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on Payment Systems and Financial Technology |
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Issue of 2023‒07‒10
forty-two papers chosen by |
| By: | Ozili, Peterson K |
| Abstract: | Credit markets around the world are undergoing digital transformation which has led to the rise in Fintech and Bigtech lending. Fintech and Bigtech lending is the provision of credit by Fintech and Bigtech providers who have more capital, cutting-edge IT systems, worldwide recognition, greater online presence and are able to handle more big data on computers and mobile phones than traditional banks. Fintech and Bigtech lending is growing in importance, but the determinants of Fintech and Bigtech lending have received little attention in the literature. This study investigates the determinants of Fintech and Bigtech lending. The study focused on the effect of financial inclusion and financial development on Fintech and Bigtech lending. Using data for 18 countries from 2013 to 2019 and employing the difference-GMM and 2SLS regression methods, the findings reveal that financial inclusion and financial development are significant determinants of Fintech and Bigtech lending. Financial development is a positive determinant of Fintech and Bigtech lending while financial inclusion has a significant effect on Fintech and Bigtech lending. Also, Fintech and Bigtech lending lead to greater banking sector stability and also poses the risk of rising nonperforming loans. There is also a significant positive correlation between financial development and Fintech and Bigtech lending. These findings add to the emerging literature on the role of Fintech and Bigtech in financial intermediation. This research is significant because it provides insights into the role of financial inclusion and financial development in digital transformation of credit markets. |
| Keywords: | financial inclusion, financial development, Fintech, Bigtech, lending, ATM, bank branch, access to finance |
| JEL: | G21 G23 |
| Date: | 2023–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:117465&r=pay |
| By: | Ochen, Ronald; Bulime, Enock Will Nsubuga |
| Abstract: | Digital Financial Services such as mobile money provides immeasurable benefits for financial inclusion and intermediation in East Africa. In this paper, we use a Fixed Effects panel model and annual data collected from 2007 to 2021 to examine the evolution of Digital Financial Services regulatory frameworks and their effects on conventional banking and Financial Inclusion in East African countries - Kenya, Tanzania, and Uganda. Results indicate that digital financial services regulations positively and significantly affect conventional banking services and mobile money (financial inclusion). Also, during the COVID19 pandemic period when the different governments instituted COVID19 policy response measures in the digital payments space to circumvent the use of cash and physical contact, positively affected digital financial services, thereby enhancing financial inclusion in the region. Also, an increase in lending rates and the consumer price index causes mobile money to decline. Therefore, digital financial services regulations are pivotal in advancing financial inclusion and intermediation through mobile money and conventional banking services in East Africa. Also, Central Banks should be concerned with mobile money in the economy because it forms part of the loanable funds by banks thus, stabilizing lending rates and prices in the economy is crucial for financial inclusion. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:73&r=pay |
| By: | Megersa, Kelbesa; Bernad, Ludovic; Nsengiyumva, Yves; Byinshi, Benjamin; Hakizimana, Naphtal; Santoro, Fabrizio |
| Abstract: | Digital merchant payments – transactions between traders, or between traders and customers using digital means of payment – can promote tax compliance by providing access to safer, quicker formal payments for consumers, and leaving a digital trail of sales data that can be accessed by tax administration. This study examines how far the potential of digital merchant payments to increase tax compliance is being realised in Rwanda, and whether fees imposed by mobile network operators on digital financial services (DFS) can hinder both DFS adoption and tax compliance. It uses original survey data from 1, 100 merchants country-wide, administrative data from the Rwanda Revenue Authority (RRA), focus group discussions and in-depth interviews. Rwanda is an interesting context in which to study digital merchant payments, as these are expected to reach 80 per cent of GDP by 2024.1 Particularly popular are mobile money payments, performed either through the person-to-business payment option MoMo Pay or through standard personal accounts. The country’s commitment to creating a cashless economy was accelerated due to the COVID-19 pandemic. Summary of Working Paper 159. |
| Keywords: | Finance, Technology, |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:18006&r=pay |
| By: | Sabina Marchetti (Bank of Italy) |
| Abstract: | ‘Web3’ is shorthand for decentralized internet applications built on blockchains. Based on distributed ledger technology, Web3 applications seamlessly encompass value tokenization (the basis of peer-to-peer payments and many other uses) and decentralized management of information, with great emphasis on their aspiration to re-shape the digital economy. To date, Web3 initiatives have been attracting sizeable resources from venture capital firms. Nevertheless, the technological limitations at the basis of decentralized applications prevent a full understanding of the effective potential of Web3. Our work provides an essential overview of the phenomenon, with a focus on the actual incentives it offers to different economic agents as well as to individuals. We pinpoint the key drivers that may contribute to the large-scale establishment of distributed ledger technology as the new paradigm underlying internet applications, and differentiate them from the hype put forward by the crypto-community. |
| Keywords: | internet, blockchain, distributed ledger technology, ownership economy |
| JEL: | O31 O33 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_717_22&r=pay |
| By: | Rodney Garratt; Maarten van Oordt |
| Abstract: | The exchange rates of cryptocurrencies are highly volatile. This paper provides insight into the source of this volatility by developing the concept of a "crypto multiplier, " which measures the equilibrium response of a cryptocurrency's market capitalization to aggregate inflows and outflows of investors' funds. The crypto multiplier takes high values when a large share of a cryptocurrency's coins is held as an investment rather than being used as a means of payment. Empirical evidence shows that the number of coins held for the purpose of making payments is rather small for major cryptocurrencies suggesting large crypto multipliers. The analysis explains why announcements by large investors, celebrity endorsements or financial crises can result in substantial price movements. |
| Keywords: | Bitcoin, cryptocurrency, exchange rates, monetary economics, risk management |
| JEL: | E42 E51 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1104&r=pay |
| By: | Michael Weber; Bernardo Candia; Olivier Coibion; Yuriy Gorodnichenko |
