solving an incomplete markets model with a large cross section of agents abstract this paper shows that perturbation methods can be applied to a dsge model with incomplete markets and a finite but arbitrarily large number of heterogeneous agents we develop a simple but general solution technique that handles many state and choice variables for each agent and thus has an extremely high dimensional state space the method is based on perturbations around a point at which the solution is known the novel idea is to exploit the symmetry of the problem to overcome the curse of dimensionality we use the analysis to demonstrate the impact of heterogeneity on macroeconomic quantities and the pricing of risk furthermore we set our technique apart from standard methods used in the literature

the predictability of interim earnings over alternative quarters this study examines the predictability of earnings per share for the first second third and fourth quarterly reporting periods forecasts of quarterly earnings per share both by security analysts and time series models are analyzed the next section of the paper deals with the question of whether there is a significant difference in the accuracy with which each quarter can be forecasted the data in this section strongly indicate that such a difference exists the third section explores explanations for the findings of section 2 these include the relationship between fourthquarter variability and the integral versus discrete reporting methods section 4 contains the summary and conclusions

computational suite of models with heterogeneous agents incomplete markets and aggregate uncertainty this paper describes the first model considered in the computational suite project that compares different numerical algorithms it is an incomplete markets economy with a continuum of agents and an inequality borrowing constraint

transmission use of system charges based on trade offs between short run operation cost and long run investment cost previous studies on long run network charges assume that network reinforcement would be required when the loading level of a circuit reaches its designed capacity such assumption works well for a passive distribution network but is not valid for transmission networks as they have active congestion management capabilities transmission network operators normally can only justify for network investment when congestion costs exceed network expansion costs this trade off between operational cost and investment cost is not considered in any of the existing long run marginal or incremental cost pricing lric or lrmc

marginal pricing and supplement cost allocation in transmission open access the application of marginal costing to transmission pricing in open access schemes requires the collection of a supplement to finance the transmission systems the paper describes the application of marginal cost based pricing in the chilean power system and the difficulties faced in allocating the supplement among parties involved alternative methods for defining the allocation are formulated generalized generation and load distribution factors for cost allocation are formulated and implemented the methods are applied to allocate payments for transmission services provided by the transmission network and by a distribution company

security analyst superiority relative to univariate time series models in forecasting quarterly earnings abstract this paper provides evidence of security analyst sa superiority relative to univariate time series ts models in predicting firms quarterly earnings numbers and shows that sa forecast superiority in our sample is attributable to 1 better utilization of information existing on the date that ts model forecasts can be initiated a contemporaneous advantage and 2 use of information acquired between the date of initiation of ts model forecasts and the date when sa forecasts are published a timing advantage

solving consumption and portfolio choice problems the state variable decomposition method we develop a new solution method for a broad class of discrete time dynamic portfolio choice problems the method efficiently approximates conditional expectations of the value function by using i a decomposition of the state variables into a component observable by the investor and a stochastic deviation and ii a taylor expansion of the value function we illustrate the accuracy of the method in handling several realistic features of portfolio choice problems such as intermediate consumption multiple assets multiple state variables portfolio constraints non time separable preferences and nonredundantendogenous state variables we finally use the method to solve a realistic large scale life cycle portfolio choice and consumption problem with predictable expected returns and recursive preferences jel g11 g12

distribution pricing based on yardstick regulation summary form only given as follows transmission and distribution t d pricing has been one of the keystones of the ongoing deregulation and privatization process in the power industry the electricity market has been established based on the assumption of open access and nondiscriminatory use of the t d assets as t d business remains as a monopoly it is necessary to provide economic regulation many papers have dealt with transmission pricing and certain maturity has been reached in this area but this is not true in the case of distribution services this paper focuses on the distribution pricing methods and suggests one that is currently under development in brazil this method is based on incremental costs derived from the aggregated expansion plan of a particular utility named model utility this utility was obtained by comparisons among the real distribution companies the method follows the fundamentals of the yardstick regulation

