The dynamic impact of macroeconomic factors on initial public offerings: evidence from time-series analysis

This article examines the explanatory power and the dynamic impact of macroeconomic conditions on Initial Public Offering (IPO) activities in US during the period from 1970 to 2005. Applying time-series econometric techniques, we find the existence of long-run equilibrium relationships between IPO activities and selected macroeconomic variables. Stock market performance and volatility are shown to play the most important role in the timing of IPOs. The Fed funds rate and the 10 year US Treasury Bond (TB) yield play a comparable role in determining the amount of proceeds raised in the IPOs. There also exist different short-run dynamic adjustment mechanisms between IPOs and macroeconomic factors towards the long run equilibrium path and they are mostly completed within the period of 6 months to 1 year. The results have some useful implications for forecasting IPO activities.     

Equilibrium and quasi-equilibrium existence theorems for a general model without ordered preferences

In previous papers Gale and Mas-Colell (1975) and later Florenzano (1981) obtained a fixed point theorem. Gale and Mas-Colell proved also an existence equilibrium theorem. In this paper I offer a more general fixed point theorem that embodies as special cases the above mentionaed results. The new fixed point theorem is used as a main result in obtaining a general equilibrium theorem in weaker conditions than those of the previous proofs.     

An extended Heckscher-Ohlin model with transaction costs and technological comparative advantage

Summary. This paper introduces technological differences and transaction costs into the Heckscher-Ohlin (HO) model and examines the HO theorem, factor price equalization theorem, the Stolper-Samuelson theorem and the Rybczynski theorem. It shows that the HO theorem can be refined, and that the factor price equalisation theorem, the Stolper-Samuelson Theorem and the Rybczynski theorem do not always hold. It also shows that transaction costs play an important role in determining the equilibrium trade pattern.Received: 26 February 2001, Revised: 27 May 2003, JEL Classification Numbers: F10, F11. Correspondence to: Wenli ChengWe are grateful for comments from the anonymous referee, Hugo Sonnenschein, Guangzhen Sun and participants of the seminar on this paper at University of Washington.     

Some theorems on the existence of competitive equilibrium

The purpose of this paper is to point out a relationship between theorems on the existence of competitive equilibrium in economies with externalities, and recent results (pioneered by A. Mas-Colell) on the existence of equilibrium for economies in which consumer preferences are neither complete nor transitive. This observation leads both to a substantial strengthening of the theorem on the existence of equilibrium with externalities, and at the same time to a revealing perspective on the Mas-Colell theorem.     

Equilibria under deferred acceptance: Dropping strategies,filled positions,and welfare

We study many-to-one matching markets where hospitals have responsive preferences over students. We study the game induced by the student-optimal stable matching mechanism. We assume that students play their weakly dominant strategy of truth-telling.Roth and Sotomayor (1990) showed that equilibrium outcomes can be unstable. We prove that any stable matching is obtained in some equilibrium. We also show that the exhaustive class of dropping strategies does not necessarily generate the full set of equilibrium outcomes. Finally, we find that the ‘rural hospital theorem’ cannot be extended to the set of equilibrium outcomes and that welfare levels are in general unrelated to the set of stable matchings. Two important consequences are that, contrary to one-to-one matching markets, (a) filled positions depend on the equilibrium that is reached and (b) welfare levels are not bounded by the optimal stable matchings (with respect to the true preferences).     

Unemployment Hysteresis in Australian States and Territories: Evidence from Panel Data Unit Root Tests

This article tests for hysteresis by applying panel data unit root tests to quarterly unemployment rates for Australian states and territories between 1982:2 and 2002:1. Panel tests proposed by Levin and Lin (1992) using ordinary least squares and O'Connell (1998) using feasible generalised least squares (which assume that under the alternative hypothesis of stationarity, all labour markets revert to the natural rate at the same speed) provide evidence in support of the natural rate hypothesis. However, the panel test proposed by Im, Pesaran and Shin (1997), which does not assume that all cross‐sectional units converge towards the equilibrium value at the same speed under the alternative and is therefore less restrictive than the other two panel tests, finds evidence of hysteresis. Given the advantages of the Im et al. (1997) test over the other two panel tests the results can be interpreted as being consistent with the existence of hysteresis in unemployment     

Learning from private information in noisy repeated games

We study the perfect type-contingently public ex-post equilibrium (PTXE) of repeated games where players observe imperfect public signals of the actions played, and both the payoff functions and the map from actions to signal distributions depend on an unknown state. The PTXE payoffs when players are patient are determined by the solutions to a family of linear programming problems. Using this characterization, we develop conditions under which play can be as if the players have learned the state. We provide a sufficient condition for the folk theorem, and a characterization of the PTXE payoffs in games with a known monitoring structure.     

