price distortions in agriculture and their effects an international comparison the central thesis of this paper is that agricultural pricing policies pursued by developing countries produce effects which are diametrically opposite to those produced by the pricing policies of many developed countries and that the policies of both are costly in terms of global welfare in general the agricultural sector in developing countries is heavily taxed while that in the developed countries receives substantial price protection the effects of agricultural price distortions on output consumption trade and rural employment are estimated for nine countries in addition the effects of price distortions on the distribution of income between producers and consumers on government revenue and foreign exchange and the net social losses of the policies are calculated the results indicate that there are large income transfers and impacts on migration from the rural to the urban sector in developing countries and from the urban to the rural sector in developed economies

the relationship between spot and futures oil prices do structural breaks matter abstract this paper examines the effect of structural breaks on the spot futures oil prices relationship we explore the impact of structural breaks on four critical issues including cointegrating relationships market efficiency under the expectation hypothesis and the no arbitrage rule causalities and forecasting performance of futures oil volatility as far as our empirical results exhibit the structural break we detect endogenously causes some influences on these issues which is in sharp contrast to the conclusions of existing studies our findings offer some implications and suggestions to researchers investors and policymakers

disaggregate energy consumption employment and income in turkey the purpose of this paper is to contribute to literature on energy consumption and economic growth relationship by examining how much of the variance in national income growth can be explained by the growth of different sources of energy consumption and employment in turkey we use the recently developed generalized forecast error variance decomposition technique of koop et al j econom 74 1996 119 and pesaran and shin econ lett 58 1998 17 to determine the information content of the growth rate of energy consumption waste seems to have the largest initial impact followed by oil however over a 3 year horizon lignite appears to explain the largest forecast error variance of gdp the total energy consumption explains 21 of forecast error variance of gdp energy consumption appears to be almost as important as employment in turkey therefore policy makers may be interested in identifying the energy dependencies of economic growth in allocating the energy investment budget

does risk aversion or attraction depend on income an experiment does risk attitude aversion or attraction vary with the level of the income at risk about half of our subjects chose to insure all levels whereas another half chose instead not to insure low levels but to insure high levels

preference reversals under ambiguity preference reversals have been widely studied using risky or riskless gambles however little is known about preference reversals under ambiguity unknown probabilities subjects were asked to make a binary choice between ambiguous p bets big likelihood of giving small prize and ambiguous bets small likelihood of giving large prize and their willingness to accept was elicited subjects then performed the same two tasks with risky bets where the probability of winning for a given risky bet is the center of the probability interval of the corresponding ambiguous bet preference reversals are not only replicated under ambiguity but are even stronger than are those under risk this is due to higher elicited prices for the bet and lower elicited prices for the p bet under ambiguity than under risk this result can be explained by the shape of the weighting function for different levels of uncertainty and for different elicitation modes this paper was accepted by peter wakker decision analysis

oil price shocks and their short and long term effects on the chinese economy a considerable body of economic literature shows the adverse economic impacts of oil price shocks for the developed economies however there has been a lack of empirical study of this kind on china and other developing countries this paper attempts to fill this gap by answering how and to what extent oil price shocks impact china s economy emphasizing on the price transmission mechanisms to that end we develop a structural vector auto regressive model our results show that an oil price increase negatively affects output and investment but positively affects inflation rate and interest rate however with the differentiated price control policies for materials and intermediates on the one hand and final products on the other hand in china the impact on real economy represented by real output and real investment lasts much longer than that to price monetary variables our decomposition results also show that the short term impact namely output decrease induced by the cut of capacity utilization rate is greater in the first one to two years but the portion of the long term impact defined as the impact realized through an investment change increases steadily and exceeds that of short term impact at the end of the second year afterwards the long term impact dominates and maintains for quite some time

dynamic cyclical comovements of oil prices with industrial production consumer prices unemployment and stock prices abstract this paper examines the empirical relationship between oil prices and several key macroeconomic variables in particular we investigate the cyclical comovements of crude oil prices with output consumer prices unemployment and stock prices the methodology involves the use of the hodrick prescott hodrick r j prescott e c 1980 post war us business cycles an empirical investigation working paper carnegie mellon university and baxter king baxter m king r g 1999 measuring business cycles approximate band pass filters for economic time series review of economics and statistics 81 575 593 filters as well as the recently developed full sample asymmetric christiano fitzgerald christiano l j fitzgerald t j 2003 the band pass filter international economic review 44 435 465 band pass filter contemporaneous and cross correlation estimates are made using the stationary cyclical components of the time series to make inference about the degree to which oil prices move with the cycle besides documenting a number of important cyclical relationships using three different time series filtering methods the results suggest that crude oil prices are procyclical and lag industrial production additionally we find that oil prices lead consumer prices

