Global corporations and local politics: income redistribution vs. FDI subsidies

Income inequality has been used empirically to explain the mixed performance of developing countries in attracting FDI. This paper sets up a theoretical model that links the skewness of the income distribution to a host government's willingness to subsidize FDI. Large skewness makes government subsidies less likely because the median income person prefers redistribution. Little skewness, however, does not guarantee FDI. In addition, host governments may switch from positive to no subsidies if a shift in economic variables changes how the policymaker trades off the FDI benefits and income redistribution, thereby offering an alternative to the conventional hold-up story.     

Perceptions of inequality

Individual perceptions of (income or wealth) inequality have strong effects on their decisions as economic agents or voters. It is therefore important to know more about the relation between perceived and measured inequality. We present a novel formal framework that is based on the assumption that people typically do not observe the entire income (wealth) distribution and that their guesses about the extent of inequality are based on “self-centered” reference groups. This framework predicts that perceptions of inequality will change along positions in the income distribution and that for a specific position various dimensions of inequality perception are related to each other. First, low (high) income individuals overestimate (underestimate) their own position. Second, subjective estimates of average earnings increase with the own income position. Third, high or low income people have different perceptions about the skewness and the “shape” of the income distribution (e.g. pyramid or diamond). Fourth, the subjective perception of inequality is lower for high-income individuals. Survey data from 40 countries provide strong support for the framework.     

Skewness,short interest and the efficiency of stock prices

We examine the association between return skewness, short interest and the efficiency of stock prices. Since preferences for skewness have been shown to impact asset prices, we examine how skewness relates to market efficiency. We find that stocks with positive skewness are less efficient, which might be explained by investor preferences for positive skewness. Next, we document that short interest reduces both total skewness and idiosyncratic skewness. Finally, while research has shown that short selling can improve the efficiency of markets generally, we show that short interest’s ability to improve market efficiency is strongest in stocks with the highest skewness.     

Systematic skewness in asset pricing: an empirical examination of the Taiwan stock market

This paper is an empirical study of asset pricing with the systematic skewness in the pricing model. We adopt the Fama-French three-factor model, which incorporates the firm-size and book-to-market ratio in asset pricing as the base case, and then includes the skewness factor used by Harvey and Siddique in the pricing model. The evidence shows that systematic skewness is significant and might be important in asset pricing when portfolios are formed by industry, firm-size, book-to-market, or momentum strategies. When portfolios are constructed by momentum or coskewness strategies, lower momentum, or lower coskewness portfolios exhibit higher skewness and higher kurtosis. When portfolios are grouped by excess returns, it is seen that the average excess return is positively correlated with size and coskewness. Thus the systematic skewness is closely related to firm size. And the relationship between systematic skewness and excess return is obscured by the reverse firm-size effect.     

Persistence and Predictability of Skewness in Country Equity Market Returns

This article explores the skewness characteristics of eighteen developed country equity market returns. The empirical results indicate that country skewness tends to have the same sign for different measurement intervals. Also, the magnitude of country skewness increases as the measurement interval increases. Further, the results indicate that positive skewness is not a predominant phenomenon. In addition, this study examines the predictability of country skewness using a Spearman Rank Order test and an autoregression test. The findings generally indicate that past monthly country skewness could not be used to reliably predict the extent of skewness of future periods.

     

Does Distributional Skewness Lead to Redistribution? Evidence from the United States

This paper presents time-series, cross-section, and historical evidence from the United States to test whether distributional skewness leads to the adoption of redistributive policies. On all accounts the theory performs poorly: we fail to find evidence either of a long-run stable relationship or of short-run causation between distributional skewness and redistribution in the time-series data; the cross-section data uncover no correlation between skewness and welfare spending or support of the Democratic Party; and analysis of the historical evidence shows that key changes in redistributive institutions in the United States were not preceded by increases in distributional skewness.     

Neoclassical versus Frontier Production Models? Testing for the Skewness of Regression Residuals*

The empirical literature on production and cost functions is divided into two strands. The neoclassical approach concentrates on model parameters, while the frontier approach decomposes the disturbance term to a symmetric noise term and a positively skewed inefficiency term. We propose a theoretical justification for the skewness of the inefficiency term, arguing that this skewness is the key testable hypothesis of the frontier approach. We propose to test the regression residuals for skewness in order to distinguish the two competing approaches. Our test builds directly upon the asymmetry of regression residuals and does not require any prior distributional assumptions.     

