{"title":"Market Equilibrium Implied Risk Aversion and Utility","authors":"Stylianos Paganopoulos","doi":"10.2139/ssrn.1470421","DOIUrl":"https://doi.org/10.2139/ssrn.1470421","url":null,"abstract":"Using as a starting point a popular version of the utility function, we obtain a value for the risk aversion parameter as implied by the market equilibrium portfolio, that is, the mean-variance efficient portfolio with the maximum Sharpe ratio. Moreover, we obtain a value for the utility of the market equilibrium portfolio.","PeriodicalId":400873,"journal":{"name":"Microeconomics: Information","volume":"102 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-09-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122618233","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Liability for Future Harm","authors":"A. Porat, Alex Stein","doi":"10.5040/9781472561022.ch-011","DOIUrl":"https://doi.org/10.5040/9781472561022.ch-011","url":null,"abstract":"This Article considers the possibility of imposing liability in torts for a wrongfully created risk of future harm. We examine the American and English court decisions pertaining to this issue and consider whether a probability-based compensation for the victim’s expected - albeit not yet materialized - harm is just and efficient. We demonstrate how the virtues of a legal regime that allows a tort victim to recover compensation for her expected harm overshadow its vices. We conclude that a person’s risk of sustaining harm in the future should be actionable whenever the risk is substantial. We further conclude that it should be left to the victim to decide whether to recover for his or her expected harm, or else wait and see if the risk materializes and recover only if it does. We observe that allowing victims to make this choice might create a collective action problem. Because expedited compensation for a victim’s expected harm erodes the wrongdoer’s ability to compensate future claimants, victims would opt for an early recovery for expected harm even when their substantive remedial preferences are different. We demonstrate, however, that this problem can be resolved.","PeriodicalId":400873,"journal":{"name":"Microeconomics: Information","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-08-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130322770","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Measuring Risk for Venture Capital and Private Equity Portfolios","authors":"Susan E. Woodward","doi":"10.2139/ssrn.1458050","DOIUrl":"https://doi.org/10.2139/ssrn.1458050","url":null,"abstract":"For alternative assets such as venture capital, buyouts (private equity), real estate, etc., the standard regression of portfolio returns on market returns to measure risk produces risk measures that are not credible. Institutional investors, doubting such measures, instead often use either some rule of thumb, such as a stock market index plus a premium (S&P500 5, or Russell3000 3) as a benchmark, or attempt to evaluate portfolios using public market equivalents. This paper shows an alternative approach to measuring risk directly which explicitly addresses the staleness of reported values for venture capital (and other alternative assets) by including lagging market returns in the regression to capture the full relatedness of portfolio returns to market returns. Examples for venture capital and buyout portfolios show that the true risk measures are generally more than double those from naive measures lacking lagging market returns. The measurement also reveals the staleness profile of each portfolio, which can be used to calculate a mark-to-market value for the portfolio.","PeriodicalId":400873,"journal":{"name":"Microeconomics: Information","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130746367","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Weather and Financial Risk-Taking: Is Happiness the Channel?","authors":"Cahit Guven","doi":"10.2139/ssrn.1476884","DOIUrl":"https://doi.org/10.2139/ssrn.1476884","url":null,"abstract":"Weather variables, in particular sunshine, are found to be strongly correlated with financial variables. I consider self-reported happiness as a channel through which sunshine affects financial variables. I examine the influence of happiness on risk-taking behavior by instrumenting individual happiness with regional sunshine. I find that happy people appear to be more risk-averse in financial decisions and (accordingly) choose safer investments. Happy people take more time for making decisions and have more self-control. Happy people also expect a longer life and (accordingly) seem more concerned about the future than the present and expect less inflation.","PeriodicalId":400873,"journal":{"name":"Microeconomics: Information","volume":"79 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127013842","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Subjective Measures of Risk Aversion, Fixed Costs, and Portfolio Choice","authors":"A. Kapteyn, Federica Teppa","doi":"10.2139/ssrn.1481312","DOIUrl":"https://doi.org/10.2139/ssrn.1481312","url":null,"abstract":"The paper investigates risk preferences among different types of individuals. We use several different measures of risk preferences, including questions on choices between uncertain income streams suggested by Barsky, Juster, Kimball, and Shapiro (1997) and a number of ad hoc measures. As in (Barsky et al., 1997) and (Arrondel and Calvo-Pardo, 2002), we