a behavioral framework for time diversification the box of factors that we call risk is both too large and too small the box is large enough to include many sometimes conflicting measures of risk variance and semivariance probabilities of losses and their amounts but the box is too small to include factors that affect choices but fall outside the boundaries of risk frames and cognitive errors self control and regret we explore the role of these factors in time diversification the belief that time diversification reduces risk underlies the current drive to invest social security funds in stocks but is such investment prudent we discuss the role of advisors in providing prudent advice changes in the standards of prudence over time the use of time diversification in guiding investors to prudent portfolios and its use in the current debate on social security

an afterlife capital model of religious choice abstract this paper uses a modified version of the afterlife capital model to study religious choice it compares a religious monopoly with various duopolies the duopolies involve both exclusivist and nonexclusivist religions contrary to the supply side literature it finds that religious choice does not necessarily increase religiosity and in some cases decreases it it also finds that adopting exclusivist doctrines is a dominant strategy for a religion possible extensions of the framework to other issues in the economics of religion are also discussed

detecting imbalances in house prices what goes up must come down i suggest a toolkit of four bubble detection methods that can be used to monitor developments in house prices these methods are applied to us finnish and norwegian data for the united states all measures unanimously suggest a bubble in the early to mid 2000s whereas current us house prices are found to be aligned with economic fundamentals one of the measures indicates imbalances in finland while there are no signs of a bubble in norway i find that large parts of the us house price bubble can be explained by the sharp increase in capital inflows and the extension of loans to the subprime mortgage market

distributional modeling and short term forecasting of electricity prices by generalized additive models for location scale and shape abstract in the context of the liberalized and deregulated electricity markets price forecasting has become increasingly important for energy company s plans and market strategies within the class of the time series models that are used to perform price forecasting the subclasses of methods based on stochastic time series and causal models commonly provide point forecasts whereas the corresponding uncertainty is quantified by approximate or simulation based confidence intervals aiming to improve the uncertainty assessment this study introduces the generalized additive models for location scale and shape gamlss to model the dynamically varying distribution of prices the gamlss allow fitting a variety of distributions whose parameters change according to covariates via a number of linear and nonlinear relationships in this way price periodicities trends and abrupt changes characterizing both the position parameter linked to the expected value of prices and the scale and shape parameters related to price volatility skewness and kurtosis can be explicitly incorporated in the model setup relying on the past behavior of the prices and exogenous variables the gamlss enable the short term one day ahead forecast of the entire distribution of prices the approach was tested on two datasets from the widely studied california power exchange calpx market and the less mature italian power exchange ipex calpx data allow comparing the gamlss forecasting performance with published results obtained by different models the study points out that the gamlss framework can be a flexible alternative to several linear and nonlinear stochastic models

sacrifice and stigma reducing free riding in cults communes and other collectives this paper presents an economic analysis of religious behavior that accounts for the continuing success of groups with strange requirements and seemingly inefficient prohibitions the analysis does not presuppose any special motives for religious activity rather religion is modeled as a club good that displays positive returns to participatory crowding the analysis demonstrates that efficient religions with perfectly rational members may benefit from stigma self sacrifice and bizarre behavioral restrictions the model also addresses sacrifice in nonreligious social clubs fraternities communes political parties work groups and families

mr smith and the preachers the economics of religion in the wealth of nations the extension of economic analysis to problems beyond the domain of formal markets and explicit prices represents a major recent intellectual development but economic imperialism is not new and was not invented in chicago adam smith in his wealth of nations extended economic reasoning to a variety of nonmarket exchange problems one example is his analysis of religious behavior smith viewed participation in religion as a rational device by which individual enhanced the value of their human capital he also explained the behavior of the clergy and other suppliers of religious services from an economic perspective

traders expectations in asset markets experimental evidence we elicit traders predictions of future price trajectories in repeated experimental markets for a 15 period lived asset we find that individuals beliefs about prices are adaptive and primarily based on past trends in the current and previous markets in which they have participated most traders do not anticipate market downturns the first time they participate in a market and when experienced they typically overestimate the time remaining before market peaks and downturns occur when prices deviate from fundamental values belief data are informative to an observer in predicting the direction of future price movements and the timing of market peaks

