nep-mic New Economics Papers
on Microeconomics
Issue of 2011‒02‒12
23 papers chosen by
Vaishnavi Srivathsan
Indian Institute of Technology

  1. A Note on Equity Premia in Markets with Heterogeneous Agents By Tatjana Chudjakow
  2. Entry and Exit of Physicians in a two-tiered public/private Health Care System By Martin Gächter; Peter Schwazer; Engelbert Theurl
  3. What Economists Know about Open Source Software - Its Basic Principles and Research Results By Sebastian von Engelhardt
  4. Negative correlation between stock and futures returns: an unexploited dedging opportunity? By Parantap Basu; William T. Gavin
  5. Swedish Fertility Swings and Public Expenditure for Children By Lindh, Thomas; Hong, Ying
  6. Competitive Equilibria with Production and Limited Commitment By Arpad Abraham; Eva Carceles-Poveda
  7. A Portrait of firm Expansion and Contraction Channels By Holger Breinlich; Stefan Niemann; Edna Solomon
  8. Influence networks By LOPEZ-PINTADO, Dunia
  9. Measuring the Welfare Gain from Personal Computers: A Macroeconomic Approach By Jeremy Greenwood; Karen A. Kopecky
  10. Generalized Nash Equilibrium and market coupling in the European power system By SMEERS, Yves; OGGIONI, Giorgia; ALLEVI, Elisabetta; SCHAIBLE, Siegfried
  11. Tax Evasion under Market Incompleteness By Marco Maffezzoli
  12. What do foreigners want? Evidence from targets in bank cross-border M&As By Caiazza, Stefano; Clare, Andrew; Pozzolo, Alberto Franco
  13. Stability and fairness in models with a multiple membership By LE BRETON, Michel; MORENO-TERNERO, Juan D.; SAVVATEEV, Alexei; WEBER, Shlomo
  14. Consumer Search Markets with Costly Second Visits By Maarten C.W. Janssen; Alexei Parakhonyak
  15. Compensating the dead? Yes we can! By FLEURBAEY, Marc; LEROUX, Marie - Louise; PONTHIERE, Gregory
  16. Co-Production and Managed Competition in Mixed Quasi-markets By F. Delbono; D. Lanzi
  17. Equity Issuance and Divident Policy under Commitment By Alexis Anagnostopoulos; Eva Carceles-Poveda; Albert Marcet
  18. Is the Value of Bioprospecting Contracts Too Low? By Anil Markandya; Paulo A.L.D. Nunes
  19. Spatial differentiation in industrial dynamics A core-periphery analysis based on the Pavitt-Miozzo-Soete taxonomy By Marco Capasso; Elena Cefis; Koen Frenken
  20. You can't be happier than your wife. Happiness Gaps and Divorce By Cahit Guven; Claudia Senik; Holger Stichnoth
  21. Volatility made observable at last By Michel Fliess; C\'edric Join; Fr\'ed\'eric Hatt
  22. Trade and Colonial Status By José De Sousa; Julie Lochard
  23. Resource Allocation, Financing and Sustainability in the Health Sector By Brick, Aoife; Nolan, Anne; O'Reilly, Jacqueline; Smith, Samantha

  1. By: Tatjana Chudjakow (Institute of Mathematical Economics, Bielefeld University)
    Abstract: We analyze a static partial equilibrium model where the agents are not only heterogeneous in their beliefs about the return on risky assets but also in their attitude to it. While some agents in the economy are subjective utility maximizers others behave ambiguity averse in the sense of Knight (1921). If ambiguity averse agents meet overly optimistic subjective utility maximizers in the market lower equity premia can arise in the equilibrium than in a purely subjective utility framework.
