null,"abstract":"Empirical evidences on corporate bond found e.g. in Frydman (2005) and Frydman and Schuermann (2008) suggest the facts that the attribution of constant intensity in the credit rating dynamics, represented by finite-state jump Markov processes, is not borne out by actual data. On the other hand, it is known facts that continuous-time finite-state jump Markov processes can be represented by means of Poisson process and embedded discrete-time Markov chains, see, e.g., Ch. 7 of Pardoux (2008), Sec. 5.10 of Resnick (2002) and and Jakubowski and Nieweglowski (2010, 2008). Motivated by the above facts, we consider representation of jump Markov processes in terms of doubly stochastic Poisson process (see e.g. Cox (1955), Kingman (1964), Serfozo (1972), and Bremaud (1981)) whose intensity is driven by observed explanatory covariates. However, we impose weaker conditions than that of specified in Kingman (1964) and Jakubowski and Nieweglowski (2010, 2008) in the construction of such jump Markov process in which the conditional rate of jump arrival in the conditional Poisson process follows the landmarking approach. This approach has been recently introduced in event history analysis by van Houwelingen (2007) and van Houwelingen and Putter (2012). By this approach, we do not require the whole trajectory (dynamics) of the observed covariates. Analogous to Cox (1955) and Jakubowski and Nieweglowski (2010), we call such representation as doubly stochastic jump Markov processes. We derive lifetime distributions until its absorption of doubly stochastic finite state absorbing jump Markov process, and propose generalization of the phase-type distribution introduced in Neuts (1981, 1975). Also, we derive conditional forward intensity of future occurrences of the jump Markov process. The new distribution and intensity are given in closed form and have ability to capture explanatory covariates and heterogeneity. The results can be seen as an alternative structural approach to the reduced-form model of credit default discussed in Duffie et al. (2009, 2007), and Duan et al. (2012). Some numerical examples are discussed to motivate the main results.","PeriodicalId":23435,"journal":{"name":"UNSW Business School Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73772758","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}
The new Solvency II regime and the upcoming IFRS 4 Phase II regime bring significant changes to current reporting of insurance entities, and particularly in relation to valuation of insurance liabilities. Insurers will be required to valuate their insurance liabilities on a risk-adjusted basis to allow for uncertainty inherent in cash flows that arise from the liability of insurance contracts. Whilst most European-based insurers are expected to adopt the Cost of Capital (CoC) approach to calculating reserve risk margin - the risk adjustment method commonly agreed under Solvency II and IFRS 4 Phase II, there is one additional requirement of IFRS to also disclose confidence level of the risk margin. Given there is no specific guidance on the calculation of confidence level, the purpose of this paper is to explore and examine practical ways of estimating the risk margin confidence level measured by Probability of Sufficiency (PoS). The paper provides some practical approximation formulae that would allow one to quickly estimate the implied PoS of Solvency II risk margin for a given non-life insurance liability, the risk profile of which is specified by the type and characteristics of the liability (e.g. type/nature of business, liability duration and convexity, etc.), which in turn are associated with: the level of variability measured by Coefficient of Variation (CoV); the degree of Skewness per unit of CoV; and the degree of Kurtosis per unit of CoV squared.The approximation formulae of PoS are derived for both the standalone class risk margin and the diversified risk margin at the portfolio level.
