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Do competition and incentives offered to designated market makers (DMMs) improve market liquidity? Using data from NYSE Euronext Paris, we show that an exogenous increase in competition among DMMs leads to a significant decrease in quoted and effective spreads, mainly through a reduction in adverse selection costs. In contrast, changes in incentives, through small changes in rebates and requirements for DMMs, do not have any tangible effect on market liquidity. Our results are of relevance for designing optimal contracts between exchanges and DMMs and for regulatory market oversight.
We show that banks that are facing relatively high locally non-diversifiable risks in their home region expand more across states than banks that do not face such risks following branching deregulation in the 1990s and 2000s. These banks with high locally non-diversifiable risks also benefit relatively more from deregulation in terms of higher bank stability. Further, these banks expand more into counties where risks are relatively high and positively correlated with risks in their home region, suggesting that they do not only diversify but also build on their expertise in local risks when they expand into new regions.
Self-control failure is among the major pathologies (Baumeister et al. (1994)) affecting individual investment decisions which has hardly been measurable in empirical research. We use cigarette addiction identified from checking account transactions to proxy for low self-control and compare over 5,000 smokers to 14,000 nonsmokers. Smokers self-directing their investment trade more frequently, exhibit more biases and achieve lower portfolio returns. We also find that smokers, some of which might be aware of their limited levels of self-control, exhibit a higher propensity than nonsmokers to delegate decision making to professional advisors and fund managers. We document that such precommitments work successfully.
We explore space improvements in LRP, a polymorphically typed call-by-need functional core language. A relaxed space measure is chosen for the maximal size usage during an evaluation. It Abstracts from the details of the implementation via abstract machines, but it takes garbage collection into account and thus can be seen as a realistic approximation of space usage. The results are: a context lemma for space improving translations and for space equivalences; all but one reduction rule of the calculus are shown to be space improvements, and the exceptional one, the copy-rule, is shown to increase space only moderately.
Several further program transformations are shown to be space improvements or space equivalences, in particular the translation into machine expressions is a space equivalence. These results are a step Forward in making predictions about the change in runtime space behavior of optimizing transformations in callbyneed functional languages.
We explore space improvements in LRP, a polymorphically typed call-by-need functional core language. A relaxed space measure is chosen for the maximal size usage during an evaluation. It Abstracts from the details of the implementation via abstract machines, but it takes garbage collection into account and thus can be seen as a realistic approximation of space usage. The results are: a context lemma for space improving translations and for space equivalences; all but one reduction rule of the calculus are shown to be space improvements, and the exceptional one, the copy-rule, is shown to increase space only moderately.
Several further program transformations are shown to be space improvements or space equivalences, in particular the translation into machine expressions is a space equivalence. These results are a step Forward in making predictions about the change in runtime space behavior of optimizing transformations in callbyneed functional languages.
The synchronous pi-calculus is translated into a core language of Concurrent Haskell extended by futures (CHF). The translation simulates the synchronous message-passing of the pi-calculus by sending messages and adding synchronization using Concurrent Haskell's mutable shared-memory locations (MVars). The semantic criterion is a contextual semantics of the pi-calculus and of CHF using may- and should-convergence as observations. The results are equivalence with respect to the observations, full abstraction of the translation of closed processes, and adequacy of the translation on open processes. The translation transports the semantics of the pi-calculus processes under rather strong criteria, since error-free programs are translated into error-free ones, and programs without non-deterministic error possibilities are also translated into programs without non-deterministic error-possibilities. This investigation shows that CHF embraces the expressive power and the concurrency capabilities of the pi-calculus.
Distributed ledger technology especially in the form of publicly coordinated validation networks such as Ethereum and Bitcoin with their own monetary circles provide for a revealing litmus test for current financial regulatory schemes. The paper highlights the interrelation between distributed coordination and the emission of virtual currency to make sense of the function of the new monetary phenomenon. It then argues for the regulation of financial services on the ground of the technology to ensure integrity standards. In this respect, it is useful to gear the development of a regulatory scheme towards the existing financial regulatory principles. However, future measures of the regulators must take the distributed nature of the platforms into account by relying on a “regulated self-regulation” of the community. Finally, the article focuses on the shortcomings of the current EU regulatory regimes, especially the regulation frameworks regarding financial services, payment services and electronic money.
Exploiting the natural experiment of the German reunification, we examine how consumers adapt to a new environment in their macroeconomic forecasting. We document that East Germans expect higher in inflation and make larger forecast errors than West
Germans even decades after reunification. Differences in consumption baskets, financial literacy, risk aversion or trust in the central bank cannot fully account for these patterns. We find most support for the explanation that East Germans, who were used to a strong norm of zero inflation, persistently overadjusted the level of their expectations in the face of the initial inflation shock in reunified Germany. Our findings suggest that large changes in the economic environment can permanently impede people's ability to form accurate macroeconomic expectations, with an important role for the interaction of old norms and new experiences around the event.
Policymakers attach an important role to the macroeconomic outlook of households. Using a representative online panel form the U.S., the authors examine how individuals' macroeconomic expectations causally affect their personal economic prospects and their behavior and provide them with different professional forecasts about the likelihood of a recession. The authors find that groups with the largest exposure to aggregate risk, such as individuals working in cyclical industries, are most likely to respond to an improved macroeconomic outlook, while a large fraction of the population is unlikely to react.
This paper uses unique administrative data and a quasi-field experiment of exogenous allocation in Sweden to estimate medium- and longer-run effects on financial behavior from exposure to financially literate neighbors. It contributes evidence of causal impact of exposure and of a social multiplier of financial knowledge, but also of unfavorable distributional aspects of externalities. Exposure promotes saving in private retirement accounts and stockholding, especially when neighbors have economics or business education, but only for educated households and when interaction possibilities are substantial. Findings point to transfer of knowledge rather than mere imitation or effects through labor, education, or mobility channels.