aggregation of information in large cournot markets consider a homogeneous product market where firms have private information about an uncertain demand parameter and compete in quantities we examine the convergence properties of bayesian cournot equilibria as the economy is replicated and conclude that large cournot or almost competitive markets do not aggregate information efficiently except possibly when the production technology exhibits constant returns to scale even in a competitive market there is a welfare loss with respect to the first best outcome due to incomplete information in general nevertheless a competitive market is efficient taking as given the decentralized private information structure of the economy endogenous and costly information acquisition is examined and seen to imply that the market outcome always falls short of the first best level with decreasing returns to scale the results are also shown to be robust to the addition of extra rounds of competition which allows firms to use the information revealed by past prices explicit closed form solutions yielding comparative static results are obtained for models characterized by quadratic payoffs and affine information structures

central local relations in china during the reform era the economic and institutional dimensions abstract central local relations are a core but problematic issue in china s reform process the conventional wisdom is that the economic reforms have considerably weakened control by the central government over economic activities in the localities political implications are derived directly from these economic observations the prevalent view is that the economic reforms have reduced the political control of the center and indeed have called into question the viability of china as a single political entity this article disputes these views it shows that economic decentralization has been accompanied by a strengthening of china s unitary political system this has direct bearings on local economic conduct because of the political and institutional constraints local officials surrender tax revenues to the central government and curb their inflationary investment demand

exploring price and non price decision making in the uk package tour industry insights from small scale travel agents and tour operators abstract the emerging literature on the uk package tour industry has drawn upon diverse academic disciplines each carrying different methodological presuppositions underplayed is the intrinsic context within which tourism providers operate this paper presents the results of a questionnaire research investigation to generate practitioners insights into the competitive behaviour of the industry in the uk such insights are central in an understanding of the perceptions and processes at work oligopoly behaviour appears to be present amongst both large company groupings and small enterprises the exploratory analysis suggests the need to re emphasise the behavioural nature of oligopoly further the tourism industry shares this characteristic with manufacturing previously assumed to be widely different

higher order expectations in asset pricing we examine formally keynes idea that higher order beliefs can drive a wedge between an asset price and its fundamental value based on expected future payoffs we call this the higher order wedge which depends on the difference between higher and first order expectations of future payoffs we analyze the determinants of this wedge and its impact on the equilibrium price in the context of a dynamic noisy rational expectations model we show that the wedge reduces asset price volatility and disconnects the price from the present value of future payoffs the impact of the higher order wedge on the equilibrium price can be quantitatively large

competition in regional environmental policies when plant locations are endogenous abstract a two region model is presented in which an imperfectly competitive firm produces a good with increasing returns at the plant level production of the good causes local pollution the firm decides whether to maintain plants in both regions serve both regions from a single plant or shut down if the disutility of pollution is high enough the two regions will compete by increasing their environmental taxes standards until the polluting firm is driven from the market alternatively if the disutility from pollution is not as great the regions will usually compete by undercutting each other s pollution tax rates

can information heterogeneity explain the exchange rate determination puzzle empirical evidence shows that most exchange rate volatility at short to medium horizons is related to order flow and not to macroeconomic variables we introduce symmetric information dispersion about future macroeconomic fundamentals in a dynamic rational expectations model in order to explain these stylized facts consistent with the evidence the model implies that a observed fundamentals account for little of exchange rate volatility in the short to medium run b over long horizons the exchange rate is closely related to observed fundamentals c exchange rate changes are a weak predictor of future fundamentals and d the exchange rate is closely related to order flow

learning from private and public observations of othersʼ actions we study how a continuum of agents learn about disseminated information by observing others actions every period each agent observes a public and private noisy signal centered around the aggregate action taken by the population the public signal represents an endogenous aggregate variable such as a price or a quantity the private signal represents the information gathered through private communication and local interactions we identify conditions such that the average learning curve is s shaped learning is slow initially intensifies rapidly and finally converges slowly to the truth we show that increasing public information always slows down learning in the long run and under some conditions reduces welfare lastly optimal diffusion of information requires that agents strive to be different agents need to be rewarded for choosing actions away from the population average

