on taxation in a two sector endogenous growth model with endogenous labor supply abstract this paper studies the effects of taxation on long run growth in a two sector endogenous growth model with i physical capital as an input in the education sector and ii leisure as an additional argument in the utility function income taxation the same rate applies for capital and labor income reduces the growth rate the same is true if only labor income is taxed however if only capital income is taxed the positive effect of an increase in total non leisure time may dominate the direct negative effect implying that capital taxation increases the long run growth rate

asymmetric forecast densities for u s macroeconomic variables from a gaussian copula model of cross sectional and serial dependence most existing reduced form macroeconomic multivariate time series models employ elliptical disturbances so that the forecast densities produced are symmetric in this article we use a copula model with asymmetric margins to produce forecast densities with the scope for severe departures from symmetry empirical and skew t distributions are employed for the margins and a high dimensional gaussian copula is used to jointly capture cross sectional and multivariate serial dependence the copula parameter matrix is given by the correlation matrix of a latent stationary and markov vector autoregression var we show that the likelihood can be evaluated efficiently using the unique partial correlations and estimate the copula using bayesian methods we examine the forecasting performance of the model for four u s macroeconomic variables between 1975 q1 and 2011 q2 using quarterly real time data we find that the point and density forecasts from the copula model are competitive with those from a bayesian

evaluating interval forecasts a complete theory for evaluating interval forecasts has not been worked out to date most of the literature implicitly assumes homoskedastic errors even when this is clearly violated and proceed by merely testing for correct unconditional coverage consequently i set out to build a consistent framework for conditional interval forecast evaluation which is crucial when higher order moment dynamics are present the new methodology is demonstrated in an application to the exchange rate forecasting procedures advocated in risk management

bargain hunting or star gazing investors preferences for stock mutual funds investors who wish to purchase shares in mutual funds balance many types of information from a variety of sources when making their fund selection this research examines how investors choose a mutual fund within a given class of funds among the major findings are that investors pay a great deal of attention to past performance and vastly overweight loads relative to expense ratios when evaluating a fund s overall fee structure i also find that investors with a greater knowledge of basic finance are less likely not more likely to make reasonable fund choices

reprint of investors distraction and strategic repricing decisions abstract in this paper i analyze investors reactions to changes in the expense ratios of equity mutual funds i show that investment flows response to fees cannot be fully explained by looking at investors performance sensitivity while performance sensitivity monotonically increases with past performance price sensitivity does not investors who buy top past performers seem to be distracted by the fund s previous return and pay relatively little attention to the expense ratios moreover price sensitivity increases with fund visibility while performance sensitivity decreases and while looking at data from 1986 to 2006 no discernible trend can be observed in the average performance sensitivity price sensitivity strongly increases due to the dramatic increase in the availability of mutual funds information for retail investors finally i show that investment companies strategically time their repricing decisions in order to exploit time variations in price and performance sensitivities and that fund governance quality affects the degree to which investment companies engage in this opportunistic behavior

tax audits fines and optimal tax evasion in a dynamic context abstract in a dynamic optimisation framework we show that the optimal tax evasion can be either a positive or a negative function of the tax rate according to the form of the fine to be paid when evasion is detected

time series copulas for heteroskedastic data we propose parametric copulas that capture serial dependence in stationary heteroskedastic time series we suggest copulas for first order markov series and then extend them to higher orders and multivariate series we derive the copula of a volatility proxy based on which we propose new measures of volatility dependence including co movement and spillover in multivariate series in general these depend upon the marginal distributions of the series using exchange rate returns we show that the resulting copula models can capture their marginal distributions more accurately than univariate and multivariate generalized autoregressive conditional heteroskedasticity models and produce more accurate value at risk forecasts

the statistical distribution of exchange rates empirical evidence and economic implications the abundant evidence that changes in exchange rates have distributions with fatter tails than the normal distribution has led researchers to consider non normal distributions including the student the stable paretian and mixtures of distributions this paper compares the empirical fits of three non normal candidates and the normal distribution for daily changes in the logarithms of exchange rates using maximum likelihood estimation of the parameters and chi square goodness of fit tests the student and mixture of two normals provide the best fits but there is evidence that the distribution parameters may vary over time