unbundling of transmission and ancillary services ii cost based pricing framework for pt i see ibid vol 12 no 2 1997 this paper presents a systematic framework for pricing transmission and ancillary services in competitive power markets this framework is based on the recovery of fixed and operating costs and it meets the traditional revenue requirements it is practical feasible easy to implement and to regulate it can be implemented with minimum transition cost this network flow dependent and nondiscriminatory framework is based on the decomposition approach presented in part i of this paper this decomposition forms an essential part of the proposed framework for usage based recovery of the fixed and operating costs the transmission system related fixed cost component is recovered from all transactions based on percentage utilization of the transmission system equipment the charge is based on the actual network power flows the ancillary service charge for a given transaction can be computed as the sum of the costs incurred at secondary generation for compensating the imbalance caused by that specific transaction the path providing function of the transmission grid is viewed as a true monopolistic service its pricing is cost based and charge for its use is usage based the generation based ancillary service supply can be made competitive its pricing is market based and charge for it is usage based a global overview of the proposed pricing strategy is analyzed in the context of other alternatives especially cost based methods a numerical example on a five bus system is given to illustrate the use of this pricing strategy

allocation of transmission fixed charges an overview the application of marginal cost in pricing the transmission services has shown not effective mainly due to revenue reconciliation problems to overcome this a set of other methods derived from the mw mile rule has been suggested to allocate transmission fixed costs this paper compares such methods known as embedded cost methods in a centralized transmission network environment although these methods actually share the total cost and are very simple they are usually rejected due to the lack of a good economic reasoning the economic issue and the impact on the system expansion planning of such allocation are addressed in this paper some examples with the brazilian transmission system illustrate the results derived from this analysis

a load flow based method for calculating embedded incremental and marginal cost of transmission capacity this paper describes the principles of a load flow based method for allocating the cost of transmission capacity the method estimates the usage of each transmission facility with cost defined on a per facility basis embedded incremental and marginal cost of transmission capacity are defined and compared to each other a discussion of other load flow based methods and their application to marginal cost is included

asset price and wealth dynamics in a financial market with heterogeneous agents abstract this paper considers a discrete time model of a financial market with one risky asset and one risk free asset where the asset price and wealth dynamics are determined by the interaction of two groups of agents fundamentalists and chartists in each period each group allocates its wealth between the risky asset and the safe asset according to myopic expected utility maximization but the two groups have heterogeneous beliefs about the price change over the next period the chartists are trend extrapolators while the fundamentalists expect that the price will return to the fundamental we assume that investors optimal demand for the risky asset depends on wealth as a result of crra utility a market maker is assumed to adjust the market price at the end of each trading period based on excess demand and on changes of the underlying reference price the model results in a nonlinear discrete time dynamical system with growing price and wealth processes but it is reduced to a stationary system in terms of asset returns and wealth shares of the two groups it is shown that the long run market dynamics are highly dependent on the parameters which characterize agents behaviour as well as on the initial condition moreover for wide ranges of the parameters a locally stable fundamental steady state coexists with a stable non fundamental steady state or with a stable closed orbit where only chartists survive in the long run such cases require the numerical and graphical investigation of the basins of attraction other dynamic scenarios include periodic orbits and more complex attractors where in general both types of agents survive in the long run with time varying wealth fractions

comparing solution methods for dynamic equilibrium economies this paper compares solution methods for dynamic equilibrium economies the authors compute and simulate the stochastic neoclassical growth model with leisure choice using undetermined coefficients in levels and in logs finite elements chebyshev polynomials second and fifth order perturbations and value function iteration for several calibrations the authors document the performance of the methods in terms of computing time implementation complexity and accuracy and they present some conclusions about their preferred approaches based on the reported evidence

earnings management and accounting income aggregation quarterly earnings allow aggregation into annual earnings in four different ways fiscal year earnings is one measure of annual earnings the others being earnings for annual periods ending at interim quarter ends we investigate earnings management in fiscal year earnings relative to these alternative measures of firms annual earnings we confirm prior findings in burgstahler and dichev 1997 earnings management to avoid earnings decreases and losses journal of accounting and economics 24 99 126 of discontinuities around zero and prior year earnings in histograms of earnings subsequent research questions whether these discontinuities are evidence of earnings management using histograms of our alternative annual earnings measures we offer evidence suggesting earnings management is responsible for the discontinuities