food grain policy in the republic of korea the economic costs of self sufficiency governments in many countries have manipulated agricultural prices to achieve a variety of social economic and political objectives these policies which often conflict with the prescriptions of neoclassical trade theory have led economists toward attempts to estimate the welfare losses associated with government intervention in the marketplace of more interest to many governments is the performance of changes in policy aimed at attaining specific national goals this paper addresses the case of food grain policy in the republic of korea and assesses the impacts of the change in grain price policy that occurred at the end of the 1960s in particular the success of price policy in attaining self sufficiency and raising farm incomes is evaluated the implications for consumers producers foreign exchange earnings and price stability are also analyzed it is worth noting here that through policy nations pursue a wide range of noneconomic objectives that are impossible to quantify in considering the findings of this analysis the reader should be cognizant of these other objectives and implications that are not specifically included

buyers pricing behavior for risky alternatives encoding processes and preference reversals numerous studies have examined individuals minimum selling prices or certainty equivalents for lotteries as measures of preference but few have examined maximum buying prices because every transaction involves a buyer as well as a seller buyers pricing behavior is of interest in its own right two prospect theory based descriptive models of maximum buying prices the integration and segregation models are developed from different assumptions about cognitive encoding processes the models were tested experimentally using an incentive compatible cash payoff scheme in which maximum buying prices for bets and choices between bets were elicited from subjects surprisingly observed maximum buying prices were far below expected values even for bets with probabilities of winning near 1 0 this suggests buyers are strongly influenced by loss aversion and that the conventional assumption that the buying price for a risky alternative is a reduction in the alternative s payoffs fails to describe behavior instead it appears subjects predominately employed a segregation encoding process in which the buying price was encoded separately from the bet s payoffs and treated as a sure loss however an additional result was not explained adequately by either encoding model buying prices were less risk averse than choices for 3 expected value bets creating preference reversals of the standard kind lichtenstein and slovic 1971 but more risk averse for 100 expected value bets creating reverse preference reversals casey 1991 implications for the scale compatibility principle tversky et al 1988 are discussed two theoretical approaches are outlined which offer promise in the development of a unified model of price judgments and choice preferences under risk

energy consumption and gdp causality relationship in g 7 countries and emerging markets abstract the causality relationship between energy consumption and income is a well studied topic in energy economics this paper studies the time series properties of energy consumption and gdp and reexamines the causality relationship between the two series in the top 10 emerging markets excluding china due to lack of data and g 7 countries we discover bi directional causality in argentina causality running from gdp to energy consumption in italy and korea and from energy consumption to gdp in turkey france germany and japan hence energy conservation may harm economic growth in the last four countries

the asymmetric impact of oil prices interest rates and oil price uncertainty on unemployment in the us abstract in this study we investigate the presence of asymmetric interactions between oil prices oil price uncertainty interest rates and unemployment in a cointegration framework utilizing the nonlinear auto regressive distributed lag nardl approach we show the asymmetric responses of unemployment to changes in oil prices oil price uncertainty and interest rates in the long run more specifically the results of our analyses suggest that an increase in oil price results in increased unemployment while there is no significant impact of reduced oil prices on the one hand reduced oil price uncertainty leads to a decrease in unemployment whereas an increase in oil price uncertainty does not have an impact we also observe increased unemployment in response to a decrease in interest rates as the impact of increased interest rates is not significant last but not least we find that option implied oil price volatility as a measure of oil price uncertainty outperforms the conditional volatility of crude oil prices in predicting unemployment this study provides valuable implications for policymakers to design sound economic policies

optimal grain pricing and storage policy in controlled agricultural economies application to zimbabwe abstract maize pricing and storage policies of zimbabwe s grain marketing board are compared to those that would be optimal under certain objective function risk and risk aversion assumptions optimal producer prices and storage levels are found to be interdependent and to respond to prices at other levels of the marketing chain the ideal maize reserve stock increases with uncertainty over import transportation costs a factor to consider in light of the threat of south african sanctions but at a reasonable risk aversion level optimal reserves still are much lower than those presently held by the board