housing really is the business cycle what survives the lessons of 2008 09 the downturn of 2008 09 has confirmed that i housing is the single most critical part of the u s business cycle ii the proper conduct of monetary policy needs to be cognizant that choices made at one point in time affect the options later and iii the best time to intervene in the housing cycle is when the volume of building is above normal and growing more so what was different this time was the rapid and substantial decline in home prices

one size fits all monetary policy and asymmetric household debt cycles in u s states i investigate the nonlinear effects of monetary policy through differences in household debt across u s states after constructing a novel indicator of inflation for the states i compute state specific monetary policy stances as deviations from an aggregate taylor rule i find that the effectiveness of monetary policy is curtailed during periods of large household debt imbalances moreover a common u s monetary policy does not fit all it may have asymmetric effects on the economic performance across states particularly at times of high dispersion in the household debt imbalances as it may have been the case around the great recession

estimating the consumption and investment demands for housing and their effect on housing tenure status theoretical work suggests that families live in owner occupied housing if their investment demand for housing exceeds their consumption demand for housing using household data from the 1983 survey of consumer finances the authors test this theory by estimating an ordered probit model of whether families rent without owning property rent while owning property other than their home own their home without owning other properties or own their home in addition to other properties for owner occupiers who own additional property both the investment and consumption demands are directly observed enabling the authors to separately identify these functions copyright 1994 by mit press

ownership occupation and risk a view of the city of london office market office returns in the city of london are more volatile than in other uk markets this volatility may reflect fluctuations in capital flows associated with changing patterns of ownership and the growing linkage between real estate and financial markets in the city using current and historical data patterns of ownership in the city are investigated they reveal that overseas ownership has grown markedly since 1985 that owners are predominantly fire sector firms and that there are strong links between ownership and occupation this raises concerns about future volatility and systemic risk in a market strongly influenced by the cyclical behaviour and shocks of the international financial system

irrational exuberance and option smiles disagreement among investors is pervasive some investors see a trend and predict continuation others see the same trend and predict reversal some investors overreact others underreact i explain how disagreement can and does cause markets to be inefficient and i argue that option markets are particularly vulnerable in this respect the volatility smile associated with index options is one manifestation of inefficiency stemming from heterogeneous beliefs as part of the argument i discuss an event study about irrational exuberance the term alan greenspan chair of the u s federal reserve board used in late 1996 to describe stock market sentiment to study this event i combined the information gleaned from option pricing data with other information about market sentiment to assess the impact of heterogeneous beliefs on market efficiency

the cross over effect of irrational sentiments in housing commercial property and stock markets abstract this paper examines the dependence in irrational sentiments across housing commercial property and stock markets our empirical results document an important and lasting impact that commercial real estate sentiment and returns have on broader financial markets we also show that the cross over effects of market sentiments are not consistent with cross over effects in market returns sentiments and returns in housing and stock markets exhibit strong dependence on other markets whereas they evolve independently in commercial real estate while housing and stock market returns respond to irrational sentiment in commercial real estate markets the opposite is not true

forecasting day ahead electricity spot prices the impact of the exaa to other european electricity markets abstract in our paper we analyze the relationship between the day ahead electricity price of the energy exchange austria exaa and other day ahead electricity prices in europe we focus on markets which settle their prices after the exaa which enables traders to include the exaa price into their calculations for each market we employ econometric models to incorporate the exaa price and compare them with their counterparts without the price of the austrian exchange by employing a forecasting study we find that electricity price models can be improved when exaa prices are considered

after the fall the impact of government regulation on church attendance in eastern europe 1990 2004 previous literature modeling the demand for religion has identified socioeconomic factors religious human capital and religious market structure as being the fundamental determinants of the level of participation in religious services and practices building on the existing literature this study analyzes the effect of government regulation and intervention on religious activity using religion related data as well as demographic and economic data from 22 eastern european countries after the fall of communism the existence of any form of religious restrictions is found to reduce church attendance rates