    Keywords: Ambiguity, Partial Equilibrium, Heterogeneous Agents, No-Trade Interval
    Date: 2011–01
  2. By: Martin Gächter; Peter Schwazer; Engelbert Theurl
    Abstract: Firm turnover has recently attracted increased interest in economic research. The entry of new firms increases competition and promises efficiency gains. Moreover, changes in the market structure influence productivity growth, because firm entry usually leads to increased innovation. The health care market exhibits important differences as compared to other markets, including various forms of market failure and, as a consequence, extensive market regulation. Thus, the economic effects of entries and exits in health care markets are less obvious. The following paper studies the determinants of entry and exit decisions of physicians in the private sector of the outpatient part of the Austrian health care system. We apply a Poisson panel estimation to a data set of 2,379 local communities and 121 districts in Austria in the time period 2002 - 2008. We are particularly interested in the question how public physicians (GPs/specialists) and their private counterparts influence the entrance and exit of private physicians. We find a significantly negative effect of existing capacities, measured by both private and public physician density of the same specialty, on the entry of new private physicians. On the contrary, we find a significantly positive effect of private GPs on the entry of private specialists. Interestingly, this cooperation/network effect also works in the other direction, as a higher density of private specialists increases the probability of the market entry of private GPs. Based on the results of previous literature, we thus conclude that private physicians establish networks to cooperate in terms of mutual referrals etc. Our estimations for market exits basically confirm the entry results, as higher competitive forces positively influence the market exit of private physicians.
    Keywords: Entry, Exit, Health Care, Physician location
    JEL: I11 I18 L14
    Date: 2011–02
  3. By: Sebastian von Engelhardt (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: For a decade, economists have been fascinated by the phenomenon of open source software (OSS). OSS is marked by free access to the software and its source code. It is developed in a public, collaborative manner by thousands of non-paid volunteers as well as profit seeking firms. Today, OSS is well established in the ICT sector and represents a new intellectual property paradigm. This paper provides an introduction into the topic OSS versus closed source software (CSS, also called 'proprietary' software). After a brief history of OSS and CSS, the differences between the open and the closed source principles and the basic logic of OSS business models are explained. Next, the paper presents what economists know about the OSS phenomena, i.e. gives an overview of the motives of the (non-paid) OSS developers, the institutions of OSS, the effects of OSS on competition, the incentives and role of firms, and finally of open source principle beyond software.
    Keywords: open source, open source software, intellectual property rights, information and communications technologies
    JEL: L17 O34 L86
    Date: 2011–02–01
  4. By: Parantap Basu; William T. Gavin
    Abstract: For over a decade, academic and industry economists argued that the negative correlation between returns on stocks and commodity futures was evidence that institutional investors should add commodity futures index funds as an asset class in their portfolio management strategies. Does this negative correlation give rise to the possibility of unexploited profit opportunity in the financial markets? Using a rational asset-pricing model, we argue that such a negative correlation could arise as a no-arbitrage equilibrium phenomenon and reflects traders’ perceptions about the fundamental processes driving the economy and commodity prices.>
    Keywords: Stocks - Rate of return ; Commodity futures
    Date: 2011
  5. By: Lindh, Thomas (Centre for Labour Market Policy Research (CAFO)); Hong, Ying (Institute for Futures Study)
    Abstract: This paper studies whether Swedish fertility swings and variation in public expenditure for children are related events. In the 1930s Swedish birth rates had fallen to levels close to the death rates and in public discourse this was perceived as a major social and national crisis, spurring a range of social policy reforms. While total fertility rates in Sweden have varied over large spans the completed cohort fertility rates are almost constant around 2 children per woman for women born in the 20th century. Using unique data for the years 1930-1997 on public expenditure per eligible child for schools, child allowances and child care we estimate age-specific fertility for broad age groups as a function of these variables. The results indicate that the age group 25-29 is most sensitive to variations in this public expenditure thus providing a tentative explanation of the swings in period fertility in terms of policy induced tempo variation. School expenditure is negatively correlated to fertility while child care and child allowance is positively correlated. This pattern is consistent with a quantity-quality trade-off by the parents. To check the predictive power of the model we use data from 1998-2007 and get an excellent prediction of the fertility turn-around after 1999 for all age groups except 35 and above where we tend to under-predict at the 10-year horizon. Further research along these lines is needed to uncover the causal mechanisms of these very stable correlations.
    Keywords: fertility swings; tempo effects; public child expenditure
    JEL: J11 J13 J18
    Date: 2011–02–07
  6. By: Arpad Abraham (Department of Economics, University of Rochester); Eva Carceles-Poveda (Department of Economics, Stony Brook University)
    Abstract: This paper studies a production economy with aggregate uncertainty where consumers have limited commitment on their financial liabilities. Markets are endogenously incomplete due to the fact that the borrowing constraints are determined endogenously. We first show that, if competitive financial intermediaries are allowed to set the borrowing limits, then the ones that prevent default will be an equilibrium outcome. The equilibrium allocations in this economy are not constrained efficient due to the fact that intermediaries do not internalize the adverse effects of capital on default incentives. We also isolate and quantifiy this new source of inefficiency by comparing the competitive equilibrium allocations to the constrained efficient ones both qualitatively and quantitatively. We tend to observe higher capital accumulation in the competitive equilibrium, implying that agents may enjoy higher (average) welfare in the long run than in the constrained efficient allocation.