| Abstract: | Using repeated large-scale surveys of U.S. households, we study the cryptocurrency investment decisions and motives of households relative to other financial assets. Cryptocurrency holders tend to be young, white, male and more libertarian relative to non-crypto holders. They expect much higher rates of returns for crypto and perceive it as relatively safer than do other households. They also view it as a better hedge against inflation. For those holding cryptocurrencies, changes in Bitcoin prices translate into their purchases of durable goods. Finally, exogenously-provided information about historical returns of cryptocurrencies leads individuals to increase their desired crypto holdings and makes them more likely to actually purchase cryptocurrency subsequently. We compare these views and behaviors to those of households toward other financial assets and argue that cryptocurrency is unique in many of these respects. |
| JEL: | D8 E4 G5 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31284&r=pay |
| By: | Shalva Mkhatrishvili (Head of Macroeconomics and Statistics Department, National Bank of Georgia); Wim Boonstra (Special Economic Advisor at Rabobank, Endowed Professor at Vrije Universiteit Amsterdam) |
| Abstract: | A central bank digital currency (CBDC) is a topic that is only going to gain importance as a couple of nations have recently went line with a retail CBDC system, dozens of them are piloting it and there are even more who actively research the topic. In the process, many studies have already identified several important potential benefits of a CBDC as well as potential risks and costs. As is already well understood, a CBDC introduction can have a profound impact on all three monetary policy, financial stability and payment systems. This paper, trying to be a go-to starting point for those just exposed to the topic, thoroughly reviews all the benefits and risks/costs associated with a CBDC in the current literature as well as underlines key areas of this topic that need more research. In addition, we try to lay some ground for systematizing three-dimensional linkages between benefits, costs/risks and design choices by (i) discussing probable design choices needed for each item in the list of benefits and costs/risks to-be-mitigated and (ii) overviewing what other benefits and cost/risk-mitigation aims these design choices may be in conflict with. |
| Keywords: | Central bank digital currencies, monetary policy, financial stability, payment systems |
| JEL: | E42 E50 G20 |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:aez:wpaper:01/2022&r=pay |
| By: | Diouf, Awa; Carreras, Marco; Santoro, Fabrizio |
| Abstract: | Many people argue that mobile money has the potential to increase financial inclusion and improve the livelihoods of poor people in Africa. However, while many African governments impose specific taxes on mobile money transactions, very little is known about their effect on the use of mobile money services. This study assesses the short- and long-term impact of the tax on money transfer fees that the Kenyan government introduced in 2013. The tax, more specifically an excise duty, was imposed on fees incurred in all money transactions, including mobile money. It was introduced at 10 per cent and increased to 12 per cent in 2018. Our analysis has two parts. We use country-level data to see if the tax affected the use of mobile money – transaction values and volume – and the number of active mobile money agents. In addition, we use four rounds of nationally representative survey data to estimate changes in the use of mobile money after introduction of the tax. We find that the excise duty did not have a significant impact on different aggregated indicators relating to the use of mobile money. However, survey data shows that the tax may have reduced the rate of increase in use of mobile money services affected by the changes in tax, such as sending and receiving money, compared to services that were not, like savings and paying bills. Importantly, while the amounts transacted may not change, users send and receive money within households less regularly. In addition, the tax seems to have a more detrimental impact on poorer households, which were less likely to be financially included before the tax was introduced. Larger households also show more negative effects after the tax. |
| Keywords: | Finance, |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:18005&r=pay |
| By: | Florentina Şoiman (CASC - Calcul Algébrique et Symbolique, Sécurité, Systèmes Complexes, Codes et Cryptologie - LJK - Laboratoire Jean Kuntzmann - Inria - Institut National de Recherche en Informatique et en Automatique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes, CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes, Cybersecurity Institute - Université Grenoble Alpes); Jean-Guillaume Dumas (CASC - Calcul Algébrique et Symbolique, Sécurité, Systèmes Complexes, Codes et Cryptologie - LJK - Laboratoire Jean Kuntzmann - Inria - Institut National de Recherche en Informatique et en Automatique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes); Sonia Jimenez-Garces (CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes) |
| Abstract: | Decentralized Finance (DeFi) is a nascent set of financial services, using tokens, smart contracts, and blockchain technology as financial instruments. We investigate 3 possible drivers of DeFi returns: exposure to the cryptocurrency market, the network effect, and the valuation ratio. As DeFi tokens are distinct from classical cryptocurrencies, we designed a new dedicated market index, denoted iDeFiX. We compare our index with the one created by Nasdaq and obtain similar results. First, we show that DeFi tokens returns are driven by their own network variables and the cryptocurrency market. We construct a valuation ratio for the DeFi market by dividing the Total Value Locked (TVL) by the Market Capitalization (MC). Our findings do not support the assumption regarding TVL/MC exposure. Overall, our empirical study shows that the impact of the cryptocurrency market on DeFi returns is stronger than any other considered driver and provides superior explanatory power. |
| Abstract: | La finance décentralisée (DeFi) est un ensemble naissant de services financiers, utilisant les jetons, les contrats intelligents et la technologie blockchain comme instruments financiers. Nous étudions trois moteurs possibles des rendements de DeFi : l'exposition au marché des crypto-monnaies, l'effet de réseau et le ratio de valorisation. Les jetons DeFi étant distincts des crypto-monnaies classiques, nous concevons un nouvel indice de marché dédié, dénommé DeFiX. Tout d'abord, nous montrons que les rendements des jetons DeFi sont déterminés par l'attention de l'investisseur sur des termes techniques tels que "finance décentralisée" ou "DeFi", et sont exposés à leurs propres variables de réseau et au marché des crypto-monnaies. Nous construisons un ratio de valorisation pour le marché DeFi en divisant la valeur totale bloquée (TVL) par la capitalisation boursière (MC). Nos résultats ne confirment pas l'hypothèse du pouvoir prédictif de la TVL/MC. Dans l'ensemble, notre étude empirique montre que l'impact du marché des crypto-monnaies sur les rendements du DeFi est plus fort que tout autre facteur considéré et fournit un pouvoir explicatif supérieur. |
| Keywords: | DeFi token, index, asset pricing, financial return |
| Date: | 2023–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03625891&r=pay |
| By: | Yerushalmi, Erez; Paladini, Stefania |