SKEWNESS AND KURTOSIS PROPERTIES OF INCOME DISTRIBUTION MODELS

This paper explores the ability of some popular income distributions to model observed skewness and kurtosis. We present the generalized beta type 1 (GB1) and type 2 (GB2) distributions' skewness–kurtosis spaces and clarify and expand on previously known results on other distributions' skewness–kurtosis spaces. Data from the Luxembourg Income Study are used to estimate sample moments and explore the ability of the generalized gamma, Dagum, Singh–Maddala, beta of the first kind, beta of the second kind, GB1, and GB2 distributions to accommodate the skewness and kurtosis values. The GB2 has the flexibility to accurately describe the observed skewness and kurtosis.     

Asymmetric signals and skewness

This paper develops a model for analyzing skewness in returns when an investor observes a novel skew-normally distributed signal about a risky asset's payoff. The equilibrium third moment increases with the signal's skewness, and its magnitude increases with the signal's noisiness. Using institutional ownership and market capitalization as proxies for information precision, we find that both proxies are significantly and negatively correlated with the future absolute third moment in firm returns in China. We show that these relations are mainly driven by the negative third moment. The two proxies are positively correlated with future skewness, which contradicts the corresponding relations found in the US. Our model can reconcile the opposite findings if the US evidence is driven by positive skewness. This paper suggests that it is more appropriate to forecast positive and negative skewness separately when using information-precision proxies.     

Herding on lottery-type stocks: evidence from the Chinese stock market

Previous studies have provided evidence that investors have gambling propensity in the stock market and exhibit a preference for lottery-type stocks. In this study, we use high total skewness and high maximum daily return (MAX) to measure lottery-type stocks and examine whether investors do exhibit distinct herding pattern in these stock types. Empirical results show that investors display stronger herding among lottery-type stocks, thereby indicating that such stocks induce correlated behaviour with the investors. In addition, we find that stocks with the highest skewness exhibit stronger herding under upmarkets, whereas stocks with the lowest skewness display stronger herding under downmarkets. Regarding the highest MAX portfolio, no significant herding asymmetry is seen between upmarket and downmarket. The results reported in this article demonstrate that comovement in stock returns may be partly attributed to the nonstandard preferences of investors in the stock market.     

Accounting for the impact of higher order moments in foreign equity option pricing model

This paper investigates the pricing of foreign equity option whose value depends on foreign equity prices and exchange rate. We assume that the underlying asset returns of foreign equity option is not a Brownian motion, and use the Gram-Charlier series expansion to augment a normal density with two additional terms to capture the effects of skewness and kurtosis. The empirical study shows that the higher order moments (skewness and kurtosis) clearly affect the estimated prices of foreign equity options. This approach enables us to capture more accurately the foreign equity option prices.     

我国股市收益率极端值与CAPM模型的应用

沪深两市收益率具有尖峰、偏斜的特征,月度收益率比日收益率、周收益率更接近正态分布。剔除异常值之后,偏度下降,收益率更接近正态分布。在回归估计贝塔系数时,如果样本过小,应剔除异常的收益率值,以保证回归的有效性。     

Consumer Choice and the Popular Music Industry: A Test of the Superstar Theory

The superstar model predicts skewness of market outcomes and returns to artist quality. We test and confirm these predictions using a unique data set on popular music.     

Empirical analysis of jump dynamics, heavy-tails and skewness on value-at-risk estimation

This study provides a comprehensive analysis of the possible influences of jump dynamics, heavy-tails, and skewness with regard to VaR estimates through the assessment of both accuracy and efficiency. To this end, the ARJI model, and its degenerative GARCH model with normal, GED, and skewed normal (SN) distributions were adopted to capture the properties of time-varying volatility, time-varying jump intensity, heavy-tails and skewness, for a range of stock indices across international stock markets during the period of the U.S. subprime mortgage crisis. Empirical results show that, with regard to the evaluation of accuracy, the role of jump dynamics is more substantial than heavy-tails or skewness as it pertains to VaR accuracy at the 90% and 95% levels, while heavy-tails become more important at the 99% level for a long position. However, the influence of the abovementioned properties on VaR estimation does not appear substantial for a short position. In addition, the properties of jump dynamics and skewness appear to be beneficial for the improvement of efficiency.     