the other commercial real estate boom and bust the effects of risk premia and regulatory capital arbitrage abstract in the 2000 s u s commercial real estate cre prices experienced a boom and bust as dramatic as the more widely analyzed swings in house prices and contributed significantly to bank failures we model short run and long run movements in capitalization rates rent to price ratio and risk premia for office building and apartments in the mid 2000s boom cre prices were mainly driven by declines in required risk premia that stemmed from a weakening of capital requirements in the bust cre price declines were initially driven by a jump in general risk premia and later by a tightening of effective capital requirements on commercial mortgage backed securities cmbs from the dodd frank act the subsequent recovery in cre prices was induced and sustained by unusually low real treasury yields we conclude that macro prudential regulation of leverage may help limit asset price booms by preventing sharp declines in risk premia

a review of the decomposition methodology for extracting and identifying the fluctuation characteristics in electricity demand forecasting abstract electricity consumption data is regarded as nonlinear non stationary series and is often made up by a superposition of several distinct frequencies thus most of the conventional approaches currently employed for the modeling and forecasting involve great complexity and uncertainty recently fluctuation characteristic analysis has increasingly become essential step in the application of electricity demand forecasting yet the implementation of this analysis is an inherently difficult task to obtain reasonable accuracy and stability in the modeling there has been the tendency to accommodate multidimensional attributes of the consumption demands with decomposition based approach in terms of more advanced and hybrid form and the decomposition can be achieved through utilization of two different procedures namely component model based and frequency domain analysis based decomposition consequently a comprehensive review and summarization of decomposition based approach for the prediction is conducted in this paper more specifically the issues of demand forecasting classification the dependency between the electricity demand and external indicators features of various decomposition approach as well as the unique fluctuation characteristic of electricity demand at different time scales are discussed in addition future research directions of the decomposition based prediction approach are outlined

recent advances in electricity price forecasting a review of probabilistic forecasting abstract since the inception of competitive power markets two decades ago electricity price forecasting epf has gradually become a fundamental process for energy companies decision making mechanisms over the years the bulk of research has concerned point predictions however the recent introduction of smart grids and renewable integration requirements has had the effect of increasing the uncertainty of future supply demand and prices academics and practitioners alike have come to understand that probabilistic electricity price and load forecasting is now more important for energy systems planning and operations than ever before with this paper we offer a tutorial review of probabilistic epf and present much needed guidelines for the rigorous use of methods measures and tests in line with the paradigm of maximizing sharpness subject to reliability the paper can be treated as an update and a further extension of the otherwise comprehensive epf review of weron 1 or as a standalone treatment of a fascinating and underdeveloped topic that has a much broader reach than epf itself

the effect of long term expansion on the evolution of electricity price numerical analysis of a theoretically optimised electricity market abstract a decision support tool is proposed for optimising the expansion planning of a semi liberalised electricity market whilst the underlying interaction of the generating mix with electricity prices is researched in the long run a nonlinear stochastic programming algorithm is used for handling multiple uncertainties optimising the power sector characteristics both in terms of financial and environmental performance two endogenous models and an exogenous one are analysed and compared the endogenous model results indicate that consumers might benefit by the moderate electricity prices in case the optimal loads and capacity orders are rendered the exogenous model is insensitive to generating mix variations the long term actions suggested for system operators are comprised of the permits issued for new entries they are affected by the evolution of electricity prices since the permits granted for conventional technologies are maintained when their profits are rising the permits granted for renewable technologies are also maintained thus allowing cleaner electricity production to be induced to the grid the optimal bid strategies of generators interact with their dispatching schedule and the diversification of their load curves the relevant bids are primarily driven by the merit order the plants are dispatched in the assigned load levels may be raised in profitable producers so that their profit is maximised they might be restrained instead in case there are no significant prospects for individual profits the lognormal distribution of electricity price results is characterised by increasing variance over time indicating that the model is more robust in the most imminent solutions

