Erasmus School of Economics (ESE)
http://repub.eur.nl/org/9724/
List of Publicationsenhttp://repub.eur.nl/eur_signature.png
http://repub.eur.nl/
RePub, Erasmus University RepositorySupply Chain Contracting for After-sales Service and Product Support
http://repub.eur.nl/pub/78526/
Fri, 18 Sep 2015 00:00:01 GMT<div>D. Li</div>
Abstract
Over the past decades, business model innovation in product and its service has been growing rapidly, especially for durable goods. Companies shift their strategies from selling physical products to delivering solutions and performance for customers. Within this context, the outcome-based service contracts, such as Performance-based Logistics and Power-by-the-Hour, have been developed in both public and commercial industry. At the same time, traditional service contracts such as Warranty and Time & Material contracts are still being used in many occasions. Under various business models, managing the after-sales service and product support becomes increasingly challenging. In this thesis, we study several important service contracting problems concerning optimal design of contract terms, spare parts inventory and service capacity management, and service outsourcing management. We provide managerial insights for selecting the best service contract, choosing the right performance measurement, optimally managing the service resources (spare parts and repair capacity), and incentivizing the supplier to improve the profit of the after-sales service and product support supply chains.Specification Testing in Hawkes Models
http://repub.eur.nl/pub/78462/
Fri, 24 Jul 2015 00:00:01 GMT<div>F. Gresnigt</div><div>H.J.W.G. Kole</div><div>Ph.H.B.F. Franses</div>
__Abstract__
We propose various specification tests for Hawkes models based on the Lagrange Multiplier (LM) principle. Hawkes models can be used to model the occurrence of extreme events in financial markets. Our specific testing focus is on extending a univariate model to a multivariate model, that is, we examine whether there is a conditional dependence between extreme events in markets. Simulations show that the test has good size and power, in particular for sample sizes that are typically encountered in practice. Applying the specification test for dependence
to US stocks, bonds and exchange rate data, we find strong evidence for cross-excitation within segments as well as between segments. Therefore, we recommend that univariate Hawkes models be extended to account for the cross-triggering phenomenon.Why do Pit-Hours outlive the Pit?
http://repub.eur.nl/pub/78374/
Fri, 03 Jul 2015 00:00:01 GMT<div>S.R. Ozturk</div><div>M. van der Wel</div><div>D.J.C. van Dijk</div>
__Abstract__
We study why a majority of trades still happen during the pit hours, i.e. when the trading pit is open, even after the pit ceased to be a liquid and informative venue. We investigate the case of 30-year U.S. Treasury futures using a ten-years-long intraday data set which contains the introduction of the CME Globex platform as an example of sophistication in electronic trading. We use a structural model to estimate the time-variation in potential factors of the clustering of trading activity around the pit hours, namely price informativeness, information asymmetry and price impact of trades. We find evidence for a feedback mechanism between trading activity and these factors. Across the sample period, price informativeness during the afterhours is a consistently significant factor attracting trade activity. Information asymmetry has a negative effect on afterhours act ivity, particularly during the crisis years. The negative effect of price impact on afterhours activity ceases to be a significant factor from 2007 on, possibly due to improvements in order execution algorithms and electronic trading facilities.Interpreting financial market crashes as earthquakes: A new Early Warning System for medium term crashes
http://repub.eur.nl/pub/78172/
Wed, 01 Jul 2015 00:00:01 GMT<div>F. Gresnigt</div><div>H.J.W.G. Kole</div><div>Ph.H.B.F. Franses</div>
__Abstract__
We propose a modeling framework which allows for creating probability predictions on a future market crash in the medium term, like sometime in the next five days. Our framework draws upon noticeable similarities between stock returns around a financial market crash and seismic activity around earthquakes. Our model is incorporated in an Early Warning System for future crash days. Testing our EWS on S&P 500 data during the recent financial crisis, we find positive Hanssen–Kuiper Skill Scores. Furthermore our modeling framework is capable of exploiting information in the returns series not captured by well known and commonly used volatility models. EWS based on our models outperform EWS based on the volatility models forecasting extreme price movements, while forecasting is much less time-consuming.Forecasting day-ahead electricity prices: Utilizing hourly prices
