Optimal portfolios when volatility can jump

We consider an asset allocation problem in a continuous-time model with stochastic volatility and jumps in both the asset price and its volatility. First, we derive the optimal portfolio for an investor with constant relative risk aversion. The demand for jump risk includes a hedging component, which is not present in models without volatility jumps. We further show that the introduction of derivative contracts can have substantial economic value. We also analyze the distribution of terminal wealth for an investor who uses the wrong model, either by ignoring volatility jumps or by falsely including such jumps, or who is subject to estimation risk. Whenever a model different from the true one is used, the terminal wealth distribution exhibits fatter tails and (in some cases) significant default risk.     

Dissecting Foreign Bank Lending Behavior During the 2008–2009 Crisis

This paper analyzes the lending behavior of foreign‐owned banks during the recent global crisis. Using bank‐level panel data for 51 countries, the paper explores the role of affiliate and parent financial characteristics, host location, as well as the impact of parent geographic origin and reach on foreign banks’ credit growth. Overall, the analysis finds robust evidence that foreign banks curtailed the growth of credit relative to other banks, independent of the host region in which they operate. Banks from the United States reduced loan growth less than other parent banks. Neither the global nor regional reach of parent banks influenced the lending growth of foreign affiliates. Parent capitalization and not parent funding explained the behavior of foreign bank credit growth during the global crisis. However, funding did affect the lending behavior of domestic and foreign banks in host countries, with those relying more heavily on deposits suffering a smaller decline in bank lending. Although not the focus of the paper, we also find that government‐owned banks played a countercyclical role in all regions.     

Die Berücksichtigung von Spitzenkappung in der Anreizregulierung

The model of temporary disconnection of renewable energy in case of high energy injection and low demand is thought to be an effective method for reducing investments in electricity networks. However, plant owners need to be reimbursed for foregone sales. According to the currently discussed draft of the Amendment of the German Incentive Regulation Ordinance, these costs can be rolled over to the consumer on a yearly basis, but are part of the cost benchmark with their base year values. This paper shows that this model sets incentives for optimal investments in electricity networks, but violates the participation constraint: Net operators will be exposed to a severe risk of worsening their position in the cost benchmark. In expectation, they will generate losses and investors have no incentive to invest in electricity networks. This problem can be solved by allowing net operators to roll over costs to customers, while considering average reimbursement fees in the cost benchmark.     

Trust,religion, and cooperation in western agriculture, 1880–1930

This article explores the role of culture in encouraging the diffusion of cooperation for the production and marketing of agricultural products, an organizational innovation that can be related to technical progress in the rural sector and higher living standards for farmers. The results of the zero‐inflated negative binomial (ZINB) pooled regressions show that trust and religion were significant determinants of the diffusion of cooperatives among farmers in western countries. Results of the logit portion of these regressions suggest that the density of production was positively related to cooperation and that cooperation decreased where higher inequality in land distribution predominated.     

Student employment and academic performance: an empirical exploration of the primary orientation theory

This study empirically assesses the thesis that student employment only hurts academic performance for students with a primary orientation towards work (versus school). To this end, we analyse unique data on tertiary education students’ intensity of and motivation for student employment by means of a state-of-the art moderation model. We find, indeed, only a negative association between hours of student work and the percentage of courses passed for work-oriented students. This finding may explain the contradictory results in the literature neglecting this factor.     

Identifying design values across countries through adaptive comparative judgment

International Journal of Technology and Design Education - Adaptive comparative judgment (ACJ) has proven to be a valid, reliable, and feasible method for assessing student performance in...