distribution access pricing application of the oftel rule to a yardstick competition scheme the paper formulates an access pricing model applied to electricity distribution based on the uk office of telecommunications oftel model originally structured to price telecommunications monopolistic essential facilities the aim is to achieve an optimal access price charge in an environment where a distribution network monopoly serves both regulated and nonregulated customers the nonregulated market faces competition so that the competitors must use the network to reach their customers a usage based hybrid model is proposed to couple with a tariff scheme for regulated customers that uses yardstick competition a way to set appropriated opportunity costs by the use of the oftel model is introduced finally the paper focuses on properly recognizing both regulated distribution and competitive supply costs the scheme is assessed within the chilean regulatory scheme proposing a way to establish marginal and fixed distribution costs for distribution companies

asset prices and exchange rates in this paper we study the implications of introducing demand shocks and trade in goods into an otherwise standard international asset pricing model trade in goods gives rise to an additional channel of international propagation through the terms of trade absent in traditional single good asset pricing models the inclusion of demand shocks helps overturn many unrealistic implications of existing international flnance models in which productivity shocks are the sole source of uncertainty our model generates a rich set of implications on how stock bond and foreign exchange markets co move we solve the model in closed form which yields a system of equations that can be readily estimated empirically our estimation validates the main predictions of the theory

uniform marginal pricing for the remuneration of distribution networks a new method for distribution access via uniform pricing for the remuneration of distribution networks is presented the proposed approach merges in a unified framework the investments the optimal network operation requirements the effect of the price elasticity of demand and the application of hourly pricing for demand side management purposes hourly uniform marginal prices understood as tariffs of use of the network are obtained from maximum social welfare condition sending efficient signals to the utility and consumers related to the optimal operation of the grid and use of the energy at peak and valley hours this method is used in the context of a performance based ratemaking regulation to get model companies from operational optimized real networks capital fees are integrated in the marginal tariff of use by means of the new replacement value concept broadly used in yardstick competition the model is stated as a mixed integer linear optimization problem suitable to be solved through well known linear programming tools the methodology has been successfully tested in a 42 bus test distribution network

long run incremental cost pricing based on unused capacity this paper proposes a novel approach for providing long run incremental cost lric pricing in network charges the proposed approach makes use of the unused capacity of an exiting network to reflect the cost of advancing or deferring future investment consequent upon the addition of generation or load at each study node on a distribution network compared with existing approaches to lric pricing the proposed approach produces forward looking charges that reflect both the extent of the network needed to service the generation or load and the degree to which that network is utilized the efficacy of the proposed lric approach has been validated by a comparison with the established investment cost related pricing icrp method used for deriving transmission charges in great brain gb this paper draws on work undertaken in projects for western power distribution and ofgem office of gas and electricity markets u k however the views expressed in this paper are those of the authors

nodal pricing for distribution networks efficient pricing for efficiency enhancing dg as distributed generation dg becomes more widely deployed distribution networks become more active and take on many of the same characteristics as transmission we propose the use of nodal pricing that is often used in the pricing of short term operations in transmission as an economically efficient mechanism nodal pricing would properly reward dg for reducing line losses through increased revenues at nodal prices and signal prospective dg where it ought to connect with the distribution network applying nodal pricing to a model distribution network we show significant price differences between buses reflecting high marginal losses moreover we show the contribution of a dg resource located at the end of the network to significant reductions in losses and line loading we also show the dg resource has significantly greater revenue under nodal pricing reflecting its contribution to reduced line losses and loading

the long term impact of transmission pricing transmission pricing has been one of the major issues on the ongoing debate about deregulation and privatization many papers have dealt with the static nature of the tariff using the incremental and the embedded cost approaches however few of them have focused on the dynamic aspects of the tariff and therefore on its impact on the long term expansion planning of both generation and transmission the main target of this paper is to address some interesting topics about the effect of the transmission pricing methods on system cost in this new environment where generation is treated as an open market and transmission as a monopoly some examples with the brazilian power system illustrate the main points shown in this paper

allocation of fixed costs in distribution networks with distributed generation in this paper we propose a method for the allocation of fixed capital and nonvariable operation and maintenance costs at the medium voltage mv distribution level the method is derived from the philosophy behind the widely used mw mile methodology for transmission networks that bases fixed cost allocations on the extent of use that is derived from load flows we calculate the extent of use by multiplying the total consumption or generation at a busbar by the marginal current variations or power to current distribution factors pidfs that an increment of active and reactive power consumed or generated in the case of distributed generation at each busbar produces in each circuit these pidfs are analogous to power transfer distribution factors ptdfs unlike traditional tariff designs that average fixed costs on a per kwh basis across all customers the proposed method provides more cost reflective price signals and helps eliminate possible cross subsidies that deter profitable in the case of competition or cost effective in the case of a fully regulated industry deployment of dg by directly accounting for use and location in the allocation of fixed costs an application of this method for a rural radial distribution network is presented