    Keywords: Enforcement Constraints, Intermediation, Risk Sharing, Capital Accumulation.
    JEL: D52 E23
    Date: 2010–10
  7. By: Holger Breinlich; Stefan Niemann; Edna Solomon
    Abstract: We present a novel set of stylised facts on forms of firm expansion and contraction, using unique business register data for the United Kingdom between 1997 and 2005. We distinguish between adjustments of employment and turnover at existing establishments, expansions and contractions taking place via greenfield investments and disinvestments, and via acquisitions and sell-offs. We document the relative importance of these three channels and how firms choose between them. We interpret our findings in the light of existing theories of firm dynamics, and propose directions for future theoretical developments.
    Date: 2010–11–12
  8. By: LOPEZ-PINTADO, Dunia (Universidad Pablo de Olavide, Department of Economics, Sevilla, Spain; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)
    Abstract: Some behaviors, ideas or technologies spread and become persistent in society, whereas others vanish. This paper analyzes the role of social influence in determining such distinct collective outcomes. Agents are assumed to acquire information from others through a certain sampling process that generates an influence network, and they use simple rules to decide whether to adopt or not depending on the observed sample. We characterize, as a function of the primitives of the model, the diffusion threshold (i.e., the spreading rate above which the adoption of the new behavior becomes persistent in the population) and the endemic state (i.e., the fraction of adopters in the stationary state of the dynamics). We find that the new behavior will easily spread in the population if there is a high correlation between how influential (visible) and how easily influenced an agent is, which is determined by the sampling process and the adoption rule. We also analyze how the density and variance of the out-degree distribution affect the diffusion threshold and the endemic state.
    Keywords: social influence, networks, diffusion threshold, endemic state
    JEL: C73 L14
    Date: 2010–12–01
  9. By: Jeremy Greenwood (University of Pennsylvania); Karen A. Kopecky (Federal Reserve Bank of Atlanta)
    Abstract: The welfare gain to consumers from the introduction of personal computers is estimated here. A simple model of consumer demand is formulated that uses a slightly modified version of standard preferences. The modification permits marginal utility, and hence total utility, to be finite when the consumption of computers is zero. This implies that the good won't be consumed at a high enough price. It also bounds the consumer surplus derived from the product. The model is calibrated/estimated using standard national income and product account data. The welfare gain from the introduction of personal computers is in the range of 2 to 3 percent of consumption expenditure.
    Keywords: Compensating Variation, Computers, Electricity, Equivalent Variation, Technological Progress, Tornqvist Price Index, Welfare Gain.
    JEL: E01 E21 O33 O47
    Date: 2011–01
  10. By: SMEERS, Yves (CORE and School of Engineering (INMA), Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium); OGGIONI, Giorgia (University of Brescia, Department of Quantitative Methods, I-25122 Brescia, Italy); ALLEVI, Elisabetta (University of Brescia, Department of Quantitative Methods, I-25122 Brescia, Italy); SCHAIBLE, Siegfried (Chung Yuan Christian University, Department of Applied Mathematics, 32023 Chung-Li, Taiwan)
    Abstract: “Market Coupling” is currently seen as the most advanced market design in the restructuring of the European electricity market. Market coupling, by construction, introduces what is generally referred to as an incomplete market: it leaves several constraints out of the market and hence avoids pricing them. This may or may not have important consequences in practice depending on the case on hand. Quasi-Variational Inequality problems and the associated Generalized Nash Equilibrium can be used for representing incomplete markets. Recent papers propose methods for finding a set of solutions of Quasi-Variational Inequality problems. We apply one of these methods to a subproblem of market coupling namely the coordination of counter-trading. This problem is an illustration of a more general question encountered for instance in hierarchical planning in production management. We first discuss the economic interpretation of the Quasi-Variational Inequality problem. We then apply the algorithmic approach to a set of stylized case studies in order to illustrate the impact of different organizations of counter-trading. The paper emphazises the structuring of the problem. A companion paper considers the full problem of market coupling and counter-trading and presents a more extensive numerical analysis.