http://repub.eur.nl/pub/78319/
Wed, 01 Jul 2015 00:00:01 GMT<div>E. Raviv</div><div>K.E. Bouwman</div><div>D.J.C. van Dijk</div>
__Abstract__
The daily average price of electricity represents the price of electricity to be delivered over the full next day and serves as a key reference price in the electricity market. It is an aggregate that equals the average of hourly prices for delivery during each of the 24 individual hours. This paper demonstrates that the disaggregated hourly prices contain useful predictive information for the daily average price in the Nord Pool market. Multivariate models for the full panel of hourly prices significantly outperform univariate models of the daily average price, with reductions in Root Mean Squared Error of up to 16%. Substantial care is required in order to achieve these forecast improvements. Rich multivariate models are needed to exploit the relations between different hourly prices, but the risk of overfitting must be mitigated by using dimension reduction techniques, shrinkage and forecast combinations.The Effects of Prize Spread and Noise in Elimination Tournaments: A Natural Field Experiment
http://repub.eur.nl/pub/78382/
Wed, 01 Jul 2015 00:00:01 GMT<div>J. Delfgaauw</div><div>A.J. Dur</div><div>J.A. Non</div><div>W.J.M.I. Verbeke</div>
__Abstract__
We conduct a natural field experiment in a retail chain to test predictions of tournament theory regarding prize spread and noise. A random subset of the 208 stores participates in two-stage elimination tournaments. Tournaments differ in the distribution of prize money across winners of the first and second rounds of the tournament. As predicted, we find that a more convex prize spread increases second-round performance at the expense of first-round performance, although the magnitude of these effects is small. Moreover, the treatment effect is larger for stores with more stable past performance.Dynamic Predictive Density Combinations for Large Data Sets in Economics and Finance
http://repub.eur.nl/pub/78461/
Wed, 01 Jul 2015 00:00:01 GMT<div>R. Casarin</div><div>S. Grassi</div><div>F. Ravazzolo</div><div>H.K. van Dijk</div>
__Abstract__
A Bayesian nonparametric predictive model is introduced to construct time-varying weighted combinations of a large set of predictive densities. A clustering mechanism allocates these densities into a smaller number of mutually exclusive subsets. Using properties of Aitchinson's geometry of the simplex, combination weights are defined with a probabilistic interpretation. The class-preserving property of the logistic-normal distribution is used to define a compositional dynamic factor model for the weight dynamics with latent factors defined on a reduced dimension simplex. Groups of predictive models with combination weights are updated with parallel clustering and sequential Monte Carlo filters. The procedure is applied to predict Standard & Poor's 500 index using more than 7000 predictive densities based on US individual stocks and finds substantial forecast and econ omic gains. Similar forecast gains are obtained in point and density forecasting of US real GDP, Inflation, Treasury Bill yield and employment using a large data set.Multivariate Volatility Impulse Response Analysis of GFC News Events
http://repub.eur.nl/pub/78463/
Wed, 01 Jul 2015 00:00:01 GMT<div>D.E. Allen</div><div>M.J. McAleer</div><div>R.J. Powell</div>
__Abstract__
This paper applies the Hafner and Herwartz (2006) (hereafter HH) approach to the analysis of multivariate GARCH models using volatility impulse response analysis. The data set features ten years of daily returns series for the New York Stock Exchange Index and the FTSE 100 index from the London Stock Exchange, from 3 January 2005 to 31 January 2015. This period captures both the Global Financial Crisis (GFC) and the subsequent European Sovereign Debt Crisis (ESDC). The attraction of the HH approach is that it involves a novel application of the concept of impulse response functions, tracing the effects of independent shocks on volatility through time, while avoiding typical orthogonalization and ordering problems. Volatility impulse response functions (VIRF) provide information about the impact of independent shocks on volatility. HH’s VIRF extends a framework provided by Koop et al. (1996) for the analysis of impulse responses. This approach is novel because it explores the effects of shocks to the conditional variance, as opposed to the conditional mean. HH use the fact that GARCH models can be viewed as being linear in the