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Publication Metadata only A bootstrap method for identifying and evaluating a structural vector autoregression(Wiley-Blackwell, 2008) Hoover, Kevin D.; Perez, Stephen J.; Department of Economics; Department of Economics; Demiralp, Selva; Faculty Member; College of Administrative Sciences and Economics; 42533Graph-theoretic methods of causal search based on the ideas of Pearl (2000), Spirtes et al. (2000), and others have been applied by a number of researchers to economic data, particularly by Swanson and Granger (1997) to the problem of finding a data-based contemporaneous causal order for the structural vector autoregression, rather than, as is typically done, assuming a weakly justified Choleski order. Demiralp and Hoover (2003) provided Monte Carlo evidence that such methods were effective, provided that signal strengths were sufficiently high. Unfortunately, in applications to actual data, such Monte Carlo simulations are of limited value, as the causal structure of the true data-generating process is necessarily unknown. In this paper, we present a bootstrap procedure that can be applied to actual data (i.e. without knowledge of the true causal structure). We show with an applied example and a simulation study that the procedure is an effective tool for assessing our confidence in causal orders identified by graph-theoretic search algorithms.Publication Metadata only A dynamic asset pricing model with time-varying factor and idiosyncratic risk(Oxford University Press (OUP), 2009) Department of Economics; Department of Economics; Glabadanidis, Paskalis; Faculty Member; College of Administrative Sciences and Economics; N/AThis paper uses a multivariate GaRCH model to account for time variation in factor loadings and idiosyncratic risk in improving the performance of the CaPM and the three-factor Fama-French model. I show how to incorporate time variation in betas and the second moments of the residuals in a very general way. Both the static and conditional CaPM substantially outperform the three-factor model in pricing industry portfolios. Using a dynamic CaPM model results in a 30% reduction in the average absolute pricing error of size/book-to-market portfolios. ad hoc analysis shows that the market beta of a value-minus-growth portfolio decreases whenever the default premium increases as well as during economic recessions.Publication Metadata only A general equilibrium analysis of state and private colleges and access to higher education in the US(Elsevier, 2017) Epple, Dennis; Romano, Richard; Sieg, Holger; Department of Economics; Department of Economics; Sarpça, Sinan; Faculty Member; College of Administrative Sciences and Economics; 52406We develop a general equilibrium model of the market for undergraduate higher education that captures the coexistence of public and private colleges, the large degree of quality differentiation among them, and the tuition and admission policies that emerge from their competition for students. A quantitative version of the model matches well estimates of enrollment elasticities, variation in need-based and merit-based institutional aid with, respectively, student income and ability, and aggregate characteristics of U.S. higher education including college attendance in public and private schools, tuition levels, and the provision of federal aid. Predictions about the provision of federal aid and the distribution of students across colleges by ability and income match the empirical counterparts well. We use the model to examine the consequences of federal and state aid policies. A one-third increase in the maximum federal aid increases college attendance by 6% of the initial college population, most of the increase being in state colleges and mainly of poor students. Elite private colleges reduce institutional aid and use the net funding gain to spend more on educational inputs and to substitute some highly able poor students for less able rich students. Reductions in federal or state aid result in substantially reduced attendance mainly by poor students. Reductions of support to state colleges induce private colleges to increase enrollments modestly and improve in quality as demand shifts toward them.Publication Metadata only A model-independent measure of aggregate idiosyncratic risk(Elsevier, 2008) Cakici, Nusret; Levy, Haim; Department of Economics; Department of Economics; Bali, Turan; Other; College of Administrative Sciences and Economics; N/AThis paper introduces a model-independent measure of aggregate idiosyncratic risk, which does not require estimation of market betas or correlations and is based on the concept of gain from portfolio diversification. The statistical results and graphical analyses provide strong evidence that there are significant level and trend differences between the average idiosyncratic volatility measures of Campbell et al. [Campbell, J.Y., Lettau, M., Malkiel, B.G., and Xu, Y., 2001, Have individual stocks become more volatile? An empirical exploration of idiosyncratic risk, journal of Finance 56, 1-43.] and the new methodology. Although both approaches indicate a noticeable increase in the firm-level idiosyncratic risk, the volatility measure of CLMX is greater and has a stronger upward trend than the new idiosyncratic volatility measure. For both measures of idiosyncratic risk, the upward trend is found to be stronger for smaller. lower-priced, and younger firms. The analytical and empirical results show that the significant upward trend in the differences of the two idiosyncratic volatility measures is related to the increase in the cross-sectional dispersion of the volatility of individual stocks.Publication Metadata only A theory of collateral for the lender of last resort(Oxford Univ Press, 2021) Choi, Dong Beom; Santos, Joao A. C.; N/A; Yorulmazer, Tanju; Faculty Member; Graduate School of Social Sciences and Humanities; 328768We consider a macroprudential approach to analyze the optimal lending policy for the central bank, focusing on spillover effects that policy exerts on money markets. Lending against high-quality collateral protects central banks against losses, but can adversely affect liquidity creation in markets since high-quality collateral gets locked up with the central bank rather than circulating in markets. Lending against low-quality collateral creates