| Abstract: | Blockchain-enabled cryptocurrency instruments have gradually filtered into financial intermediation, disrupting traditional institutions. This paper discusses the benefits of blockchain to household welfare, focusing on financial intermediation services (FIS). Its main aim is to highlight points of incompatibility with current institutional frameworks and outlines the greatest barriers for its widespread adoption (i.e., regulatory, technological, and environmental). To support our discussion, we develop a stylized general equilibrium model with two competing FIS technologies (i.e., traditional and blockchain). We show that removing these barriers could displace traditional institutions with blockchain technology and raise welfare. Finally, we argue that the 2022 and 2023 cryptocurrency scandals and the ongoing calls for comprehensive, cross-country, institutional changes will be remembered as a turning point in terms of serious efforts to integrate this new technology and make it more mainstream. |
| Keywords: | Blockchain; Institutional Barriers; Fintech; Cryptocurrencies; Financial Intermediation |
| Date: | 2023–06–14 |
| URL: | http://d.repec.org/n?u=RePEc:akf:cafewp:22&r=pay |
| By: | Kodongo, Odongo |
| Abstract: | We examine the effect of the fintech ecosystem on the consumption of formal financial services such as savings, credit and use of capital markets instruments in Kenya. We deploy Probit regression on data from FinAccess Survey for 2016 and 2021. Findings suggest that the fintech ecosystem facilitates credit evaluation and fosters credit use, offer financial products and services that better match users' needs hence fostering usage of those services, but does not mitigate the distance barrier. Second, the probability of an individual enjoying fintech ecosystem services falls by at least 19% if the individual resides in Northern Kenya. Third, the fintech ecosystem increases the probability of usage of traditional services of financial institutions by at least 5.2%. Fourth, the financial inclusion gains of the fintech ecosystem are not uniform across all user categories. We recommend several policy actions such as improved provisioning of physical infrastructure in remote areas, fiscal policy incentives, and affirmative action on financial inclusion. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:70&r=pay |
| By: | Raza Ali Kazmi; Duc-Phong Le; Cyrus Minwalla |
| Abstract: | Digital payments and decentralized systems enable the creation of new financial products and services for users. One core challenge in digital payments is the need to protect users from fraud and abuse while retaining privacy in individual transactions. We propose a pseudonymous credential scheme for use in payment systems to tackle this problem. The scheme is privacy-preserving, efficient for practical applications, and hardened against quantum computing attacks. We present a constant-round, interactive, zero-knowledge proof of knowledge (ZKPOK) that relies on a one-way function and an asymmetric encryption primitive—both of which need to support at most one homomorphic addition. The scheme is implemented with SWIFFT as a post-quantum one-way function and ring learning with errors as a post-quantum asymmetric encryption primitive, with the protocol deriving its quantum-hardness from the properties of the underlying primitives. We evaluate the performance of the ZKPOK instantiated with the chosen primitive and find that a memory footprint of 85 KB is needed to achieve 200 bits of security. Comparison reveals that our scheme is more efficient than equivalent, state-of-the-art post-quantum schemes. A practical and interactive credential mechanism was constructed from the proposed building blocks, in which users are issued pseudonymous credentials against their personally identifiable information that can be used to register with financial service providers without revealing personal information. The protocol is shown to be secure and free of information leakage, preserving the user’s privacy regardless of the number of registrations. |
| Keywords: | Central bank research; Digital currencies and fintech; Payment clearing and settlement systems |
| JEL: | E4 E42 G2 G21 O3 O31 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:23-33&r=pay |
| By: | Gabriel Weimann (School of Government, Reichman University, Israel,) |
| Abstract: | The recognized correlation between the growing spread of violent extremist and terrorist content on the Internet and online platforms and the significant increase of attacks inspired by these postings caused governments and security agencies to launch various countermeasures. These measures included removal of terrorist and violent extremist online content (or “deplatforming†), suspension of their social media accounts, hacking websites and pressuring social media companies to remove terrorist propaganda. Struggling to adjust to these countermeasures and sustain their online presence, terrorist and violent extremists moved from mainstream online platforms to alternative online channels including anonymous sharing portals and cloud services. The most popular archiving service used by various extremist and terrorist groups is the Internet Archive. While the few studies on hate speech and violent content on Internet Archive focused only on a certain type of content or a specific group, this study attempts to reveal a wide range of contents, groups and organizations who use this archive for sharing and promoting such contents. To examine the use of Internet Archive by various groups and organizations involved in violence, terrorism, hate speech, racism and neo-Nazism we applied several stages of data collection and analysis. The findings highlight an alarming volume of terrorist, extremist, and racist material on the Internet Archive. These findings are discussed in terms of ethical and practical implications. |
| Keywords: | social media, hate speech, violent extremism, terrorism, Internet Archive |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:smo:raiswp:0185&r=pay |
| By: | Githu, Jackson Macharia |
| Abstract: | This paper reviews the legal and regulatory framework governing digital financial services in Kenya including some of the unanswered questions by the current regulatory framework. The paper focusses on the question of the statutory definition of the rapidly evolving payment services, the architecture of the regulatory framework of the digital financial services and the regulation of digital credit providers. The paper identifies that there are risks and opportunities in the current regulatory framework and the regulatory regime should strike the required balance. The paper concludes by recommending that Parliament amends the definition of payment services in the National Payment Services Act. Further, even though the digital lenders regulatory framework has just come into force, the paper calls for its continued enhancement. The paper also calls for some minimum regulatory guidelines to be issued for the currently unregulated non digital lenders on areas such as interest rates and consumer protection. The paper also urges reconsideration of the regulatory framework to consolidate the regulators, laws and regulations on the area. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:68&r=pay |
| By: | Sebastian Doerr; Leonardo Gambacorta; Luigi Guiso; Marina Sanchez del Villar |