squares, and that multivariate GARCH models are known to have a VARMA representation with non-Gaussian errors. They use this particular structure to calculate conditional expectations of volatility analytically in their VIRF analysis. A Jordan decomposition of Σt is used to obtain independent and identically distributed innovations. A general issue in the approach is the choice of baseline volatilities. VIRF is defined as the expectation of volatility conditional on an initial shock and on history, minus the baseline expectation that conditions on history. This makes the process endogenous, but the choice of the baseline shock within the data set makes a difference. We explore the impact of three different shocks, the first marking the onset of the GFC, which we date as 9 August 2007 (GFC1). This began with the seizure in the banking system precipitated by BNP Paribas announcing that it was ceasing activity in three hedge funds that specialised in US mortgage debt. It took a year for the financial crisis to come to a head, but it did so on 15 September 2008, when the US government allowed the investment bank Lehman Brothers to go bankrupt (GFC2). The third shock is 9 May 2010, which marked the point at which the focus of concern switched from the private sector to the public sector. A further contribution of this paper is the inclusion of leverage, or asymmetric effects. Our modelling is undertaken in the context of a multivariate GARCH model featuring pre-whitened return series, which are then analysed using both BEKK and diagonal BEKK models with the t-distribution. A key result is that the impact of negative shocks is larger, in terms of the effects on variances and covariances, but shorter in duration, in this case a difference between three and six months, in the context of the return series.Axiomatic Characterization of the Median and
Antimedian Function on a Complete Graph minus a
Matching
http://repub.eur.nl/pub/78348/
Thu, 18 Jun 2015 00:00:01 GMT<div>M. Changat</div><div>D.S. Lekha</div><div>S. Mohandas</div><div>H.M. Mulder</div><div>A.R. Subhamathi</div>
__Abstract__
A median (antimedian) of a profile of vertices on a graph G is a vertex that minimizes (maximizes) the sum of the distances to the elements in the profile. The median (antimedian) function has as output the set of medians (antimedians) of a profile. It is one of the basic models for the location of a desirable (obnoxious) facility in a network. The median function is well studied. For instance it has been characterized axiomatically by three simple axioms on median graphs. The median function behaves nicely on many classes of graphs. In contrast the antimedian function does not have a nice behavior on most classes. So a nice axiomatic characterization may not be expected. In this paper an axiomatic characterization is obtained for the median and antimedian function on complete graphs minus a matching.Aggregated Marcoeconomic News and Price Discovery
http://repub.eur.nl/pub/78243/
Thu, 11 Jun 2015 00:00:01 GMT<div>J. Brazys</div>
__Abstract__
Is there a link between asset prices and economic fundamentals? Many studies fail to find a convincing link and conclude that asset prices and economic fundamentals are disconnected. A famous example of the disconnect between exchange rates and macroeconomic fundamentals is presented in Meese and Rogoff (1983). The main success connecting asset prices to economic fundamentals is in very short periods immediately after macroeconomic announcements (e.g. Andersen et al., 2007). However, individual announcements are much less important in the medium term. The reason is that medium term returns are contaminated by other types of news (including economic news) unrelated to the news analyzed. Therefore simultaneously relating medium term asset returns to a large number of economic news announcements can provide means of mitigating contamination. This thesis provides evidence of a strong medium term relation between asset prices and economic fundamentals by using news aggregation and novel methods. While the literature documents that the link between asset prices and economic fundamentals, measured by R-squared, does not exceed eight percent, this thesis shows that the R-squared can be as high as 27 percent.Three Essays in Empirical Corporate Finance
http://repub.eur.nl/pub/78334/
Thu, 11 Jun 2015 00:00:01 GMT<div>G. Zhu</div>
__Abstract__
This dissertation documents my exploration of the modern corporation in the
past few years. I outline a detailed picture of major U.S. public corporations in
more recent decades from two perspectives: ownership structure and internal
nepotism. I also study the private information carried in the CEOs’ unexpected
