Adverse Selection,Investor Experience and Security Choice in Venture Capital Finance: Evidence from Germany

This article analyses 336 German venture capital transactions from 1990 to 2005 and seeks to determine why selected financial securities differ across deals. We find that a broad array of financial instruments is used, covering straight equity, mezzanine and debt‐like securities. Based on the chosen financial securities’ upside potential and downside protection characteristics, we provide an explanation for the differing use of these securities. Our results show that investors’ deal experience, adverse selection risks and economic prospects in the public equity market influence the selection of financial securities.     

A Note on Forecasting Emerging Market Exchange Rates: Evidence of Anti‐herding

Using survey forecasts of a large number of Asian, European, and South American emerging market exchange rates, we studied empirically whether evidence of herding or anti‐herding behavior of exchange‐rate forecasters can be detected in the cross‐section of forecasts. Emerging market exchange‐rate forecasts are consistent with herding (anti‐herding) if forecasts are biased towards (away from) the consensus forecast. Our empirical findings provide strong evidence of anti‐herding of emerging market exchange‐rate forecasters.     

Analysing tax evasion dynamics via the Ising model

We develop a model of tax evasion based on the Ising model. We augment the model using an appropriate enforcement mechanism that may allow policy makers to curb tax evasion. With a certain probability tax evaders are subject to an audit. If they get caught they behave honestly for a certain number of periods. Simulating the model for a range of parameter combinations, we show that tax evasion may be controlled effectively by using punishment as an enforcement mechanism.     

Green, Brown, and Now White Certificates: Are Three One Too Many? A Micro-Model of Market Interaction

In recent years, European environmental policy has focused primarily on the reduction of carbon emissions and on fostering the expansion of renewable energy production. In 2008, the EU established the 20/20/20 vision, demanding that carbon emissions and energy consumption both be reduced by 20%, and that the production of Green Energy be further increased in order to account for 20 percent of total energy production by 2020. Regarding the reduction of emissions, a cap-and-trade system (Brown Certificates) was implemented. for the fostering of so called renewable, i.e. Green, energy different nations chose different measures, such as direct subsidies, feed-in-tariffs (e.g. Germany), or Green Certificate markets based on a quota system (e.g. Denmark). Recently, a market-based instrument (White Certificates) intended to improve efficiency of non-commercial energy consumption is also on the agenda of several European nations (demand side management). All of these instruments are directed towards the energy market. Therefore, this paper deals with identifying interdependencies and trade-offs that might occur, if both, supply and demand side, of a single market are regulated by different policy measures. Our results show that, in fact, significant interdependencies and trade-offs exist. In our model, a feed-in tariff in combination with an emission cap or tax renders the most favorable results??in the absence of demand side management.     

Notes and Communications

Note

Notes and Communications     

Social security and saving — A critical note on the feldstein hypothesis

Zusammenfassung In der vorliegenden Arbeit wird versucht, Feldsteins Hypothese, wonach die Sozialversicherung das Sparen dämpft, an Hand internationaler Querschnittdaten zu überprüfen. Ausgehend von einem Ansatz, den Feldstein aufbauend auf das Lebenszyklusmodell in den Jahren 1977 und 1980 entwickelte, wird versucht, die Validität der Ergebnisse in bezug auf Änderungen in den Variablendefinitionen, der Zeitperiode sowie der Sampleauswahl aufzuzeigen. Weiters wird der Einfluß von geringen Modellmodifikationen (Berücksichtigung der Arbeitslosenrate als Unsicherheits-bzw. Stimmungsindikator) sowie Änderungen der Schätzmethode (gewogene oder ungewogene Regression bzw. OLS oder TSLS) auf die Resultate untersucht. Die Ergebnisse zeigen, daß die Feldstein-Hypothese keineswegs als ein empirisch allgemein gültiges Gesetz angesehen werden kann, sondern eher als zufällig zustandegekommen.     

Information Cascades in the Labor Market

A model of herding behavior in the labor market is presented where employers receive signals with limited precision about the workers types, and can observe previous employers decisions. Both the employer and the worker can influence the signal probabilities. In particular, the employer tries to increase the precision of the signal about the workers type whereas the worker wants to get a good signal, independent of her type. In a two-period model, we derive conditions for an equilibrium in which only down-cascades occur, i.e., the second employer does not hire a worker with a bad history even if he receives a favorable private signal about the workers type, but he follows his own signal if the workers history is good.