Publikationen

Hedge fund returns are often explained using linear factor models such as Fung and Hsieh (2004). However, since most hedge funds live only for 3 years, these linear regressions are subject to over-parameterization. I improve the out-of-sample accuracy of the linear factor model by combining cross-sectional and time series information for groups of hedge funds with similar investment strategies. The additional cross-sectional information allows more accurate estimates of risk exposures. I also propose a trading strategy based on this methodology for extracting substantially larger risk-adjusted returns.

To assess the educational performance gaps in Eastern Europe, this article takes a look at the differences in PISA test scores between Finland and seven Eastern European countries, as well as between Eastern European countries. The methodology applied is a semiparametric version of the threefold Blinder–Oaxaca decomposition. We find that main part of the average test score gap cannot be explained by the individual characteristics. Furthermore, our analysis at different quantiles provides evidence that the average test score gaps are due to the fact that poorly performing students in Finland score much higher than poorly performing students in Eastern Europe.

The famous Hand rule weighs the burden of precaution against the reduction in expected harm. The burden may be type‐specific, implying different standards of care for different injurer types. We show that this fact may be exploited by principals in their search for minimized individual costs. Principals may hire agents with high cost of care‐taking although other agents are available. This is shown in a unilateral‐care setting either with perfect or with asymmetric information. We therefore highlight a neglected downside of the negligence rule.

While it is recognized that the family is a risk-sharing institution, little is known about the quantitative effects of this source of insurance on savings and labor supply. In this paper, we present a model where workers (females and males) are subject to idiosyncratic employment risk and where capital markets are incomplete. A household is formed by a female and a male, who decide on consumption, savings and labor supplies. In a calibrated version of our model we find that intra-household risk sharing has its largest impact among wealth-poor households. While the wealth-rich use mainly savings to smooth consumption across unemployment spells, wealth-poor households rely on spousal labor supply. For instance, for low-wealth households, average hours worked by wives of unemployed husbands are 8% higher than those worked by wives of employed husbands. This response in wives’ hours makes up 9% of lost family income. We also study consumption losses upon an unemployment spell, precautionary savings and the crowding out effects of the public unemployment insurance program on the extent of risk sharing within the household.

We study the monetary instrument problem in a dynamic noncooperative game between separate, discretionary, fiscal and monetary policy makers. We show that monetary instruments are equivalent only if the policy makers' objectives are perfectly aligned; otherwise an instrument problem exists. When the central bank is benevolent while the fiscal authority is short‐sighted relative to the private sector, excessive public spending and debt emerge under a money growth policy but not under an interest rate policy. Despite this property, the interest rate is not necessarily the optimal instrument.

In this paper, a method based on prospect theory is proposed to solve the multiple attribute decision making (MADM) problem with three formats of attribute aspirations. According to the idea of prospect theory, reference points concerning attributes are first determined. Then, for the three formats of attribute aspirations, the calculation formulae of alternatives' gains/losses concerning attributes are given. By calculating each alternative's gain/loss, a gain–loss matrix is constructed. Further, using the value function from prospect theory and the simple additive weighting method, the overall prospect value of each alternative is calculated. Based on the obtained overall prospect values, a ranking of alternatives can be determined. Finally, a case study is given to illustrate the use of the proposed method.

We describe a simple mechanism that generates inflation persistence in a standard sticky-price model of optimal fiscal and monetary policy. Key to this mechanism is that policies are implemented under discretion. The government's discretionary incentive to erode the real value of nominal public debt by means of surprise inflation renders inflation expectations and, in further consequence, equilibrium inflation rates highly correlated with the stock of public debt. Debt, in turn, is highly persistent, allowing for tax-smoothing in the face of disturbances. Due to the aforementioned correlation, the persistence in debt carries over to inflation. Our analysis uncovers a non-monotonic effect of nominal rigidities on inflation persistence and shows that government debt under discretion does not display the near random walk property familiar from the Ramsey literature. A calibrated version of the model that incorporates a moderate degree of monopolistic competition and price stickiness is quantitatively consistent with the inflation dynamics experienced in the USA since the Volcker disinflation of the early 1980s.

Da die Ausgaben für medizinische Behandlung typischerweise im Laufe des Lebens ansteigen, ist die Befürchtung weit verbreitet, dass die zunehmende Bevölkerungsalterung in Deutschland gemeinsam mit dem medizinischen Fortschritt eine ernste Gefahr für die zukünftige Finanzierung des Gesundheitswesens darstellt. Zu dem Zusammenhang zwischen Alterung und Entwicklung der Gesundheitsausgaben hat sich in den letzten 15 Jahren eine reichhaltige theoretische und empirische Literatur entwickelt, die in diesem Artikel resümiert wird. Darin wurde zwar gezeigt, dass die höchsten Behandlungskosten weniger dem Alter per se als der Nähe zum Tod geschuldet sind. Dennoch zeigen selbst Simulationsrechnungen, die diesen Effekt berücksichtigen, dass der Anstieg der Lebenserwartung – ebenso wie der medizinische Fortschritt – einen Beitrag zum Wachstum der Pro-Kopf-Ausgaben in der Gesetzlichen Krankenversicherung leisten wird.

This paper investigates the finding that reported life satisfaction scores are significantly higher in the German Socio-Economic Panel when a third person is present during the interview. Even after controlling a variety of relevant factors, third person presence makes up a significant difference in satisfaction levels. A plausible explanation is that interviewees distort their responses in a favourable way. The evidence suggests that this apparently minor aspect could even affect empirical outcomes in happiness research. This study contributes to the literature in this field, especially with respect to the recently revived debate on survey methodology in the reporting of satisfaction.

