A re-examination of the “zero is enough” hypothesis in the emergence of financial stylized facts

In recent years, a growing literature has claimed that the market microstructure is sufficient to generate the so-called stylized facts without any reference to the behaviour of market players. Indeed, qualitative stylized-facts can be generated with zero-intelligence traders (ZITs) but we stress that they are without any quantitative predictive power. In this paper we show that in most of the cases, such qualitative stylized facts hide unrealistic price motions at the intraday level and ill-calibrated return processes as well. To generate realistic price motions and return series with adequate quantitative values is out-of-reach using pure ZIT populations. To do so, one must increasingly constrain agents?? choices to a point where it is hard to claim that their behaviour is completely random. In addition we show that even with highly constrained ZIT agents, one cannot reproduce real time series from these. Except in a few cases, first order moments of ZITs never equal real data ones. We therefore claim that stylized facts produced by means of ZIT agents are useless for financial engineering.     

Weighted majoritarian rules for the location of multiple public facilities

We consider collective decision problems given by a profile of single-peaked preferences defined over the real line and a set of pure public facilities to be located on the line. In this context, Bochet and Gordon (2012) provide a large class of priority rules based on efficiency, object-population monotonicity and sovereignty. Each such rule is described by a fixed priority ordering among interest groups. We show that any priority rule which treats agents symmetrically — anonymity — respects some form of coherence across collective decision problems — reinforcement — and only depends on peak information — peak-only — is a weighted majoritarian rule. Each such rule defines priorities based on the relative size of the interest groups and specific weights attached to locations. We give an explicit account of the richness of this class of rules.     

Role and impact of the environment on entrepreneurial learning

Abstract

This article is presenting an overview of the literature devoted to entrepreneurial learning and, more specifically, those research bringing environmental elements into the study of the entrepreneurial learning process. Then, it shows how each of the four Special Issue selected research papers contribute to enhancing our knowledge of the complexity of the learning process vis-à-vis entrepreneurial processes placed in context. By doing this, it makes an attempt to explain the specific context behind each contribution as well as presenting the wider context. Finally, the article is suggesting a set of key challenges and research pathways that might be explored in the future.     

Iterated potential and robustness of equilibria

For any given set-valued solution concept, it is possible to consider iterative elimination of actions outside the solution set. This paper applies such a procedure to define the concept of iterated monotone potential maximizer (iterated MP-maximizer). It is shown that under some monotonicity conditions, an iterated MP-maximizer is robust to incomplete information [A. Kajii, S. Morris, The robustness of equilibria to incomplete information, Econometrica 65 (1997) 1283-1309] and absorbing and globally accessible under perfect foresight dynamics for a small friction [A. Matsui, K. Matsuyama, An approach to equilibrium selection, J. Econ. Theory 65 (1995) 415-434]. Several simple sufficient conditions under which a game has an iterated MP-maximizer are also provided.     

BEYOND THE STARS

It is frequent to hear in economic seminars or read in academic papers that an effect is economically significant or economically important. Yet, the economic literature is vague on what economic importance means and how it should be measured. In this paper, I show that existing measures of economic importance are flawed and misused. I derive a new metric that measures, in percentage terms, the contribution of each explanatory variable to deviations in the dependent variable, ceteris paribus. As an illustration, the method is applied to study the determinants of migration and the determinants of fertility.     

Nowcasting the French index of industrial production: A comparison from bridge and factor models

Governments and central banks need to have an accurate and timely assessment of indicators for the current month, as this is essential for providing a reliable and early analysis of the current economic situation. The index of industrial production (IIP) is probably the most important and widely analyzed monthly indicator, given the relevance of the manufacturing activity as a driver of the whole business cycle. This paper presents a series of models conceived to forecast the current French monthly IIP, based on regression models and dynamic factor models. The combination of these two approaches allows selecting economically relevant explanatory variables among a large data set. In addition, a rolling forecast study is carried out to assess the forecasting performance of the estimated models, using predictive ability and model confidence set tests. This latter allows getting several models displaying equivalent forecasting performance and therefore gives robustness to the forecasting exercise rather than to base the forecasting analysis only on one model.     

Relative concerns of rural-to-urban migrants in China

As their environment changes, migrants constitute an interesting group to study the effect of relative income on subjective well-being. This paper focuses on the huge population of rural-to-urban migrants in China. Using a novel dataset, we find that the well-being of migrants depends on several reference groups: it is negatively affected by the income of other migrants and workers of home regions; in contrast, we identify a positive, ‘signal’ effect vis-à-vis urban workers: larger urban incomes indicate higher income prospects for the migrants. These effects are particularly strong for migrants who wish to settle permanently, decline with years since migrations and change with other characteristics including work conditions and community ties.     

EXPLAINING THE SPREAD OF TEMPORARY JOBS AND ITS IMPACT ON LABOR TURNOVER

This article provides a simple model that explains the choice between permanent and temporary jobs. This model, which incorporates important features of actual employment protection legislations neglected by the economic literature so far, reproduces the main stylized facts about entries into permanent and temporary jobs observed in Continental European countries. We find that job protection has very small effects on total employment but induces large substitution of temporary jobs for permanent jobs, which significantly reduces aggregate production.