    Keywords: Generalized Nas Equilibrium, Quasi-Variational Inequalities, market coupling, counter-trading, European electricity market
    JEL: D52 D58 Q40
    Date: 2010–09–01
  11. By: Marco Maffezzoli
    Abstract: The available empirical evidence suggests that the distribution of income and its composition play an important role in explaining tax noncompliance. We address the issue from a macroeconomic point of view, building a dynamic general equilibrium Bewley model that jointly endogenizes the determinants of tax evasion and income heterogeneity. Our results show that the model can successfully replicate the salient qualitative and quantitative features of the data. In particular, the model replicates fairly well the shape of the cross-sectional distribution of misreporting rates over true income levels. Furthermore, we show that a switch from progressive to proportional taxation has important quantitative effects on noncompliance rates and tax revenues.
    Date: 2011
  12. By: Caiazza, Stefano; Clare, Andrew; Pozzolo, Alberto Franco
    Abstract: Given the recent traumatic events in the world’s banking industry it is important to understand what drives bankers to create larger and larger, often multinational, banking groups. In this paper we investigate whether the targets in cross-border bank M&As are materially different from those banks targeted in domestic M&A deals. To address this question we use a sample of over 24,000 banks from more than 100 countries. We begin by estimating the probability that a bank will be a M&A target; this probability is based upon both bank specific and country specific characteristics. The sample also naturally includes banks that were not involved in any M&A deal, this set of banks acts as a control sample for the study. We then estimate a multinomial model that distinguishes between (i) targets in domestic operations, (ii) targets in cross-border operations and (iii) non-targets. The main message of the paper is that, with few exceptions, domestic and foreign investors target similar banks. In particular, contrary to what one might expect, bank size does not affect differently the probability of being a domestic or a cross-border target, but it has a positive and highly significant effect in both cases. What differs between national and international M&As are the characteristics of the countries where banks operate. On average, banking systems characterized by lower leverage, higher cost inefficiency and lower liquidity are more likely to be targets of cross-border acquisitions, while none of this characteristics affects the likelihood of being acquired domestically.
    Keywords: M&As, M&Asbank internationalisation
    JEL: G15 G21 G34
    Date: 2011–02–01
  13. By: LE BRETON, Michel (Université de Toulouse 1, GREMAQ and IDEI, Toulouse, France); MORENO-TERNERO, Juan D. (Universidad de Malaga, Spain; Universidad Pablo de Olavide, Seville, Spain; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); SAVVATEEV, Alexei (New Economic School, Moscow, Russia); WEBER, Shlomo (Southern Methodist University, Dallas, USA and New Economic School, Moscow, Russia)
    Abstract: This article studies a model of coalition formation for the joint production (and finance) of public projects, in which agents may belong to multiple coalitions. We show that, if projects are divisible, there always exists a stable (secession-proof) structure, i.e., a structure in which no coalition would reject a proposed arrangement. When projects are in- divisible, stable allocations may fail to exist and, for those cases, we resort to the least core in order to estimate the degree of instability. We also examine the compatibility of stability and fairness on metric environments with indivisible projects. To do so, we explore, among other things, the performance of several well-known solutions (such as the Shapley value, the nucleolus, or the Dutta-Ray value) in these environments.
    Keywords: stability, fairness, membership, coalition formation
    JEL: C71
    Date: 2010–12–01
  14. By: Maarten C.W. Janssen; Alexei Parakhonyak
    Abstract: This is the first paper on consumer search where the cost of going back to stores already searched is explicitly taken into account. We show that the optimal sequential search rule under costly second visits is very different from the traditional reservation price rule in that it is nonstationary and not independent of previously sampled prices. We explore the implications of costly second visits on market equilibrium in two celebrated search models. In the Wolinsky model some consumers search beyond the first firm and in this class of models costly second visits do make a substantive difference: equilibrium prices under costly second visits can both be higher and lower than their perfect recall analogues. In the oligopoly search model of Stahl where consumers do not search beyond the first firm, there remains a unique symmetric equilibrium that has firms use pricing strategies that are identical to the perfect recall case.