the effects of imprecise probabilities and outcomes in evaluating investment options vagueness attitudes have been used to explain anomalies and irregularities in investment behavior it is generally assumed ellsberg 1961 that decision makers dms dislike vagueness but this assumption has been challenged by empirical results documenting systematic alternative attitudes to vagueness as a function of its source the domain of the decisions and the response mode used we investigate these three factors in a within subjects design that was embedded in an investment context dms evaluated investment options that varied in terms of their sources of vagueness probabilities and or outcomes in both domains gains or losses and employed two response modes pricing or choice we confirm that individuals vagueness attitudes are malleable contingent on the dimension salience and the reference domain in particular we observed three distinct patterns of reversals of attitudes towards vagueness our results indicate that the ability of vagueness attitudes to predict investment behavior is limited as decisions can be systematically influenced by task context and or perceived gain or loss positions economic models may be improved by incorporating more flexible assumptions about individuals attitudes toward vagueness

unemployment equilibria and input prices theory and evidence from the united states the paper develops an efficiency wage model where input prices affect the equlibrium rate of unemployment we show that a simple framework based on only two prices the real price of oil and the real rate of interest is able to explain the main post war movements in the rate of u s joblessnss the equations do well in forecasting unemployment many out of sample and provide evidence that the oil price spike associated with iraq s invasion of kuweit appears to be a component of the mystery recession which followed

attitudes to risk and attitudes to uncertainty experimental evidence in a series of experiments the interactions among individual attitudes towards risk and uncertainty the sign of the outcome domain and the way uncertainty is represented are tested this is done in a unified framework eliciting individual values by means of a second price auction results confirm the presence of the well known fourfold pattern of risk attitude risk aversion for gains and risk seeking for losses at high probability and risk seeking for gains and risk aversion for losses at low probability and show that this pattern can also be extended to uncertainty in the valuation of losses the modal pattern is decreasing risk and uncertainty aversion as the probability of loss increases while increasing risk and uncertainty aversion is observed for gains moreover it is found that the size of reaction to uncertainty does not depend on the outcome domain and that it persists in the face of an incentive compatible mechanism to elicit preferences

ambiguity and underwriter decision processes this paper provides empirical evidence that risk and ambiguity affect underwriters decisions on pricing insurance a field study of primary insurance underwriters in a random sample of commercial property and casualty insurance companies reveals that premiums are significantly higher for risks when there is either ambiguity regarding the probability of a particular event occurring and or uncertainty about the magnitude of the resulting loss the paper suggests economic and organizational rationales for this behaviour and offers several explanations as to why insurers in a competitive market can charge higher prices for ambiguous risks which promise to yield excess profits in the long run

ssb and weighted linear utility as expected utility with suspicion we show that a suspicious subjective expected utility seu maximizer i e one who treats potential consequences of states as information useful in assessing the probability of those states may under reasonable circumstances act as though he were maximizing either weighted linear utility or skew symmetric bilinear ssb utility seu with suspicion therefore explains at least as many empirical violations of seu theory as do these and similar models we give examples to illustrate how several important types of seu violations may seem to arise when suspicion is present

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

crude oil and the macroeconomy tests of some popular notions a note perhaps no other economic events in the post world war ii era have generated as much attention as the series of crude oil price shocks that have jolted the world economy since the opec boycott of 1973 a tremendous amount of space in the popular and professional literature has been devoted to analyzing the impacts of these shocks on the developed economies and the adjustments these shocks have induced one residual of this literature has been a general impression that since 1973 the functional relationship between crude oil prices and the developed macroeconomies has been dramatically and fundamentally altered yet to our knowledge no one has formally tested this impression recent evidence of hamilton 1983 suggests that crude oil prices had a strong impact on the u s business cycle well before 1973 further while textbook treatments of oil price shocks tend to highlight cost push inflationary effects the research of berndt and wood 1975 1979 and wilcox 1983 indicates the net complementarity between energy and capital in the u s economy is quite strong both before and after 1973 thus oil price shocks may have stronger real effects than generally believed in this paper we formally test three popular notions associated with the so called

