A well-known pitfall of Markowitz (1952) portfolio optimization is that the sample covariance matrix, which is a critical input, is very erroneous when there are many assets to choose from. Ifnunchecked, this phenomenon skews the optimizer towards extreme weights that tend to performnpoorly in the real world. One solution that has been proposed is to shrink the sample covariance matrix by pulling its most extreme elements towards more moderate values. An alternative solution is the resampled efficiency suggested by Michaud (1998). This paper compares shrinkagenestimation to resampled e*ciency. In addition, it studies whether the two techniques can bencombined to achieve a further improvement. All this is done in the context of an active port-nfolio manager who aims to outperform a benchmark index and who is evaluated by his realizedninformation ratio.
"We provide a direct test of the role of social preferences in voluntary cooperation. We elicit individuals’ cooperation preference in one experiment and make a point prediction about the contribution to a repeated public good. This allows for a novel test as to whether there are ""types"" of players who behave consistently with their elicited preferences. We find clear-cut evidence for the existence of ""types"". People who express free rider preferences show the most systematic deviation from the predicted contributions, because they contribute in the first half of the experiment. We also show that the interaction of heterogeneous types explains a large part of the dynamics of free riding. "
Laboratory experiments are an important methodology in economics, especially in the field of behavioral economics. However, it is still debated to what extent results from laboratory experiments can be applied to field settings. One highly important question with respect to the external validity of experiments is whether the same individuals act in experiments as they wouldnin the field.nThis paper presents evidence on how individuals behave in donation experiments and how thensame individuals behave in a naturally occurring decision situation on charitable giving. The results show that behavior in experiments is correlated with behavior in the field. The results are robust to variations in the experimental setting, and the correlation between experimental and field behavior is between 0.25 and 0.4. We discuss whether this correlation should be interpreted as strong or weak and what consequences the findings have for experimental economics.
It is typically assumed that people engage in entrepreneurship because there are profits to be made. In contrast to this view, this paper argues that entrepreneurship is more adequately characterized as a non-profit-seeking activity. Evidence from a broad range of authors and academic fields is discussed showing that entrepreneurship does quite generally not pay in monetary terms. Being an entrepreneur seems to be rather rewarding because it entails substantialnnon-monetary benefits, like greater autonomy, broader skill utilization, and the possibility to pursue one’s own ideas. It is shown how incorporating these non-monetary benefits intoneconomic models of entrepreneurship can lead to a better understanding of the phenomenon.
We study finitely repeated 2 / 2 normal form games, where playersnhave incomplete information about their opponents’ payoffs. In a laboratory experiment we investigate whether players (a) learn the game they are playing, (b) learn to predict the behavior of their opponent, and (c)nlearn to play according to a Nash equilibrium of the repeated game. Ournresults show that the success in learning the opponent’s type depends on the characteristics of the true game. The learning success is much higher for games with pure strategy Nash equilibria than for games with a unique mixed strategy Nash equilibrium, and it is higher for games with symmetricnpure strategy Nash equilibria than for games with asymmetric equilibria. Moreover, subjects learn to predict the opponents’ behavior very well. However, they rarely play according to a Nash equilibrium and we observenno correlation between equilibrium play and learning about the game.
In a first attempt to apply the global games methodology tonsignalling games, Ewerhart and Wichardt (2004) analyse a beer-quiche type signalling game with additional imperfect information about the preferences of the receiver. Their approach allows them to dismiss the unreasonable pool-ning on quiche equilibrium. This paper revisits their example and discusses how an extension of the set of strategies for the sender affects the analysis. Interestingly, for an extended beer-quiche game, a unique equilibrium is selected while two equilibria are consistent with the Intuitive Criterionn(Cho and Kreps, 1987). Apart from the technical analysis, potential economic applications of the results, e.g. in a context of limit pricing and entry deterrence, are indicated.
In monetary models where agents are subject to trading shocksnthere is typically an ex-post inefficiency since some agents are holding idle balances while others are cash constrained. This problem creates a role for financial intermediaries, such as banks, who accept nominal deposits and make nominal loans. In general, financial intermediation improves the allocation. The gains in welfarencome from the payment of interest on deposits and not from relaxing borrowers’ liquidity constraints. We also demonstrate that when credit rationing occurs increasing the rate of inflation can benwelfare improving.
(English text below) Il prossimo 31 marzo a Palazzo dei congressi a Lugano si terrà l evento Silicon Valley meets Switzerland. Si tratta di una piattaforma di incontro tra il mondo della ricerca scientifica in ambito informatico e quello delle imprese attive nel settore tecnologico, con l obiettivo ...
I consider the problem of evaluating the effect of a health care reform on the demand for doctor visits when the effect is potentially different in different parts of the outcome distribution. Quantile regression is a useful technique for studying such heterogeneous treatment effects. Recent progree has been made to extend such methods to applications with a count dependent variable. An analysis of a 1997 health care reform in Germany shows the benefit of the approach: lower quantiles, such as the 25 percent quantile, fell by substantially larger amounts than what would have been predicted based on Poisson or negative binomial models.
This paper uses recent data for Germany and a new outcome variable to assess the consequences of parental separation on the well-being of youths. In particular, it is considered how subjective well-being, elicited from an ordinal 11-point general life satisfaction question, differs between youths living in intact and non-intact families, holding many other potential determinants of well-being constant using ordered probit regressions. The main finding of this study is that living in a non-intact family has not the hypothesised large negative effect on child well-being.
