Stylised facts of financial time series and hidden Markov models in continuous time

Hidden Markov models are often applied in quantitative finance to capture the stylised facts of financial returns. They are usually discrete-time models and the number of states rarely exceeds two because of the quadratic increase in the number of parameters with the number of states. This paper presents an extension to continuous time where it is possible to increase the number of states with a linear rather than quadratic growth in the number of parameters. The possibility of increasing the number of states leads to a better fit to both the distributional and temporal properties of daily returns.     

Über eine Ungleichung der mathematischen Statistik

Abstract

1. Es sei ?(x) eine für ? ∞ < x < + ∞ reelle nichtnegative Funktion, die für x = a ihr Maximum hat und von a nach beiden Seiten monoton abnimmt. ¹ d. h. ?(x) ≦ ?(x′) für jedes x und jedes zwischen α und x gelegene x′. Ferner sei und konvergent.     

Strategic and Natural Risk in Entrepreneurship: An Experimental Study

We report on the results of experiments where participants choose between entrepreneurship and an outside option. Entrepreneurs enter a market and then make investment decisions to capture value. Payoffs depend on both strategic risk (i.e., the investments of other entrepreneurs) and natural risk (i.e., luck). Absent natural risk, participants endogenously sort themselves into entrepreneurial and safe types, and returns from the two paths converge. Adding natural risk fundamentally changes these conclusions: Here we observe excessive entry and excessive investment so that entrepreneurs earn systematically less than the outside option. These payoff differences persist even after many repetitions of the task. With a risky outside option, entry further increases and about one‐third of entrepreneurs adopt a passive strategy, investing little or nothing. Finally, we examine an environment where an individual must become an entrepreneur but chooses the stakes over which she will compete. Due to under‐entry and under‐investment in the high stakes setting, the returns gap grows to over 15 percentage points. A two‐factor model incorporating loss aversion and love of winning can rationalize these returns patterns.     

Trust and growth: a shaky relationship

We conduct an extensive robustness analysis of the relationship between trust and growth by investigating a later time period and a bigger sample than in previous studies. In addition to robustness tests that focus on model uncertainty, we systematize the investigation of outlier influence on the results by using the robust estimation technique Least Trimmed Squares. We find that when outliers (especially China) are removed, the trust-growth relationship is no longer robust. On average, the trust coefficient is half as large as in previous findings.      

Counterintuitive number effects in experimental oligopolies

Recent theoretical research on oligopolistic competition suggests that under certain conditions prices increase with the number of competing firms. However, this counterintuitive result is based on comparative-static analyses which neglect the importance of dynamic strategies in naturally-occurring markets. When firms compete repeatedly, supra-competitive prices can become sustainable but this is arguably more difficult when more firms operate in the market. This paper reports the results of laboratory experiments investigating pricing behavior in a setting in which (static) theory predicts the counterintuitive number effect. Under a random matching protocol, which retains much of the one-shot nature of the model, the data corroborates the game-theoretic prediction. Under fixed matching duopolists post substantially higher prices, whereas prices in quadropolies remain very similar. As a result, the predicted effect is no longer observed, and towards the end the reverse effect is observed.

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Electronic Supplementary Material  The online version of this article () contains supplementary material, which is available to authorized users.      

BLOCOS URBANISM: Capitalism and Modularity in the Making of Contemporary Luanda

In this article we portray and unpack the fabric of urban expansion in contemporary Luanda. In doing so, we examine interdependencies and complementarities between the organization of oil extraction off the coast of Angola, the emergence of particular modalities of modernist city planning for the expansion of its capital city, and the proliferation of cement blocks in the making of new urban forms throughout its burgeoning peripheries. By showing how urban development has unfolded through the interconnected realization of multiple kinds of systematizing blocks—namely oil blocks, city blocks and cement blocks—we analyse key material components in the production of new markets and urban spaces in the Angolan capital. By tracing forms of capitalism and modularity in the making of contemporary Luanda, we develop the concept of blocos urbanism to draw attention to modes of standardization and the production of legibility in contemporary processes of urbanization. Through this study, we aim to contribute to the conceptual apparatus for deciphering our global urban condition.     

Ponderous,Proficient or Professional? Survey Experience and Smartphone Effects in Stated Preference Research

Environmental and Resource Economics - Stated preference surveys are increasingly conducted online using internet panel samples, where a fast-growing share of respondents answer on smartphones....     

Do asylum-seekers respond to policy changes? Evidence from the Swedish–Syrian case*

Do asylum-seekers respond to policy changes in their destination country, and to what extent? We approach this question by using high-frequency data, and we focus on a sudden liberalization in Swedish policy toward Syrian asylum-seekers, which implied permanent instead of temporary residence. We show a clear and fast, yet temporary, increase in Syrian asylum applications in Sweden after the policy change. Also, the policy caused a shift – not limited to the short term – in the share of individuals arriving without family, and consequently in the share applying for family reunification. Our study adds quasi-experimental evidence to the literature on inter-country asylum flows and migration policy.     

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Institute of Engineering and Computational Mechanics, University of Stuttgart, Stuttgart, Germany