effects of budgetary constraints on international tourism expenditures abstract this paper implements a logistic transition regression model to examine the relationships between gdp per capita and international tourism expenditures across countries in 2001 2010 by types of savings regimes while studies have focused on the effect of income on international tourism expenditures none consider the nonlinear smooth transition status of savings and its impacts on discretionary spending and hence expenditure on tourism the impact of income on tourism expenditures can vary under different savings regimes the results show that in a low savings regime the effect of an increase in the gdp per capita on international tourism expenditures is more pronounced in a high savings regime there is strong motivation for precautionary savings and tourism is considered a luxury therefore such spending is crowded out by an increase in savings as gdp per capita increases although international tourism expenditures also increase with gdp per capita they do so at a slower rate these findings establish an accurate understanding of the effects of savings on international tourism expenditures

speculation and the term structure of interest rates we develop and estimate a tractable equilibrium term structure model populated with rational but heterogeneously informed traders that take on speculative positions to exploit what they perceive to be inaccurate market expectations about future bond prices the speculative motive is an important driver of trading volume yield dynamics due to speculation are 1 statistically distinct from classical term structure components due to risk premiums and expectations about future short rates and are orthogonal to public information available to traders in real time and 2 quantitatively important accounting for a substantial fraction of the variation of long maturity u s bond yields received may 12 2014 editorial decision may 10 2016 by editor pietro veronesi

strategic and tactical price decisions in hotel revenue management abstract dynamic pricing techniques allow using a number of variables in a tactical way compared to standard catalogue prices this study merges in a conceptual model the relevance of the tactical and the strategic dimension of these variables classified according to their tangible reputational or contextual nature to empirically validate the hypotheses a database of 21 596 price observations was retrieved from booking com the study presents a hedonic price function using the shapley owen decomposition of the r squared to elicit the importance of each group of factors further a hierarchical cluster analysis measures the presence of heterogeneity across operators the results show that online reputation is gaining importance over the traditional star rating despite the tangible variables remain of paramount importance the findings suggest the relevant role of contextual variables in short run price variations the players operating in the tourism and hospitality industries should integrate these findings when designing pricing strategies

regional decentralization and fiscal incentives federalism chinese style abstract aligning the interests of local governments with market development is an important issue for developing and transition economies using a panel data set from china we investigate the relationship between provincial government s fiscal incentives and provincial market development we report three empirical findings first we find that during the period of fiscal contracting system the discrepancy between ex ante contracts and ex post implementation was relatively small suggesting that the fiscal contracts were credible second we find a much higher correlation about four times between the provincial government s budgetary revenue and its expenditure during 1980s and 1990s as compared to 1970s demonstrating that provincial governments faced much stronger ex post fiscal incentives after reform third we find that stronger ex ante fiscal incentives measured by the contractual marginal retention rate of the provincial government in its budgetary revenue are associated with faster development of the non state sector as well as more reforms in the state sector in the provincial economy this holds even when we control for the conventional measure of fiscal decentralization finally we compare federalism chinese style to federalism russian style

political decentralization and corruption evidence from around the world abstract how does political decentralization affect the frequency and costliness of bribe extraction by corrupt officials previous empirical studies using subjective indexes of perceived corruption and mostly fiscal indicators of decentralization have suggested conflicting conclusions in search of more precise findings we combine and explore two new data sources an original cross national data set on particular types of decentralization and the results of a firm level survey conducted in 80 countries about firms concrete experiences with bribery in countries with a larger number of government or administrative tiers and given local revenues a larger number of local public employees reported bribery was more frequent when local or central governments received a larger share of gdp in revenue bribery was less frequent overall the results suggest the danger of uncoordinated rent seeking as government structures become more complex