| Abstract: | We find that, following the introduction of the CCPA, loan applications to fintechs increase by significantly more than those to traditional banks, leading to an increase in fintechs' market share by up to 19%. This increase can be attributed to applicants' increased willingness to share their data. Fintechs, taking advantage of this data, expand their utilisation of information beyond traditional credit scores during the application process. Consequently, they engage in more personalised pricing and reject a larger proportion of applications. These findings suggest that fintechs enhance their screening process, leading to an improvement in the quality of their average borrower. As a result, fintechs are able to offer significantly lower loan rates than banks can following the CCPA's implementation. In sum, the CCPA has benefited consumers by providing fintech lenders, equipped with advanced screening technology, with improved access to data. |
| Keywords: | data privacy, data sharing, fintech, privacy regulation, CCPA |
| JEL: | G21 G23 G28 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1103&r=pay |
| By: | Fernando E. Alvarez; David Argente; Francesco Lippi; Esteban Méndez; Diana Van Patten |
| Abstract: | This paper develops a dynamic model of technology adoption featuring strategic complementarities: the benefits of usage increase with the number of adopters. We study the diffusion of new means of payments, where such complementarities are pervasive. We show that complementarities give rise to multiple equilibria, suboptimal allocations, and study the planner’s problem. The model generates gradualism in adoption, as individuals optimally wait for others to adopt before doing so. We apply the theory to the adoption of SINPE, an electronic peer-to-peer (P2P) payment app developed by the Central Bank of Costa Rica. Transaction-level data on the use of SINPE and several administrative data sets on the network structure allow us to exploit plausibly exogenous variation and to document sizable complementarities. A calibrated version of the model shows that the optimal subsidy pushes the economy to universal adoption. |
| JEL: | O1 O2 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31280&r=pay |
| By: | Megersa, Kelbesa; Santoro, Fabrizio; Lees, Adrienne; Carreras, Marco; Mukamana, Theonille; Hakizimana, Naphtal; Nsengiyumva, Yves |
| Abstract: | Many low-income countries are increasingly digitising their tax services, which can bring a range of benefits, from reducing compliance costs and improving record-keeping, to limiting opportunities for corruption and increasing fairness in the tax system. However, the success of these benefits depends on adequate levels of awareness and adoption of e-services among taxpayers; where these levels are suboptimal, tax e-services may produce only partial benefits. This paper examines the extent of awareness and uptake of tax e-services in Rwanda from a pre-pandemic situation up to two years into the COVID-19 crisis. The country has increasingly digitalised its tax administration, even more so during the pandemic. Electronic filing and payment of taxes have been mandatory since 2015, and two different e-services are available: E-tax, a free web-based platform designed to be used on computers and smartphones, and M-declaration, a feature phone-based application which enables mobile money payments and a simpler process for filing a return. This allows us to run a comparative analysis of the two solutions. We apply a mixed methods approach, using a nationally representative panel survey of 2, 000 corporate (CIT) and personal (PIT) income taxpayers, with baseline information collected pre-COVID-19 and four follow-up rounds carried out after the pandemic hit, and focus group discussions (FGDs) with 24 e-services users. Summary of Working Paper 153. |
| Keywords: | Finance, Technology, |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:18007&r=pay |
| By: | Ochenge, Rogers Ondiba |
| Abstract: | Cognizant of the recent revolution in financial technology (FinTech), this paper explores the effect of FinTech development on bank risk-taking behavior in Kenya over the period 2008 to 2021. The study first develops a FinTech index using text mining technology and then relates this index to bank-risk taking in a dynamic panel regression model. The study uncovers the following empirical results: (i) The impact of FinTech on bank's risktaking shows a "U" shape, first falling bank risk and then rising. That is, at early stage of development, FinTech reduces risk-taking, but as key technologies mature and FinTech companies directly compete with traditional commercial banks, FinTech exacerbates risktaking. (ii) The impact of FinTech is heterogeneous across bank sizes. Specifically, large banks appear to be more sensitive to changes in FinTech development compared to small and medium-sized banks. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:72&r=pay |
| By: | Gregory M. Dickinson |
| Abstract: | We do everything online. We shop, travel, invest, socialize, and even hold garage sales. Even though we may not care whether a company operates online or in the physical world, however, the question has dramatic consequences for the companies themselves. Online and offline entities are governed by different rules. Under Section 230 of the Communications Decency Act, online entities -- but not physical-world entities -- are immune from lawsuits related to content authored by their users or customers. As a result, online entities have been able to avoid claims for harms caused by their negligence and defective product designs simply because they operate online. The reason for the disparate treatment is the internet's dramatic evolution over the last two decades. The internet of 1996 served as an information repository and communications channel and was well governed by Section 230, which treats internet entities as another form of mass media: Because Facebook, Twitter and other online companies could not possibly review the mass of content that flows through their systems, Section 230 immunizes them from claims related to user content. But content distribution is not the internet's only function, and it is even less so now than it was in 1996. The internet also operates as a platform for the delivery of real-world goods and services and requires a correspondingly diverse immunity doctrine. This Article proposes refining online immunity by limiting it to claims that threaten to impose a content-moderation burden on internet defendants. Where a claim is preventable other than by content moderation -- for example, by redesigning an app or website -- a plaintiff could freely seek relief, just as in the physical world. This approach empowers courts to identify culpable actors in the virtual world and treat like conduct alike wherever it occurs. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.02876&r=pay |
| By: | Gregory M. Dickinson |
