Subsampling the distribution of diverging statistics with applications to finance

In this paper we propose a subsampling estimator for the distribution of statistics diverging at either known or unknown rates when the underlying time series is strictly stationary and strong mixing. Based on our results we provide a detailed discussion of how to estimate extreme order statistics with dependent data and present two applications to assessing financial market risk. Our method performs well in estimating Value at Risk and provides a superior alternative to Hill's estimator in operationalizing Safety First portfolio selection.     

Adverse Selection and Moral Hazard in Equity Partnerships: Evidence from Hollywood's Slate Financing Agreements

We use a movie industry project‐by‐project data set to analyze the principal–agent problem in slate financing arrangements. Under this specific film financing regime, which has become a significant mode of raising capital in Hollywood over the past decade, an external investor concludes a long‐term contract with a film producer and commits to cofinance a larger number of future film projects of that particular partner. In line with our theoretical conjectures, slate cofinanced movies receive poorer quality ratings and yield considerably lower return rates. Our data suggests that a substantial part of these performance differences may be attributed to adverse project selection and producer moral hazard.     

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.     

Shrinkage estimation of semiparametric multiplicative error models

Within models for nonnegative time series, it is common to encounter deterministic components (trends, seasonalities) which can be specified in a flexible form. This work proposes the use of shrinkage type estimation for the parameters of such components. The amount of smoothing to be imposed on the estimates can be chosen using different methodologies: Cross-Validation for dependent data or the recently proposed Focused Information Criterion. We illustrate such a methodology using a semiparametric autoregressive conditional duration model that decomposes the conditional expectations of durations into their dynamic (parametric) and diurnal (flexible) components. We use a shrinkage estimator that jointly estimates the parameters of the two components and controls the smoothness of the estimated flexible component. The results show that, from the forecasting perspective, an appropriate shrinkage strategy can significantly improve on the baseline maximum likelihood estimation.     

The relevance of reputation in the nonprofit sector: the moderating effect of socio-demographic characteristics

This paper extends prior research on the reputation of nonprofit organizations (NPOs) by investigating the moderating role of socio-demographic characteristics in forming NPO reputation and reputation's effects on donating and volunteering behavior. The findings offer new insights into the role an NPO's reputation plays and its effects on key outcomes such as willingness to donate and work as a voluntary member in specific subgroups. The results show that successful reputation management is specifically important for male, older, highly educated, and affluent respondents. Communicational measures aimed at strengthening an organization's social responsibility are particularly promising regarding triggering favorable donor behavior and voluntary support. Copyright © 2014 John Wiley & Sons, Ltd.     

Unique equilibrium in rent-seeking contests with a continuum of types

It is shown that rent-seeking contests with continuous and independent type distributions possess a unique pure-strategy Nash equilibrium.     

On the role of consumer expectations in markets with network effects

We analyze the role of consumer expectations in a Hotelling model of price competition when products exhibit network effects. Expectations can be strong (stubborn), weak (price-sensitive) or partially stubborn (a mix of weak and strong). As a rule, the price-sensitivity of demand declines when expectations are more stubborn. An increase of stubbornness (i) increases (decreases) the parameter region with a unique duopoly equilibrium (multiple equilibria), (ii) reduces competition, (iii) reduces the conflict between consumer and social preferences for de facto standardization, and (iv) reduces the misalignment between consumer and social preferences for compatibility.     

Do unfair perceived own pay and top managers’ pay erode satisfaction with democracy?

Many people are relatively unsatisfied with the democratic system as it currently exists. In this empirical research note, the authors present evidence that German workers, who perceive their own pay or top managers’ pay as unfair, are on average significantly less happy with the democracy in Germany. Thus, fairness perceptions in the labour market and of income inequality seem to have spillover effects on the overall satisfaction with the democratic system.