choosing the devil you don t know evidence for limited sensitivity to sample size based uncertainty when it offers an advantage many decision makers seek to optimize choices between uncertain options such as strategies employees or products when performance targets must be met attending to observed past performance is not enough to optimize choices option uncertainty must also be considered for example for stretch targets that exceed observed performance more uncertain options are often better bets a significant determinant of option uncertainty is sample size for a given option the smaller the sample of information we have about it the greater the uncertainty in two studies choices were made between pairs of uncertain options with the goal of exceeding a specified performance target information about the options differed in the size of the sample drawn from them sample size and the observed performance of those samples the proportion of successes or hits in the sample we found people to be sensitive to sample size based uncertainty only when differences in observed performance were negligible we conclude that

choices involving uncertain probabilities abstract this paper contains an analytic and empirical component the analytic one examines how people should value information on probabilities versus payoffs according to expected utility theory it also examines under what conditions various generalized utility models such as subjective expected utility theory prospect theory and rank dependent utility entail testable predictions for preference for information the empirical component examines people s actual information preferences and to what extent they fit the various models after describing two experiments and their findings it is concluded that generalized utility models are unlikely to offer much insight into risky decision making

oil price shocks and the dispersion hypothesis recent research by david lilien shows that a significant fraction of aggregate unemployment can be explained by the dispersion of employment growth across industries this paper presents two new results in this area first it is shown that a significant fraction of the variation in lilien s dispersion index is due to the differential impact of oil shocks across industries second and more important it is shown that once the dispersion in employment growth due to oil shocks is accounted for the residual dispersion has no explanatory power for unemployment

a human experiment on inventory decisions under supply uncertainty abstract controlled human experiments are adopted in this paper to investigate the impact of supply uncertainty on buyers inventory management the experiments aim at assessing the impact of one specific source of supply chain uncertainty namely stochastic lead times on inventory holdings and the extent of the bullwhip effect three experimental treatments are run within the framework of the beer game manipulating variability in demand and in lead times results confirm that the bullwhip effect arises in all experimental treatments and that the variance of orders is higher under stochastic lead times analysis of players behaviour in the course of the game suggests that players react to higher uncertainty by holding fewer inventories a behaviour consistent with the predictions of some psychological models of choice under ambiguity

this is what happened to the oil price macroeconomy relationship reply abstract james hamilton argues that oil price changes are still important for the macroeconomy and that using a filter which screens out drops and measures increases relative to a reference level wellrepresents the effects of price changes when they are choppy while this measure outperforms the oil price transformations considered in my paper much of its predictive power is coming from the pre 1986 and pre 1973 part of the sample with less than 10 years of choppy data finding the best oil price transformation will likely require analysis with cross sectional components ruling out effects from oil price decreases is also probably counterproductive to uncovering structure

moderate stake variations for risk and uncertainty gains and losses methodological implications for comparative studies risk attitudes are known to be sensitive to large stake variations however little is known on the sensitivity to moderate variations in stakes this is important for studies that want to compare risk attitudes between countries or over time i find that variations of 20 affect only utility while larger variations may affect also probability weighting surprisingly the effect on weighting functions is larger for losses than for gains it is also more pronounced for risk than for uncertainty

food self sufficiency making sense of it and when it makes sense food self sufficiency gained increased attention in a number of countries in the wake of the 2007 08 international food crisis as countries sought to buffer themselves from volatility on world food markets food self sufficiency is often presented in policy circles as the direct opposite of international trade in food and is widely critiqued by economists as a misguided approach to food security that places political priorities ahead of economic efficiency this paper takes a closer look at the concept of food self sufficiency and makes the case that policy choice on this issue is far from a straightforward binary choice between the extremes of relying solely on homegrown food and a fully open trade policy for foodstuffs it shows that in practice food self sufficiency is defined and measured in a number of different ways and argues that a broader understanding of the concept opens up space for considering food self sufficiency policy in relative terms rather than as an either or policy choice conceptualizing food self sufficiency along a continuum may help to move the debate in a more productive direction allowing for greater consideration of instances when the pursuit of policies to increase domestic food production may make sense both politically and economically

a multivariate cointegration analysis of the role of energy in the us macroeconomy abstract this paper extends my previous analysis of the causal relationship of gdp and energy use in the usa in the post war period a majority of the relevant variables are integrated justifying a cointegration analysis the results show that cointegration does occur and that energy input cannot be excluded from the cointegration space the results are plausible in terms of macroeconomic dynamics the results are similar to my previous granger causality results and contradict claims in the literature based on bivariate models that there is no cointegration between energy and output