costly search and mutual fund flows this paper studies the flows of funds into and out of equity mutual funds consumers base their fund purchase decisions on prior performance information but do so asymmetrically investing disproportionately more in funds that performed very well the prior period search costs seem to be an important determinant of fund flows high performance appears to be most salient for funds that exert higher marketing effort as measured by higher fees flows are directly related to the size of the fund s complex as well as the current media attention received by the fund which lower consumers search costs

growth effect of taxes in an endogenous growth model to what extent do taxes affect economic growth abstract this paper presents an endogenous growth model comprising of financial human and physical capital and incorporating major features of a general tax system technology and preference parameter values in the model are chosen to fit the actual growth experiences of the united states and a rapidly growing east asian nic using the calibrated model i assess the role of differences in taxes and other variables in explaining the difference in growth rates the main findings are i the difference in tax systems across countries explains a significant proportion around 30 of the difference in growth rates ii the difference in preferences explains at most 4 and iii differences in labor income tax debt equity ratio and inflation can be important in explaining the growth difference further i evaluate the contribution of the monetary factor to the growth rate gap and the growth effect of us tax reforms e g revenue neutral changes in relative tax structure

correlations in price changes and volatility across international stock markets the short run interdependence of prices and price volatility across three major international stock markets is studied daily opening and closing prices of major stock indexes for the tokyo london and new york stock markets are examined the analysis utilizes the autoregressive conditionally heteroskedastic arch family of statistical models to explore these pricing relationships evidence of price volatility spillovers from new york to tokyo london to tokyo and new york to london is observed but no price volatility spillover effects in other directions are found for the pre october 1987 period article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

real time macroeconomic forecasting with a heteroskedastic inversion copula there is a growing interest in allowing for asymmetry in the density forecasts of macroeconomic variables in multivariate time series this can be achieved with a copula model where both serial a

macroeconomic forecasting performance under alternative specifications of time varying volatility summary this paper compares alternative models of time varying volatility on the basis of the accuracy of real time point and density forecasts of key macroeconomic time series for the usa we consider bayesian autoregressive and vector autoregressive models that incorporate some form of time varying volatility precisely random walk stochastic volatility stochastic volatility following a stationary ar process stochastic volatility coupled with fat tails garch and mixture of innovation models the results show that the ar and var specifications with conventional stochastic volatility dominate other volatility specifications in terms of point forecasting to some degree and density forecasting to a greater degree copyright 2014 john wiley sons ltd

of tournaments and temptations an analysis of managerial incentives in the mutual fund industry we test the hypothesis that when their compensation is linked to relative performance managers of investment portfolios likely to end up as losers will manipulate fund risk differently than those managing portfolios likely to be winners an empirical investigation of the performance of 334 growth oriented mutual funds during 1976 to 1991 demonstrates that mid year losers tend to increase fund volatility in the latter part of an annual assessment period to a greater extent than mid year winners furthermore we show that this effect became stronger as industry growth and investor awareness of fund performance increased over time

why does the law of one price fail an experiment on index mutual funds we conduct an experiment to evaluate why individuals invest in high fee index funds in our experiments subjects allocate 10 000 across four s p 500 index funds and are rewarded for their portfolio s subsequent return subjects overwhelmingly fail to minimize fees we can reject the hypothesis that subjects buy high fee index funds because of bundled non portfolio services search costs for fees matter but even when we eliminate these costs fees are not minimized instead subjects place high weight on annualized returns since inception fees paid decrease with financial literacy interestingly subjects who choose high fee funds sense they are making a mistake

demand curves and the pricing of money management one reason why funds charge different prices to their investors is that they face different demand curves one source of differentiation is asset retention performance sensitive investors migrate from worse to better prospects taking their performance sensitivity with them in the cross section we show that past attrition significantly influences the current pricing of retail but not institutional funds in time series we show that the repricing of retail funds after merging in new shareholders is predicted by the estimated effect on its demand curve this result is robust to other influences on repricing including asset and account size changes copyright 2002 oxford university press

