Funded social security and economic growth

This paper investigates the relationship between economic growth and a fully funded social security system in an overlapping generations model with family altruism. It is shown that funded social security may harm growth if there are operative bequests within the family.     

Can An 'Estimation Factor' Help Explain Cross-Sectional Returns?

Abstract:  We show in a theoretical model that the expected excess return on any asset depends on its covariance not only with the market portfolio, but also with changes in the representative agent's estimate. We test our model using GMM and compare it to the CAPM. The results suggest that adding an 'estimation factor' to the CAPM helps explain cross-sectional returns and that, unconditionally, this estimation factor carries a negative risk premium.     

Combining quality and quantity. A psychometric evaluation of the self-anchoring scale

In this study a psychometric comparison is made between a category rating scale with fixed anchors and a self-anchoring category rating scale where respondents themselves define the end anchors by referring to their personal experiences with the construct being measured. A student-satisfaction questionnaire was administered to 301 undergraduate students on two test moments separated by a 1-month period. Both types of category rating scales were crossed with both test moments according to a 2 ×  2 mixed factorial design. Our results show that respondents perceive the construct being measured in the same way with both rating scales. A comparison concerning different indicators of reliability, i.e. test–retest reliability, internal consistency and the error variances associated with each item, also failed to find a difference between both rating scales. In a last analysis it is demonstrated that using a self-anchoring rating scale or a rating scale with fixed anchors has a small but significant effect on the ratings of the respondents. In conclusion, a self anchoring scale may be the scale of choice if additional qualitative information from the anchors is warranted, but when quantitative comparisons between groups are required, rating scales with fixed anchors are preferable thanks to their ease of use.     

Online Price Discrimination and EU Data Privacy Law

Online shops could offer each website customer a different price. Such personalized pricing can lead to advanced forms of price discrimination based on individual characteristics of consumers, which may be provided, obtained, or assumed. An online shop can recognize customers, for instance through cookies, and categorize them as price-sensitive or price-insensitive. Subsequently, it can charge (presumed) price-insensitive people higher prices. This paper explores personalized pricing from a legal and an economic perspective. From an economic perspective, there are valid arguments in favour of price discrimination, but its effect on total consumer welfare is ambiguous. Irrespectively, many people regard personalized pricing as unfair or manipulative. The paper analyses how this dislike of personalized pricing may be linked to economic analysis and to other norms or values. Next, the paper examines whether European data protection law applies to personalized pricing. Data protection law applies if personal data are processed, and this paper argues that that is generally the case when prices are personalized. Data protection law requires companies to be transparent about the purpose of personal data processing, which implies that they must inform customers if they personalize prices. Subsequently, consumers have to give consent. If enforced, data protection law could thereby play a significant role in mitigating any adverse effects of personalized pricing. It could help to unearth how prevalent personalized pricing is and how people respond to transparency about it.     

中国私募反击战

来自西方的“野蛮人”成功抵达长城脚下，而现在他们发现这里也已经有一批野蛮人。 过去，只要我们提及中国的私募股权，那一定是来自西方的凯雷、TPG、华平创投等。但如今这批野蛮人遇到了中国对手，而且还在日渐增多。凯雷亚洲创投基金董事总经理祖文萃（Wayne Tsou）就称“本地竞争已经成为我们遇到的最大挑战”。     

Why do private acquirers pay so little compared to public acquirers?

Using the longest event window, we find that public target shareholders receive a 63% (14%) higher premium when the acquirer is a public firm rather than a private equity firm (private operating firm). The premium difference holds with the usual controls for deal and target characteristics, and it is highest (lowest) when acquisitions by private bidders are compared to acquisitions by public companies with low (high) managerial ownership. Further, the premium paid by public bidders (not private bidders) increases with target managerial and institutional ownership.     

The Effect of Information Quality on Optimal Portfolio Choice

Three types of agents acting on different information sets are considered: fully informed agents, insiders, and outsiders. Differences in information quality are shown to affect the properties of their optimal portfolios. For an outsider, the share of wealth invested in the stock is decreasing in the variance of the stock. However, for an insider, the effect of an increasing stock variance on the optimal portfolio weight is ambiguous. In a calibration to U.S. data, the confidence intervals of the insider's demand for the stock converge, whereas the outsider's confidence intervals become wider.     

‘Carrots for Corporate Sustainability’: Impacts of Incentive Inclusiveness and Variety on Environmental Performance

In this paper we explore the role that managerial incentives play in improving corporate environmental performance, finding that greater inclusiveness of incentive beneficiaries and greater variety of incentive types are important factors in firms' incentive schemes. Drawing on a large dataset of multinational enterprises, our results suggest that including more beneficiaries from different levels within the corporate hierarchy and offering both monetary and non‐monetary rewards are generally more likely to lead to reductions in corporate greenhouse gas emissions. Developing two principles of incentive design, inclusiveness and variety, and the conceptualization of patterns of these in organizations as configurations of incentives, our research contributes substantially to normative advice regarding the relative effectiveness of alternative systems of environmental incentives. Such an understanding of the potential of incentives is critical to informing how firms address complex problems such as sustainability in the context of increasingly extended organizational hierarchies and designs. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

Expected life-time utility and hedging demands in a partially observable economy

This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor's expected life-time utility, and analyze his hedging demands for intertemporal changes in the stochastic unobservable growth of the endowment process and the changing quality of information regarding these changes. The hedging demands consist of two components, which could work in opposite directions so that a conservative consumer may end up having positive hedging demands. Our results are qualitatively different from those prevailing under constant growth (cf. [Brennan, M.J., 1998. The role of learning in dynamic portfolio decisions. European Finance Review, 1, 295-306; Ziegler, A., 2003. Incomplete Information and Heterogeneous Beliefs in Continuous-Time Finance. Springer, Berlin, Chapter 2].     

Risk premia: Exact solutions vs. log-linear approximations

We derive exact expressions for the risk premia for general distributions in a Lucas economy and show that the errors when using log-linear approximations can be economically significant when the shocks are nonnormal. Assuming growth rates are Normal Inverse Gaussian (NIG) and fitting the distribution to the data used in Mehra and Prescott (1985), the coefficient of relative risk aversion required to match the equity premium is more than halved compared to the finding in their article. We also consider a standard long-run risk model and, by comparing our exact solutions to the log-linear approximations, we show that the approximation errors are substantial, especially for high levels of risk aversion.