Balanced equilibrium in a consumption loans model

In a consumption loans model with many generations, Gale's theorem on the existence of balanced equilibrium is generalized, allowing more general preferences. The new theorem shows that there are plausible conditions under which there exists a Pareto optimal (non-optimal) balanced equilibrium whenever there exists (does not exist) a monetary golden rule equilibrium.     

Nonlinear adjustment in the forward premium: evidence from a threshold unit root test

This paper considers testing the mean reversion of the forward premium in a nonlinear framework. In contrast to previous studies, we consider a novel approach that allows for testing for a unit root in the forward premium while explicitly allowing for nonlinearity in the data. Within this approach, we employ bootstrap methods based on threshold autoregressive (TAR) models to investigate whether the 1- and 3-month forward premia for six industrialized countries are mean-reverting. Overall, we are able to reject the null hypotheses of linearity and nonstationarity indicating nonlinear mean reversion. Furthermore, large deviations of the forward premium from its equilibrium band are found to have faster speed of mean reversion than small deviations, which are strongly persistent. In all, the results support the view that the forward premium exhibits mean reversion, but in a special manner not captured by the usual linear tests. Finally, the results have important implications for foreign exchange market efficiency under risk aversion.     

The Three-Legged Race: Cooperating to Compete

In the prisoners' dilemma contest several couples play the finitely repeated prisoners' dilemma. Each time a couple cooperates, it scores a point, and a small prize is awarded to the winners. An analogue of the “folk” theorem for repeated games is obtained with subgame perfect equilibrium (SPE). Next, allowing renegotiations within each team, we study a solution concept based on renegotiation-proof equilibrium (RPE). If couples are informed about the score, no equilibrium exists. If they are not, cooperation is the unique equilibrium outcome.Journal of Economic LiteratureClassification Number: C72.     

A reexamination of the consumption function using frequency domain regressions

This paper reexamines the permanent income hypothesis (PIH) in the frequency domain. In contrast to some time domain tests, our frequency domain approach provides an explicit and natural test ofboth the permanentand transitory implications of the PIH for jointly nonstationary consumption and income data. Using a simple theoretical model, we demonstrate that the PIH implies the marginal propensity to consume (MPC) out of zero frequency income is unity. The PIHalso implies that the theoretical MPC out of transitory (or high frequency) income is smaller than the long-run MPC. These theoretical restrictions are natural implications of Friedman's hypothesis that agents consume out of permanent or low frequency income and (dis)save out of transitory or high frequency income. We test this full set of restrictions directly using spectral regression techniques. Under our set of assumptions, the derived disposable income process is shown to have a unit root and to be cointegrated with consumption. We therefore employ a systems spectral regression procedure that accommodates stochastic trends in the consumption and income series as well as the joint dependence in these series. In view of the relatively recent development of these systems spectral estimators, we also conduct Monte Carlo simulations across both low and high frequencies to assess properties of the estimator relative to established single equation techniques. New empirical estimates of the consumption function and tests of the PIH based on systems spectral regression methods are reported for U.S. aggregate consumption and income data over the period 1948–1993. The empirical results provide some evidence for the theoretical implications of the PIH.     

Do shale gas and oil productions move in convergence? An investigation using unit root tests with structural breaks

This paper investigates the long-run trends of shale gas and shale oil productions by applying univariate and panel Lagrange Multiplier (LM), GARCH-based, and PANICCA unit root tests to discover the mean-reverting behaviors. We employ monthly data from January 2007 to December 2016 of shale gas withdrawals and shale oil productions in the U.S. The empirical results both on specific state/oil well and panel data show that most structural breaks emerge around 2007–2011, during which shale energy was massively produced in the U.S. and the global financial crisis and energy shock occurred. Our results also indicate that most external shocks are transitory and the trends soon converge, and that cross-state/well factors have greater potential as temporary shocks than the state-specific/well-particular components. For robust analysis, we conduct additional LM tests of natural gas and crude oil productions for a comparison with the unconventional shale energy. The unit root test of Narayan and Popp (2010) on shale gas and shale oil productions help us to find more stationary evidence. Overall, we present powerful findings of the mean-reversion property and propose critical implications for authorities and market participants.     