option exercise behavior. This dissertation aims to deepen our understanding of
the modern corporation and CEOs’ option exercise behavior.An ABC-Problem for Location and Consensus
Functions on Graphs
http://repub.eur.nl/pub/78320/
Mon, 08 Jun 2015 00:00:01 GMT<div>F.R. McMorris</div><div>B. Novick</div><div>H.M. Mulder</div><div>R.C. Powers</div>
__Abstract__
A location problem can often be phrased as a consensus problem or a voting problem. We use these three perspectives, namely location, consensus and voting to initiate the study of several questions. The median function Med is a location/consensus function on a connected graph G that has the finite sequences of vertices of G as input. For each such sequence, Med returns the set of vertices that minimize the distance sum to the elements of the sequence. The median function satisfies three intuitively clear axioms: (A) Anonymity, (B) Betweenness and (C) Consistency. In [13] it was shown that on median graphs these three axioms actually characterize Med. This result raises a number of questions: (i) On what other classes of graphs is Med characterized by (A), (B) and (C)? (ii) If some class of graphs has other ABC-functions besides Med, then determine additional axioms that are needed to characterize Med. (iii) In the latter case, can we find characterizations of other functions that satisfy (A), (B) and (C)? We call these questions, and related questions, the ABC-Problem for location/consensus functions on graphs. In this paper we present first results. For the first question we use consensus terminology. We construct a non-trivial class different from the median graphs, on which the median function is the unique “ABC function”. For the second and third question voting terminology is most apt for our approach. On K_n with n > 2 we construct various non-trivial ABC-voting procedures. For some nice families, we present a full axiomatic characterization. We also construct an infinite family of ABC-functions on K_3.Upgrading across Organisational and Geographical Configurations
http://repub.eur.nl/pub/78224/
Thu, 04 Jun 2015 00:00:01 GMT<div>E. van Tuijl</div>
__Abstract__
This thesis deals with upgrading: a process of learning and knowledge sourcing in order to generate value added. We analyse how upgrading takes place across various organisational configurations: formal collaboration, clusters, projects, and events. Moreover, we investigate the process of upgrading within, as well as between, different spatial scales, and analyse the role of different actors, upgrading mechanisms, and the symbolic and synthetic knowledge bases. We study the upgrading process in a number of empirical case studies of the Chinese automotive industry.
We find that in addition to upgrading in formal collaboration – through joint-ventures in particular – upgrading also takes place in other organisational configurations. We unveil that clusters and events are of particular importance for upgrading via ‘monitoring’ and ‘buzz’. Hereby, we stress the critical role of event organisers as ‘temporary cluster managers’, acting as a bridge between the global and Chinese automotive industry. We also show the importance of the project configuration which crosses over other organisational configurations, and upgrading in projects takes place via nearly all upgrading mechanisms. In addition, we provide new empirical evidence for the importance of physical co-presence of different specialists in the automotive industry on the (temporary) local scale to enable non-verbal communication, while on the other hand, we demonstrate that upgrading of the synthetic and symbolic knowledge bases has a global dimension as well.Volatility Spillovers Between Energy and Agricultural Markets:
A Critical Appraisal of Theory and Practice
http://repub.eur.nl/pub/78349/
Mon, 01 Jun 2015 00:00:01 GMT<div>C-L. Chang</div><div>Y. Li</div><div>M.J. McAleer</div>
__Abstract__
Energy and agricultural commodities and markets have been examined extensively, albeit separately, for a number of years. In the energy literature, the returns, volatility and volatility spillovers (namely, the delayed effect of a returns shock in one asset on the subsequent volatility or covolatility in another asset), among alternative energy commodities, such as oil, gasoline and ethanol across different markets, have been analysed using a variety of univariate and multivariate models, estimation techniques, data sets, and time frequencies. A similar comment applies to the separate theoretical and empirical analysis of a wide range of agricultural commodities and markets. Given the recent interest and emphasis in bio-fuels and green energy, especially bio-ethanol, which is derived from a range of agricultural products, it is not