A meta-analysis of the equity premium

The equity premium is a key parameter in asset allocation policies. There is a vigorous debate in the literature regarding the actual measurement of the equity premium, its size and the determinants of its variation. This study aims to take stock of this literature by means of a meta-analysis. We identify how the size of the equity premium depends on the way it is measured, along with its evolution over time and its variation across regions in the world. We find that the equity premium is significantly lower if measured by ex ante methods rather than ex post, in more recent periods, and for more developed countries. In addition, looking at the underlying fundamentals, we find that larger volatility in GDP growth tends to raise the equity premium while a higher nominal interest rate has a negative impact on the equity premium.     

Combining strengths of methods of party positioning to counter their weaknesses: the development of a new methodology to calibrate parties on issues and ideological dimensions

In this paper we review various methods of party positioning on issues and abstract political dimensions and describe the method that has been developed specifically for the Dutch voting advice application Kieskompas (Election Compass). Basically there are five methods for positioning political parties on political issues and on deeper-lying conflict dimensions: (a) expert surveys (b) voter surveys, (c) party elite surveys, (d) on the basis of roll-call behaviour (e) placements based on manifesto coding (either hand coded or by computer-based calibration). After reviewing the strengths and weaknesses of the various methods, we argue that combining expert placements with text-based calibration (using party manifestos) results in an improved methodology to position political parties on issues and bipolar political dimensions. This new methodology, that was developed for the Voting Advice Application Kieskompas, combines a text-based expert judgement, party-manifesto coding (including computer-based search techniques) and a self-placement by political parties. This process increases the validity and reliability of estimating party positions on political issues.     

For those about to talk we salute you: an experimental study of credible deviations and ACDC

We test the Average Credible Deviation Criterion (ACDC), a stability measure and refinement for cheap talk equilibria introduced in De Groot Ruiz et al. (Equilibrium selection in cheap talk games: ACDC rocks when other criteria remain silent, Working paper, University of Amsterdam 2012a). ACDC has been shown to be predictive under general conditions and to organize data well in previous experiments meant to test other concepts. In a new experimental setting, we provide the first systematic test of whether and to which degree credible deviations matter for the stability of cheap talk equilibria. Our principal experimental result is that in a setting where existing concepts are silent, credible deviations matter and matter gradually, as predicted by ACDC.     

Welfare effects of energy subsidy reform in developing countries

We analyze the potential welfare effect of energy subsidy reforms. The income distributions of eleven developing countries from different geographical regions are simulated using the assumption that income is lognormally distributed. We use the concept of the compensating variation to measure how much compensation is required to compensate consumers for a price increase in formerly subsidized goods. The behavior of consumers is modeled by a standard Cobb–Douglas and a quasilinear utility function. In the Cobb–Douglas case, a fixed fraction of income is spent on the subsidized good, which does not change after a price increase. With quasilinear preferences, the optimal amount of the subsidized good does not vary with income, but does change as prices change. We show theoretically and empirically that the required compensating variation can be set below the saved expenditures on subsidies, so a budget neutral reform can have a positive effect on social welfare.     

Gravity models of trade-based money laundering

Several attempts have been made in the literature to measure money laundering. However, the adequacy of these models is difficult to assess, as money laundering takes place secretly and, hence, goes unobserved. An exception is Trade-Based Money Laundering (TBML), a special form of trade abuse that has been discovered only recently. TBML refers to criminal proceeds that are transferred around the world using fake invoices that under- or overvalue imports and exports. This article is a first test on the well-known prototype models proposed by Walker and Unger to predict illicit money laundering flows and to apply traditional gravity models familiar in international trade theory. To do so, we use a dataset of Zdanowicz of TBML flows from the US to 199 countries. Our test rejects the specifications of the Walker and Unger prototype models, at least for TBML. The traditional gravity model that we present can explain TBML flows worldwide in a plausible manner. An important determinant is trade in which TBML is hidden. Furthermore, our results suggest that criminals use TBML in order to escape the stricter anti-money laundering regulations of financial markets.     

Do commercial real estate prices have predictive content for GDP?

Using a uniquely compiled database concerning rental prices of commercial real estates, which are property of the largest broker in the Netherlands, we examine whether these prices have predictive value for quarterly economic growth. In contrast to related studies, we document that the mean price contains no relevant information, whereas other properties of the price distributions have. We show that these distributions can be described by mixtures of two distributions, reflecting low-end and high-end price segments. Our main findings are that higher economic growth is predictable from more new buildings being rented, more variation in the price levels and a larger size of the low-price segment, while lower economic growth emerges when the differences in prices between high-end and low-end segments increase and when the average price level in the low-price segment increases.     

TEACHER CHARACTERISTICS AND THEIR EFFECTS ON STUDENT TEST SCORES: A SYSTEMATIC REVIEW

It has become widely accepted that teachers are important in facilitating student learning. Hundreds of empirical studies have tried to explain differences in student performance by evaluating the impact of particular teacher characteristics. Yet, this topic has not been the subject of a systematic review for more than 10 years, even though most of the empirical evidence has emerged over the past decade. This study provides an up‐to‐date review, drawing on empirical findings from several countries and distinguishing between acquired and sociodemographic teacher characteristics. This review confirms the existing consensus that subject‐related degrees and knowledge, and not general teacher certifications, are positively related to student performance and particularly so for Master's degrees in math and science. A new insight is that recent findings point out that teacher experience continues to contribute to student test scores throughout a teacher's career, instead of merely the first few years. An important future research avenue would be to examine which mechanisms can explain these teacher characteristic effects.     

The effect of interruptions and part-time work on women's wage rate: A test of the variable-intensity model

Summary In this article we investigated the effects of interruptions of labour market participation and part-time work on women's gross wage rates, using the variable-intensity model. Women who interrupt their labour market careers suffer not only from depreciation, which effects all workers. Every year they do not participate they also miss experience. Part-time work mitigates the depreciation of human capital compared to a situation of non-participation. The expectation that part-time work — as opposed to full-time work — leads in the long run to a lower wage rate is confirmed.