asset prices and trading volume in a beauty contest speculators buy an asset hoping to sell it later to investors with higher private valuations if agents are uncertain about the distribution of private valuations and about the beliefs of others about this distribution a beauty contest with an infinite hierarchy of beliefs arises under harsanyi s assumption of a common prior the infinite beliefs hierarchy is readily solved using bayes law this paper shows that common knowledge of the beliefs formation rule mapping the private valuation of each agent into his first order belief also simplifies the beliefs hierarchy while allowing for disagreement among agents we analyse the resulting speculation in a stylized asset market several statistics computed only from readily observable quote return and volume data are evaluated in terms of their power to discriminate between genuine disagreement and the harsanyian case only statistics that relate volume and volatility or volume and changes in best offers have the necessary discriminatory power

the price competitive position of mediterranean countries in tourism evidence from the thomson brochure abstract tourism in the mediterranean region is highly dependent on the few large mass market tour operators situated in the north european tourist originating countries price competition is intense both between the tour operators and between the mediterranean countries themselves this paper uses the hotel package prices listed in the thomson summer and winter brochures to develop relative price indexes of each mediterranean country with respect to the mediterranean average indexes are developed in the 3 star 4 star 5 star 7 nights and 14 nights half board holiday packages the prices in the thomson brochure can be regarded as a unified internally consistent set of price data compiled by the largest uk tour operator and offered to uk tourists desiring a thomson summer holiday the change through time of the competitive relative price ranking of hotels regions and countries listed in the thomson brochure may be regarded as an important competitive indicator by industry operators and national policy makers concerned about tourism development

spatial heterogeneity in hedonic house price models the case of austria modelling spatial heterogeneity sh is a controversial subject in real estate economics single family home prices in austria are explored to investigate the capability of global and locally weighted hedonic models even if regional indicators are not fully capable to model sh and technical amendments are required to account for unmodelled sh the results emphasise their importance to achieve a well specified model due to sh beyond the level of regional indicators locally weighted regressions are proposed mixed geographically weighted regression mgwr prevents the limitations of fixed effects by exploring spatially stationary and non stationary price effects besides reducing prediction errors it is concluded that global model misspecifications arise from improper selected fixed effects reported findings provide evidence that the sh of implicit prices is more complex than can be modelled by regional indicators or purely local models the existence of both stationary and non stationary effects implies that the austrian housing market is economically connected

trading volume definitions data analysis and implications of portfolio theory we examine the implications of portfolio theory for the cross sectional behavior of equity trading volume two fund separation theorems suggest a natural definition for trading activity share turnover if two fund separation holds share turnover must be identical for all securities if k 1 fund separation holds we show that turnover satisfies an approximately linear k factor structure these implications are examined empirically using individual weekly turnover data for nyse and amex securities from 1962 to 1996 we find strong evidence against two fund separation and a principal components decomposition suggests that turnover is well approximated by a two factor linear model if price and quantity are the fundamental building blocks of any theory of market interactions the importance of trading volume in modeling asset markets is clear although most models of asset markets have focused on the behavior of returns predictability variability and information content their implications for trading volume have received far less attention in this article we derive the implications of various asset market models for volume and quantify their importance using recently available volume data for individual securities from the center for research in security prices crsp although the volume literature is voluminous 1 we hope to add to this literature in two ways first we develop the volume implications of popular asset market models rather than construct more specialized and often stylized models to

a monopolistic market for information abstract we analyze a model where traders buy information from a monopolistic seller which is subsequently used in a speculative market in order to overcome the dilution in the value of information due to its leakage through informative prices the seller of information may prefer to sell noisier versions of the information he actually has moreover to obtain higher profits it is desirable for the seller to sell different signals to different traders so that the added noise realizations do not affect equilibrium prices one way of doing so which does not require discrimination is to sell identically distributed personalized signals to each of a large number of traders