{"title":"Probability of Sufficiency of Solvency II Reserve Risk Margins: Practical Approximations","authors":"Eric Dal Moro, Yuriy Krvavych","doi":"10.1017/ASB.2017.12","DOIUrl":"https://doi.org/10.1017/ASB.2017.12","url":null,"abstract":"The new Solvency II regime and the upcoming IFRS 4 Phase II regime bring significant changes to current reporting of insurance entities, and particularly in relation to valuation of insurance liabilities. Insurers will be required to valuate their insurance liabilities on a risk-adjusted basis to allow for uncertainty inherent in cash flows that arise from the liability of insurance contracts. Whilst most European-based insurers are expected to adopt the Cost of Capital (CoC) approach to calculating reserve risk margin - the risk adjustment method commonly agreed under Solvency II and IFRS 4 Phase II, there is one additional requirement of IFRS to also disclose confidence level of the risk margin. Given there is no specific guidance on the calculation of confidence level, the purpose of this paper is to explore and examine practical ways of estimating the risk margin confidence level measured by Probability of Sufficiency (PoS). The paper provides some practical approximation formulae that would allow one to quickly estimate the implied PoS of Solvency II risk margin for a given non-life insurance liability, the risk profile of which is specified by the type and characteristics of the liability (e.g. type/nature of business, liability duration and convexity, etc.), which in turn are associated with: the level of variability measured by Coefficient of Variation (CoV); the degree of Skewness per unit of CoV; and the degree of Kurtosis per unit of CoV squared.The approximation formulae of PoS are derived for both the standalone class risk margin and the diversified risk margin at the portfolio level.","PeriodicalId":23435,"journal":{"name":"UNSW Business School Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-10-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76595008","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}
Roger Backhouse begins his essay on “MIT and the Other Cambridge” (Backhouse, 2014; hereafter RB with page numbers only) citing Joan Robinson’s “challenge to what she chose to call the neoclassical theory of production” (RB, p. 252). His title referred, of course, to Robinson’s protagonists at the Massachusetts Institute of Technology; in particular, Paul Samuelson and Robert Solow. After developing his thesis that disequilibrium macroeconomics emerged as a by-product of the capital theory controversy, Backhouse concludes with the observation: “The controversy between the two Cambridges eventually came to be seen by MIT economists (and most of the economics profession) as a waste of time” (RB, p. 269).
{"title":"Joan Robinson and MIT","authors":"H. Gram, G. Harcourt","doi":"10.2139/ssrn.2843349","DOIUrl":"https://doi.org/10.2139/ssrn.2843349","url":null,"abstract":"Roger Backhouse begins his essay on “MIT and the Other Cambridge” (Backhouse, 2014; hereafter RB with page numbers only) citing Joan Robinson’s “challenge to what she chose to call the neoclassical theory of production” (RB, p. 252). His title referred, of course, to Robinson’s protagonists at the Massachusetts Institute of Technology; in particular, Paul Samuelson and Robert Solow. After developing his thesis that disequilibrium macroeconomics emerged as a by-product of the capital theory controversy, Backhouse concludes with the observation: “The controversy between the two Cambridges eventually came to be seen by MIT economists (and most of the economics profession) as a waste of time” (RB, p. 269).","PeriodicalId":23435,"journal":{"name":"UNSW Business School Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-09-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74427228","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}
At an exogenous deadline, Receiver takes an action, the payoff from which depends on Sender’s private type. Sender privately observes if and when a bombshell arrives. Upon arrival, she chooses when to drop it, which starts a public flow of information about her type. Dropping the bombshell earlier exposes it to greater scrutiny, but signals credibility. We characterize the set of equilibria and show that Sender delays dropping the bombshell, and completely withholds it with positive probability. Our model provides an explanation for an “October Surprise” effect and generates further predictions about the dynamics of information disclosure during election campaigns. We find empirical support for these predictions in data on US presidential scandals.
{"title":"When to Drop a Bombshell","authors":"Gabriele Gratton, Richard Holden, A. Kolotilin","doi":"10.1093/RESTUD/RDX070","DOIUrl":"https://doi.org/10.1093/RESTUD/RDX070","url":null,"abstract":"At an exogenous deadline, Receiver takes an action, the payoff from which depends on Sender’s private type. Sender privately observes if and when a bombshell arrives. Upon arrival, she chooses when to drop it, which starts a public flow of information about her type. Dropping the bombshell earlier exposes it to greater scrutiny, but signals credibility. We characterize the set of equilibria and show that Sender delays dropping the bombshell, and completely withholds it with positive probability. Our model provides an explanation for an “October Surprise” effect and generates further predictions about the dynamics of information disclosure during election campaigns. We find empirical support for these predictions in data on US presidential scandals.","PeriodicalId":23435,"journal":{"name":"UNSW Business School Research Paper Series","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-09-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79103880","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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