Anomalies in finance: What are they and what are they good for?

In the natural sciences, anomalies contribute significantly to the development of new and ultimately more successful theories. The role of anomalies in financial economics, however, has been quite different. Although at the beginning, the word was used to show deviations from the Efficient Markets Hypothesis (EMH)/Capital Asset Pricing Model (CAPM) paradigm, lately, it has been applied to a new literature that is also more accurately called Behavioral Finance (BF). This paper argues that this misuse and misapplication of the word anomaly is not a simple coincidence. It is rather a sophisticated and accordant effort to imply that although there are some unresolved deviations from the norm, the reigning paradigm is irreplaceable, and its validity needs no empirical proof. In fact, an alternative paradigm such as BF is not only insignificant but also unnecessary and even impossible.     

The life and death of the Australian permanent building societies

Throughout the nineteenth and twentieth centuries permanent building societies have been important providers of housing finance in Australia. Despite their long history Australian building societies have been disappearing at a steady rate since the early 1980s as they have converted into banks or become involved in mergers. The purpose of this paper is to give a background account of the history of Australian building societies and put forward explanations for their past popularity and more recent disappearance from Australian housing finance markets.     

金融创新支持现代农业发展中存在的问题及对策

近几年来,延边州金融机构不断进行农村金融服务方式和产品创新尝试,取得了一定成效。但仍存在信贷信贷资金外流严重、农村金融创新还受到较多因素制约,亟待改进。     

Existence of financial equilibria with restricted participation

We consider a two-date model of a financial exchange economy with finitely many agents having nonordered preferences and portfolio constraints. There is a market for physical commodities at any state today or tomorrow and financial transfers across time and across states are allowed by means of finitely many nominal assets or numéraire assets. We prove a general existence result of equilibria for such a financial exchange economy in which portfolios are defined by linear constraints, extending the framework of linear equality constraints by Balasko et al. (1990), and the existence results in the unconstrained case by Cass (1984, 2006), Werner (1985), Duffie (1987), and Geanakoplos and Polemarchakis (1986). Our main result is a consequence of an auxiliary result, also of interest for itself, in which agents’ portfolio constraints are defined by general closed convex sets and the financial structure is assumed to satisfy a “nonredundancy-type” assumption, weaker than the ones in Radner (1972) and Siconolfi (1989).     

Regulating an externality-generating public utility: A multi-dimensional screening approach

In this paper, I present a monopoly screening model in which a firm holds private information on fixed abatement costs. Because of the nature of the optimal contracts, bunching is never optimal even with ‘n’ distinct types. A characterization of full and limited information solutions is offered and it is shown that the design standards alone determine the value of an information rent. The variable charge is completely free of any marginal information costs. This allows the variable charge to track marginal damages and thereby ensures that marginal social costs are covered. A fixed charge implements the optimal solution.