Effort and Performance: What Distinguishes Interacting and Noninteracting Groups from Individuals?

We study how group membership affects behavior both when group members can and cannot interact with each other. Our goal is to isolate the contrasting forces that spring from group membership: a free‐riding incentive leading to reduced effort and a sense of social responsibility that increases effort. In an environment with varying task difficulty and individual decision making as the benchmark, we show that the free‐riding effect is stronger. Group members significantly reduce their effort in situations where they share the outcome but are unable to communicate. When group members share outcomes and can interact, they outperform groups without communication and individuals. We show that these groups do as well as the best constituent member would have done on his or her own.     

DECIDING WHEN TO DECIDE: COLLECTIVE DELIBERATION AND OBSTRUCTION

We study the impact of deliberation rules on collective learning and decision making in committees. In contrast to much of the existing literature, this article makes a distinction between the final votes over policy proposals and the cloture votes that bring them about. We show how deliberation rules can cause Pareto-inefficient outcomes and failures to bring good proposals to a final vote, and how they affect the distribution of power among committee members in the deliberative process. We further show that deliberation rules are dynamically stable, even when they generate Pareto-inefficient outcomes.     

Bank ownership and cost efficiency: New empirical evidence from Russia

This paper investigates the cost efficiency of Russian banks with regard to their heterogeneity in terms of ownership form, capitalization and asset structure. Using bank-level quarterly data over the period 2005–2013, we perform stochastic frontier analysis (SFA) and compute cost efficiency scores at the bank and bank group levels. We deduct from gross costs the negative revaluations of foreign currency items generated by official exchange rate dynamics rather than by managerial decisions. The results indicate that the core state banks, as distinct from other state-controlled banks, were nearly as efficient as private domestic banks during and after the crisis of 2008–2009. Foreign banks appear to be the least efficient market participants in terms of costs, which might reflect their lower (and decreasing over time) penetration of the Russian banking system. We further document that the group ranking by cost efficiency is not permanent over time and depends on the observed differences in bank capitalization and asset structure. We find that foreign banks gain cost efficiency when they lend more to the economy. Core state banks, conversely, lead in terms of cost efficiency when they lend less to the economy, which can result from political interference in their lending decisions in favor of unprofitable projects Private domestic banks that maintain a lower capitalization significantly outperform foreign banks and do not differ from the core state banks in this respect.     

12. Transculture: A Broad Way Between Globalism and Multiculturalism

This paper develops a concept of transculture as a model of cultural development that differs from both leveling globalism and isolating pluralism. While culture frees humans from the material dependencies of nature, it also creates new, symbolic dependencies—on customs, traditions, conventions, which a person receives as a member of a certain group and ethnos. Among the many freedoms proclaimed as rights of the individual, there emerges yet another freedom—from one's own culture, in which one was born and educated. Transculture is viewed as the next level of liberation, this time from the "prison house of language," from unconscious predispositions and prejudices of the "native," naturalized cultures. The case of the Japanese poet Araki Yasusada (1903–1972), a survivor of Hiroshima, demonstrates how transcultural creativity, though cast in the form of a literary hoax, can produce an internationally recognized achievement. Transculturalism is especially needed in world politics, where the factor of fixed cultural identity based on race, ethnos, religion, or ideological commitments turned out to be a source of conflict and violence. This paper argues that the categories of opposition and identity do not preclude the significance of the third category, which is difference. The differences complement each other and create a new interpersonal transcultural community to which we belong, not because we are similar but because we are different. The transcultural perspective opens a possibility for globalization not as homogenization but, rather, as further differentiation of cultures and their "dissemination" into transcultural individuals, liberating themselves from their dependence from their native cultures. The global society can be viewed as the space of diversity of free individuals rather than that of fixed groups and cultures. It is an alternative to the clash of civilizations and a hope for lasting peace.     

Leverage constraints and asset prices: Insights from mutual fund risk taking

Prior theory suggests that time variation in the degree to which leverage constraints bind affects the pricing kernel. We propose a measure for this leverage constraint tightness by inverting the argument that constrained investors tilt their portfolios to riskier assets. We show that the average market beta of actively managed mutual funds—intermediaries facing leverage restrictions—captures their desire for leverage and thus the tightness of constraints. Consistent with theory, it strongly predicts returns of the betting-against-beta portfolio, and is a priced risk factor in the cross-section of mutual funds and stocks. Funds with low exposure to the factor outperform high-exposure funds by 5% annually, and for stocks this difference reaches 7%. Our results show that the tightness of leverage constraints has important implications for asset prices.     

Learning cycles in Bertrand competition with differentiated commodities and competing learning rules

This paper stresses the importance of heterogeneity in learning. We consider a Bertrand oligopoly with firms using either least squares learning or gradient learning for determining the price. We demonstrate that convergence properties of the rules are strongly affected by heterogeneity. In particular, gradient learning may become unstable as the number of gradient learners increases. Endogenous choice between the learning rules may induce cyclical switching. Stable gradient learning gives higher average profit than least squares learning, making firms switch to gradient learning. This can destabilize gradient learning which, because of decreasing profits, makes firms switch back to least squares learning.     

No-arbitrage macroeconomic determinants of the yield curve

No-arbitrage macro-finance models use variance decompositions to gauge the extent of association between the macro variables and yields. We show that results generated by this approach are sensitive to the order of variables in the recursive identification scheme. In a four-factor model, one may obtain 18 different sets of answers out of 24 possible. We propose an alternative measure that is based on levels of macro variables as opposed to shocks. We account for the correlation between the macro and latent factors via projection of the latter onto the former. As a result, the association between macro variables and yields can be computed uniquely via an R²$R^2$. Macro variables explain 80% of the variation in the short rate and 50% of the slope, and 54% to 68% of the term premia.     

Excess Cash and Stock Returns

I document a positive relationship between corporate excess cash holdings and future stock returns. The difference in returns of portfolios of high and low excess cash firms amounts to 5% annually or 6% after standard three-factor risk adjustment. Firms with more excess cash have higher market betas and earn lower returns during market downturns. High excess cash companies invest considerably more in the future than do their low cash peers, but do not experience stronger future profitability. On the whole, this evidence is consistent with the notion that excess cash holdings proxy for risky growth options.