sentiment spillover effects for us and european companies abstract the fast growing literature on news analytics provides evidence that financial markets are partially driven by sentiments in contrast with previous studies that have almost exclusively focused on the direct effects of the news related to single companies or sectors we investigate the time varying dynamics of news cross industry influences for a set of us and european stocks over a period of 10 years the graphical granger causality of the news sentiments excess return networks is estimated by applying the adaptive lasso we find significant spillover effects and show the importance of sentiments related to certain sectors for the whole cross section of stocks

economic growth and the separation of church and state the french case i introduction historically the decision to establish or forsake a state religion was seldom democratic it resulted from the political leaders willingness to consolidate their hold on power and did not reflect the people s attitudes toward a state religion even in a democracy like the united states the separation of church and state did not result from a popular vote but was derived from the first amendment of the u s constitution and subsequently reaffirmed by the supreme court france is actually one of the few countries where citizens had a say in the separation between church and state in 1905 the democratically elected french representatives adopted a bill that separated religion from the state the bill abolished the concordat which had been instituted by napoleon bonaparte in 1801 so as to govern the relationship between the french state and the roman catholic church under this arrangement the members of the catholic clergy were paid by the french state which in return had a say in their appointment the 1905 bill ended state subsidies for the church but also governmental interventions in the appointment of the church s personnel the passing of the 1905 bill illustrates the progressive rejection of the church in french politics it occurred at a time when france remained an agricultural country even though a growing share of the population worked in industrial activities in addition because primary education had been made compulsory in 1881 for both boys and girls illiteracy was decreasing nevertheless there remained many disparities between the different french departements 1 for instance the share of the french army s conscripts who were illiterate substantially varied between the different departements from 0 32 in haute savoie to 16 89 in morbihan in the academic literature economists have shown that religious laws have consequences on economic growth and human capital for example kuran 2003 botticini and eckstein 2005 hillman 2007 but they still debate the causal relationship between a nation s actual degree of religious observance and economic development there are indeed two major theories of religiosity the religion market model and the secularization hypothesis the religion market model developed by iannaccone 1991 iannaccone and stark 1994 iannaccone finke and stark 1994 and gill 1999 among others argues that religious participation is mainly supply driven in other words the government s intervention such as the establishment of state religion is a major determinant of religiosity however following weber 1905 proponents of the secularization hypothesis such as chaves 1994 and bruce 2001 argue that religious participation is demand driven they consider that economic development which includes industrialization an increase in literacy and wealth and a decrease in fertility rates entails a decline in religiosity this secularization process supposedly leads individuals to define themselves as less religious and decreases the influence of religion on social and political institutions as a matter of fact mccleary and barro 2006 find in a study of religiosity in 68 countries that economic development has an overall negative effect on religiosity urbanization also makes individuals less observant but education and the presence of children are positively correlated with religiosity still studies by finke and stark 1992 iannaccone and stark 1994 and stark 1999 among others argue that there is no empirical evidence to support secularization theories in particular the secularization hypothesis predicts that the separation between religion and state should become widespread as countries become richer but barro and mccleary 2005 cannot find any link between wealth measured by a country s gross domestic product gdp and the current existence of a state religion

the bicausal relation between religion and income in this article the relation between religion and income is investigated using a micro dataset for the netherlands religion is measured by religious membership and by participation instead of estimating a religion equation and an income equation separately joint regression is preferred since this generally yields more efficient estimates following the single equation approach both religious measures are found to decrease income significantly and income is found to affect religion negatively however these cross effects become insignificant once the equations are estimated simultaneously in contrast the effects of socio economic characteristics on religion and income hardly differ between the approaches

deregulating religion the economics of church and state traditional religious research fails to recognize religion as a market phenomenon it especially overlooks supply side factors that shape the incentives and opportunities of religious firms emphasizing instead demand side shifts in the perceptions tastes and needs of consumers this paper reviews the effects of government actions that alter religious supply a longer version appears in economic inquiry 40 2 april 1997

