Kyle equilibrium under random price pressure

Decisions in Economics and Finance - We study the equilibrium in the model proposed by Kyle (Econometrica 53(6):1315–1335, 1985) and extended to the continuous-time setting by Back (Rev...     

Mutual funds relationships and performance analysis

The present paper aims at exploring the equity exposure of Italian equity mutual funds as they emerge from their portfolio holdings at the date of December 31st, 2010. The technique adopted in the analysis considers the construction of a bipartite network and the detection of the overlap of portfolios held by mutual funds. The relationship among stocks due to their presence in the same portfolios is analyzed, too. Methods typical of complex networks are then applied. The comparison with several performance measures allows to discuss features of active/passive style management for institutional portfolios.     

Are Exporters More Likely to Introduce Product Innovations?

A firm’s export status may improve its ability to introduce product innovations (learning by exporting). We explore this idea using very rich firm‐level data on Italian manufacturing, which enables us to control for many confounding factors in the exporting–product innovation link (i.e. selection on observable variables). We also make an attempt to address the potential self‐selection of firms into exporting according to unobservable characteristics using an industry–province specific measure of firm distances from their most likely export markets, and of these export markets’ potentials as sources of presumably exogenous variations in export status using an instrumental variables strategy. We find that export status significantly increases the likelihood of introducing product innovations and that this effect is not fully captured by the channels commonly stressed by the theoretical literature, such as larger markets (and accordingly firm size) or higher investments in R&D. We argue that heterogeneity in foreign customers’ tastes and needs may explain our findings.     

Bayesian approach to LR assessment in case of rare type match

The likelihood ratio (LR) is largely used to evaluate the relative weight of forensic data regarding two hypotheses, and for its assessment, Bayesian methods are widespread in the forensic field. However, the Bayesian ‘recipe’ for the LR presented in most of the literature consists of plugging‐in Bayesian estimates of the involved nuisance parameters into a frequentist‐defined LR: frequentist and Bayesian methods are thus mixed, giving rise to solutions obtained by hybrid reasoning. This paper provides the derivation of a proper Bayesian approach to assess LRs for the ‘rare type match problem’, the situation in which the expert wants to evaluate a match between the DNA profile of a suspect and that of a trace from the crime scene, and this profile has never been observed before in the database of reference. LR assessment using the two most popular Bayesian models (beta‐binomial and Dirichlet‐multinomial) is discussed and compared with corresponding plug‐in versions.     

The Swiss payment for milk processed into cheese: ex post and ex ante analysis

We make use of both an ex post and an ex ante evaluation to analyze the Swiss payment for milk processed into cheese. This payment for each kilogram of raw milk processed into cheese is issued to milk producers through dairy processors. In the ex post evaluation, by applying a vector autoregressive model, we estimate the effects of reductions of the payment for prices of raw milk used to produce Emmentaler, Gruyère, and industrial cheese. Past declines in the payment have only been partially transmitted to raw milk prices. The rate of transmission is higher for milk used for the production of industrial cheese than for artisan cheeses. In the ex ante impact evaluation, we use a partial equilibrium model and develop a counterfactual scenario in which the payment is removed. The payment for milk processed into cheese is found to have effects on cheese production and exports but also has important indirect effects on other dairy products. Our findings suggest that about two‐thirds of the payment are benefiting milk producers. At the same time, the overall welfare losses resulting from the elimination of the aid are smaller than the budget allocated to this measure, suggesting a net welfare gain from elimination.     

“Misfits,” “stars,” and immigrant entrepreneurship

Prior research has shown that immigrants are more likely than natives to become entrepreneurs, and that entrepreneurs are disproportionately drawn from the extremes of the ability distribution. Using a large panel of US residents with bachelors’ degrees in scientific fields, we ask whether higher rates of entrepreneurship among immigrants can be explained by their position on the ability spectrum and establish four new facts about science-based and immigrant entrepreneurship. First, in this sample, an immigrant entrepreneurship premium exists only in science-based entrepreneurship. Second, this premium persists after controlling for ability (measured by paid employment wage residuals.) Third, a U-shaped relationship between ability and entrepreneurship exists only in non-science entrepreneurship; for science entrepreneurship, the relationship is increasing. Finally, the immigrant premium in science entrepreneurship is largest among immigrants with non-US degrees and those from non-English-speaking or culturally dissimilar countries. Stated preferences for self-employment do not explain the immigrant premium. The results suggest that immigrants may on average have higher levels of unobservable skills related to entrepreneurship.     

Market microstructure,banks’ behaviour and interbank spreads: evidence after the crisis

We present a study of the European electronic interbank market of overnight lending (e-MID) before and after the beginning of the financial crisis. The main goal of the paper is to explain the structural changes of lending/borrowing features due to the liquidity turmoil. Unlike previous contributions that focused on banks’ dependent and macro information as explanatory variables, we address the role of banks’ behaviour and market microstructure as determinants of the credit spreads. We show that all banks experienced significant variations in their liquidity costs due to the sensitivity of interbank rates to the timing and side of trades. We argue that, while larger banks did experience better funding conditions after the crisis, this was not just a consequence of the “too big to fail” perception of the market. Larger banks have been able to play more strategically when managing their liquidity by taking advantage of the changing market microstructure.

     

FROM THE LAB TO THE FIELD: A REVIEW OF TAX EXPERIMENTS

Tax experiments have been gaining momentum in recent years, although this literature dates back several decades. With new developments in methods and data availability, tax experiments have gradually moved away from lab settings and towards the field. This movement from the lab to the field has happened against the background of the ‘credibility revolution’ in applied economics, which has seen more rigorous methods applied to policy relevant questions, and of the availability to researchers of administrative data from tax returns. These developments have allowed significant advances in the experimental literature on tax compliance. This paper reviews this literature, giving particular attention to field experiments using administrative data, but putting them in the broader context of the compliance literature. A particular effort is made to take a global perspective, in a literature that is only recently seeing the emergence of evidence from Africa, Latin America and Asia.