rational expectations in stationary linear models linear time series models have come to dominate the macroeconomic literature on rational expectations and equilibrium business cycle theory but the explicit solution of such models has generally required strong restrictions upon the exogenous process of stochastic shocks e g temporal independence as well as upon the values of various demand and supply elasticities this paper exhibits a solution technique the method of z transforms which does not require one to impose such restrictions the value of this method is illustrated by applying it to completely characterize the symmetric stationary rational expectations equilibria of a naive linear model of land speculation this approach also permits systematic study of the informationally asymmetric equilibria of the model this paper develops a method for analyzing rational expectations re equilibria in linear economic models the methods i shall discuss usually enable one to determine whether or not a given model has a re equilibrium and if one exists to exhibit an explicit expression for the stochastic process of equilibrium prices the techniques apply to linear models driven by stationary processes of exogenous random shocks

imperfect competition among informed traders we analyze competition among informed traders in the continuous time kyle 1985 model as foster and viswanathan 1996 do in discrete time we explicitly describe the unique linear equilibrium when signals are imperfectly correlated and confirm the conjecture of holden and subrahmanyam 1992 that there is no linear equilibrium when signals are perfectly correlated one result is that at some date and at all dates thereafter the market would have been more informationally efficient had there been a monopolist informed trader instead of competing traders the relatively large amount of private information remaining near the end of trading causes the market to approach complete illiquidity copyright the american finance association 2000

tourism participation and expenditure by spanish households the effects of the economic crisis and unemployment abstract this paper examines household tourism participation decisions and tourism expenditure across the business cycle microdata is used from the spanish household budget survey for the years 2006 2010 facilitating an analysis of the consequences of the economic crisis and unemployment on tourism consumption decisions by households by estimating a heckman model the effects of households socioeconomic determinants on participation and expenditure decisions can be identified taking the year 2008 the beginning of the crisis as a reference the stability of the tourism expenditure model is tested identifying variables whose effects alter in times of crisis one important aspect of the study is how household unemployment affects tourism participation and expenditure decisions the effect of unemployment takes into account whether it is the main breadwinner his or her spouse or another member of the household who is unemployed concentrating on those households whose main breadwinner was employed at the time an analysis is also made of how job insecurity affects tourism consumption decisions from the results the unemployment variables can be seen to have a significant explanatory power suggesting that unemployment information does help to explain the evolution of tourism expenditure across the business cycle

truth telling by third party auditors and the response of polluting firms experimental evidence from india in many regulated markets private third party auditors are chosen and paid by the firms that they audit potentially creating a conflict of interest this article reports on a two year field experiment in the indian state of gujarat that sought to curb such a conflict by altering the market structure for environmental audits of industrial plants to incentivize accurate reporting there are three main results first the status quo system was largely corrupted with auditors systematically reporting plant emissions just below the standard although true emissions were typically higher second the treatment caused auditors to report more truthfully and very significantly lowered the fraction of plants that were falsely reported as compliant with pollution standards third treatment plants in turn reduced their pollution emissions the results suggest reformed incentives for third party auditors can improve their reporting and make regulation more effective jel codes q56 m42 d22 copyright 2013 oxford university press

forecasting the forecasts of others implications for asset pricing we develop a dynamic asset pricing model with heterogeneously informed agents unlike previous research we focus on the general case where differential information leads to the problem of forecasting the forecasts of others and to non trivial dynamics of higher order expectations in particular we prove that the model does not admit a finite number of state variables using numerical analysis we compare equilibria characterized by identical fundamentals but different information structure we demonstrate that the distribution of information has substantial impact on equilibrium prices and returns in particular we show that asymmetric information can generate momentum in returns and high trading volume

on aggregation of information in competitive markets the dynamic case abstract this article examines in the spirit of hellwig 1980 how a dynamic competitive security market aggregates and communicates information between various market participants at every instant it employs a continuous time economy consisting of a large number of heterogeneous agents who are endowed with noisy private signals about the risky asset payoff of differing precision it yields a stationary rational expectations equilibrium in which at every instant the agents use information contained in the market prices without rendering their private information redundant it shows that the market price reflects only that part of private information which is common to many signals and thus extends hellwig s single period results to a multi period model

