Two-stage non Gaussian QML estimation of GARCH models and testing the efficiency of the Gaussian QMLE

In generalized autoregressive conditional heteroskedastic (GARCH) models, the standard identifiability assumption that the variance of the iid process is equal to 1 can be replaced by an alternative moment assumption. We show that, for estimating the original specification based on the standard identifiability assumption, efficiency gains can be expected from using a quasi-maximum likelihood (QML) estimator based on a non Gaussian density and a reparameterization based on an alternative identifiability assumption. A test allowing to determine whether a reparameterization is needed, that is, whether the more efficient QMLE is obtained with a non Gaussian density, is proposed.     

A note on introducing a "zero‐line" of welfare as an escape route from Arrow's theorem

Since Sen's insightful analysis of Arrow's Impossibility Theorem, Arrow's theorem is often interpreted as a consequence of the exclusion of interpersonal information from Arrow's framework. Interpersonal comparability of either welfare levels or welfare units is known to be sufficient for circumventing Arrow's impossibility result. But it is less well known whether one of these types of comparability is also necessary or whether Arrow's conditions can already be satisfied in much narrower informational frameworks. This note explores such a framework: the assumption of (ONC + 0), ordinal measurability of welfare with the additional measurability of a "zero‐line", is shown to point towards new, albeit limited, escape routes from Arrow's theorem. Some existence and classification results are established, using the condition that social orderings be transitive as well as the condition that social orderings be quasi‐transitive.     

Expiration day effects of stock index derivatives in Germany

There is a significant increase in trading volume on quarterly futures expiration days in Germany. Delays in the opening for the majority of index stocks indicate that a large part of this extraordinary volume is indeed traded right at the opening of the market. an increase in trading activity is also observed over the 10-minute settlement period for index options. Volatility remains unchanged around the expiration of a futures contract. an increase is found for the 10-minute settlement period of DAX options. Return reversals as the measure for the economic costs of contract expirations are significantly higher when a futures contract expires at the open. When an option expires at the close no clear pattern for reversals can be found.     

Notes and Communications

Note

Notes and Communications     

The Relevance of the Group for the Evolution of Social Norms and Values

Social group selection is explored as a scheme for the evolution of institutions giving rise to coordination and cooperation. Its crucial characteristic is the formation of psychic ties between group members which further the compliance with institutions by causing individuals to systematically underrate both the benefits of rule-breaking and the costs of rule-enforcement. With regard to the relationship between groups, these ties allow for the evolution of cooperation by enhancing selective forces acting between groups over those acting within. The resulting set of institutions represents a spontaneous order since neither perfect knowledge nor goodwill of any actor are required.