probabilistic mid and long term electricity price forecasting abstract the liberalization of electricity markets and the development of renewable energy sources has led to new challenges for decision makers these challenges are accompanied by an increasing uncertainty about future electricity price movements the increasing amount of papers which aim to model and predict electricity prices for a short period of time provided new opportunities for market participants however the electricity price literature seem to be very scarce on the issue of medium to long term price forecasting which is mandatory for investment and political decisions our paper closes this gap by introducing a new approach to simulate electricity prices with hourly resolution for several months up to three years considering the uncertainty of future events we are able to provide probabilistic forecasts which are able to detect probabilities for price spikes even in the long run as market we decided to use the epex day ahead electricity market for germany and austria our model extends the x model which mainly utilizes the sale and purchase curve for electricity day ahead auctions by applying our procedure we are able to give probabilities for the due to the eeg practical relevant event of six consecutive hours of negative prices we find that using the supply and demand curve based model in the long run yields realistic patterns for the time series of electricity prices and leads to promising results considering common error measures

introduction to the economics of religion after a very long hiatus economists have begun again to study the relationship between economics and religion this article seeks to summarize and evaluate the principal themes and empirical findings that have appeared in some 200 recent papers on the economics of religion although some of the research concerns the economic consequences of religiosity most applies standard economic theory to the study of individual religious activity the characteristics of religious groups and the impact of regulation and competition on religious markets

simultaneous determination of church contributions and church attendance in a standard model of household allocation of time and income church attendance and church contributions are determined simultaneously there are life cycle aspects to both attendance and contributions as azzi and ehrenberg 1975 and ehrenberg 1977 have argued and contributions behavior is affected by tax treatment and by a potential free rider problem as well this paper motivates an econometric specification which recognizes these features and estimates the parameters with a data set of over 2000 protestant church members

religious freedom and the unintended consequences of state religion 1 introduction a union of government and religion tends to destroy government and degrade religion so wrote justice hugo black in the majority opinion in engel v vitale 1 a 1962 school prayer case decided by the united states supreme court today church state issues continue to rise to the forefront of american politics in recent years alone disputes have arisen over public school vouchers and prayers the phrase under god in the pledge of allegiance the display of the ten commandments in public meeting halls and courthouses and the proper scope of president bush s recent faith based and community initiative across the atlantic william carey the recently retired archbishop of canterbury argued in april 2002 that establishment strengthens the church of england by allowing it to build a comprehensive network of parishes throughout the entire country and he denied that establishment has constrained the prophetic voice of the church 2 in contrast carey s successor rowan williams who became archbishop of canterbury in july 2002 has in the past advocated the disestablishment of the church of england 3 in sweden where the church of sweden had been the state church since 1593 the parliament passed a statute providing for the formal disestablishment of the church on january 1 2000 4in the united states the strongest advocates for giving religion a more prominent role in governmental settings have often been religious conservatives whereas the strongest opponents are often political liberals for example in the recently decided cleveland school voucher case 5 christian organizations like focus on the family the christian legal society the ethics and religious liberty commission of the southern baptist convention the national association of evangelicals and the united states conference of catholic bishops filed briefs in support of the program which allowed public funds to pay tuition in private schools including religious schools among the organizations filing briefs in opposition to the program were the naacp and various public education lobbies whereas the american civil liberties union people for the american way and americans united for separation of church and state provided legal representation for some of the plaintiffs challenging the voucher program interestingly however several religious organizations also filed briefs in opposition to the voucher program including the american jewish committee the jewish council for public affairs the baptist joint committee on public affairs the national council of churches of christ in the usa ncc and two regional seventh day adventist organizations except for the ncc these organizations represent the interests of religious groups that are or in the case of the baptists once were distinctly in the religious minority a growing body of research suggests that any positive benefits to the church with direct support from the state are outweighed by indirect effects that undermine the church s autonomy and its authority with the general populace for an excellent introduction to this research see stark and finke 2000 chapter 9 if such research is correct then the advocates of governmental endorsement of religion may be undermining the very institutions they seek to support in this article we use cross country survey responses to assess the impact of religious freedom and the separation of church and state on the health of religion throughout the world using survey responses on the frequency of attendance at religious services we find that government establishment of state religion reduces religious attendance whereas enduring constitutional protection of religion increases religious attendance adam smith recognized that establishment could ultimately undermine the state religion in the wealth of nations smith discussed the impact of establishing a religion on the fervor and effectiveness of the clergy in that religion the teachers of religion in the same manner as other teachers may either depend altogether for their subsistence upon the voluntary contributions of their hearers or they may derive it from some other fund to which the law of their country may entitle them such as a landed estate a tythe or land tax an established salary or stipend