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

a neoclassical model of unemployment and the business cycle this paper investigates a general equilibrium model of unemployment and the business cycle in which specialization of labor plays a key role a rational expectations equilibrium with fully flexible wages and prices can exhibit unemployment in which the marginal product of employed workers exceeds the reservation wage of those who are without jobs workers are unemployed either because they are in the process of relocating for a better job or because they are waiting for conditions in the depressed sector to improve moreover seemingly small disruptions in the supplies of primary commodities such as energy could be the source of fluctuations in aggregate employment and can exert surprisingly large effects on real output

averting risk in the face of large losses bernoulli vs tversky and kahneman abstract prospect theory asserts that people display risk attraction in high probability losses but our subjects tend to avoid fair risks for large 30 to 90 high probability 80 real losses vindicating bernoulli s view that risk aversion is the dominant attitude

what happened to the oil price macroeconomy relationship abstract strong evidence is found that oil prices no longer granger cause many u s macroeconomic indicator variables in data after 1973 a number of potential explanations are explored that sample stability issues are responsible that oil prices are now endogenous and that linear and symmetric specifications misrepresent the form of the oil price interaction none of these hypotheses are supported by the data the opec price increases do appear to have had significant impacts while the effects of the price declines of the 1980s are smaller and harder to characterize these results have potentially important implications for the large body of research which utilizes oil prices as an instrumental or explanatory variable

predicting buyer seller pricing disparities numerous studies have shown that compensation demanded cd to give up a commodity often greatly exceeds willingness to pay wtp to obtain the same commodity even in incentive compatible experiments that penalize strategic misrepresentation observed cd wtp disparities are too large to be reconciled with traditional assumptions of economic rationality a prospect theory based behavioral framework for predicting cd and wtp is proposed which produces five distinct transaction encoding rules any one of which can in principle apply to a buyer or a seller according to this framework cd wtp gaps occur when buyers and sellers encode the prospective transaction differently and gaps can occur in multiple ways and vary in size depending on encoding the transaction encoding framework was tested in two experiments in experiment 1 model fits to subjects cd and wtp for lottery tickets were consistent with the hypothesis that buyers and sellers encode transaction problems differently moreover the quite large observed cd wtp gaps were explained fully by encoding when differences between buyers and sellers encoding processes were taken into account their estimated utility value and probability weighting functions did not differ the present framework and results show that the widely cited endowment effect is but one of several ways in which loss aversion can give rise to cd wtp gaps consistent with this broadened perspective experiment 2 demonstrated cd wtp gaps in the absence of an endowment effect and in the absence of rational economic causes the transaction encoding framework 1 provides a structured approach for predicting and testing the effects of a variety of task factors on pricing behavior and transaction outcomes and 2 reveals the useful property that in many cases the ratio cd wtp can be interpreted as a direct measure of the degree of loss aversion

oil price movements and macroeconomic performance evidence from twenty six oecd countries abstract this study investigates the relationship between oil price movements and macroeconomic aggregates such as gross domestic product gdp consumer prices cpi and unemployment for oecd countries to do this second generation econometric methods have been employed to panel data including panel unit root tests panel cointegration tests and panel long run models panel unit root tests suggest that oil prices plus selected macroeconomic aggregates in oecd countries are non stationary at levels but become stationary at first differences in the existence of multiple structural breaks five structural break points have successfully been investigated in the series of this study during panel unit root and panel cointegration tests durbin h panel co integration tests confirm that there is a long term relationship between oil prices and those macroeconomic aggregates on the other hand results of this study reveal that the price of oil exerts statistically and negatively significant impacts on gdp cpi and unemployment in the case of oecd countries in general

changing crude oil price effects on us agricultural employment the effect of changes in the price of crude oil on agricultural employment in the usa between 1947 and 1995 is investigated after reviewing previous assessments of the issue the existence of an empirical relationship between agricultural employment and crude oil price changes is established using granger causality subsequently the nature of the relationship is estimated with the results suggesting that at least three full years are required before the measurable effects of a percentage change in the real price of crude oil on the change in agricultural employment are exhausted finally the structural stability of the functional relationship between the change in agricultural employment and changes in the price of crude oil the percentage changes in expected net farm income realized technological innovation and the wage rate is studied

the rich domain of uncertainty source functions and their experimental implementation we often deal with uncertain events for which no probabilities are known several normative models have been proposed descriptive studies have usually been qualitative or they estimated ambiguity aversion through one single number this paper introduces the source method a tractable method for quantitatively analyzing uncertainty empirically the theoretical key is the distinction between different sources of uncertainty within which subjective choice based probabilities can still be defined source functions convert those subjective probabilities into willingness to bet we apply our method in an experiment where we do not commit to particular ambiguity attitudes but let the data speak

