Correcting for the Missing Rich: An Application to Wealth Survey Data

It is a well‐known criticism that if the distribution of wealth is highly concentrated, survey data are hardly reliable when it comes to analyzing the richest parts of society. This paper addresses this criticism by providing a general rationale of the underlying methodological problem as well as by proposing a specific methodological approach tailored to correcting the arising bias. We illustrate the latter approach by using Austrian data from the Household Finance and Consumption Survey. Specifically, we identify suitable parameter combinations by using a series of maximum‐likelihood estimates and appropriate goodness‐of‐fit tests to avoid arbitrariness with respect to the fitting of the Pareto distribution. Our results suggest that the alleged non‐observation bias is considerable, accounting for about one quarter of total net wealth in the case of Austria. The method developed in this paper can easily be applied to other countries where survey data on wealth are available.     

The triggers and clustering properties of merger waves

This article studies the triggers and the agglomeration of mergers and acquisitions (M&A) activity within clusters constituted by time, market and industry. Based on almost 500,000 individual transactions, we find that industry factors play a significant role in triggering activity and that M&A agglomerates strongly across related industries. While clustering in time turns out to be insignificant, stock market effects can be either an attracting or a repelling force, depending on the type of deal examined. This supports the view that merger waves are largely driven by industry shocks.     

Creatine and entrepreneurship

Creatine is a nitrogenous organic acid which supplies energy to body cells and enhances physical performance. Using the Young Finns Study combined with the Finnish Linked employer-employee data we show that quantities of creatine measured in 1980 prior to labour market entry affect entrepreneurial success as measured by capital income accumulation over the period 1993–2010 (in particular for females). However, we do not find evidence that creatine affects the propensity to become an entrepreneur. Our study contributes to the emerging literature on biomarkers and entrepreneurship.     

Exploring the predictability of range‐based volatility estimators using recurrent neural networks

We investigate the predictability of several range‐based stock volatility estimates and compare them with the standard close‐to‐close estimate, which is most commonly acknowledged as the volatility. The patterns of volatility changes are analysed using long short‐term memory recurrent neural networks, which are a state‐of‐the‐art method of sequence learning. We implement the analysis on all current constituents of the Dow Jones Industrial Average index and report averaged evaluation results. We find that the direction of changes in the values of range‐based estimates are more predictable than that of the estimate from daily closing values only.     

Recovering the real-world density and liquidity premia from option data

In this paper, we develop a methodology for simultaneous recovery of the real-world probability density and liquidity premia from observed S&P 500 index option prices. Assuming the existence of a numéraire portfolio for the US equity market, fair prices of derivatives under the benchmark approach can be obtained directly under the real-world measure. Under this modelling framework, there exists a direct link between observed call option prices on the index and the real-world density for the underlying index. We use a novel method for the estimation of option-implied volatility surfaces of high quality, which enables the subsequent analysis. We show that the real-world density that we recover is consistent with the observed realized dynamics of the underlying index. This admits the identification of liquidity premia embedded in option price data. We identify and estimate two separate liquidity premia embedded in S&P 500 index options that are consistent with previous findings in the literature.     

The Illiquidity Discount of Life Insurance Investments

We incorporate an illiquid life insurance investment in the multi-period investment strategy of an investor with constant relative risk aversion and independent and identically distributed returns. In our setup, the liquid and the illiquid assets are risky and correlated and the illiquid investment cannot be rebalanced. We calculate the illiquidity discount as the difference in certainty equivalent rates of return between the optimal strategy with all assets being rebalanced in each period and the strategy with the illiquid investment. Calibrating our model to data of the German market we find a negative relationship between the level of risk aversion and the illiquidity discount when the investor does not rebalance at all. However, when the investor rebalances his liquid assets in each period to hedge against the illiquid investment the illiquidity discount becomes economically negligible.     

Competition in the presence of individual demand uncertainty

This article offers a tractable model of (oligopolistic) competition in differentiated product markets characterized by individual demand uncertainty. The main result shows that, in equilibrium, firms offer advance purchase discounts and that these discounts are larger than in the monopolistic benchmark. Competition reduces welfare by increasing the fraction of consumers who purchase in advance, that is, without (full) knowledge of their preferences.     

Relevant and Preferred Public Service: A study of user experiences and value creation in public transit

When public service success is dependent upon creating value that attracts users, public managers can benefit from adopting private sector principles. This article draws on the theory of attractive quality and strategic management research to focus on the theoretical and managerial implications of how organizations’ resource allocations affect user experiences. The present study shows how public transit organizations’ achievement of twenty-five different service requirements affected their offerings’ relevance and preference among 930 users. This article increases the understanding of how strategic choices and prioritization between various service requirements affect both the effectiveness and efficiency of (public) service offerings.     

Transition from part-time entrepreneurship to full-time entrepreneurship: the role of financial and non-financial motives

Part-time entrepreneurship is often a first step towards full-time entrepreneurship. This study analyzes how financial and non-financial motives of part-time entrepreneurs influence the propensity of part-time entrepreneurs to become full-time entrepreneurs. Our results show that the motivation to supplement wage income or the motivation to achieve social recognition is negatively associated with transition behavior, whereas the motivation to achieve independence or self-realization is positively associated with transition behavior. The motivation to follow a role model, financial success, and innovation are not significantly related to transition behavior. The implications of these results with regard to part-time entrepreneurship are discussed.