A framework for analyzing the political support for active labor market policy


Journal of Public Economics

février 1998, vol. 67, n°2, pp.151-165

Départements : Finance

We develop a general equilibrium analysis of the impact of active labor market policy on unemployment, wages and the welfare of the employed. This framework is used to assess the political support in favour of such policies and to relate it to the working of Such policies and other parameters characterizing the economic environment. The main finding is that if the employed have little exposure to unemployment and if the demand for unskilled labour is inelastic, then there may be political support for policies which actually raise the equilibrium level of total unemployment

Asset Prices and Trading Volume in a Beauty Contest


Review of Economic Studies

avril 1998, vol. 65, n°2, pp.307-340

Départements : Finance

Speculators buy an asset hoping to sell it later to investors with higher private valuations. If agents are uncertain about the distribution of private valuations and about the beliefs of others about this distribution, a beauty contest with an infinite hierarchy of beliefs arises. Under Harsanyi's assumption of a common prior the infinite beliefs hierarchy is readily solved using Bayes' law. This paper shows that common knowledge of the "beliefs formation rule," mapping the private valuation of each agent into his first-order belief, also simplifies the beliefs hierarchy while allowing for disagreement among agents. We analyse the resulting speculation in a stylized asset market. Several statistic, computed only from readily observable quote, return and volume data, are evaluated in terms of their power to discriminate between genuine disagreement and the Harsanyian case. Only statistics that relate volume and volatility, or volume and changes in best offers, have the necessary discriminatory power

Condorcet Cycles in Bipartite Populations

H. CRES, Y. Balasko

Economic Theory

août 1998, vol. 12, pp.313-334

Départements : Finance

Simple majority voting between pairs of alternatives is used to aggregate individual preferences. The occurence of Condorcet cycles is limited thanks to a principle of homogeneity on individual preferences. The restrictions induced on the domain of the latters are weak: among the n! possible orderings of n alternatives, more than one half are admissible within a domain. The resulting aggregated preference has then a neglectable probability of showing up cycles. We show moreover that the set of individual preferences can be 'naturally' partitioned into two such domains.

Efficient Liability Rules for Multi-Party Accidents with Moral Hazard

E. Feess, U. HEGE

Journal of Institutional and Theoretical Economics

1998, vol. 154, n°2, pp.422-450

Départements : Finance, GREGHEC (CNRS)

The economic analysis of tort law is extended to multi-party accidents with unobservable actions. Due to the requirement of no punitive damages, the problem resembles a team production problem. It is shown that asymmetry in the agents' impact on the stochastic damage function can be exploited to improve ex ante incentives. This implies departures from the proportional rule, based on the statistical information contained in the circumstances of the accident. If a noisy monitoring technology is introduced, then monitoring can add enough stochastic identifiability among injurers to restore efficiency.

Exchange and Optimality


Economic Theory

1998, n°00

Départements : Finance

Floors, Limit Order Markets and Dealer Markets


Journal of Financial Markets

1998, vol. 1, n°3-4, pp.253-284

Départements : Finance, GREGHEC (CNRS)

pas sous affiliation hecIn dealer markets, liquidity suppliers have entire flexibility to bargain on the price with their customers. In limit order markets, they are restricted to convex schedules: they cannot sell the first share at a higher price than the second. Floor traders simply respond to the liquidity demand conveyed by brokers by crying out one price. In floor markets risk-sharing is inefficient and spreads are large. In dealer markets, risk-sharing can be efficient, but spreads tend to be large. In limit order markets, the unique equilibrium entails efficient risk-sharing and competitive spreads. Hence there is a non-monotonic relation between the efficiency of the market and the extent to which the offers of the liquidity suppliers are restricted. Author Keywords: Floor markets; Dealer markets; Limit orders; Market design; Tacit collusion

General Equilibrium Under Imperfect Competition: A Comment


Scandinavian Journal of Economics


Départements : Finance

Global Asset Management


Journal of Portfolio Management

été 1998, pp.43-51

Départements : Finance

Currency risk is low in the long term, as exchange rates tend to revert to fundamentals over the very long run, but the contribution of currencies to the longterm performance of a global portfolio never gets to be nil. Currency risk premiums exist in the long run and are consistent with world market equilibrium and finance theory. The author argues that if the plan sponsor sets a benchmark for a very long-term horizon (say, fifty years), it should probably be unhedged as currency returns provide only a small, positive or negative, contribution to total return, while systematic currency hedging is a cumbersome process. If the plan sponsor has in mind a shorter strategic horizon (say, five years), the ideal currency allocation in the strategic benchmark is, and will remain, a question open to debate. Applying some universal hedging rule is questionable in the presence of the complex,correlation structure of stock prices, interest rates, and exchange rates. Finally, the author explains that if the plan sponsor believes in active management, currencies should be an integral part of the tactical asset allocation and security valuation process.

Implied volatility functions: Empirical test

B. DUMAS, R. Whaley, J. Fleming

The Journal of Finance

1998, vol. 53, n°6, pp.2059-2106

Départements : Finance

Irrational Entry, Rational Exit

B. Hazari, M. CHESNEY

Journal of Mathematical Economics

1998, n°29, pp.1-13

Départements : Finance