impact of the financial crisis on bank run risk danger of the days after abstract we examine the developments of depositor knowledge attitudes and behavior throughout the recent financial crisis and discuss their impact on bank run risk based on a self collected data set surveying depositors before 2007 at 2008 and after the peak of the crisis 2009 we observe a worrying dynamic pattern at the peak depositors knew more about deposit insurance placed more importance on deposit security and slightly raised their deposits however in the aftermath of the crisis the enhanced depositor knowledge proved to be non permanent while the increased importance of deposit security and the exposure of depositors persisted the proportion of completely uninformed strongly involved and highly exposed depositors who carry the highest risk of triggering a bank run was reduced around the peak of the crisis but rebounded strongly afterwards even exceeding pre crisis levels these findings point to a higher bank run risk in the aftermath than during the financial crisis

on the importance of the long term seasonal component in day ahead electricity price forecasting abstract in day ahead electricity price forecasting epf the daily and weekly seasonalities are always taken into account but the long term seasonal component ltsc is believed to add unnecessary complexity to the already parameter rich models and is generally ignored conducting an extensive empirical study involving state of the art time series models we show that i decomposing a series of electricity prices into a ltsc and a stochastic component ii modeling them independently and iii combining their forecasts can bring contrary to a common belief an accuracy gain compared to an approach in which a given time series model is calibrated to the prices themselves

irrational exuberance and option smiles disagreement among investors is pervasive some investors see a trend and predict continuation others see the same trend and predict reversal some investors overreact others underreact i explai

household borrowing constraints and residential investment dynamics abstract it is well known that residential investment leads output in the us economy the main contribution of our paper is to highlight the role of household borrowing constraints in accounting for this fact we study the role of home equity loans used to boost consumption as a channel that affects residential investment we consider a multi agent model where some home owning households face borrowing constraints that reflect home equity loans or refinancing constraints we show that the severity of the households borrowing constraints in an economy can generate this stylized fact of us residential investment dynamics interestingly the model correctly predicts coincident residential investment dynamics in countries with less severe borrowing constraints this prediction is borne out when the model is calibrated to french data

bullish or bearish the sentiment of newsletter writers whether bullish or bearish does not forecast future returns but past returns and the volatility of those returns do affect sentiment high returns over four week periods are associated with a migration of newsletter writers from the bearish camp into the bullish camp high returns over periods of 26 and 52 weeks are associated with nervous bullishness a migration of newsletter writers from the bearish camp into both the bullish and the correction camps high volatility instead of scaring newsletter writers into bearishness reduces the effects of both positive and negative returns on sentiment also contrary to a popular hypothesis the crash of 1987 had no significant effect on the pattern of forecasts

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

time varying impact of uncertainty shocks on the us housing market abstract this paper investigates the impact of uncertainty shocks on the housing market of the united states using the time varying parameter factor augmented vector autoregression tvp favar we use a comprehensive quarterly time series dataset on real economic activity price and financial variables besides housing market variables covering the period 1963 q1 to 2014 q3 in addition to housing prices we also consider variables related to home sales permits and starts in general the results of the cumulative response of housing variables to a one standard deviation positive uncertainty shock at the one four eight and twelve quarter horizon tends to change over time both in terms of sign and magnitude with the uncertainty shock primarily negatively affecting the housing variables in particular prices permits and starts in longer runs i e two and three years ahead horizons