comparison of solutions to the incomplete markets model with aggregate uncertainty abstract this paper compares numerical solutions to the model of krusell and smith 1998 income and wealth heterogeneity in the macroeconomy journal of political economy 106 867 896 generated by different algorithms the algorithms have very similar implications for the correlations between different variables larger differences are observed for i the unconditional means and standard deviations of individual variables ii the behavior of individual agents during particularly bad times iii the volatility of the per capita capital stock and iv the behavior of the higher order moments of the cross sectional distribution for example the two algorithms that differ the most from each other generate individual consumption series that have an average maximum difference of 1 63 11 4

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

wheeling of power under deregulated environment of power system a bibilographical survey the power industry is moving rapidly from regulated conventional setup to a deregulated environment there is an urgent need to keep a track of international experiences and activities taking place in this emerging field this paper gives a bibliographical survey and general backgrounds of research and development in the field of power system wheeling under deregulated environment based on over 170 published articles wheeling in general and the establishment of wheeling rate in particular are subjects of extensive debate today this will be very much useful for all countries especially those developing countries which are moving toward the unbundling of electricity supply industry esi the collected literature have been divided into many section so that new researchers do not face any difficulty for obtaining literature particularly in the area of wheeling of power under deregulated environment

consumption and labor supply with partial insurance an analytical framework we develop a model with partial insurance against idiosyncratic wage shocks to quantify risk sharing closed form solutions are obtained for equilibrium allocations and for moments of the joint distribution of consumption hours and wages we prove identification and demonstrate how labor supply data are informative about risk sharing the model estimated with us data over the period 1967 2006 implies that i 39 percent of permanent wage shocks pass through to consumption ii the share of wage risk insured increased until the early 1980s and iii preference heterogeneity is important in accounting for observed dispersion in consumption and hours jel e21 e23 e31 e52

cost of wheeling methodologies the cost of wheeling and the methodology by which it is computed is a high priority problem throughout the power industry due to the growth in transmission facilities the cost differentials between utility companies and the dramatic growth in nonutility generation capacity this paper contains descriptions and summaries of computational procedures and data requirements of four embedded cost methodologies two long run incremental cost methods and the short run marginal cost method four methodologies are also presented for allocating the wheeling costs among a number of wheels when simultaneously present on a company s system as required for the standard long run incremental cost method

earnings volatility post earnings announcement drift and trading frictions earnings volatility post earnings announcement drift we find that lower ex ante earnings volatility leads to higher post earnings announcement drift pead pead is a function of both the magnitude of an earnings surprise and its persistence while prior research has largely investigated market reactions to the magnitude of the earnings surprise in this study we show that the persistence of the earnings surprise is equally important a unique feature of the anomalous pead returns documented here concerns the association between abnormal returns and trading frictions besides demonstrating that firms with lower earnings volatility have higher abnormal returns we also find that lower earnings volatility firms have lower trading frictions taken together these findings imply that higher abnormal returns are associated with lower trading frictions we exploit this implication to empirically demonstrate that pead returns due to earnings volatility are not concentrated in the firms with the largest trading frictions which is in contrast to the findings in prior anomaly studies

asset pricing with limited risk sharing and heterogeneous agents we develop a model with incomplete markets and heterogeneous agents that generates a large equity premium while simultaneously matching stock market participation and individual asset holdings the high risk premium is driven by incomplete risk sharing among stockholders which results from the combination of aggregate uncertainty borrowing constraints and a realistically calibrated life cycle earnings profile subject to idiosyncratic shocks we show that it is challenging to simultaneously match asset pricing moments and individual portfolio decisions while limited participation has a negligible impact on the risk premium contrary to the results of models where it is imposed exogenously

