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- Kiss, Tamás
(author)
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Predictability in Equity Markets: Estimation and Inference
- 2019
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Doctoral thesis (other academic/artistic)abstract
- The thesis consists of three chapters dealing with predictability in equity markets. The first chapter analyses predictive regressions in a predictive system framework, where the predictor is an imperfect proxy for the expected returns. I show that when there are differences between the dynamic structure of the expected return and the predictor, the predictive regression uses predictive information inefficiently. As a solution, I propose a persistence adjustment for the predictive regression. The resulting estimator is a two-stage method, where the expected return and predictor processes are modelled separately, allowing for each to have distinct dynamic properties. Simulations, as well as empirical results, show that the method leads to both better in-sample fit and real-time forecasting performance. In the second chapter we show that the dividend-growth based test of return predictability, proposed by Cochrane [2008, Review of Financial Studies 21, 1533-1575], is similar to a likelihood-based test of the standard return-predictability model, treating the autoregressive parameter of the dividend-price ratio as known. In comparison to standard OLS-based inference, both tests achieve power gains from a strong use of the exact value postulated for the autoregressive parameter. When compared to the likelihood-based test, there are no power advantages for the dividend-growth based test. In common implementations, with the autoregressive parameter set equal to the corresponding OLS estimate, Cochrane's test also suffers from severe size distortions. The third chapter provides an explanation for why predictive regressions may have lost power in recent samples. In a noisy predictor framework, where expected returns are stationary and a non-stationary component masks the information in the regressor, I show that the predictive power of the regression vanishes as the sample size increases. To address vanishing predictability, I propose an estimation method, subsample fixed effects. It involves estimating the predictive relationship locally in subsamples and then pooling the estimates via a fixed effects estimator. Empirically, important predictors of the stock returns exhibit vanishing predictability but applying subsample fixed effects indicates that the underlying predictive relationship between these predictors and returns remains significant.
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- Borcan, Oana, 1987
(author)
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Economic Determinants and Consequences of Political Institutions
- 2015
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Doctoral thesis (other academic/artistic)abstract
- This thesis is comprised of four empirical essays on the economic determinants and consequences of political institutions. It opens with a broad perspective on the link between the state throughout history and the past and current economic performance of nations. The rest of the chapters focus on a particular form of institutional failure - "endemic corruption" - with illustrations of its harmful impact on key development areas: human capital formation and democracy. More specifically, chapters two and three identify causal links between public sector wages, monitoring and incentives and corruption in education. The final chapter examines the clientelistic structure of electoral politics showing that local politicians in can influence national elections by vote buying and electoral fraud.
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- Kurz, Verena, 1986
(author)
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Essays on behavioral economics: Nudges, food consumption and procedural fairness
- 2017
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Doctoral thesis (other academic/artistic)abstract
- Decreasing meat consumption holds significant potential for the reduction of human-induced greenhouse gas emissions and the mitigation of climate change. Fostering behavioral change to reduce climate emissions related to food consumption is challenging and requires new strategies based on an understanding of human decision-making. The first two chapters of this thesis are devoted to studying the potential of nudging interventions to reduce meat consumption in different contexts. The third chapter explores the role procedural fairness plays for solving a coordination problem. We study how an informal rule in the form of recommendations affects efficiency, and how the results vary with changes in the fairness of the recommendations. This thesis highlights the importance of contextual factors for human decision making and its implications for policy.