| Abstract: | Online platforms have completely transformed American social life. They have democratized publication, overthrown old gatekeepers, and given ordinary Americans a fresh voice in politics. But the system is beginning to falter. Control over online speech lies in the hands of a select few -- Facebook, Google, and Twitter -- who moderate content for the entire nation. It is an impossible task. Americans cannot even agree among themselves what speech should be permitted. And, more importantly, platforms have their own interests at stake: Fringe theories and ugly name-calling drive away users. Moderation is good for business. But platform beautification has consequences for society's unpopular members, whose unsightly voices are silenced in the process. With control over online speech so centralized, online outcasts are left with few avenues for expression. Concentrated private control over important resources is an old problem. Last century, for example, saw the rise of railroads and telephone networks. To ensure access, such entities are treated as common carriers and required to provide equal service to all comers. Perhaps the same should be true for social media. This Essay responds to recent calls from Congress, the Supreme Court, and academia arguing that, like common carriers, online platforms should be required to carry all lawful content. The Essay studies users' and platforms' competing expressive interests, analyzes problematic trends in platforms' censorship practices, and explores the costs of common-carrier regulation before ultimately proposing market expansion and segmentation as an alternate pathway to avoid the economic and social costs of common-carrier regulation. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.02874&r=pay |
| By: | Marco Magnani (University of Padova and ARERA); Federico Navarra (University of Padova) |
| Abstract: | We study the incentives of a monopolistic hybrid platform in sharing its superior market information with the third-party seller hosted on its marketplace. After observing platform information-sharing policy, the seller competes in prices with the platform over a horizontally differentiated good. Despite platform duality, an equilibrium in which the platform shares information with the seller occurs. We highlight how the platform has incentives to share information either for relaxing price-competition or for increasing the volume of transactions. Platform incentives to share information are strongest for intermediate degrees of product differentiation. Information provision results in consumer surplus extraction such that the total welfare is reduced. Although entering as a seller and providing market information is profitable, when analysing platform entry as the acquisition of one of the sellers we may observe equilibria in which the platform either sticks to agency or does not provide information since this would increase the entry cost. |
| Keywords: | hybrid platforms, information provision, data sharing, vertical integration. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0301&r=pay |
| By: | David Ardia; Keven Bluteau |
| Abstract: | We examine the influence of Twitter promotion on cryptocurrency pump-and-dump events. By analyzing abnormal returns, trading volume, and tweet activity, we uncover that Twitter effectively garners attention for pump-and-dump schemes, leading to notable effects on abnormal returns before the event. Our results indicate that investors relying on Twitter information exhibit delayed selling behavior during the post-dump phase, resulting in significant losses compared to other participants. These findings shed light on the pivotal role of Twitter promotion in cryptocurrency manipulation, offering valuable insights into participant behavior and market dynamics. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.02148&r=pay |
| By: | Deffuant, Guillaume; Keijzer, Marijn; Banisch, Sven |
| Abstract: | Worry over polarization has grown alongside the digital information consump-tion revolution. Where most scientific work considered user-generated and user-disseminated (i.e., Web 2.0) content as the culprit, the potential of purely increased access to informa-tion (or Web 1.0) has been largely overlooked. Here, we suggest that the shift to Web 1.0 alone could include a powerful mechanism of belief extremization. We study an empiri-cally calibrated persuasive argument model with confirmation bias. We compare an offline setting—in which a limited number of arguments is broadcast by traditional media—with an online setting—in which the agent can choose to watch contents within a very wide set of possibilities. In both cases, we assume that positive and negative arguments are balanced. The simulations show that the online setting leads to significantly more extreme opinions and amplifies initial prejudice. |
| Date: | 2023–06–05 |
| URL: | http://d.repec.org/n?u=RePEc:tse:iastwp:128134&r=pay |
| By: | Yeboah, Samuel |
| Abstract: | This systematic review examines the link between financial inclusion (FI) and bank stability (BS). FI, defined as access to and usage of formal financial services by individuals and businesses, has gained significant attention as a policy goal in many countries. BS, on the other hand, is a critical aspect of financial system resilience and plays a key role in promoting economic growth and stability. The review synthesizes the existing literature to understand the potential linkages, mechanisms, and empirical evidence regarding the link between FI and BS. The findings highlight the complex nature of this link, with both positive and negative implications for BS arising from increased FI. The review concludes with policy implications and directions for future research. |
| Keywords: | FI, BS, access to finance, formal financial services, financial system resilience, economic growth. |
| JEL: | G21 G28 O16 |
| Date: | 2023–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:117547&r=pay |
| By: | Aman Saggu; Lennart Ante |
| Abstract: | The introduction of OpenAI's large language model, ChatGPT, catalyzed investor attention towards artificial intelligence (AI) technologies, including AI-related crypto assets not directly related to ChatGPT. Utilizing the synthetic difference-in-difference methodology, we identify significant 'ChatGPT effects' with returns of AI-related crypto assets experiencing average returns ranging between 10.7% and 15.6% (35.5% to 41.3%) in the one-month (two-month) period after the ChatGPT launch. Furthermore, Google search volumes, a proxy for attention to AI, emerged as critical pricing indicators for AI-related crypto post-launch. We conclude that investors perceived AI-assets as possessing heightened potential or value after the launch, resulting in higher market valuations. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.12739&r=pay |
| By: | Orhan Koc |
| Abstract: | Price feeds of securities is a critical component for many financial services, allowing for collateral liquidation, margin trading, derivative pricing and more. With the advent of blockchain technology, value in reporting accurate prices without a third party has become apparent. There have been many attempts at trying to calculate prices without a third party, in which each of these attempts have resulted in being exploited by an exploiter artificially inflating the price. The industry has then shifted to a more centralized design, fetching price data from multiple centralized sources and then applying statistical methods to reach a consensus price. Even though this strategy is secure compared to reading from a single source, enough number of sources need to report to be able to apply statistical methods. As more sources participate in reporting the price, the feed gets more secure with the slowest feed becoming the bottleneck for query response time, introducing a tradeoff between security and speed. This paper provides the design and implementation details of a novel method to algorithmically compute security prices in a way that artificially inflating targeted pools has no effect on the reported price of the queried asset. We hypothesize that the proposed algorithm can report accurate prices given a set of possibly dishonest sources. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.13227&r=pay |
| By: | Oscar Borgogno (Bank of Italy) |
