A Comparison of Standard Multi-Unit Auctions With Synergies

G. Albano, F. Germano, S. LOVO

Economics Letters

2001, n°71, pp.55-60

Départements : Finance, GREGHEC (CNRS)

In an example where some bidders have superadditive values, we characterize the equilibria of a simultaneous ascending auction and compare the revenue and efficiency generated with ones generated by the sequential, the one-shot simultaneous, and the Vickrey-Clarke-Groves auctions.

A Time Varying Parameter Model to Test For Predictability and Integration in Stock Markets of Transition Economies


Journal of Business and Economic Statistics

janvier 2001, vol. 19, n°1, pp.73-84

Départements : Finance

Mots clés : Central and Eastern Europe, Kalman filter, Market integration, Stock indexes, Volatility transmission

This article introduces a model, based on the Kalman-filter framework, that allows for time-varying parameters, latent factors, and a general generalized autoregressive conditional heteroscedasticity (GARCH) structure for the residuals. With this extension of the Bekaert and Harvey model, it is possible to test if an emerging stock market becomes more efficient over time and more integrated with other already established markets in situations in which no macroeconomic conditioning variables are available. We apply this model to the Czech, Polish, Hungarian, and Russian stock markets. We use data at daily frequency running from April 7, 1994, to July 10, 1997. A latent factor captures macroeconomic expectations. Concerning predictability, measured with time-varying autocorrelations, Hungary reached efficiency before 1994. Russia shows signs of ongoing convergence toward efficiency. For Poland and the Czech Republic, we find no improvements. With regard to market integration, there is evidence that the importance of Germany has changed over time for all markets. Shocks in the United Kingdom are positively related to the Czech and Polish markets but not to the Russian or the Hungarian markets. Shocks in the United States have no impact on these markets with the exception of Russia. A strong negative correlation between Russia and the United States and Germany tends to disappear over the time span studied. We also show that these markets exhibit significant asymmetric GARCH effects where bad news generates greater volatility. In Hungary, good news, instead, generates greater volatility, which leads us to formulate a liquidity hypothesis

Aggregation of Coarse Preferences


Social Choice and Welfare

2001, vol. 3, n°18, pp.507-525

Départements : Finance

We consider weak preference orderings over a set A(n) of n alternatives. An individual preference is of refinement l less than or equal to n if it first partitions A(n) into l subsets of 'tied' alternatives, and then ranks these subsets within a linear ordering. When l < n, preferences are coarse. It is shown that, if the refinement of preferences does not exceed l, a super majority rule (within non-abstaining voters) with rate 1- 1/l is necessary and sufficient to rule out Condorcet cycles of any length. It is argued moreover how the coarser the individual preferences, (1) the smaller the rate of super majority necessary to rule out cycles 'in probability'; (2) the more probable the pairwise comparisons of alternatives, for any given super majority rule.

Continua of Underemployment Equilibria Reflecting Coordination Failures, Also at Walrasian Prices

H. CRES, A. CITANNA, A. Villanacci, J. Drèze, J. Herings, H. Crès

Journal of Mathematical Economics

2001, n°36, pp.169-200

Départements : Finance, Economie et Sciences de la décision

In this paper, the existence of unemployment is partly explained as being the result of coordination failures. It is shown that as a result of self-fulfilling pessimistic expectations, even at Walrasian prices, a continuum of equilibria results, among which an equilibrium with approximately no trade and a Walrasian equilibrium. These coordination failures also arise at other price systems, but then unemployment is the result of both a wrong price system and coordination failures. Some properties of the set of equilibria are analyzed. Generically, there exists a continuum of non-indifferent equilibrium allocations. Under a condition implied by gross substitutability, there exists a continuum of equilibrium allocations in the neighborhood of a competitive allocation, when prices are Walrasian. For a specialized economy, a dynamic illustration is offered

Equivariant Elliptic Cohomology and Rigidity


American Journal of Mathematics

août 2001, vol. 123, n°4, pp.647-677

Départements : Finance, GREGHEC (CNRS)

Equivariant elliptic cohomology with coriplex coefficients was defined axiomatically by Ginzburg. Kapranov and Vasserot and constructed by Grojnowski. We give an invariant definition of complex S1-equivariant elliptic cohomology, and use it to give an entirely cohomological proof of the rigidity theorem of Witten for the elliptic genus. We also state and prove a rigidity theorem for families of elliptic genera.