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- Nguyen, Van Diem
(author)
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Essays on Takeovers and Executive Compensation
- 2015
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Doctoral thesis (other academic/artistic)abstract
- Paper 1. The non-US premium discount in global takeovers This paper examines takeover premia around the world and documents a significant discount in bid offers to target firms outside the US. Controlling for deal-level premium determinants, the non-US discount approximates seven percent of the target pre-deal stock price. I investigate whether the discount can be explained by country variation in legal investor protection, economic strength, financial market development and potential competition in the takeover market. I find that the size of the economy in the target country is the most robust premium determinant among these country characteristics. 40 percent of the non-US premium discount can be attributed to the economy size. Even after controlling for a set of country characteristics, target firms in the US still earn more than those in other countries by at least four percent of the target traded price before the deal announcement. For the average firm in the sample, a four percent discount equals 31 million dollars. Paper 2. Distribution of takeover gains: A comparison between the US and other major markets The takeover literature lacks comparative studies of the US versus non-US markets, though certain facts present the US as an outlier. Non-US evidence is usually on individual markets, and at most on a group of European countries. This paper provides a unified analysis of takeover gain and gain division in seven major markets including Australia, Canada, France, Germany, Japan, the UK and the US. I compare the US to non-US markets, controlling for common gain determinants at both the deal and the country levels. I examine both the combined gain generated by the takeover and how this gain is split between the acquired and the acquiring firms. Consistent with the literature, I find that US takeovers, on average, create value. However, value creation is not significantly larger in the US than in other markets. The difference between US and non-US takeovers lies in the distribution of takeover gains. US targets earn systematically more than non-US targets in both absolute and relative terms. The finding is robust to individual country effects, common law legal origin, and differences in firm size between US and non-US targets. Paper 3. Executive compensation in foundation-controlled firms In general, a large shareholder can discipline the manager by monitoring and/or incentivizing through compensation contracts. In foundation-controlled (FC) firms, the controlling shareholder, i.e., the foundation, does not personally consume the cash flow rights, and hence has weaker incentives to monitor the manager, ceteris paribus. I find evidence of the substitution of compensation for monitoring based on a sample of 193 Swedish family firms listed on the Stockholm Stock Exchange during the period of 2001 - 2009. A family can control a firm either with or without the establishment of a foundation. In the latter case, the family would donate their shareholdings to the foundation and thus give up their personal consumption of the resulting cash flow rights. Compared to non-foundation family firms, foundation family firms reward their CEOs more. While base salary and bonus are equally competitive, foundation family firms strengthen the performance pay schemes by increasing the proportion of variable compensation and pay sensitivity to performance. The results are robust to various effects including managerial ownership, family CEO, supplementary monitoring by other large shareholders, and self-selection of better CEOs into FC firms.
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- Ruhinduka, Remidius Denis
(author)
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Essays on Field Experiments and Impact Evaluation
- 2015
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Doctoral thesis (other academic/artistic)abstract
- Paper 1: Improving Welfare Through Climate-Friendly Agriculture: The Case of the System of Rice Intensification We use rich survey data to investigate the economic impact of a climate-friendly rice farming method known as the system of rice intensification (SRI) on the welfare of rain-dependent small-holder farmers in Tanzania. SRI reduces water consumption by half, which makes it a promising farming system in the adaptation to climate change in moisture constrained areas, and it does not require flooding of rice fields, resulting in reduced methane emissions. Endogenous switching regression results suggest that SRI indeed improves yield in rain-dependent areas, but its profitability hinges on the actual market price farmers face. SRI becomes profitable only when the rice variety sells at the same market price as that of traditional varieties, but results in loss when SRI rice sells at a lower price. We argue that the effort of promoting adoption of such types of climate-friendly agricultural practices requires complementary institutional reform