real interest rate and labor market performance around the world this article studies the effects of the real interest rate on labor market performance using a much larger sample of countries and more indicators of labor market performance than have been used in previous articles it finds that a rise in the real interest rate increases the unemployment rate raises the share of long term unemployed and reduces the employment rate the magnitude of these effects is very small in the short run but much more pronounced though still fairly small in the long run young people are disproportionately affected the results are robust to variations in specification

oil price shocks stock market economic activity and employment in greece abstract using a multivariate vector autoregression var approach this paper attempts to shed light into the dynamic relationship among oil prices real stock prices interest rates real economic activity and employment for greece the empirical evidence suggests that oil price changes affect real economic activity and employment oil prices are important in explaining stock price movements stock returns do not lead to changes in real activity and employment

eliciting von neumann morgenstern utilities when probabilities are distorted or unknown this paper proposes a new method the gamble tradeoff method for eliciting utilities in decision under risk or uncertainty the elicitation of utilities to be used in the expected utility criterion turns out to be possible even if probabilities are ambiguous or unknown a disadvantage of the tradeoff method is that a few more questions usually must be asked to clients also the lotteries that are needed are somewhat more complex than in the certainty equivalent method or in the probability equivalent method the major advantage of the tradeoff method is its robustness against probability distortions and misconceptions which constitute a major cause of violations of expected utility and generate inconsistencies in utility elicitation thus the tradeoff method retains full validity under prospect theory rank dependent utility and the combination of the two i e cumulative prospect theory the tradeoff method is tested for monetary outcomes and for outcomes describing life duration we find higher risk aversion for life duration but the tradeoff method elicits similar curvature of utility apparently the higher risk aversion for life duration is due to more pronounced deviations from expected utility

experimental evidence on varying uncertainty and skewness in laboratory double auction markets abstract we investigate the influence of skewness in asset fundamentals on asset prices under different states of uncertainty in double auction markets three different types of assets are considered risky assets ambiguous assets and assets where the fundamental value distribution can be learned by repeated sampling of realizations we show that market prices for skewed assets initially differ from those of non skewed assets for risky as well as for ambiguous assets because of learning the difference in market prices mostly disappears towards the end of trading when fundamentals are learned by experience sampling prices of all assets irrespective of skewness are very efficient from the beginning thus when probabilities are not described but experienced subjects are better able to estimate the fundamental value of an asset

relationship between oil prices interest rate and unemployment evidence from an emerging market abstract while the interrelation between oil price changes economic activity and employment is an important issue that has been studied mainly for developed countries little attention has been devoted to inquiries on fluctuations in the price of crude oil and its impact on employment for small open economies adopting an efficiency wage model for equilibrium employment that does not require any assumptions regarding labor supply this paper contributes to the literature by investigating the causality between unemployment and two input prices namely energy crude oil and capital real interest rate in an emerging market turkey for the period 2005 01 2009 08 applying a relatively new technique the toda yamamoto procedure we find that the real price of oil and interest rate improve the forecasts of unemployment in the long run this finding supports the hypothesis that labor is a substitute factor of production for capital and energy

oil price shocks unemployement investment and the current account an intertemporal disequilibrium analysis recent work on macroeconomics of price increases of intermediate imports while theoretical rigorous and elegant is still unable to explain the stylized facts this paper attempts to remedy the shortcomings of earlier papers by using a two period model to properly analyse investment and savings behaviour and hence the current account this model also incorporates disequilibrium in first period labour and goods markets to compare the response of countries in different disequilibrium regimes to shocks in intermediate input prices

sealed bid auctions with ambiguity theory and experiments this study presents a laboratory experiment of the first and second price sealed bid auctions with independent private values where the distribution of bidder valuations may be unknown in our experimental setting in first price auctions bids are lower with the presence of ambiguity this result is consistent with ambiguity loving in a model that allows for different ambiguity attitudes we also find that the first price auction generates significantly higher revenue than the second price auction with and without ambiguity