| Abstract: | Decentralized Autonomous Organisations (DAOs) can be understood as collective organizations that are run through blockchain-based smart contracts, which allow token holders to participate directly in decision-making processes. By harnessing the key features of distributed ledger technology (DLT), they are increasingly posing tricky questions for policy makers, supervisors, and legal scholars. Even though DAOs are often claimed to be beyond the reach of national jurisdictions, it is clear that a broad array of legal issues need to be solved for DAOs to achieve scalability and widespread application, namely the lack of limitation of liability, governance concerns, and the definition of token-holders’ rights. Our paper delves into these concerns and argues that DAOs can benefit from the solutions provided by corporate law over the past decades in coping with management and moral hazard problems involving all complex organizations. |
| Keywords: | blockchain, DAOs, decentralization, corporate governance, tokens |
| JEL: | K22 L22 G34 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_718_22&r=pay |
| By: | Daniel B. Kurz (Middlesex College, Edison, New Jersey, USA); Spencer Jahng (The Pingry School, New Jersey, USA) |
| Abstract: | The Texas State Legislature has been dominated by the Republican Party for over a decade, with solid majorities in both houses. This has enabled it to rapidly take ideas from the so-called ‘Conservative Public Sphere’ and enact them into genuine policy in very short periods of time. In other words, when prominent Texas Republicans think out loud, it is not very long until many of those thoughts become law. Just this June, the conservative Texas Public Policy Foundation called for a ‘Social Media Ban’ based on its own research. According to the Foundation, teens should be totally barred from using all platforms in this sphere until they are adults due to the immense harm they pose to young people. Within a few weeks, major Texas Republicans echoed this sentiment on social platforms like Twitter, with one, Representative James Patterson, going the furthest. He has pledged in the next session to introduce a bill aimed at shutting off social media access to all Texas teens in 2023. (Whiting 2022). In this short paper, we will try to consider what accounts for the enormous speed of radical policymaking. Do these aims go beyond mere protection and exceed the First Amendment rights of teens? How will such a ban be enforced? What are the potential complexities and impact of such a change on the lives of Texas teens? |
| Keywords: | Adolescence, Internet, Grooming, First Amendment, Networking, Isolation, Mental Illness, Texas, Legislature, Legislation, Overreaction |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:smo:raiswp:0230&r=pay |
| By: | Giuseppe Bruno (Bank of Italy) |
| Abstract: | The advent of quantum computation and quantum information theory and the ever increasing empirical possibilities of translating these theories into real physical systems has raised expectations in the private and public sectors. Quantum computers process information using the laws of quantum mechanics. By exploiting superposition (an object can be in different states at the same time) and entanglement (different objects can be deeply connected without any direct physical interaction) quantum computers are heralded as the next technological breakthrough. Compared to traditional digital computing, quantum computing offers the potential to dramatically reduce both execution time and energy consumption. However, quantum algorithms cannot be fully realized on an actual scale of less than 1, 000 qubits. The greatest hurdle in harnessing quantum computing is the instability of their quantum mechanical features. Meanwhile, research has shifted towards making 'noisy' quantum computers useful. In this work we show three noteworthy applications for central banking activities such as gauging financial risk, credit scoring and transaction settlement. These are still proof-of-concepts applications but demonstrate the new software paradigms along with looming potential breakthroughs. We provide a few hints in the trade-off between deploying the innovative technology before it is mainstream and the risk of holding off on adopting it and being surpassed by nimbler competition. |
| Keywords: | quantum computing, quantum information, superposition, entanglement |
| JEL: | C65 C87 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_716_22&r=pay |
| By: | Osoro, Jared; Cheruiyot, Kiplangat Josea |
| Abstract: | This paper seeks to examine the effect of Fintech credit on bank stability using an unbalanced panel dataset of 37 commercial banks in Kenya between 2013 and 2020. The recent evolution of Fintech comes with the promise of being both revolutionary and disruptive. The temptation of a unidirectional expectation that effects of Fintech will only be positive masks the potential destabilization effects, hence the motivation to examine possibility of its being a source of fragility in the banking sector in Kenya. We employ both static panel models and a dynamic panel of System Generalized Method of Moments (GMM) that lead us to the conclusion that Fintech credit has not occasioned concerns of market fragility. If anything, the empirical results reveal that the FinTech credit is associated with higher bank stability in the sense that FinTech intermediated credit is associated with a higher Z-score suggesting higher overall bank stability. The relationship is however nonlinear, with the squared term of the FinTech credit being negative and statistically significant. We infer that the influence of FinTech on bank stability is inverted "U" type relationship. Bank-specific factors such as equity to assets, asset quality and cost-to-income rations having a strong influence on bank stability. That is a pointer to the possibility of the current magnitude of Fintech credit - the possible conduit of instability - not being associated with fragility, with the likelihood of that changing as the its share of bank assets grows with time. |
| Keywords: | Bank Stability, FinTech, Kenya |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:69&r=pay |
| By: | Sam Sims (UCL Centre for Education Policy & Equalising Opportunities); Kate Forbes (Brunel University London); Josh Goodrich (Steplab) |
| Abstract: | Instructional coaching has emerged as an effective form of teacher professional development. However, there is evidence of large variation in effectiveness between different coaches. What is it that differentiates more from less effective instructional coaching? Attempts to answer this question have been hampered by the difficulties of cost-effectively capturing variations in coaching practice. This paper reports on a pilot study using 360-degree (fisheye) video footage of teaching captured using classroom cameras, as well as audio recordings of coaching conversations uploaded via an online instructional coaching platform. The main aim of this research was to understand the feasibility of using such technology to get inside the black box of instructional coaching. We found that the camera technology could indeed capture meaningful variation in teachers' practice after a coaching session. Likewise, we found that the audio uploads (recorded via mobile phones) could capture content of the coaching conversation relevant to assessing leading hypotheses about what differentiates more and less effective coaching. Having said that, the project also surfaced several important challenges related to the way in which the cameras were used, which hampered our ability to consistently capture time-series data. The paper concludes with recommendations for researchers considering using this sort of technology in future projects. |