and support in order to ensure their profitability to small-holder farmers. Paper 2: Selling now or later, to process or not? The role of risk and time preferences in rice farmers’ decisions In this study, we carry out experiments to measure risk, ambiguity, and time preferences of Tanzanian rice farmers and use the results to explain actual field behavior. In particular, we look into previously unexplored post-harvest decisions of farmers, i.e., whether to sell paddy (unprocessed) or processed rice and whether to sell the harvest immediately or store it for future sale. Processing and storing rice implies higher expected revenues but processing costs, price uncertainties, and a delay in income. Our results show that estimated risk and time preferences predict farmers’ field behavior. Impatient farmers are less likely to store paddy, and risk-averse farmers are less likely both to process and to store paddy for future sales. These results imply that there is scope for improving rice farmers’ welfare substantially by addressing the uncertainties and problems associated with rice processing and storage. Paper 3: Credit, LPG Stove Adoption and Charcoal Consumption: Evidence from a Randomised Controlled Trial The high start-up cost of modern cooking appliances has been shown to be the key factor that hinders transition of households from biomass energy to clean energy in developing countries. We designed a randomised controlled trial to identify the impact of relaxing households’ liquidity constraints on LPG stove adoption and charcoal use in urban Tanzania. In collaboration with a local micro-finance institution, we randomly assigned households into a subsidy treatment and a credit treatment, which included different repayment arrangements. We show that relative to households in the control group, adoption of LPG stoves reduced charcoal use by 47.5% in the treated group. However, providing subsidies for stove purchases resulted in a much larger reduction in charcoal use (54%) than did providing access to credit (41%). We highlight the importance of relaxing households’ financial constraints and improving access to credit to encourage urban households to switch to clean energy sources and save the remaining forest resources of Africa. Paper 4: Why (field) experiments on unethical behavior are important: Comparing stated and revealed behavior Understanding unethical behavior is essential to many phenomena in the real world. The vast majority of existing studies have relied on stated behavior in surveys and some on incentivized experiments in the laboratory. In this paper, we carry out a field experiment in a unique setting. A survey more than one year before the field experiment allows us to compare stated unethical behavior with revealed behavior in the same situation. Our results indicate a strong discrepancy between stated and revealed behavior. This suggests that, given a natural setting, people may actually behave differently from what they would otherwise “brand” themselves to be, cautioning the interpretation of stated behavioral measures commonly used in research on unethical behavior.
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| 9. |
- Yashodha, Yashodha
(author)
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Contract Choice and Trust in Informal Groundwater Markets
- 2017
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Doctoral thesis (other academic/artistic)abstract
- Bargaining and Contract Choice: Evidence from Informal Groundwater Contracts Informal market arrangements are often in place when formal institutions are too weak to establish a formal mechanism for resource allocation. In this paper, we study informal groundwater contracts in India, in particular, the bargaining power of sellers and buyers. We conduct an economic experiment with actual buyers and sellers of groundwater contracts, where agents make a series of choices between output-shared and fixed-price contracts, first individually and then jointly. Output-shared contracts are chosen more often when the decision is joint. Further, the likelihood of choosing an output-shared contract depends on the relative risk preferences of sellers and buyers. Sellers have a strong influence in deciding the joint contract. However, buyers’ bargaining power increases when they share interpersonal relationships with sellers, such as kinship ties, or have a long contractual history together. JEL codes: C83, C93, D86, Q13, Q25 Keywords: Output-shared contract, Fixed-price contract, Lab-in-field experiment, Random parameter model Contract Choice and Risk Preferences: Evidence from Informal Groundwater Contract Choices in Rural India Exploring the different contract systems in an agrarian market is important to understand their efficiency and equity aspects. This study analyses factors that can affect the choice of groundwater contracts in rural India. A primary survey and a lab-in-the-field experiment were carried out to obtain matched information about buyers and sellers of groundwater and to elicit their risk preferences. We find that the risk preferences of both sellers and buyers influence the choice of contract, which suggests a risk-sharing motive in the choice decision. A