Asset prices, exchange rates and the current account

Author(s):

Lucio Sarno

Industry:
Banking

This paper analyses the role of asset prices in comparison to other factors, in particular exchange rates, as a driver of the US trade balance. It employs a Bayesian structural VAR model that requires imposing only a minimum of economically meaningful sign restrictions.

Updated: 27/10/2011
Comments:
Views: 5,215

Profitability, capacity, and uncertainty: a model of UK manufacturing investment

Author(s):

Giovanni Urga

 et al.

Standard models fail to explain variation in UK capital investment. This paper develops and tests a new theory based on the insights of Edmond Malinvaud, in which investment under uncertainty is adjusted to balance the cost of excess and deficient capacity.

Updated: 27/10/2011
Comments:
Views: 5,684

Testing for stochastic dominance efficiency

Author(s):

Thierry Post

Industry:
Banking

We propose a new test of the stochastic dominance efficiency of a given portfolio over a classof portfolios. We establish its null and alternative asymptotic properties, and define a methodfor consistently estimating critical values. We present some numerical evidence that our testswork well in moderate sized samples.

Updated: 27/10/2011
Comments:
Views: 5,656

Spanning and intersection: a stochastic dominance approach

Author(s):

Thierry Post

Industry:
Banking

We propose linear programming tests for spanning and intersection based on stochasticdominance rather than mean-variance analysis.

Updated: 27/10/2011
Comments:
Views: 5,242

Non-parametric tests for firm efficiency in case of errors-in-variables

Author(s):

Thierry Post

Industry:
Banking

This paper develops a novel statistic for firm efficiency called efficiency depth that allows for statistical inference in case of errors-in-variables.

Updated: 27/10/2011
Comments:
Views: 5,080

Loss aversion with a state-dependent reference point

Author(s):

Thierry Post

This study investigates loss aversion when the reference point is state-dependent. Using a state-dependent structure, prospects are more attractive if they depend positively on the reference point and are less attractive in case of negative dependence.

Updated: 27/10/2011
Comments:
Views: 5,372

Irrational diversification: an experimental examination of portfolio construction

A portfolio construction experiment reveals strong evidence for a conditional 1/n diversification heuristic. Subjects have a tendency to exclude choice alternatives that are unattractive when held in isolation, despite their attractive diversification benefits.

Updated: 27/10/2011
Comments:
Views: 5,719

Risky choice and the relative size of stakes

We examine framing effects by analyzing how risky choice depends on the absolute and relative size of the amounts at stake, using an extensive sample of choices from ten different editions of the large-stake TV game show Deal or No Deal.

Updated: 03/11/2011
Comments:
Views: 5,294

Downside risk and asset pricing

Author(s):

Thierry Post

Industry:
Banking

We analyse if the value-weighted stock market portfolio is second-order stochastic dominance (SSD) efficient relative to benchmark portfolios formed on size, value, and momentum.

Updated: 27/10/2011
Comments:
Views: 4,482