surprising that there is a topical and developing literature on the spillovers between energy and agricultural markets. Modelling and testing spillovers between the energy and agricultural markets has typically been based on estimating multivariate conditional volatility models, specifically the BEKK and DCC models. A serious technical deficiency is that the Quasi-Maximum Likelihood Estimates (QMLE) of a full BEKK matrix, which is typically estimated in examining volatility spillover effects, has no asymptotic properties, except by assumption, so that no statistical test of volatility spillovers is possible. Some papers in the literature have used the DCC model to test for volatility spillovers. However, it is well known in the financial econometrics literature that the DCC model has no regularity conditions, and that the QMLE of the parameters of DCC has no asymptotic properties, so that there is no valid statistical testing of volatility spillovers. The purpose of the paper is to evaluate the theory and practice in testing for volatility spillovers between energy and agricultural markets using the multivariate BEKK and DCC models, and to make recommendations as to how such spillovers might be tested using valid statistical techniques. Three new definitions of volatility and covolatility spillovers are given, and the different models used in empirical applications are evaluated in terms of the new definitions and statistical criteria.Volatility Spillovers between Energy and Agricultural Markets: A Critical Appraisal of Theory and Practice
http://repub.eur.nl/pub/78373/
Mon, 01 Jun 2015 00:00:01 GMT<div>C-L. Chang</div><div>Y. Li</div><div>M.J. McAleer</div>
__Abstract__
Energy and agricultural commodities and markets have been examined extensively, albeit separately, for a number of years. In the energy literature, the returns, volatility and volatility spillovers (namely, the delayed effect of a returns shock in one asset on the subsequent volatility or covolatility in another asset), among alternative energy commodities, such as oil, gasoline and ethanol across different markets, have been analysed using a variety of univariate and multivariate models, estimation techniques, data sets, and time frequencies. A similar comment applies to the separate theoretical and empirical analysis of a wide range of agricultural commodities and markets. Given the recent interest and emphasis in bio-fuels and green energy, especially bio-ethanol, which is derived from a range of agricultural products, it is not surprising that there is a topical and developing literature on the spillovers between energy and agricultural markets. Modelling and testing spillovers between the energy and agricultural markets has typically been based on estimating multivariate conditional volatility models, specifically the BEKK and DCC models. A serious technical deficiency is that the Quasi-Maximum Likelihood Estimates (QMLE) of a full BEKK matrix, which is typically estimated in examining volatility spillover effects, has no asymptotic properties, except by assumption, so that no statistical test of volatility spillovers is possible. Some papers in the literature have used the DCC model to test for volatility spillovers. However, it is well known in the financial econometrics literature that the DCC model has no regularity conditions, and that the QMLE of the parameters of DCC has no asymptotic properties, so that there is no valid statistical testing of volatility spillovers. The purpose of the paper is to evaluate the theory and practice in testing for volatility spillovers between energy and agricultural markets using the multivariate BEKK and DCC models, and to make recommendations as to how such spillovers might be tested using valid statistical techniques. Three new definitions of volatility and covolatility spillovers are given, and the different models used in empirical applications are evaluated in terms of the new definitions and statistical criteria.Homothetic Efficiency and Test Power: A Non-Parametric Approach
http://repub.eur.nl/pub/78294/
Sun, 31 May 2015 00:00:01 GMT<div>J. Heufer</div><div>P. Hjertstrand</div>
__Abstract__
We provide a nonparametric revealed preference approach to demand analysis based on homothetic efficiency. Homotheticity is a useful restriction but data rarely satisfies testable conditions. To overcome this we provide a way to estimate homothetic efficiency of consumption choices. It generalises Heufer's (2013) two-dimensional concept to arbitrary dimensions and is motivated by a form of rationalisation similar to Halevy et al. (2012). The method allows to recover larger preferred and worse sets and provides considerably more preditive success and discriminatory power against random behaviour. An application to experimental and household expenditure data illustrates the potential of our approach.Measurement, Dynamics, and Implications of Heterogeneous Beliefs in Financial Markets