In this paper, a method based on prospect theory is proposed to solve the multiple attribute decision making (MADM) problem considering aspiration-levels of attributes, where attribute values and aspiration-levels are represented in two different formats: crisp numbers and interval numbers. According to the idea of prospect theory, aspiration-levels are firstly regarded as the reference points, and the four possible types for comparing an attribute value with an aspiration-level are described. Then, for all possible cases of the four types, the calculation formulae of gains and losses of alternatives concerning attributes are given. By calculating gain and loss of each alternative, a gain matrix and a loss matrix are constructed, respectively. Further, using the value function proposed in prospect theory and the simple additive weighting method, the overall prospect value of each alternative is calculated. Based on the obtained overall prospect values, a ranking of alternatives can be determined. Finally, a numerical example is used to illustrate the use of the proposed method.

Allowing the plaintiff and defendant to choose the order in which they invest effort into trial, we show that the timing of litigation efforts is critically dependent on the level of defendant fault. For a high (low) level of defendant fault, the plaintiff invests after (before) the defendant’s investment choice. The equilibrium order of litigation efforts in turn is decisive for (a) the level of total litigation effort, (b) justice achieved by the litigation contest, and (c) plaintiffs’ incentives to bring suit. As a result, the endogenous timing bears vital implications for policy makers.

TODIM (an acronym in Portuguese of interactive and multiple attribute decision making) is a method for solving the multiple attribute decision making (MADM) problem considering decision maker’s (DM’s) behavior, in which the attribute values are in the format of crisp numbers. It cannot be used to handle hybrid MADM problems with various formats of attribute values. In this paper, an extended TODIM method is proposed to solve the hybrid MADM problem. First, three formats of attribute values (crisp numbers, interval numbers and fuzzy numbers) are expressed in the format of random variables with cumulative distribution functions. Then, according to the concept of the classical TODIM method, the gain and loss matrices concerning each attribute are constructed by calculating the gain and loss of each alternative relative to the others. Further, by calculating the dominance degree of each alternative over the others, the overall value of each alternative can be obtained to rank the alternatives. Finally, two numerical examples are used to illustrate the use of the proposed method.

This paper considers extended prisoners' dilemma games in which a second pure strategy equilibrium in the stage game allows for mutual cooperation in all but the last round of the finitely repeated game as an equilibrium outcome. We distinguish a strict and a weak extension of the prisoners' dilemma game in a long and a short horizon treatment. A comparison with the corresponding finitely repeated prisoners' dilemma games shows that the strict additional equilibrium increases cooperation rates while the weak does not. This result is robust to the variation of the time horizon.

This article analyzes the output, abatement, and investment decisions made by a monopolistic polluter under environmental liability law. The model applied considers both integrated and end-of-pipe abatement technologies. We find that in the case of fixed technology, in many instances negligence produces more favorable results than strict liability in terms of social welfare. The reason is that output under strict liability is always less than first-best output, whereas output under negligence is not similarly limited. However, this ranking of liability rules may be reversed when technology is endogenous. Under such conditions investment in both integrated and end-of-pipe abatement technologies under negligence is guided by motives foreign to the social planner, whereas the polluter’s calculus under strict liability is similar to that of the social planner.

It has been shown that psychological predispositions to benefit others can motivate human cooperation and the evolution of such social preferences can be explained with kin or multi-level selectionmodels. It has also been shown that cooperation can evolve as a costly signal of an unobservable quality that makes a person more attractive with regard to other types of social interactions. Here we show that if a proportion of individuals with social preferences is maintained in the population through kin or multi-level selection, cooperative acts that are truly altruistic can be a costly signal of social preferences and make altruistic individuals more trustworthy interaction partners in social exchange. In a computerized laboratory experiment, we test whether altruistic behavior in the form of charitable giving is indeed correlated with trustworthiness and whether a charitable donation increases the observing agents' trust in the donor. Our results support these hypotheses and show that, apart from trust, responses to altruistic acts can have a rewarding or outcome-equalizing purpose. Our findings corroborate that the signaling benefits of altruistic acts that accrue in social exchange can ease the conditions for the evolution of social preferences.

We use statewide administrative data from Florida to estimate the impact of attending public schools with different grade configurations on student achievement through grade 10. Based on an instrumental variable estimation strategy, we find that students moving from elementary to middle school suffer a sharp drop in student achievement in the transition year. These achievement drops persist through grade 10. We also find that middle school entry increases student absences and is associated with higher grade 10 dropout rates. Transitions to high school in grade 9 cause a smaller one-time drop in achievement but do not alter students' performance trajectories.

We study the welfare effect of tax-optimizing portfolio decisions in a life cycle model with unspanned labor income and realization-based capital gain taxation. For realistic parameterizations of our model, certainty equivalent welfare gains from fully tax-optimized portfolio decisions are less than 2% of present financial wealth and lifetime income compared to a heuristic portfolio policy ignoring the taxation of profits (capital gains, interest and dividend payments). Compared to a heuristic portfolio policy that only ignores the realization-based feature of capital gain taxation and instead assumes mark-to-market taxation, these gains are less than 0.5%. That is, our work provides a justification for ignoring taxes in life cycle portfolio choice problems – a wide-spread assumption in that literature. However, if capital gains are forgiven at death (as in the U.S.), investors with strong bequest motives face substantial welfare costs when not tax-optimizing their portfolio decisions towards the end of the life cycle.

This paper provides a self-contained definition and a characterization of the class of extensive form games that are adequate for applications, but still do not employ any finiteness assumptions. In spite of its simplicity, the resulting definition is more general than the classical ones. Moreover, we show that this class satisfies the basic desiderata that strategies induce outcomes and do so uniquely. Within the class of playable extensive forms, the characterization is by the existence of an immediate predecessor function on the set of moves.