optimal dynamic tax evasion abstract we study optimal dynamic tax evasion in the framework proposed by lin and yang 2001 and dzhumashev and gahramanov 2011 with some modifications a more flexible utility function a more realistic audit process and a penalty function which can be defined both on evaded income and evaded taxes in the former case the elasticity between tax rate and tax evasion is positive unless the subsistence consumption level is higher than a given threshold in the latter case the relationship is usually negative but the value of elasticity depends on the form of absolute risk aversion in particular we show that for increasing relative risk aversion for a tax rate higher than 50 the elasticity may even become positive us data are consistent with irra preferences

taxation risk taking and growth a continuous time stochastic general equilibrium analysis with labor leisure choice abstract this paper investigates the equilibrium relationship between taxation portfolio choice risk taking and capital accumulation specifically it examines how taxes affect risk taking and capital accumulation we extend the existing literature by relaxing two crucial assumptions in modelling risk taking behavior i that the investment opportunity set is fixed and ii that there is no distinction between attitudes towards risk and behavior towards intertemporal substitution we extend the investment opportunity set of individuals through optimally determined human capital and distinguish intertemporal substitution from attitudes towards risk via a recursive utility function in the presence of these extensions the paper successfully derives a closed form solution to the stochastic growth model with stochastic wage income

a dynamic portfolio choice model of tax evasion comparative statics of tax rates and its implication for economic growth abstract this paper extends the portfolio choice model of tax evasion from a static to a dynamic setting it is shown that while higher tax rates repress tax evasion in the static model they encourage tax evasion in the dynamic model we explore a novel implication of this result and show that while growth is decreasing in tax rates in the absence of tax evasion it is u shaped in tax rates in the presence of tax evasion

product differentiation search costs and competition in the mutual fund industry a case study of s p 500 index funds we investigate the role that non portfolio fund differentiation and information search frictions play in creating two salient features of the mutual fund industry the large number of funds and the sizeable dispersion in fund fees in a case study we find that despite the financial homogeneity of s p 500 index funds this sector exhibits the fund proliferation and fee dispersion observed in the broader industry we show how extra portfolio mechanisms explain these features these mechanisms also suggest an explanation for the puzzling late 1990s shift in sector assets to more expensive and often newly entered funds an influx of highinformation cost novice investors

dynamic stochastic copula models estimation inference and applications we propose a new dynamic copula model where the parameter characterizing dependence follows an autoregressive process as this model class includes the gaussian copula with stochastic correlation process it can be viewed as a generalization of multivariate stochastic volatility models despite the complexity of the model the decoupling of marginals and dependence parameters facilitates estimation we propose estimation in two steps where rst the parameters of the marginal distributions are estimated and then those of the copula parameters of the latent processes volatilities and dependence are estimated using efficient importance sampling eis we discuss goodness of t tests and ways to forecast the dependence parameter for two bivariate stock index series we show that the proposed model outperforms standard competing models

timing tax evasion standard models of tax evasion implicitly assume that evasion is either fully detected or not detected at all empirically this is not the case casting into doubt the traditional rationales for interior evasion choices i propose two alternative dynamic explanations for interior tax evasion rates first fines increasing in the duration of an evasion spell implying that the expected costs of evasion increase convexly with the time spent non reporting while the benefits increase linearly second different vintages of income sources subject to aggregate risk and fixed costs when switched between evasion states the dynamic approach yields a transparent representation of revenue losses and social costs due to tax evasion novel findings on the effect of policy on tax evasion and a tractable framework for the analysis of tax evasion dynamics

intra day and inter market volatility in foreign exchange rates four foreign exchange spot rate series recorded on an hourly basis for a six month period in 1986 are examined a seasonal garch model is developed to describe the time dependent volatility apparent in the percentage nominal return of each currency hourly patterns in volatility are found to be remarkably similar across currencies and appear to be related to the opening and closing of the worlds major markets robust lm tests designed to deal with the extreme leptokurtosis in the data fails to uncover any evidence of misspecification or the presence of volatility spillover effects between the currencies or across markets