oil price fluctuation volatility spillover and the ghanaian equity market implication for portfolio management and hedging effectiveness abstract this study attempts to contribute to the literature on stock markets and energy prices by examining the dynamic volatility and volatility transmission between oil and ghanaian stock market returns in a multivariate setting using the recently developed var garch var agarch and dcc garch frameworks in turn the models results are used to compute and analyze the optimal weights and hedge ratios for oil stock portfolio holdings for comparison purposes and to put the paper more in the perspective of west africa the nigerian stock market is also included in the analysis our findings point to the existence of significant volatility spillover and interdependence between oil and the two stock market returns while spillover effects are stronger for nigeria the transmission of volatility is much more apparent from oil to stock than from stock to oil in the case of ghana also the study demonstrates evidence of short term predictability in oil and stock price changes through time and reveals that conditional volatility changes more rapidly as result of substantial effects of past volatility rather than past news shocks for all market returns moreover we show that there is a slightly more effective hedge in the two stock markets under the dcc garch framework our preferred model compared to the other two models although hedging effectiveness is much greater for ghana on the whole our findings for optimal hedge ratios are consistent with other studies and particularly the view that oil assets should be an integral part of a diversified portfolio of stocks and suggest that a better understanding of volatility links is crucial for portfolio management in the presence of oil price risk finally the existence of multivariate asymmetric effects and dynamic conditional correlations as revealed by the var agarch and dcc garch models make it clear that the assumptions of symmetric effects and constant conditional correlations are not supported empirically

ambiguity attitudes in a large representative sample using a theorem showing that matching probabilities of ambiguous events can capture ambiguity attitudes we introduce a tractable method for measuring ambiguity attitudes and apply it in a large representative sample in addition to ambiguity aversion we confirm an ambiguity component recently found in laboratory studies a insensitivity the tendency to treat subjective likelihoods as 50 50 thus overweighting extreme events our ambiguity measurements are associated with real economic decisions specifically a insensitivity is negatively related to stock market participation ambiguity aversion is also negatively related to stock market participation but only for subjects who perceive stock returns as highly ambiguous this paper was accepted by james smith decision analysis

preference reversals for ambiguity aversion this paper finds preference reversals in measurements of ambiguity aversion even if psychological and informational circumstances are kept constant the reversals are of a fundamentally different nature than the reversals found before because they cannot be explained by context dependent weightings of attributes we offer an explanation based on sugden s random reference theory with different elicitation methods generating different random reference points then measurements of ambiguity aversion that use willingness to pay are confounded by loss aversion and hence overestimate ambiguity aversion this paper was accepted by teck ho decision analysis

effects of ambiguity in market experiments prior studies have shown that individuals are averse to ambiguity in probability many decisions are however made in market settings where an individual s decision is influenced by decisions of others participating in the market in this paper we extend the previous research to evaluate the effect of ambiguity on individual decisions and the resulting market price in market settings we therefore examine an important issue whether ambiguity effects persist in the face of market incentives and feedback two different market organizations the sealed bid auction and the double oral auction were employed the subjects in the experiments were graduate business students and bank executives our results show that the individual bids and market prices for lotteries with ambiguous probabilities are consistently lower than the corresponding bids and market prices for equivalent lotteries with well defined probabilities the aversion to ambiguity therefore does not vanish in market settings our results provide insights into what a manager can expect in bidding situations where the object of the sale oil leases mineral rights involves ambiguity in probability due to for example lack of information or prior experience the results may also be useful in understanding some phenomena in insurance and equity markets

the disposition effect in securities trading an experimental analysis the disposition effect is the tendency to sell assets that have gained value winners and keep assets that have lost value losers disposition effects can be explained by the two features of prospect theory the idea that people value gains and losses relative to a reference point the initial purchase price of shares and the tendency to seek risk when faced with possible losses and avoid risk when a certain gain is possible our experiments were designed to see if subjects would exhibit disposition effects subjects bought and sold shares in six risky assets asset prices fluctuated in each period contrary to bayesian optimization subjects did tend to sell winners and keep losers when the shares were automatically sold after each period the disposition effect was greatly reduced