second order beliefs and the individual investor in a panel survey of individual investors we show that investors second order beliefs their beliefs about the return expectations of other investors influence investment decisions investors who believe others hold more optimistic stock market expectations allocate more of their own portfolio to stocks even after controlling for their own risk and return expectations however second order beliefs are inaccurate and exhibit several well known psychological biases we observe both the tendency of investors to believe that their own opinion is relatively more common among the population false consensus and that others who hold divergent beliefs are considered to be biased bias blind spot

a note on environmental federalism interpreting some contradictory results abstract this paper reconciles some conflicting interpretations of recent literature on interjurisdictional environmental regulatory competition 6 7 present a model in which competition to attract investment by lowering environmental standards leads to a pareto optimal equilibrium 3 and 4 describe a model in which such competition can result in a suboptimal nash equilibrium while it would be possible to draw opposite policy implications from the two models regarding the appropriate degree of environmental federalism such a conclusion would be incorrect this paper reconciles the different results by showing that they depend in large part on monopoly profits and tax exporting not the nature of the pollution externality or environmental federalism

the impact of crisis events and macroeconomic activity on taiwan s international inbound tourism demand abstract the number of inbound tourism arrivals directly impacts the tourism industry and the government agency investments therein therefore policymakers need to improve their understanding of how crisis events affect the demand for inbound tourism from the first quarter of 1996 to the second quarter of 2006 taiwan experienced four major disasters at approximately two year intervals these disasters included the asian financial crisis in 1997 the 21st september 1999 earthquake the 11th september 2001 attacks in the united states and the outbreak of sars in 2003 this paper examines the impact of crisis events on the demand for tourism in order to establish a better understanding of changes and trends in the demand for international tourism this paper uses the auto regression distributed lag model by pesaran shin and smith pesaran m h shin y smith r j 2001 bounds testing approaches to the analysis of long run relationship journal of applied econometrics 16 289 326 to examine the negative impact of these disasters on the demand for inbound tourism this paper also explores the influence of variables such as foreign exchange rates incomes relative prices and transportation costs on the dynamics of the demand for inbound tourism this paper finds that a long term equilibrium exists among all variables indicating that macroeconomic variables may be used to determine the rise or fall of the number of inbound tourism arrivals income and foreign exchange rates are both significant explanatory variables in terms of incurred losses the number of inbound tourism arrivals suffered the greatest decline during the outbreak of severe acute respiratory syndrome sars followed by the 21st september 1999 earthquake and the 11th september 2001 attacks the impact of the asian financial crisis was relatively mild this paper finds that any impact on safety whether domestic or international negatively affects tourism demand the impact of financial crises on tourism demand is less significant ensuring the safety and health of tourists is the key to maintain demand for inbound tourism

heaping induced bias in regression discontinuity designs heaping induced bias in rd designs this study uses monte carlo simulations to demonstrate that regression discontinuity designs arrive at biased estimates when attributes related to outcomes predict heaping in the running variable after showing that our usual diagnostics may not be well suited to identifying this type of problem we provide alternatives and then discuss the usefulness of different approaches to addressing the bias we then consider these issues in multiple non simulated environments

when demand drops and prices rise tourist packages in the balearic islands during the economic crisis abstract the aim of this paper is to analyse the effects of the crisis on the prices of package holidays to the balearic islands sold by a sample of british and german tour operators three alternative price indexes are calculated the results show that tour operators have reacted by using market strategies other than pricing aimed at boosting their revenue even though they do not push up the number of tourists thus protecting the tour operators financial yield

a model of competitive stock trading volume a model of competitive stock trading is developed in which investors are heterogeneous in their information and private investment opportunities and rationally trade for both informational and noninformational motives i examine the link between the nature of heterogeneity among investors and the behavior of trading volume and its relation to price dynamics it is found that volume is positively correlated with absolute changes in prices and dividends i show that informational trading and noninformational trading lead to different dynamic relations between trading volume and stock returns