Approximate equilibria in markets with indivisible commodities

This paper presents results on the existence of approximate equilibria in large but finite exchange economies in which all the traders have non-convex consumption sets. As such, the paper gives a natural extension, to the finite economy, of Mas-Colell's results on existence with indivisible commodities and a continuum of agents. It also presents an approximate equilibrium theorem without any assumption of compactness or bounded non-convexity of preferences.     

Are unit export values correct measures of the exports’ quality?

It has become common to measure the quality of exports using their unit export value (UEV). Applications of this method include studies of intra-industry trade (IIT) and analyses of industrial ‘competitiveness.’ This literature seems to assume that export quality and export price (the most natural interpretation of UEV) are not merely correlated but that they follow each other one-for-one. We put this assumption under scrutiny from both a theoretical and empirical point of view. In terms of theory, we formalize this assumption as a hypothesis of the proportionality of equilibrium prices and equilibrium qualities. We discuss several cases for which this hypothesis is theoretically doubtful (nonlinear utility and cost functions; strong and asymmetric horizontal product differentiation). We also suggest a method of verifying the hypothesis for cases in which it cannot be easily rejected theoretically. This method is then applied to German imports in the period of 1994–2009. We find that the implications of the proportionality hypothesis are largely contradicted by the data.     

Self-Correcting Information Cascades

We report experimental results from long sequences of decisions in environments that are theoretically prone to severe information cascades. Observed behaviour is much different—information cascades are ephemeral. We study the implications of a theoretical model based on quantal response equilibrium, in which the observed cascade formation/collapse/formation cycles arise as equilibrium phenomena. Consecutive cascades may reverse states, and usually such a reversal is self-correcting: the cascade switches to the correct state. These implications are supported by the data. We extend the model to allow for base rate neglect and find strong evidence for overweighting of private information. The estimated belief trajectories indicate fast and efficient learning dynamics.     

Are natural gas spot and futures prices predictable?

We answer two questions concerning natural gas spot and futures prices. The first is: Can natural gas futures prices predict natural gas spot prices? The second is: Are natural gas spot and futures prices weak form efficient or can they be predicted based on examination of historical data? To answer these questions, we use daily data for Henry Hub natural gas spot and futures prices. Our answer to the first question is that natural gas futures prices do not predict the magnitude of future natural gas spot prices any better than what would be predicted by a random walk model. This result has important implications for many financial analysts and policy institutions that have used commodity futures prices to predict movements in spot prices. The answer to the second question is that when we apply a unit root test that allows for heteroskedasticity and two structural breaks, natural gas spot and futures prices are predictable. We then simulate a contrarian trading strategy for spot and futures prices to show under what circumstances trading in spot and futures prices are also profitable. The results point to the need to accommodate heteroskedasticity when applying unit root tests to model energy spot and futures prices with high-frequency data, such as daily data.     

Uncertain vacancies and unemployment equilibria

The paper develops a dynamic implicit contracts model to consider the rationale for rejections of qualified applicants in the search process and to explore the implications for unemployment rates under equilibrium in the labor market. The implications are similar to traditional search models, although the effects of stochastic output prices upon equilibrium unemployment can be directly determined. A nearly invariant natural rate result pertains. A stochastic sales-rations variant of the model leads to equilibrium unemployment rates that depend upon both neoclassical and Keynesian factors.     

Strategic pattern recognition—experimental evidence

The repeated play of an asymmetric Battle of the Sexes is analyzed from the perspective of “strategic pattern recognition.” Convergence to equilibrium patterns (in finite histories) and related concepts like breaking-an-equilibrium-pattern are defined and applied to the data. More than half of 202 pairs of subjects are characterized as weakly converging to a fixed equilibrium pattern. The results also show that subjects tend to break their best pattern in cases where their partners' payoffs are relatively low and that convergence initiation does not pay off. While female subjects frequently reject the males' best equilibrium with anonymous matching, behavior gets more cooperative when pairs are introduced to each other before the beginning of the game.     

A Semiparametric Analysis of the Life Cycle-Permanent Income Hypothesis

This paper considers a semiparametric regression model to test the various implications of the Life Cycle-Permanent Income (LCP) hypothesis proposed by Hall (1978). The semiparametric regression model does not require any parametric assumption on the functional form of the unknown utility function in our analysis. In contrast, the linear regression models frequently used in the literature are justified under specific parametric forms of the utility function and may lead to a misleading conclusion on the LCP hypothesis if the parameterization is incorrect. Using both linear and semiparametric regression models, tests of the martingale property of consumption along with several specification tests are performed on the U. S quarterly data from 1947 to 1990. The results from the semiparametric model do not differ significantly from those from the linear model and suggest some evidences against the implications of the LCP hypothesis. [C14]