venture theory a model of decision weights several theories suggest that people replace probabilities by decision weights when evaluating risky outcomes this paper proposes a model called venture theory of how people assess decision weights it is assumed that people first anchor on a stated probability and then adjust this by mentally simulating other possible values the amount of mental simulation is affected by the absolute size of payoffs the extent to which the anchor deviates from the extremes of 0 and 1 and the level of perceived ambiguity concerning the relevant probability the net effect of the adjustment i e up or down vis i vis the anchor reflects the relative weight given in imagination to values above as opposed to below the anchor this in turn is taken to be a function of both individual and situational variables and in particular the sign and size of payoffs cognitive and motivational factors therefore both play important roles in determining decision weights assuming that people evaluate outcomes by a prospect theory value function kahneman and tversky 1979 and are cautious in the face of risk fourteen predictions are derived concerning attitudes toward risk and ambiguity as functions of different levels of payoffs and probabilities the results of three experiments are reported whereas only a subset of the model s predictions can be tested in experiment 1 all fourteen are tested in experiments 2 and 3 using hypothetical and real payoffs respectively several of the model s predictions are not supported in experiment 2 but almost all are validated in experiments 1 and 3 the failures relate to the exact nature of probability payoff interactions in attitudes toward risk and ambiguity for losses the theory and results are discussed in relation to other experimental evidence future tests of the theory alternative models of risky choice and implications of venture theory for explaining further phenomena

approximate portfolio analysis abstract this paper presents a portfolio selection model based on the idea of approximation the model describes a portfolio by its decumulative distribution curve and a preference structure by a family of convex indifference curves it prescribes the optimal portfolio as the one whose decumulative curve has the highest tangent indifference curve the model extends the mean variance model in the sense that it does not restrict the return distributions of assets to be normal while under the assumption of normality the model simplifies to the mean variance model the model has a measure of risk attitudes that resembles the arrow pratt measure while combining both wealth and probability attitudes using this measure we show that the smaller the curvature of a value function and the larger the curvature of a weighting function the more risk averse an agent

oil prices and economic activity an asymmetric cointegration approach the aim of this paper is to study the long term relationship between oil prices and economic activity proxied by gdp to account for asymmetries existing in the links between the two variables we propose an approach based on asymmetric cointegration our empirical analysis concerns the u s economy but also the g7 europe and euro area economies results indicate that while standard cointegration is rejected there is evidence for asymmetric cointegration between oil prices and gdp

fossil fuel price uncertainty and feedstock edible oil prices evidence from mgarch m and virf analysis abstract this paper focuses on examining the impact of crude oil price volatility on the price changes of major edible oils rapeseed soybean and sunflower which are the main feedstock for the biodiesel industry in the european union for this purpose a four variate version of non diagonal garch in mean model that allows for asymmetry in the variance covariance matrix is used an important conclusion that emerges from this study is that the crude oil price uncertainty appears to be responsible for a significant decline in price returns of major feedstock edible oils considered in this study the volatility impulse response analyses support the conclusion that the conditional variances of both edible and crude oil and covariances between them are generally highly responsive to historical shock however the size of the impacts is mainly commodity specific finally we investigate the causality from crude oil price volatility to edible oil prices and the effects of oil price shocks on edible oil prices by using the granger causality test and generalized impulse response function analysis respectively the empirical results show that there is strong evidence of causality from crude oil price volatility to all edible oil prices under study and generalized impulse response analysis shows that the edible oil markets significantly respond to the shocks in oil prices

macroeconomic performance of oil price shocks outlier evidence from nineteen major oil related countries regions abstract as a special energy commodity oil price shocks can affect not only the energy market but also the performance of the macroeconomy this research provides complementary explanations for nineteen major oil related countries regions macroeconomic effects caused by unexpected oil price changes it focuses on the macroeconomic performance of oil price shocks from outlier perspective investigating the inner hidden factors of co movements between oil price shocks and macroeconomy three methods called empirical covariance ec method robust covariance rc method and one class support vector machine svm method are used in the outlier detection empirical results show that a one class svm method has the best environmental adaptability for detecting the outlier performance of the co movements between oil price shocks and macroeconomy followed by ec and rc methods b according to the time axis the outlier performances of gross domestic production consumer price index and unemployment rate are all concentrated in 2005 2014 which is highly consistent with the oil price shock process and c according to the spatial axis countries four categories with similar outlier performances are obtained outlier performance of macroeconomy of oil related country region in lower levels seems to be worse than that of the country region in higher levels which can be attributed to more attentions paid by higher leveled oil related countries on the oil price shock response system to relieve the severe macroeconomic impacts caused by oil price shocks

testing choquet expected utility many theories have been developed to model decision behavior under ambiguity in this paper we empirically investigate choquet expected utility which is based on nonadditive probabilities we first replicate ellsberg paradox behavior then we elicit nonadditive probabilities called capacities for individual decision makers those capacities did not have all properties theoretically required by ceu finally we found that ceu is not really superior to eu in predicting the participants decisions