prices prices and prices a study in the airline sector abstract this article creates and empirically analyzes a dynamic pricing framework the model includes the main theories on prices in the literature and dynamically analyzes how companies change their pricing policies according to different circumstances through the use of regressions the article shows the relative long and short term impact on pricing equations strategic versus operational matters and on production conditions versus demand perspectives in the setting of operational prices in addition it highlights how the proportions of these pricing perspectives change in the airline sector according to the effect of the environment on the configuration of the strategy determined by monthly and hourly seasonality and also according to the nature of this competitive strategy determined by the characteristics of the company and the destination airport the results confirm our framework and show how firms combine the different perspectives in their pricing strategies

infrequent rebalancing return autocorrelation and seasonality a model of infrequent rebalancing can explain specific predictability patterns in the time series and cross section of stock returns first infrequent rebalancing produces return autocorrelations that are consistent with empirical evidence from intraday returns and new evidence from daily returns autocorrelations can switch sign and become positive at the rebalancing horizon second the cross sectional variance in expected returns is larger when more traders rebalance this effect generates seasonality in the cross section of stock returns which can help explain available empirical evidence

differential information and dynamic behavior of stock trading volume this article develops a multiperiod rational expectations model of stock trading in which investors have differential information concerning the underlying value of the stock investors trade competitively in the stock market based on their private information and the information revealed by the market clearing prices as well as other public news we examine how trading volume is related to the information flow in the market and how investors trading reveals their private information article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

a theory of demand shocks this paper presents a model of business cycles driven by shocks to consumer expectations regarding aggregate productivity agents are hit by heterogeneous productivity shocks they observe their own productivity and a noisy public signal regarding aggregate productivity the public signal gives rise to noise shocks which have the features of aggregate demand shocks they increase output employment and inflation in the short run and have no effects in the long run numerical examples suggest that the model can generate sizable equilibrium dsge models of the business cycle include a large number of shocks to technol ogy monetary policy preferences etc but typically do not include expectational shocks as independent drivers of short run fluctuations 1 this paper explores the idea of expectation driven cycles looking at a model where technology determines equilibrium output in the long run and consumers receive noisy signals about technology in the short run the presence of noisy signals produces expectational errors this paper studies the role of these expectational errors in gener ating volatility at business cycle frequencies the model is based on two ingredients first consumers take time to recognize permanent changes in aggregate fundamentals although they may have good information on the current state of the individual firm or sector where they operate they have only limited information regarding the long run determinants of aggregate activity second consumers have access to public information that is relevant to estimate long run productivity this includes news about technological innovations publicly released macroeconomic and sectoral statistics financial market prices and public statements by policy makers however these signals provide only a noisy forecast of the long run effects of technological innovations this opens the door to noise shocks which induce consumers to temporarily overestimate or underestimate the productive capacity of the economy

solving generalized multivariate linear rational expectations models abstract we generalize the linear rational expectations solution method of whiteman 1983 to the multivariate case this facilitates the use of a generic exogenous driving process that must only satisfy covariance stationarity multivariate cross equation restrictions linking the wold representation of the exogenous process to the endogenous variables of the rational expectations model are obtained we argue that this approach offers important insights into rational expectations models we give two examples in the paper an asset pricing model with incomplete information and a monetary model with observationally equivalent monetary fiscal policy interactions we relate our solution methodology to other popular approaches to solving multivariate linear rational expectations models and provide user friendly code that executes our approach

beauty contests and iterated expectations in asset markets in a financial market where traders are risk averse and short lived and prices are noisy asset prices today depend on the average expectation today of tomorrow s price thus iterating this relationship the date 1 price equals the date 1 average expectation of the date 2 average expectation of the date 3 price this will not in general equal the date 1 average expectation of the date 3 price we show how this failure of the law of iterated expectations for average belief can help understand the role of higher order beliefs in a fully rational asset pricing model and explain over reaction to noisy public information

