Search results for "RICE"
showing 10 items of 2331 documents
Do individuals with higher cognitive ability play more strategically?
2016
Abstract This paper experimentally analyses the relationship between cognitive ability and strategic behaviour. In our experiment, individuals play in a sequential game, where computing the equilibrium is challenging. On completion of the game, we measure each player’s cognitive ability using Raven’s Progressive Matrices test. Our results reveal that the number of strategic decisions (played in the sequential game) increases significantly among those individuals with higher cognitive ability (measured by Raven’s test), compared to those with lower cognitive ability. These results clearly confirm that individuals with higher cognitive abilities play more strategically.
FISCAL POLICY AND ASSET PRICES
2011
We assess the role played by fiscal policy in explaining the dynamics of asset markets. Using a panel of ten industrialized countries, we show that a positive fiscal shock has a negative impact in both stock and housing prices. However, while stock prices immediately adjust to the shock and the effect of fiscal policy is temporary, housing prices gradually and persistently fall. As a result, the attempts of fiscal policy to mitigate stock price developments may severely de-stabilize housing markets. The empirical findings also point to: (i) a contractionary effect of fiscal policy on output in line with the existence of crowding-out effects; (ii) a weakening of the effectiveness of fiscal p…
A Spatiotemporal Solution for the Simultaneous Sale Price and Time-on-the-Market Problem
2015
There exists an important methodological challenge when dealing with sale price and time-on-the-market variables because both variables are simultaneously determined and related to the motivation of the sellers and buyers. Exploiting the fact that transactions occur over space and time, we propose a two-stage approach based on instrumental variables (IV) built from information collected from previous transactions. The unidirectional temporal property and the fact that other transactions are exogenous from the perspective of a single buyer or seller are exploited to evaluate the effect of the sale price on time-on-the-market, and the effect of time-on-the-market on the sale price. Based on 2…
The welfare cost of unpriced heterogeneity in insurance markets
2016
We consider the welfare loss of unpriced heterogeneity in insurance markets, which results when private information or regulatory constraints prevent insurance companies to set premiums reflecting expected costs. We propose a methodology which uses survey data to measure this welfare loss. After identifying some “types” which determine expected risk and insurance demand, we derive the key factors defining the demand and cost functions in each market induced by these unobservable types. These are used to quantify the efficiency costs of unpriced heterogeneity. We apply our methods to the US Long-Term Care and Medigap insurance markets, where we find that unpriced heterogeneity causes substan…
The timeline of trading frictions in the European carbon market
2012
We evaluate the quality of prices of EU-ETS, the most active European derivative market for greenhouse gas emissions allowances (EUAs). So far, this market has had two phases, a trial phase (from 2005 to 2007) and a commitment phase (from 2008 to 2012). The true value of a trial-phase EUA at the beginning of 2008 was inevitably zero because it could not be used in the commitment phase to cover emission targets. However, continued rumors of over-allocation of EUAs led to an early collapse of the market by May 2007. We study whether this market breakdown and the subsequent outbreak of the international financial crisis had a persistent effect on the quality of the commitment phase. We provide…
Are there threshold effects in the stock price–dividend relation? The case of the US stock market, 1871–2004
2008
We use recent developments on threshold autoregressive models that allow deriving endogenously threshold effects to analyse the evolution of the US stock price–dividend relation over the period 1871 to 2004. More specifically, a mean-reverting dynamic behaviour of the stock price–dividend ratio should be expected once such threshold is reached. Our empirical results showed that significant adjustments would occur when, in a particular year, the stock price–dividend ratio had shown a decrease of more than 8.0% between the previous year and the fourth year before, which implies nonlinearities in the dynamic behaviour of the US stock price–dividend relation.
Booms and busts in housing markets: determinants and implications
2009
This study looks at real estate price booms and busts in industrialised countries. It identifies major and persistent deviations from long term trends for 18 countries and estimates the probabilities of their occurrence using a Random Effects Panel Probit model over the period 1980-2007. It finds that 1) most recent housing booms have been very persistent and of a significant magnitude; 2) there appears to be a strong correlation between the persistence and magnitude of booms and subsequent busts; 3) economic costs (in terms of GDP losses during the post-boom phase) depend significantly on the magnitude and duration of the boom and money and credit developments during that period; 4) a numb…
Pricing of forwards and other derivatives in cointegrated commodity markets
2015
Abstract We analyze cointegration in commodity markets, and propose a parametric class of pricing measures which preserves cointegration for forward prices with fixed time to maturity. We present explicit expressions for the term structure of volatility and correlation in the context of our spot price models based on continuous-time autoregressive moving average dynamics for the stationary components. The term structures have many interesting shapes, and we provide some empirical evidence from refined oil future prices at NYMEX defending our modeling idea. Motivated from these results, we present a cointegrated forward price dynamics using the Heath–Jarrow–Morton approach. In this setting, …
Model Based Monte Carlo Pricing of Energy and Temperature Quanto Options
2010
Weather derivatives have become very popular tools in weather risk management in recent years. One of the elements supporting their diffusion has been the increase in volatility observed on many energy markets. Among the several available contracts, Quanto options are now becoming very popular for a simple reason: they take into account the strong correlation between energy consumption and certain weather conditions, so enabling price and weather risk to be controlled at the same time. These products are more efficient and, in many cases, significantly cheaper than simpler plain vanilla options. Unfortunately, the specific features of energy and weather time series do not enable the use of …
Why is equity order flow so persistent?
2015
Abstract Order flow in equity markets is remarkably persistent in the sense that order signs (to buy or sell) are positively autocorrelated out to time lags of tens of thousands of orders, corresponding to many days. Two possible explanations are herding, corresponding to positive correlation in the behavior of different investors, or order splitting, corresponding to positive autocorrelation in the behavior of single investors. We investigate this using order flow data from the London Stock Exchange for which we have membership identifiers. By formulating models for herding and order splitting, as well as models for brokerage choice, we are able to overcome the distortion introduced by bro…