| Keywords: | teachers, professional development, instructional coaching |
| JEL: | I20 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:ucl:cepeow:23-05&r=pay |
| By: | Andrew Garin; Emilie Jackson; Dmitri K. Koustas; Alicia Miller |
| Abstract: | We document the dynamics of tax-based measures of work mediated by online platforms from 2012 through 2021. We present a measurement framework to account for high reporting thresholds on some information returns using returns from states with lower reporting thresholds to provide a more complete estimate of total platform work. Updating data through 2021 allows us to provide the most comprehensive estimates of the COVID-19 pandemic on tax filing behavior. We find that the number of workers receiving information returns not subject to the 1099-K gap increased dramatically during the pandemic, with least 5 million individuals receiving information returns from platform gig work by 2021, nearly all from transportation platforms. We present evidence that the availability of expanded unemployment insurance benefits resulted in many individuals who were platform workers in 2019 not reporting any self-employment income in 2020-2021. At the same time, other services done by platform gig workers increased dramatically by at least 3.1 million people between 2019 and 2021. Interestingly, the broader 1099-contract economy follows a different trend, declining during this period, suggesting the challenges for tax administration are largely concentrated among platform gig workers, at least through 2021. |
| JEL: | H24 J21 J41 J46 M13 Y1 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31273&r=pay |
| By: | Deborah Elms; Nick Agnew |
| Abstract: | Digital trade has become a major driver of economic development by enhancing productivity and lowering costs of trade in goods. While digital trade promises new opportunities for individuals and firms of all sizes, it also raises new challenges. Policymakers and business leaders need to better understand the drivers of this paradigm for trade and find solutions for potential issues in dialogue with stakeholders so as to ensure digital trade policies that are more sustainable and inclusive for all. This paper addresses emerging topics, with limited existing regulations in place and with clear challenges ahead in designing effective and appropriate policy responses that effectively address each topic. The risks of incompatible policy frameworks across the Asia-Pacific region cannot be discounted. Such regulatory fragmentation could destroy the promise of the digital economy and make it significantly harder for large and small firms across the region to participate in digital trade in the future. |
| Keywords: | digital trade, trade in services, Asia, digital policy |
| Date: | 2022–07 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2022/51&r=pay |
| By: | Minnis, Michael; Sutherland, Andrew; Vetter, Felix |
| Abstract: | Using a dataset covering 3 million commercial borrower financial statements, we document a substantial, nearly monotonic decline in banks’ use of attested financial statements (AFS) in lending over the past two decades. Two market forces help explain this trend. First, technological advances provide lenders with access to a growing array of borrower information sources that can substitute for AFS. Second, banks are increasingly competing with nonbank lenders that rely less on AFS in screening and monitoring. Our results illustrate a novel implication of positive accounting theory: technology adoption and changes in credit market structure can render AFS less efficient for screening and monitoring, and reduce lenders’ demand for them. |
| Keywords: | banks, lending standards, financial statements, auditing, SME lending, nonbank lending, fintech |
| JEL: | M40 M41 M42 |
| Date: | 2023–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:117472&r=pay |
| By: | Barry Quinn |
| Abstract: | This paper explores the journey of AI in finance, with a particular focus on the crucial role and potential of Explainable AI (XAI). We trace AI's evolution from early statistical methods to sophisticated machine learning, highlighting XAI's role in popular financial applications. The paper underscores the superior interpretability of methods like Shapley values compared to traditional linear regression in complex financial scenarios. It emphasizes the necessity of further XAI research, given forthcoming EU regulations. The paper demonstrates, through simulations, that XAI enhances trust in AI systems, fostering more responsible decision-making within finance. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.02773&r=pay |
| By: | Orlikowski, Wanda J.; Scott, Susan V. |
| Abstract: | As “the digital” becomes pervasive within organizations and industries, it is increasingly evident that how we live, work, connect, coordinate, and govern are being significantly changed by digitalization. Many of these digital transformations are highly visible and dramatic, involving a purposeful repositioning and restructuring of organizations and industries. But in addition to these direct and visible changes, we argue that processes of digitalization are also producing less visible transformations in core institutional values, norms, and rules, which are indirectly, yet more fundamentally, reconfiguring how organizations and industries perform. Referencing findings from two different sectors, we posit that the corollary effects of waves of digitalization — what we conceptualize as the “digital undertow” — are generating a set of dynamics that are displacing institutional apparatuses from their positions of primacy and authority within industries. We further suggest that our conventional toolkits for studying organizational phenomena are not well equipped to examining such corollary effects of digitalization. In addressing this challenge, we consider how the relational and performative theorizing of strong sociomateriality provides a powerful analytic for investigating these effects and we highlight how it offers valuable insights into the institutional displacements arising in the digital undertow. |
| JEL: | J50 |
| Date: | 2023–05–23 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:119271&r=pay |
| By: | Donato Masciandaro (Department of Economics, Bocconi University); Davide Romelli (Department of Economics, Trinity College Dublin); Gaia Rubera (Department of Marketing, Bocconi University) |
| Abstract: | Monetary policy announcements of major central banks trigger substantial discussions about the policy on social media. In this paper, we use machine learning tools to identify Twitter messages related to monetary policy in a short-time window around the release of policy decisions of three major central banks, namely the ECB, the US Fed and the Bank of England. We then build an hourly measure of similarity between the tweets about monetary policy and the text of policy announcements that can be used to evaluate both the ex-ante predictability and the ex-post credibility of the announcement. We show that large differences in similarity are associated with a higher stock market and sovereign yield volatility, particularly around ECB press conferences. Our results also show a strong link between changes in similarity and asset price returns for the ECB, but less so for the Fed or the Bank of England. |
