6. June 18, 2014
5. June 17, 2014
4. June 17, 2014
3. May 22, 2014
2. April 17, 2014
1. April 4, 2014
- Speaker: Prof. Miao, Jianjun (Boston University)
- Topic: Robust contracts in continuous time
- Time: 16:00--17:30
- Venue: Liangsheng Building, B129
- Abstract: We study two types of robust contracting problem under hidden action in continuous time. In type I problem, the principal is ambiguous about the project cash flows, while he is ambiguous about the agent's beliefs in type II problem. The principal designs a robust contract that maximizes his utility under the worst-case scenario subject to the agent's incentive and participation constraints. We implement the optimal contract by cash reserves, debt and equity. In addition to receiving ordinary dividends when cash reserves reach a threshold, outside equity holders also receive special dividends or inject cash in the cash reserves to cope with model misspecification. Ambiguity aversion lowers outside securities value and raises the credit yield spread. It generates equity premium for type I problem, but not for type II problem. The equity premium and the credit yield spread are state dependent and high for distressed firms with low cash reserves.
5. June 17, 2014
- Speaker: Dr. Jiang, Bing (Virginia Military Institute)
- Topic: Can personality type explain heterogeneity in probability distortions?
- Time: 16:00--17:30
- Venue: Liangsheng Building, B129
- Abstract: There are two regularities we have learned from experimental studies of choice under risk. The first is that the majority of people weigh objective probabilities non-linearly. The second regularity, although less commonly acknowledged, is that there is a large amount of heterogeneity in how people distort probabilities. Despite of this, little effort has been made to identify the source of heterogeneity. In this paper, we explore the possibility that personality type is linked to probability distortions. Using validated psychological questionnaires, we clustered participants into distinct personality types: motivated, impulsive, and affective. We found that the motivated viewed gambling more attractive, whereas the impulsive were the most capable of discriminating non-extreme probabilities. Our results suggest that the observed heterogeneity in probability distortions may be explained by personality profiles, which can be elicited though standard psychological questionnaires.
4. June 17, 2014
- Speaker: Dr. Feng, Zhigang (University of Illinois at Urbana-Champaign)
- Topic: Mandated benefits, entrepreneurship and talent misallocation
- Time: 10:00--11:30
- Venue: Liangsheng Building, B129
- Abstract: This paper studies the macroeconomic effects of three ways of financing health care on the allocation of occupational talent in an economy. The three policies are employer provided health insurance (EHI), health exchanges, and universal health coverage. EHI is a mandated benefit, which distorts occupational choice by driving a wedge between marginal utility and the cost of the benefit. Two types of misallocations occur. Some highly skilled individuals with adverse health shocks leave entrepreneurship while individuals with intermediate skills but favorable health shocks opt to mange firms. The effects of the policies on firm size, productivity, GDP, earnings and welfare depend on assets, managerial ability, health care shocks, and endogenous factor prices. Risk aversion and the discount factor are also important parameters. Agents are heterogeneous and welfare effects, which may be positive or negative, vary significantly with assets and ability.
3. May 22, 2014
- Speaker: Prof. Shachat, Jason (Xiamen University)
- Topic: Discrete rule learning and the bidding of the sexes
- Time: 16:00--17:30
- Venue: Liangsheng Building, B129
- Abstract: We present a hidden Markov model of discrete strategic heterogeneity and learning in first price independent private values auctions. The model includes three latent bidding rules: constant absolute mark-up, constant percentage mark-up, and strategic best response. Rule switching probabilities depend upon a bidder's past auction outcomes. We apply this model to a new experiment that varies the number of bidders, the auction frame between forward and reverse, and includes the collection of saliva samples - used to measure subjects' sex hormone levels. We find the proportion of bidders following constant absolute mark-up increases with experience, particularly when the number of bidders is large. The primary driver here is subjects' increased propensity to switch strategies when they experience a loss (win) reinforcement when following a strategic (heuristic) rule. This affect is stronger for women and leads them spend more time following boundedly rational rules. We also find women in the Luteal and Menstrual phases of their menstrual cycle bid less aggressively, in terms of surplus demanded, when following the best response rule. This combined with spending more time following simple rules of thumbs explains gender differences in earnings.
2. April 17, 2014
- Speaker: Prof. Sun, Ning (Shanghai University of Finance and Economics)
- Topic: Hybrid mechanisms for car licenses allocation with budget constraints
- Time: 0930--1100
- Venue: Liangsheng Building, B127
- Abstract: In this paper, we use a multi-unit auction model to describe the car licenses allocation problem in China, where buyers are assumed to be of unit demand and hold budget constraints. When designing a car licenses allocation mechanism, the social planner is assumed to consider three factors: efficiency, revenue, and equality. We give a modified Gini coefficient to measure the equality of an allocation mechanism. We then propose a kind of Hybrid Mechanisms for car licenses allocation incorporating auction and lottery, and discuss bidders’ relative strategies. By numerically computing the expressions of efficiency, equality and revenue under the assumption of continuum-mass agents and licenses, we present the performance of the hybrid mechanism with different parameters. Simulations under the assumption of discrete number of agents and licenses are also run to check the robustness of the results of continuum-mass cases. We further describe the Probabilistic Allocation Mechanism and Auctions with price ceilings and compare them with the Hybrid Mechanisms.
1. April 4, 2014
- Speaker: Dr. Chuang, O-Chia (National Taiwan University)
- Topic: Risk measures based on first four moments and resulting trading strategies
- Time: 0930--1100
- Venue: Liangsheng Building, B127
- Abstract: In this paper we propose a method to calculate the risk measures proposed by Aumann and Serrano (2008) and Huang, Tzeng, and Wang (2012), where the former is related to stochastic dominance, and the latter hinges on central dominance. This method enables us to utilize the information about mean, variance, skewness, and kurtosis of a distribution. We demonstrate the risk measure of Huang et al. (2012) provides sufficient information for the investment decision of all constant absolute risk averse investors in the traditional portfolio selection model. A trading strategy is then constructed with respect to this measure. Our empirical results show that this trading strategy outperforms buy-and-hold trading strategy during sample period from January 2001 to October 2009, and conclude that information of higher order moments are valuable for invest decisions.