stock market volatility in a heterogeneous information economy the informational role of prices contributes positively to their variability in a noisy rational expectations equilibrium traders rationally respond to price changes by revising their estimates of other traders private signals and hence their own expectations of future dividends the resultant shifts in traders demands amplify any supply shock induced price changes we develop an infinite horizon noisy rational expectations model and calibrate simulate and test it using u s stock market data the price variability in a heterogeneous information economy is shown to be 20 to 46 higher than in an otherwise equivalent economy in which all signals are publicly announced i introduction a common theme of the rational expectations literature is the ability of prices to convey information a question is the extent to which this informational role induces additional variability in prices grundy and mcnichols 1989 present a rational expectations model with multiple rounds of trade preceding a final consumption date they show that the revelation of existing private information through price changes can be the sole cause of the price variability equilibrium prices can change even in the absence of any change in supply or the arrival of any new information beyond the observation that the price itself has changed we examine the link between the informational role of prices and price variability in a multi period model with heterogeneous information arriving and consumption taking place at each trading date our goal is to obtain a comparison of price variability in a world of heterogeneous information with variability in an otherwise equivalent homogeneous information economy in which in effect all private signals are publicly announced and

on interjurisdictional competition and environmental federalism herein we construct a competitive interjurisdictional model that reconciles two recent exceptions to the race to the bottom j publ econ 35 1988 333 354 j urban econ 37 1995 290 310 our results suggest that since environmental rents from local production are likely not captured 100 percent by local residents devolved command and control environmental regulation is inefficient moreover faced with the reality of fiscal constraints local governments adopt property tax structures that serve to compound inefficiencies within such a second best setting if a jurisdiction underprovides non environmental public goods and jurisdictional capital productivity and emissions are strong complements a race to the bottom equilibrium is supported

the more we know about the fundamental the less we agree on the price i allow trading horizon heterogeneity across groups in a standard differential information model of a financial market this approach can explain the well established phenomenon that after a public announcement trading volume increases more private information is incorporated into prices and volatility increases in such environments public information has the important secondary role of helping agents learn about the information of other agents therefore whenever the correlation between the private information of different groups is sufficiently low a public announcement increases disagreement among short horizon traders regarding the expected selling price even as it decreases disagreement about the fundamental value of the asset additional testable implications are also suggested

information percolation momentum and reversal abstract we propose a joint theory of time series momentum and reversal based on a rational expectations model we show that a necessary condition for momentum to arise in this framework is that information flows at an increasing rate we focus on word of mouth communication as a mechanism that enforces this condition and generates short term momentum and long term reversal investors with heterogeneous trading strategies contrarian and momentum traders coexist in the marketplace although a significant proportion of investors are momentum traders momentum is not completely eliminated word of mouth communication spreads rumors and generates price run ups and reversals our theoretical predictions are in line with empirical findings

polluting thy neighbor unintended consequences of china s pollution reduction mandates this paper studies how the pollution reduction mandates imposed by china s central government in 2001 triggered unanticipated responses from its provinces we apply the difference in differences in differences ddd method to a unique dataset on industry level activities in counties along 24 major rivers in china from 1998 through 2008 we find that the most downstream county of a province has up to 20 percent more water polluting activities than otherwise identical counties since 2001 moreover we find that the enforcement of pollution fee collection is more lenient in the most downstream county of a province and that private firms contribute more to the downstream effect than state owned enterprises and foreign firms these findings are consistent with the hypothesis that the provincial governments respond to the pollution reduction mandates by shifting their enforcement efforts away from the most downstream county