solving heterogeneous agent models by projection and perturbation the paper proposes a numerical solution method for general equilibrium models with a continuum of heterogeneous agents that combines elements of projection and of perturbation methods the basic idea is to solve first for the stationary solution of the model without aggregate shocks but with fully specified idiosyncratic shocks afterwards one computes a first order perturbation of the solution in the aggregate shocks this approach allows to include a high dimensional representation of the cross sectional distribution in the state vector the method is applied to a model of household saving with uninsurable income risk and liquidity constraints techniques are discussed to reduce the dimension of the state space such that higher order perturbations are feasible

the relation between earnings and cash flows abstract a model of earnings cash flows and accruals is developed assuming a random walk sales process variable and fixed costs and that the only accruals are accounts receivable and payable and inventory the model implies earnings better predict future operating cash flows than current operating cash flows and the difference varies with the operating cash cycle also the model is used to predict serial and cross correlations of each firm s series the implications and predictions are tested on a 1337 firm sample over 1963 1992 both earnings and cash flow forecast implications and correlation predictions are generally consistent with the data

framework for assessing the economic efficiencies of long run network pricing models this paper presents a framework for assessing the economic efficiency of different long run network pricing models the aim is to provide a quantifiable efficiency measure that will inform regulators network operators and network users when an alternative pricing model is contemplated the efficiency measure is derived from the long term network development costs that flow from a dynamic interaction between network pricing and planning that is the response of network users to differing charging models the consequential network investment and new financial incentives that follow reinforcement of the network to illustrate the approach the framework has been used to assess the relative efficiency of three broad class of distribution pricing models in a study undertaken for the great britain gb s regulator for gas and electricity markets in england wales and scotland ofgem the study contemplated three pricing models that are used in practice the efficiency assessment in the ofgem study was conducted on a pseudo distribution reference network on the assumption that the results from the reference network could be scaled up to the national level then the assessment suggests that by moving from the present drm model to the more economic lric approach gb distribution network operators could save in the region of pound200 m over the next 20 years in their network investment costs this paper draws heavily on the project undertaken for ofgem but any views expressed are solely those of the authors

the social cost of near rational investment abstract we show that the stock market may fail to aggregate information even if it appears to be efficient and that the resulting decrease in the information content of prices may drastically red

solving the revenue reconciliation problem of distribution network providers using long term marginal prices in this paper the authors describe an integrated methodology to compute long term marginal prices in distribution networks long term marginal prices are considered the most interesting and economically sound way of allocating network costs to users additionally they inherently deal with the revenue reconciliation problem as they generally do not require other large supplementary tariff terms the proposed methodology uses fuzzy sets to model uncertainties in load forecasts and considers several criteria to guide the identification of solutions at the end there is a final decision making step to select the most adequate expansion plan according to the preferences of the decision maker

closure to discussion of integration of price cap and yardstick competition schemes in electrical distribution regulation in the uk allocation of costs to the network users has largely been left in the hands of the distributors with the regulator having no direct influence over the prices charged to individual customer distribution companies largely use conventional pricing models that attempts to identify costs attributable to different customer groups domestic industrial and commercial on the other hand one of the basic objectives of the ongoing reforms of electricity supply industries around the world is to promote competition in the generation and retail segments of the industry both generators and retailers require access to network services and therefore a necessary pre condition for competition to develop is open and nondiscriminatory access to transmission and distribution networks by all electricity prices at wholesale electricity market in uk average at about 2 2 5 p kwh while the retail price of electricity is currently about 6 7 p kwh transmission and distribution networks together with the supply business are responsible for the difference between retail and wholesale prices with energy provided much closer to the load the value of dispersed kwh may be higher since the costs of bought in network services to facilitate product delivery from point of purchase to point of sale is likely to be considerably lower what is important to recognize is that the issue of competitiveness of embedded generation is a network pricing problem at present however distribution network pricing conceptualized for passive distribution networks does not recognize this impact and is not able to facilitate competition in generation clearly location specific impact of dispersed generation cannot be captured by the generic cost allocation scheme currently used and this considerably disadvantages the competitiveness of dispersed sources

wheeling rates based on marginal cost theory knowledge of what rates for wheeling electric power should be if based on marginal costs is vital in the debate on how wheeling should be priced the authors present extensive computations of marginal costs sensitivities to losses constraints load levels amount of power wheeled revenue reconciliation etc are examined in the context of two case studies revenue reconciliation for capital recovery is described briefly