http://repub.eur.nl/pub/78191/
Thu, 28 May 2015 00:00:01 GMT<div>S. ter Ellen</div>
__Abstract__
This dissertation is part of a growing research field in which the heterogeneity of economic actors is incorporated. It bundles four studies that consider the measurement, dynamics and implications of heterogeneous beliefs in financial markets, using a variety of datasets. The studies show that investors are not only heterogeneous, they also do not use stable, unconditional, forecasting rules to form their expectation on future movements of financial markets. Instead, they may change the way they form expectations based on various factors, such as the past performance of different forecasting rules or the horizon for which they form their expectations. The dynamics between the different types of investors can cause periods of severe mispricing and disruption of financial markets. Survey datasets that contain analysts’ forecast are important tools to unravel investor expectation mechanisms and dynamics that can otherwise not always be directly observed in the data. They can also reveal why investors sometimes disagree more with each other than at other times and how these underlying reasons can be of crucial importance for market dynamics.Symbolic Multidimensional Scaling
http://repub.eur.nl/pub/78189/
Wed, 27 May 2015 00:00:01 GMT<div>P.J.F. Groenen</div><div>Y. Terada</div>
__Abstract__
Multidimensional scaling (MDS) is a technique that visualizes dissimilarities between pairs of objects as distances between points in a low dimensional space. In symbolic MDS, a dissimilarity is not just a value but can represent an interval or even a histogram. Here, we present an overview of developments for symbolic MDS. We discuss how interval dissimilarities they can be represented by (concentric) circles or rectangles, how replications can be represented by a three-way MDS version, and show how nested intervals of distances can be obtained for representing histogram dissimilarities. The various models are illustrated by empirical examples.Subjective Truths
http://repub.eur.nl/pub/78157/
Fri, 22 May 2015 00:00:01 GMT<div>A. Baillon</div>
__Abstract__
On the one hand, economists heavily rely on hard numbers: GDP, growth rate, and exchange rates. On the other hand, their explanations often rely on soft factors: executive confidence in the economy, consumer sentiment, and investor expectations. The hard numbers are objective, but the soft factors are subjective and depend on each individual. Economists increasingly recognize the need to study subjective factors.
The first part of the lecture illustrates the key role of subjective truths in modern economics. For instance, measures of subjective well-being are now being proposed to replace or at least complement GDP. Economic policies often rely on subjective forecasting by experts. The second part of the lecture will show that even though they are subjective, the soft factors can still be studied objectively. We will see how to incentivize people to reveal their expectations about future events but also their confidence in their expectations. Finally, I will show how to make people reveal truths that are completely unverifiable.Empirical Studies on the Economic Impact of Trust
http://repub.eur.nl/pub/78159/
Thu, 21 May 2015 00:00:01 GMT<div>R. de Bliek</div>
__Abstract__
Generally speaking, would you say that most people can be trusted, or that you cannot be too careful when dealing with strangers?” This survey question is frequently asked to thousands of individuals globally. The aim of this question is to obtain a measure for how trusting individuals are towards people they do not know, but with whom they nonetheless interact. This thesis shows that trust has substantial economic consequences.
Currently, in economics trust is often disregarded. It is difficult to reconcile trusting behavior with the classical view of ‘economic man’ as a completely rational, self-interested being. This thesis includes four studies where this behavioral assumption does not hold, however. In fact, they show that more trust is better in various dimensions. From individual income and the location decision of multinational firms to the productivity and technological development of countries: trust matters. Each study identifies how trust generates economic value, and how large the effect of trust is. Furthermore, the development of trust is modeled to explain why there exist such large differences in trust levels between individuals, regions and countries.