    JEL: D11 D40 D83 L13
    Date: 2011–01
  15. By: FLEURBAEY, Marc (CNRS, University Paris-Descartes & Sciences-Po, Paris, France; Université catholique de Louvain , CORE, B- 1348 Louvain-la-Neuve, Belgium; LSE; IDEP); LEROUX, Marie - Louise (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); PONTHIERE, Gregory (Ecole Normale Supérieure, Paris School of Economics, F-75014 Paris, France)
    Abstract: An early death is, undoubtedly, a serious disadvantage. However, the compensation of short-lived individuals has remained so far largely unexplored, probably because it appears infeasible. Indeed, short-lived agents can hardly be identified ex ante, and cannot be compensated ex post. We argue that, despite the above difficulties, a compensation can be carried out by encouraging early consumption in the life cycle. In a model with heterogeneous preferences and longevities, we show how a specific social criterion can be derived from intuitive principles, and we study the corresponding optimal policy under various informational assumptions. We also study the robustness of our solution to alternative types of preferences and savings policies.
    Keywords: compensation, longevity, mortality, fairness, redistribution
    JEL: D63 D71 I18 J18
    Date: 2010–10–01
  16. By: F. Delbono; D. Lanzi
    Abstract: In this paper, we provide a very simple model to shed light on the issue of managed competition in mixed quasi-markets (i.e. regulated markets in which social and for-profit firms coexist). In doing this, we consider the literature on mixed oligopolies as a reasonable reference point and try to enrich it with the idea of quasi-market. Firstly, our results show that social firms serve the relatively richer portion of the population. Only relatively poor consumers buy units of service from the profit-oriented firm. Secondly, the socially-preferable form of managed competition is to introduce coproduction practices and, hence, to raise profit-oriented firm's production costs. The diffusion of coproduction paradigms ensures maximal service quality and eliminates mark-up from the market.
    JEL: I18 L13 L84
    Date: 2011–02
  17. By: Alexis Anagnostopoulos (Department of Economics, Stony Brook University); Eva Carceles-Poveda (Department of Economics, Stony Brook University); Albert Marcet (Department of Economics, The London School of Economics and Political Science)
    Abstract: This paper studies a model of corporate finance in which firms use stock issuance to finance investment. Since the firm recognizes the relationship between future dividends and stock prices, future variables enter in the constraints and optimal policy is in general time inconsistent. We discuss the nature of time inconsistency and show that it arises because managers promise to incorporate value maximization gradually into their objective function. This shows how one could change managers’ incentives in order to enforce the optimal contract under full commitment. We then characterize several cases where time consistency arises and we study different examples where policy is time inconsistent. This allows us to address some outstanding issues in the literature about dividend policy and equity issuance. In particular, our results suggest that growing firms that can credibly commit will pay lower dividends at the beginning and promise higher dividends in the future, consistent with empirical evidence. Our results also suggests that compensation that is tied to stock options creates incentives to inflate prices and pay lower dividends. This is consistent with the empirical evidence of increased stock option compensation and payout through repurchases instead to dividends during the last decades.
    Keywords: Stock Issuance; time inconsistency; dividend policy
    JEL: E44 G32
    Date: 2010–12
  18. By: Anil Markandya (Basque Center for Climate Change and University of Bath); Paulo A.L.D. Nunes (Fondazione Eni Enrico Mattei and University of Venice)
    Abstract: In order to regulate the proliferated bioprospecting and protect the biological diversity in the source countries, the Convention on Biological Diversity (CBD) established a legal framework for the reciprocal transfer of biological materials between the interested parties in bioprospecting activities, subject to the Prior Informed Content (PIC) principles and a set of mutually agreed items on equitable sharing of benefits (CBD 1992, Bhat 1999; Ten Kate and Laird 1999; Dedeurwaerdere 2005). Although interesting and valuable to the cause of conservation, there is a feeling that the ‘price’ being paid under these arrangements is too low. Somehow ecologists argue that, surely, these materials have a greater value than the few million dollars being paid to national conservation organizations for the protection of the areas where the material are located. In this paper we seek to understand better how a biodiversity resource’ use value in production is determined, and how the real value is obscured by the fact that the resource is largely open access. We attempt to analyse how special arrangements, set op top of a basic framework in which the resource open access is limited in what it can achieve and in the ‘price’ that will emerge from any transaction between the buyers of the rights and the sellers of the rights.