how equilibrium prices reveal information in a time series model with disparately informed competitive traders abstract accommodating asymmetric information in a dynamic asset pricing model is technically challenging due to the problems associated with higher order expectations that is rational investors are forced into a situation where they must forecast the forecasts of other agents in a dynamic setting this problem telescopes into the infinite future and the dimension of the relevant state space approaches infinity by using the frequency domain approach of whiteman linear rational expectations models a user s guide university of minnesota press minneapolis 1983 and kasa forecasting the forecasts of others in the frequency domain rev econ dynam 3 2000 726 756 this paper demonstrates how information structures previously believed to preserve asymmetric information in equilibrium converge to a symmetric information rational expectations equilibrium the revealing aspect of the price process lies in the invertibility of the observed state space which makes it possible for agents to infer the economically fundamental shocks and thus eliminating the need to forecast the forecasts of others

voting for pollution policy the importance of income inequality and openness to trade abstract this paper analyzes how openness and the distribution of factor ownership interact to determine individual and aggregate demand for pollution policy analysis of voter preferences in autarky shows that an increased stake in either the dirty or the clean industry can induce an individual voter to prefer stricter environmental policy similarly the paper shows that poorer voters may be the greener voters within an electorate the model also reveals that the incidence of pollution policy depends upon a country s trade regime with consequences for the direction in which income inequality influences aggregate demand for pollution policy

vacationers and the economic double dip in europe the subject of this study concerns individual vacationers reactions to the global economic crisis this crisis is lasting longer than expected resulting in europe in a double dip vacationers can use different strategies to cope with this crisis from pruning giving up the vacation via cheese slicing economizing on vacation attributes to non economizing based on a theoretical framework it was predicted that over time the pruning segment would become larger than the cheese slicing segment a longitudinal study in the netherlands covering 4 years shows economic developments having a relatively minor effect on vacationers holiday plans and intentions with no increase in the size of the pruning segment six vacationer segments were found three of which can be considered to be crisis resistant each segment pursues different economizing strategies with each requiring a customized marketing strategy five explanations are proposed for the relatively limited influence of the economic double dip on dutch vacationers future research can be directed to comparing vacations with other consumer products in order to explain the crisis resistance of vacation planning during this economic crisis

multi period information markets abstract this article examines the single shot decision problem of a monopolistic information seller selling a flow of information in a dynamic framework in a generalized version of wang s 1993 economy it shows that the profit maximizing strategy of the seller is to sell his information as is but only to a fraction of traders it argues that this strategy of selling information is different from that in a static model mainly due to the very different nature of constraints faced by the information seller in a dynamic framework

trading volume and serial correlation in stock returns this paper investigates the relationship between aggregate stock market trading volume and the serial correlation of daily stock returns for both stock indexes and individual large stocks the first order daily return autocorrelation tends to decline with volume the paper explains this phenomenon using a model in which risk averse market makers accommodate buying or selling pressure from liquidity or noninformational traders changing expected stock returns reward market makers for playing this role the model implies that a stock price decline on a high volume day is more likely than a stock price decline on a low volume day to be associated with an increase in the expected stock return

information aggregation in a noisy rational expectations economy abstract this paper analyzes a general equilibrium model of a competitive security market in which traders possess independent pieces of information about the return of a risky asset each trader conditions his estimate of the return both on his own private source of information and price which in equilibrium serves as a noisy aggregator of the total information observed by all traders a closed form characterization of the rational expectations equilibrium is presented a counter example to the existence of fully revealing equilibrium is developed

does central supervision enhance local environmental enforcement quasi experimental evidence from china abstract this paper draws on a natural experiment generated by the national specially monitored firms nsmf program in china to evaluate the effectiveness of central supervision at improving local environmental enforcement we explore a unique firm level chinese environmental statistics dataset and utilize a regression discontinuity design to assess the impact of central supervision through the nsmf program on an industrial firm s chemical oxygen demand cod emissions the results suggest that central supervision significantly reduces industrial cod emissions by at least 26 8 these results highlight the substantial room for improvement in chinese environmental regulations via central supervision a more flexible environmental decentralization regime and comprehensive central supervision are thus recommended for future reforms