Did bank distress stifle innovation during the Great Depression?

We find a negative relationship between bank distress and the level, quality and trajectory of firm-level innovation during the Great Depression, particularly for R&D firms operating in capital intensive industries. However, we also show that because a sufficient number of R&D intensive firms were located in counties with lower levels of bank distress, or were operating in less capital intensive industries, the negative effects were mitigated in aggregate. Although Depression era bank distress was associated with the stifling of innovation, our results also help to explain why technological development was still robust following one of the largest shocks in the history of the U.S. banking system.     

An Empirical Comparison of Two Stochastic Volatility Models using Indian Market Data

We conduct an empirical comparison of hedging strategies for two different stochastic volatility models proposed in the literature. One is an asymptotic expansion approach and the other is the risk-minimizing approach applied to a Markov-switched geometric Brownian motion. We also compare these with the Black–Scholes delta hedging strategies using historical and implied volatilities. The derivatives we consider are European call options on the NIFTY index of the Indian National Stock Exchange. We compare a few cases with profit and loss data from a trading desk. We find that for the cases that we analyzed, by far the better results are obtained for the Markov-switched geometric Brownian motion.     

Reflected Glory Versus Repulsive Envy: How Do the Smiths Feel About the House of the Joneses?*

A key question raised regarding conspicuous consumption is whether such consumption leads to positive or negative net externalities. The present paper examines how the presence of luxury and expensive properties within a local area affects the house prices in Taipei City. Positive externalities may be associated with improved urban amenities or reflected glory. Negative externalities may be associated with the adverse reference group effect; that is, repulsive envy. The paper discusses the spillover effects due to changes in neighborhood's housing characteristics, and shows significant spatial patterns in house prices and the importance of socioeconomic influences on house prices.     

Democratizing entry: Banking deregulations,financing constraints,and entrepreneurship

We examine entrepreneurship and creative destruction following US banking deregulations using US Census Bureau data. US banking reforms brought about exceptional growth in both entrepreneurship and business closures. Most of the closures, however, were the new ventures themselves. Although we find evidence for the standard story of creative destruction, the most pronounced impact was a massive increase in churning among new entrants. We argue that creative destruction requires many business failures along with the few great successes. The successes are difficult to identify ex ante, which is why democratizing entry is an important trait of well-functioning capital markets.     

Asymmetric Patterns of Demand-Supply Mismatch in Real Estate

The Journal of Real Estate Finance and Economics - As expectations change, we may observe asymmetry in responses of economic agents over various phases of the economic cycles. In this paper, we...