Evaluation et financement des start-up Internet


Revue Economique

2001, vol. 52, pp.291-312

Départements : Finance, GREGHEC (CNRS)

numéro spécial

Extreme Correlation of International Equity Markets

F. Longin, B. SOLNIK

The Journal of Finance

avril 2001, vol. 56, n°2, pp.649-676

Départements : Finance

Testing the hypothesis that international equity market correlation increases in volatile times is a difficult exercise and misleading results have often been reported in the past because of a spurious relationship between correlation and volatility. Using “extreme value theory” to model the multivariate distribution tails, we derive the distribution of extreme correlation for a wide class of return distributions. Empirically, we reject the null hypothesis of multivariate normality for the negative tail, but not for the positive tail. We also find that correlation is not related to market volatility per se but to the market trend. Correlation increases in bear markets, but not in bull markets

Forecasting multifractal volatility

A. Fisher, L. E. CALVET

Journal of Econometrics

octobre 2001, vol. 105, n°1, pp.27-58

Départements : Finance, GREGHEC (CNRS)

This paper develops analytical methods to forecast the distribution of future returns for a new continuous-time process, the Poisson multifractal. The process captures the thick tails, volatility persistence, and moment scaling exhibited by many financial time series. It can be interpreted as a stochastic volatility model with multiple frequencies and a Markov latent state. We assume for simplicity that the forecaster knows the true generating process with certainty but only observes past returns. The challenge in this environment is long memory and the corresponding infinite dimension of the state space. We introduce a discretized version of the model that has a finite state space and an analytical solution to the conditioning problem. As the grid step size goes to zero, the discretized model weakly converges to the continuous-time process, implying the consistency of the density forecasts.

Global pricing of equity

J. Diermeier, B. SOLNIK

Financial Analysts Journal

juillet-août 2001, vol. 57, n°4, pp.37-47

Départements : Finance

Global equity management has historically been structured around country asset allocation. This approach was supported by the observations that the country factor is the major source of influence on stock-price behavior and that the correlation between equity and currency is close to zero and unstable. If a corporation is regarded as a portfolio of international activities, however, its stock price should be influenced by international factors in relation to the geographical breakdown of its activities rather than where its headquarters is located or its stock is traded. We examined a large cross-section of security prices and found that regional factors and currency factors have a strong influence on asset returns beyond that of domestic factors. Moreover, the sensitivity of individual company returns to nondomestic factors is closely related to the extent of their international activities, as proxied by the relative importance of foreign sales to total sales. We review the implications of these findings for the asset management profession

Gram-Charlier Densities

M. ROCKINGER, E. Jondeau

Journal of Economic Dynamics and Control

octobre 2001, vol. 25, n°10, pp.1457-1483

Départements : Finance

Mots clés : Hermite expansion, Semi-nonparametric estimation, Risk-neutral density, GARCH model

The Gram–Charlier expansion, where skewness and kurtosis directly appear as parameters, has become popular in Finance as a generalization of the normal density. We show how positivity constraints can be numerically implemented, thereby guaranteeing that the expansion defines a density. The constrained expansion can be referred to as a Gram–Charlier density. First, we apply our method to the estimation of risk neutral densities. Then, we assess the statistical properties of maximum-likelihood estimates of Gram–Charlier densities. Lastly, we apply the framework to the estimation of a GARCH model where the conditional density is a Gram–Charlier density