| Keywords: | monetarypolicy, centralbankcommunication, financialmarkets, socialmedia, Twitter, USFederalReserve, EuropeanCentralBank, BankofEngland. |
| JEL: | E44 E52 E58 G14 G15 G41 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:tcd:tcduee:tep1023&r=pay |
| By: | Simone Emiliozzi (Bank of Italy); Concetta Rondinelli (Bank of Italy); Stefania Villa (Bank of Italy) |
| Abstract: | This study analyzes high-frequency data on credit cards to identify the impact of the COVID-19 pandemic on Italian consumer transactions. Using an event study approach, it finds that during the national lockdown total transactions fell by over 50%. The decline was particularly severe in high-contact sectors such as restaurants and travel, reflecting the impact of containment measures. The analysis uncovers a strong heterogeneity also in the responses of different regions, with larger contractions recorded in the Northern regions due to early government restrictions. Overall, this dataset can be particularly useful given the publication lag of official data on household consumption both at the national and regional level. |
| Keywords: | consumption, transaction data, Covid-19 |
| JEL: | D12 E21 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_769_23&r=pay |
| By: | Vilgis, Veronika; Jordán, Valeria; Patiño, Alejandro |
| Abstract: | La adopción de tecnologías digitales es un instrumento esencial para reducir las brechas de productividad entre los países de América Latina y el Caribe y los países más desarrollados, generar nuevas fuentes de crecimiento y la creación de empleos de calidad. Para aprovechar estas tecnologías se necesitan políticas basadas en datos empíricos que permitan encauzar el cambio tecnológico, aprovechando sus oportunidades y reduciendo sus riesgos. En esta publicación se presenta un ejercicio exploratorio realizado en el Brasil, Chile, Colombia y México en el que se combinan fuentes alternativas de información, particularmente datos extraídos de la web, con fuentes oficiales de estadísticas para medir la actividad empresarial en línea. Esta metodología permite clasificar a las empresas según el uso que hacen de Internet, sin necesidad de restringirse a clasificaciones industriales tradicionales, lo que genera una nueva caracterización: la economía de Internet. Asimismo, el estudio permite experimentar sobre las posibilidades que ofrece el uso de técnicas y herramientas de grandes datos para mejorar la comprensión de la transformación digital y sirve como base para futuras investigaciones. |
| Keywords: | INTERNET, TECNOLOGIA DE LA INFORMACION, TECNOLOGIA DE LAS COMUNICACIONES, TECNOLOGIA DIGITAL, CAMBIO TECNOLOGICO, DESARROLLO ECONOMICO, DESARROLLO SOSTENIBLE, ESTUDIOS DE CASOS, INDICADORES TIC, MEDICION, ASPECTOS ECONOMICOS, INTERNET, INFORMATION TECHNOLOGY, COMMUNICATION TECHNOLOGY, DIGITAL TECHNOLOGY, TECHNOLOGICAL CHANGE, ECONOMIC DEVELOPMENT, SUSTAINABLE DEVELOPMENT, CASE STUDIES, ICT INDICATORS, MEASUREMENT, ECONOMIC ASPECTS |
| Date: | 2023–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:ecr:col022:48908&r=pay |
| By: | J Bayoán Santiago Calderón; Dylan Rassier (Bureau of Economic Analysis) |
| Abstract: | With the recent proliferation of data collection and uses in the digital economy, the understanding and statistical treatment of data stocks and flows is of interest among compilers and users of national economic accounts. In this paper, we measure the value of own-account data stocks and flows for the U.S. business sector by summing the production costs of data-related activities implicit in occupations. Our method augments the traditional sum-of-costs methodology for measuring other own-account intellectual property products in national economic accounts by proxying occupation-level time-use factors using a machine learning model and the text of online job advertisements (Blackburn 2021). In our experimental estimates, we find that annual current-dollar investment in own-account data assets for the U.S. business sector grew from $84 billion in 2002 to $186 billion in 2021, with an average annual growth rate of 4.2 percent. Cumulative current-dollar investment for the period 2002–2021 was $2.6 trillion. In addition to the annual current-dollar investment, we present historical-cost net stocks, real growth rates, and effects on value-added by the industrial sector. |
| JEL: | E22 O3 O51 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:bea:wpaper:0204&r=pay |
| By: | Tali Bank (Bank of Israel); Nimrod Segev (Bank of Israel); Maya Shaton (Ben-Gurion University) |
| Abstract: | We show the effect of credit scores’ introduction on consumer credit prices. Utilizing a novel dataset of the universe of loans in Israel, we find that a decline in information asymmetry, following the introduction of credit scores introduction, led to a decrease in loan prices for households with strong relationship banking. Prior to that, when banks held a monopoly on potential borrowers’ credit history, they charged higher interest rates, all else equal, as predicted by theoretical models. We further show that these informational rents significantly decrease once credit scores are introduced, resulting in a decline in the hold-up problem. To the best of our knowledge, this paper is the first to show the causal impact of credit scoring on households’ loan pricing. Our results underscore the importance of information sharing in consumer credit markets, and have important public policy implications. |
| Keywords: | Credit Scores, Relationship Lending, Relationship Banking, Hold-up Problem, Consumer Credit, Information Sharing, Credit Register |
| JEL: | G21 G28 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:boi:wpaper:2023.05&r=pay |
| By: | Lawrence Clegg; John Cartlidge |
| Abstract: | We present a strict replication and correction of results published in a recent article (Ramirez, P., Reade, J.J., Singleton, C., Betting on a buzz: Mispricing and inefficiency in online sportsbooks, International Journal of Forecasting, 2022, doi:10.1016/j.ijforecast.2022.07.011). RRS introduced a novel "buzz factor" metric for tennis players, calculated as the log difference between the number of Wikipedia profile page views a player receives the day before a tennis match and the player's median number of daily profile views. The authors claim that their buzz factor metric is able to predict mispricing by bookmakers and they demonstrate that it can be used to form a profitable strategy for betting on tennis match outcomes. Here, we use the same dataset as RRS to reproduce their results exactly. However, we discover that the published results are significantly affected by a single bet (the "Hercog" bet) that returns substantial outlier profits; and these profits are generated by taking advantage of erroneously long odds in the out-of-sample test data. Once this data quality issue is addressed, we show that the strategy of RRS is no longer profitable in "practical" scenarios. Using an extended and cleaned dataset, we then perform further exploration of the models and show that the "impractical" betting strategy that uses best odds in the market remains profitable (in theory). However, evidence suggests that the vast majority of returns are generated by exploiting individual bookmaker's mispricing of odds relative to the market, and the novel buzz factor metric has negligible contribution to profits. We make all code and data available online. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.01740&r=pay |