GENERAL INTENSITY SHAPES IN OPTIMAL LIQUIDATION

The classical literature on optimal liquidation, rooted in Almgren–Chriss models, tackles the optimal liquidation problem using a trade‐off between market impact and price risk. It answers the general question of optimal scheduling but the very question of the actual way to proceed with liquidation is rarely dealt with. Our model, which incorporates both price risk and nonexecution risk, is an attempt to tackle this question using limit orders. The very general framework we propose to model liquidation with limit orders generalizes existing ones in two ways. We consider a risk‐averse agent, whereas the model of Bayraktar and Ludkovski only tackles the case of a risk‐neutral one. We consider very general functional forms for the execution process intensity, whereas Guéant, Lehalle and Fernandez‐Tapia are restricted to exponential intensity. Eventually, we link the execution cost function of Almgren–Chriss models to the intensity function in our model, providing then a way to see Almgren–Chriss models as a limit of ours.     

Technical trading revisited: False discoveries,persistence tests,and transaction costs

We revisit the apparent historical success of technical trading rules on daily prices of the Dow Jones Industrial Average index from 1897 to 2011, and we use the false discovery rate (FDR) as a new approach to data snooping. The advantage of the FDR over existing methods is that it selects more outperforming rules, which allows diversifying against model uncertainty. Persistence tests show that, even with the more powerful FDR technique, an investor would never have been able to select ex ante the future best-performing rules. Moreover, even in-sample, the performance is completely offset by the introduction of low transaction costs. Overall, our results seriously call into question the economic value of technical trading rules that has been reported for early periods.     

Understanding Landscape Stewardship – Lessons to be Learned from Public Service Economics

We argue that public service economics provides a new perspective on landscape stewardship by explaining it as human‐to‐human transfer of partial property rights. These mutually linked exchanges involve rights to use, to access, or to control and allocate land, labour, skills or information. From the perspective of public service economics, we identify the actors involved in landscape stewardship and distinguish entrepreneurial strategies for service provision based on resource orientation, user orientation or competiveness orientation. The difficulties in evaluating the quality of services in general and landscape stewardship in particular result in substantial uncertainty. Three types of contracts that cope differently with this uncertainty can be distinguished: contracts focusing on the technical process, on the intended outcome or on the choice of suppliers based on trust and features of their performance potential. We conclude that a service economics perspective can add to the understanding of landscape stewardship. Due to the fact that ‘public service’ is already a well‐known and broadly acknowledged concept in society, public service economics could possibly provide more rapid progress towards a better co‐ordination of supply and demand for landscape qualities than other more novel concepts.     

The New Deal in Services - A Challenge for Europe

This article is based upon surveys on services and their development carried out by 15 European research centres, within the context of the FASTprogramme of the European Communities' Committee. After an analysis of why the question of services is the object of growing attention on the part of governments, some of the aspects analysed by FAST, such as the new technology/service interaction and the change in the productive system are considered, and the implications of these evolutions for the community policies are discussed.     

When does a developing country use new technologies?

We develop a model of optimal pattern of economic development that is first rooted in physical capital accumulation and then in technical progress. We study an economy where capital accumulation and innovative activity take place within a two sector model. The first sector produces a consumption good using physical capital and non skilled labor. Technological progress in the consumption sector is driven by the research activity that takes place in the second sector. Research activity which produces new technologies requires technological capital and skilled labor. New technologies induce an endogenous increase of the total factor productivity of the consumption sector. Physical and technological capital are not substitutable while skilled and non skilled labor may be substitutable. We show that under conditions about the adoption process of new technologies, the optimal strategy for a developing country consists in accumulating physical capital first; postponing the importation of technological capital to the second stage of development. This result is due to a threshold effect from which new technologies begin to have an impact on the productivity of the consumption sector. However, we show that once a certain level of wealth is reached, it becomes optimal for the economy to import technological capital to produce new technologies. The authors would like to thank the participants to the seminar of GREDEG, especially Richard Arena, Flora Bellone, Jean-Luc Gaffard and Jacques Ravix, and also the participants to a seminar at European University Institute. We are also grateful to the referees for their very thoughtful remarks and criticisms. Cuong Le Van started writing this joint paper with Olivier Bruno and Benoit Masquin in 2005, in GREDEG.     

Not just babble: Opening the black box of communication in a voluntary contribution experiment

We let subjects in a voluntary contribution experiment make non-binding numerical announcements about their “possible” contributions and, in some treatments, send written promises to contribute specific amounts. We find that announcements were responded to both by others’ announcements and by real play, for example announcements led to costly punishment when found to be misleading. We also find that adding pre-play announcements to treatments with punishment can increase efficiency by letting cost-free warnings substitute for costly punishment. The threat of punishing false announcements and promises helps reduce false signals, but only when promise statements can be sent is the effect sufficient for achieving greater efficiency.