    Keywords: Access and Benefit Sharing, Convention for Biological Diversity, Bioprospecting Contract, Genetic Resource, Open Access and Welfare Analysis
    JEL: D21 D23 D61 L14 Q57
    Date: 2010–12
  19. By: Marco Capasso; Elena Cefis; Koen Frenken
    Abstract: We compare the industrial dynamics in the core, semi-periphery and periphery in The Netherlands in terms of firm entry-exit, size, growth and sectoral location patterns. The contribution of our work is to provide the first comprehensive study on spatial differentiation in industrial dynamics for all firm sizes and all sectors, including services. We find that at the aggregate level the spatial pattern of industrial dynamics is consistent with the spatial product lifecycle thesis: entry and exit rates are highest in the core and lowest in the periphery, while the share of persistently growing firms is higher in the periphery than in the core. Disaggregating the analysis to the sectoral level following the Pavitt-Miozzo-Soete taxonomy, findings are less robust. Finally, sectoral location patterns are largely consistent with the spatial product lifecycle model: Fordist sectors are over-represented in the periphery, while sectors associated with the ICT paradigm are over-represented in the core, with the notable exception of science-based manufacturing.
    Keywords: Entry, exit, spatial product lifecycle, Fordist paradigm, ICT paradigm
    JEL: L25 L26 L60 L80 O18 O33 R10
    Date: 2011–01
  20. By: Cahit Guven (Deakin University - Minister for Innovation, Industry, Science and Research); Claudia Senik (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, Université Paris-Sorbonne - Ministère de l'Education nationale, de l'Enseignement supérieur et de la Recherche); Holger Stichnoth (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, ZEW - Zentrum für Europäische Wirtschaftsforschung - ZEW)
    Abstract: This paper asks whether a gap in spouses' subjective happiness matters per se, i.e. whether it predicts divorce. We use three large panel surveys to explore this question. Controlling for the life satisfaction levels of spouses, we find that a larger happiness gap, even in the first year of marriage, increases the likelihood of a future separation. This association even holds for couples where both spouses are identified as being better off than in their outside option. We interpret this observation as reflecting a concern for relative utility. To the best of our knowledge, this effect has not been taken into account by any existing economic models of the household. The relationship between happiness gaps and divorce is consistent with the fact that couples who are unable to transfer utility are more at risk than others. It is also possible that assortative mating by happiness baseline level reduces the risk of separation. However, assortative mating cannot entirely explain the finding, as a widening of the happiness gap over time increases the risk of separation. We also uncover an asymmetry in the effect of happiness gaps: couples are more likely to break-up when the difference in life satisfaction is unfavorable to the woman. De facto, divorces appear to be initiated predominantly by women who are less happy than their husband. This asymmetry suggests that the effect of happiness gaps is grounded on motives of relative deprivation, rather than on a preference for equal happiness. The presence of this new argument in spouses' utility is likely to modify their optimal behavior, e.g. in terms of labor supply. It should also be taken into account for public policy measures concerning gender-based labor incentives.
    Keywords: divorce ; happiness ; comparisons ; panel ; households, marriage
    Date: 2010–12
  21. By: Michel Fliess (LIX); C\'edric Join (INRIA Saclay - Ile de France, CRAN); Fr\'ed\'eric Hatt
    Abstract: The Cartier-Perrin theorem, which was published in 1995 and is expressed in the language of nonstandard analysis, permits, for the first time perhaps, a clear-cut mathematical definition of the volatility of a financial asset. It yields as a byproduct a new understanding of the means of returns, of the beta coefficient, and of the Sharpe and Treynor ratios. New estimation techniques from automatic control and signal processing, which were already successfully applied in quantitative finance, lead to several computer experiments with some quite convincing forecasts.
    Date: 2011–02
  22. By: José De Sousa; Julie Lochard
    Abstract: Does colonisation explain differences in trade performance across developing countries? In this paper, we analyse the differential impact of British versus French colonial legacies on the current trade of African ex-colonies. We initially find that former British colonies trade more, on average, than do their French counterparts. This difference might be the result of the relative superiority of British institutions. However, a core concern is the non-random selection of colonies by the British. Historians argue that with Britain, trade preceded colonisation. Using an instrument based on colonisation history to control for this endogeneity, we find no evidence of a systematic difference between the British and French colonial legacies with respect to trade. This finding suggests that the apparent better performance of British ex-colonies might be instead explained by pre-colonial conditions.
    Keywords: Trade, colonisation, Africa
    JEL: F10 F54 O55
    Date: 2010
  23. By: Brick, Aoife; Nolan, Anne; O'Reilly, Jacqueline; Smith, Samantha
    Date: 2010–10

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