counterparty risk but can improve liquidity in markets. We illustrate the optimal policy incorporating these trade-offs. Contrary to what is generally accepted, lending against high-quality collateral can have negative effects, whereas it may be optimal to lend against low-quality collateral.Publication Metadata only A two-sided reputation result with long-run players(Academic Press Inc Elsevier Science, 2013) Ekmekçi, Mehmet; Department of Economics; Department of Economics; Atakan, Alp Enver; Faculty Member; College of Administrative Sciences and Economics; 39383We establish reputation results, under two sided incomplete information, for a class of repeated games. We consider a repeated game that satisfies the assumptions of either Atakan and Ekmekci (2012) [3] or Cripps et al. (2005) [6] and we assume that both players are Stackelberg types with positive probability. If the stage game is not a common interest game, then equilibrium play converges to the unique equilibrium of a continuous time war of attrition as the stage game is repeated arbitrarily frequently. Alternatively, if the stage game is a common-interest game, then the players' equilibrium payoffs converge to their highest payoffs as the stage game is repeated arbitrarily frequently. (C) 2012 Elsevier Inc. All rights reserved.Publication Metadata only Adaptive stochastic search(Elsevier, 2019) Aguiar, Victor H.; Department of Economics; Department of Economics; Kimya, Mert; Faculty Member; College of Administrative Sciences and Economics; N/AWe characterize Simon's (1955) search and satisficing model with an adaptive threshold and random search (SM-AT). The decision maker (DM) consistent with the SM-AT is endowed with a utility function, a random search distribution, and a deterministic but menu-dependent threshold. On any given trial, the DM searches the menu and stops whenever she finds an item with a utility level that is above the threshold. This simple choice procedure accommodates the well-known compromise and attraction effects. The SM-AT is more general than the random utility model and allows for systematic departures from regularity. Its characterization lets us differentiate adaptive satisficing behavior from random preference maximization in a (limited) standard stochastic choice data set.Publication Metadata only Aggregate earnings, firm-level earnings, and expected stock returns(Cambridge Univ Press, 2008) Tehranian, Hassan; Demirtaş Özgür; Department of Economics; Department of Economics; Bali, Turan; Other; College of Administrative Sciences and Economics; N/AThis paper provides an analysis of the predictability of stock returns using market-, industry-, and firm-level earnings. Contrary to Lamont (1998), we find that neither dividend payout ratio nor the level of aggregate earnings can forecast the excess market return. We show that these variables do not have robust predictive power across different stock portfolios and sample periods. In contrast to the aggregate-level findings, earnings yield has significant explanatory power for the time-series and cross-sectional variation in firm-level stock returns and the 48 industry portfolio returns. The mean reversion of stock prices as well as the earnings' correlation with expected stock returns are responsible for the forecasting power of earnings yield. These results are robust after controlling for book-to-market, size, price momentum, and post-earnings announcement drift. At the aggregate level, the information content of firm-level earnings about future cash flows is diversified away and higher aggregate earnings do not forecast higher returns.Publication Metadata only Aggregate investor preferences and beliefs: a comment(Elsevier Science Bv, 2013) Kopa, Milos; N/A; Post, Gerrit Tjeerd; Other; Graduate School of Business; N/AA recent study in this journal presents encouraging results of a daunting simulation analysis of the statistical properties of a centered bootstrap approach to stochastic dominance efficiency analysis. However, by relying on the first-order optimality condition in a situation where multiple optima may occur, the empirical analysis draws the questionable conclusion that some of the toughest data sets in empirical asset pricing can be rationalized by the representative investor maximizing an S-shaped utility function, consistent with the so-called Prospect Stochastic Dominance criterion. Further research could be directed to developing global optimization algorithms and consistent re-sampling methods for statistical inference for general risky choice problems.Publication Metadata only Agricultural transformation and the rural labor market in Turkey(Nova Science Publishers, Inc., 2011) İlkkaracan, Ipek; Department of Economics; Department of Economics; Tunalı, Fehmi İnsan; Faculty Member; College of Administrative Sciences and Economics; 105635After five decades of transformation, the share taken by agriculture in total employment in Turkey had decreased from 85 percent in 1950 to 36 percent in 2000. Despite significant technological progress, total agricultural employment remained in the 8-9 million range during much of this period. The pace of transformation hastened upon implementation of the Agricultural Reform Implementation Project (ARIP) in 2001. This process placed some two million additional inhabitants in the "surplus labor" category as the share of agricultural employment fell to under 25 percent by the end of 2008. We rely on various data sources to trace the contours of this transformation and examine its manifestations in the rural labor market. Since the transformation burdens the urban labor market with the task of absorbing the surplus labor, we also review the changes that have taken place in urban areas to gauge the prospects. We tease out the demographic manifestations of the transformation by breaking the aggregates down by gender, age, and education. We find that the agricultural labor force is ageing at unprecedented rates as the young and women opt for nonparticipation. Women, who typically contribute to the small family farm as unpaid family labor, face the biggest challenges as the distinctions between the rural economy and the urban economy become blurred. Although there are signs that the rural economy took a more diverse form in the post-ARIP period, rural labor markets do not appear to hold much promise for the working-age population.