Search results for "premium"
showing 10 items of 84 documents
Stature and long-term labor market outcomes: Evidence using Mendelian randomization.
2017
We use the Young Finns Study (N = ∼2000) on the measured height linked to register-based long-term labor market outcomes. The data contain six age cohorts (ages 3, 6, 9, 12, 15 and 18, in 1980) with the average age of 31.7, in 2001, and with the female share of 54.7. We find that taller people earn higher earnings according to the ordinary least squares (OLS) estimation. The OLS models show that 10 cm of extra height is associated with 13% higher earnings. We use Mendelian randomization, with the genetic score as an instrumental variable (IV) for height to account for potential confounders that are related to socioeconomic background, early life conditions and parental investments, which ar…
Consumers' willingness to pay for natural food: Evidence from an artefactual field experiment
2018
Abstract Among foods with credence attributes, food with “natural” components have received in the last years particular attention by consumers. This study applies the BDM incentive compatible mechanism to explore young (18–35 years old) consumers’ interest and willingness to pay for chewing gums having the natural attribute. Our analysis shows that over 68% of consumers are interested in the natural attribute and are willing to pay a price premium. We also find that consumers’ higher age and interest in the environment have significant impacts on consumers’ preferences for the natural attribute.
The impact of an urban toll ring on housing prices
2020
Abstract Building on standard urban economics theory we set up a stylized model within which we demonstrate that the imposition of a toll ring leads to higher housing prices within the ring, and lower outside the ring. We examine this prediction empirically by using transaction data for 15,306 dwellings in the Norwegian town of Kristiansand, where since 1992 there has been a toll ring. We find that the toll ring implies 6.9 per cent higher housing prices within the toll ring than outside it. The relationship between toll fees and housing prices seems to be stable over time. The impact of the toll ring on the prices of detached houses, apartments, row houses and twin houses is strikingly dif…
Dynamic Volatility Weighting in the Presence of Transaction Costs
2015
Numerous empirical studies demonstrate the superiority of dynamic strategies with volatility weighting over time mechanism. These strategies control the portfolio risk over time by adjusting the risk exposure according to updated volatility forecasts. Yet, in order to reap all benefits promised by volatility weighting over time, the composition of the active portfolio must be revised rather frequently. Transaction costs represent a serious obstacle to benefiting from this dynamic risk control technique. In this paper we propose a modified volatility weighting strategy that allows one to reduce dramatically the amount of trading costs. The empirical evidence shows that the advantages of the …
Pricing of electricity futures based on locational price differences : The case of Finland
2018
We find that the pricing of Finnish electricity market futures has been inefficient during the latest 10 years, when the trading volumes of Electricity Price Area Differentials (EPADs) have more than doubled. Even though the calculated futures premium on EPADs is related to some risk measures and the variables capturing the demand and supply conditions in the spot electricity markets, there has been a significant positive excess futures premium in the Finnish market, and financial market participants should have been able to utilize this also in economic terms. This finding is new and relevant for the participants of the Nordic electricity markets also in the future, because both the specul…
Statistical Learning Algorithms to Forecast the Equity Risk Premium in the European Union
2018
With the explosion of “Big Data”, the application of statistical learning models has become popular in multiple scientific areas as well as in marketing, finance or other business disciplines. Nonetheless, there is not yet an abundant literature that covers the application of these learning algorithms to forecast the equity risk premium. In this paper we investigate whether Classification and Regression Trees (CART) algorithms and several ensemble methods, such as bagging, random forests and boosting, improve traditional parametric models to forecast the equity risk premium. In particular, we work with European Monetary Union data for a period that spans from the EMU foundation at the begin…
Predictable Dynamics in the Small Stock Premium
2014
We start this paper by providing a detailed study of how the mean monthly return on the Small-Minus-Big (SMB) Fama-French factor is affected by the January effect and the stock market return during the preceding month and preceding calendar year. We then proceed to building a predictive model for the monthly SMB factor return that incorporates the January effect and the dependence on both the market return during the preceding month and preceding calendar year. Our findings suggest that a positive small stock premium appears mainly during the years following the years with a negative return on the market as the result of a delayed and stronger reaction of small stocks to good news and a str…
Debt Sustainability and Fiscal Space in a Heterogeneous Monetary Union: Normal Times Vs the Zero Lower Bound
2020
In this paper we study fiscal policy effects and fiscal space for countries in a monetary union with different levels of public debt. We develop a dynamic stochastic general equilibrium (DSGE) model of a two-country monetary union, calibrated to match the characteristics of Spain and Germany, in which debt sustainability is endogenously determined a la Bi (2012) to shape the responses of the risk premium on public debt. Policy shocks change the market’s expectation about future primary surplus, producing a direct effect on the sovereign risk premium and macroeconomic responses of the economy. In normal times the costs of a government spending driven fiscal consolidation in the high-debt cou…
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, …
Liquidity and dirty hedging in the Nordic electricity market
2012
Abstract Hedging involves tradeoffs in incomplete markets because the number of hedging instruments is limited. Even when an extensive set of hedging instruments is available, the ease with which these instruments can be traded may be highly variable. This study finds systematic variations in liquidity in different segments of the Nordic electricity swap market and analyzes the potential for replacing low-liquidity, delivery-period-matched hedging instruments with more liquid, delivery-period-mismatched hedging instruments. When the costs of implementing such dirty hedging strategies are lower than those of the replaced hedging instruments and the loss of hedge effectiveness is small, dirty…