situation with a buyer who is more educated and older than the seller is associated with a lower probability that the contract is an output-shared contract, which implies the agents’ relative influence on the contract decision. The results are particularly relevant for groundwater contracts where the endogenous matching of agents is less likely be an issue. JEL Codes: C83, C93, D86, Q13, Q25 Keywords: Output-shared contract, Fixed-price contract, Endogenous matching, Omitted variable bias Trust and Kinship: Experimental Evidence from Rural India The empirical evidence on the role of kinship in trust and cooperation is mixed. In this study, we investigate the role of kinship when it comes to altruism and trust. We conduct a field experiment, using a dictator and trust game, in India with households involved in informal groundwater sharing. We find that a kin partner is trusted more than non-kin. Altruistic motives play a major role in explaining the differential trust towards kin and non-kin. We find only a small difference between trustworthiness of kin and non-kin receivers. However, we observed a change in the trustworthiness of kin receivers based on how close they are within their kin network. Interestingly, the expectation about non-kin trustworthiness is low, while in reality there is no difference in trustworthiness between kin and non-kin. Yashodha Yashodha AKADEMISK AVHANDLING som med vederbörligt tillstånd för vinnande av filosofie doktorsexamen vid Handelshögskolans fakultet, Göteborgs universitet, framlägges till offentlig granskning fredagen den 20 oktober, kl 10.15, i sal D32, Institutionen för nationalekonomi med statistik, Vasagatan 1 Göteborg 2017 Bargaining and Contract Choice: Evidence from Informal Groundwater Contracts Informal market arrangements are often in place when formal institutions are too weak to establish a formal mechanism for resource allocation. In this paper, we study informal groundwater contracts in India, in particular, the bargaining power of sellers and buyers. We conduct an economic experiment with actual buyers and sellers of groundwater contracts, where agents make a series of choices between output-shared and fixed-price contracts, first individually and then jointly. Output-shared contracts are chosen more often when the decision is joint. Further, the likelihood of choosing an output-shared contract depends on the relative risk preferences of sellers and buyers. Sellers have a strong influence in deciding the joint contract. However, buyers’ bargaining power increases when they share interpersonal relationships with sellers, such as kinship ties, or have a long contractual history together. JEL codes: C83, C93, D86, Q13, Q25 Keywords: Output-shared contract, Fixed-price contract, Lab-in-field experiment, Random parameter model Contract Choice and Risk Preferences: Evidence from Informal Groundwater Contract Choices in Rural India Exploring the different contract systems in an agrarian market is important to understand their efficiency and equity aspects. This study analyses factors that can affect the choice of groundwater contracts in rural India. A primary survey and a lab-in-the-field experiment were carried out to obtain matched information about buyers and sellers of groundwater and to elicit their risk preferences. We find that the risk preferences of both sellers and buyers influence the choice of contract, which suggests a risk-sharing motive in the choice decision. A situation with a buyer who is more educated and older than the seller is associated with a lower probability that the contract is an output-shared contract, which implies the agents’ relative influence on the contract decision. The results are particularly relevant for groundwater contracts where the endogenous matching of agents is less likely be an issue. JEL Codes: C83, C93, D86, Q13, Q25 Keywords: Output-shared contract, Fixed-price contract, Endogenous matching, Omitted variable bias Trust and Kinship: Experimental Evidence from Rural India The empirical evidence on the role of kinship in trust and cooperation is mixed. In this study, we investigate the role of kinship when it comes to altruism and trust. We conduct a field experiment, using a dictator and trust game, in India with households involved in informal groundwater sharing. We find that a kin partner is trusted more than non-kin. Altruistic motives play a major role in explaining the differential trust towards kin and non-kin. We find only a small difference between trustworthiness of kin and non-kin receivers. However, we observed a change in the trustworthiness of kin receivers based on how close they are within their kin network. Interestingly, the expectation about non-kin trustworthiness is low, while in reality there is no difference in trustworthiness between kin and non-kin. JEL Codes: C90, C93, D03, D64 Keywords: Trust, Altruism, Kinship ISBN: 978-91-88199-25-6 (PRINTED) 978-91-88199-26-3(PDF) Contact information: Yashodha Yashodha, Department of Economics, School of Business, Economics and Law, University of Gothenburg, P.O. Box 640, SE 405 30, Gothenburg, Sweden. E-mail: yashodha.yashodha@economics.gu.se
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