Does Probability Weighting Drive Lottery Preferences?

Abstract

We propose a test of the theory of skewness preferences. The probability weighting feature that is the basis of their theory relies on investors overweighting the probability of extreme, positive returns. The resulting investor preferences for positive skewness in return distributions will lead to excess demand, contemporaneous price premiums, and negative expected returns. We use the well-documented 52-week high bias as a method to truncate investors’ weighted probability of expected right-tail events. We find evidence supporting the theoretical framework of Barberis and Huang as the negative return premiums associated with positive skewness is driven almost entirely by stocks that are farther away from the their 52-week high. No negative premiums related to skewness are detected when stock prices are close to the 52-week high.     

On the Effect of Skewness and Kurtosis Misspecification on the Hedging Error

Using a result in Angelini and Herzel (2009a) , we measure, in terms of variance, the cost of hedging a contingent claim when the hedging portfolio is re‐balanced at a discrete set of dates. We analyse the dependence of the variance of the hedging error on the skewness and kurtosis as modeled by a Normal Inverse Gaussian model. We consider two types of strategies, the standard Black–Scholes Delta strategy and the locally variance‐optimal strategy, and we perform some robustness tests. In particular, we investigate the effect of different types of model misspecification on the performance of the hedging, like that of hedging without taking skewness into account. Computations are performed using a Fast Fourier Transform approach.     

代际收入流动性与收入不平等——基于面板数据联立方程模型的分析

利用CHNS数据,在测度收入不平等的代际传递性的基础上,通过面板数据联立方程模型实证分析代际收入流动与收入不平等之间的关系。实证研究结果表明,收入不平等程度的上升阻碍了代际收入的流动,而代际收入弹性的提高也会导致收入不平等状况的恶化。     

Persistence of gender inequality: the role of ethnic divisions

Gender inequality remains a fundamental challenge for global policymakers given that it has detrimental implications for growth and human capital formation. However, studies examining the roots of gender inequality, and what determines the level of inequality are relatively scant. In this study, we seek to contribute to the literature that examines the roots of gender inequality and thus, our objective is to examine the impact of ethnic diversity on gender inequality. We argue that the level of ethnic diversity within a country plays a role in either deepening or bridging gender gaps. Using indices of ethnic fractionalization, we examine the effects of ethnic diversity on measures of gender inequality such as the gender inequality index, and its associated dimensions of empowerment, educational attainment and labour market outcomes. Our evidence suggests that ethnic diversity widens existing gender gaps. We discuss several mechanisms through which ethnic diversity may lead to the increase of existing gender gaps, and lay out various policy approaches to address gender inequality.     

Testing inequality of opportunities in Italy using the ANOVA framework

While the analysis of inequality has been central to economic studies for centuries, it was only in recent years that studies have concentrated on the distinction between inequality of opportunity and inequality of returns to effort and have attempted empirical estimates of the two components. The decomposition of a general inequality index into these two components allows to analyse the prevalence of fair or unfair income inequality within a country. This paper suggests to test the differences between the two sources of inequality in a simple way using the ANOVA framework adapted to decompose the coefficient of variation, to better suit the requirements of an inequality index. The proposed procedure is applied to the Italian Survey on Income and Living Condition (IT-SILC data, wave 2005 and 2011). The empirical results help identifying the circumstances that foster the rise of inequality of opportunities in Italy. Our analysis shows, in particular, that father education, region of residence and gender result as the most relevant circumstances determining inequality of opportunity. On the other side, the role of mother education starting from a lower level as an inequality of opportunity factor has increased its influence over time.     

中国物价波动与经济增长关系研究——基于城乡居民消费差距视角的分析

物价波动与经济增长之间的关系是经济学传统的研究课题。本文在测量城乡居民消费差距的基础上,利用TARCH模型研究了物价波动对城乡居民消费差距的非对称影响,并从城乡居民消费差距的视角分析了物价波动对经济增长的影响。研究结果表明:物价波动使得城乡居民消费差距的变化越来越小;物价波动与城乡居民消费差距之间呈负相关关系,当物价变动1%时,城乡居民消费差距反向变动0.579%;物价波动对经济增长有着负的直接影响;物价波动通过影响城乡居民消费差距进而对经济增长产生负的间接影响。