first analyze individual variation in the risk aversion measures and explain them by background characteristics (both \"objective\" characteristics and other subjective measures of risk preference). Next we incorporate the measured risk preferences into a household portfolio allocation model, which explains portfolio shares, while accounting for incomplete portfolios and fixed costs. Our results show that a measure based on factor analysis of answers to a number of simple risk preference questions has the most explanatory power. The Barsky et al. (1997) measure has less explanatory power than this \"a-theoretical\" measure, suggesting that sophisticated measures based on economic theory may exceed the financial capability of respondents. Fixed costs turn out to provide an economically and statistically highly significant explanation for incomplete portfolios.","PeriodicalId":400873,"journal":{"name":"Microeconomics: Information","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-07-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130874941","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Investment under Uncertainty and the Recipient of the Entry Cost","authors":"D. Lavee, Yishay D. Maoz","doi":"10.2139/ssrn.1433428","DOIUrl":"https://doi.org/10.2139/ssrn.1433428","url":null,"abstract":"A typical model of investment under uncertainty where firms incur an irreversible cost in order to produce is studied with a novel focus on the reciever of this cost (\"the source\"). The source is modeled as a firm or a government that sells a resource or a right that are necessary for the production of the final good. We study in detail how the source sets its resource's price. We find that this price is a decreasing function of the elasticity of the demand for the final good. We also find that when this demand is sufficiently low, the source does not lower its price accordingly, and the producers of the final good delay their purchases of the resource. The reason is that the source expects demand to be higher in the future and does not want to be committed then to a low price for its resource.","PeriodicalId":400873,"journal":{"name":"Microeconomics: Information","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-07-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126450934","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Market Shares in Two-Sided Media Industries","authors":"Hans Jarle Kind, F. Stähler","doi":"10.1628/093245610791343067","DOIUrl":"https://doi.org/10.1628/093245610791343067","url":null,"abstract":"This paper generalizes the frequently used Hotelling model for two-sided markets in order to determine the equilibrium market shares. We show that advertisement levels depend neither on the media price nor on the location of the media firm. An increase in advertising revenues does not change location but only the media price. If the distribution of consumers is asymmetric, market shares will be asymmetric as well, and the media firm with the larger market share charges the higher media price. The larger firm makes a higher profit per reader and in aggregate compared to its smaller rival.","PeriodicalId":400873,"journal":{"name":"Microeconomics: Information","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128775080","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Executive Pay, Talent and Firm Size: Why has CEO Pay Grown so Much?","authors":"J. Sung, P. Swan","doi":"10.2139/ssrn.1420952","DOIUrl":"https://doi.org/10.2139/ssrn.1420952","url":null,"abstract":"We exposit an integrated agency model of multi-period career concerns and labor market equilibrium with managerial reservation utility levels, and thus pay levels, determined endogenously for firms of different sizes. Based on observations from a long time-series of S&P 1500 companies, we estimate the stochastic production function describing the incremental wealth created by the manager as a function of “effort”, latent raw “talent”, idiosyncratic firm risk (asset volatility) and the opening value of assets employed. We show that CEO talent affects the marginal productivity of the firm at approximately twice the rate as effort. Since asset volatility is also more subject to scale effects than effort, risk per marginal product of effort is higher in larger firms. Due to the cost of compensating managers for risk, pay-performance sensitivity optimally declines with size. Furthermore, our talent estimates explain much of the increments to real CEO pay levels and income over recent decades as a response to increases in talent and as compensation for higher risk borne by executives, with firm size growth playing a negligible role. We also identify the most talented CEOs who earned enterprise returns 17 times higher than the CEOs of the largest firms.","PeriodicalId":400873,"journal":{"name":"Microeconomics: Information","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-06-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125009836","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Speed of Stock Price Adjustment to Market-Wide Information","authors":"K. Lim","doi":"10.2139/ssrn.1412231","DOIUrl":"https://doi.org/10.2139/ssrn.1412231","url":null,"abstract":"The speed of stock price adjustment to new information is central to market efficiency, and the price delay measure has emerged as a useful tool. This approach enables earlier studies to identify a set of factors responsible for delaying stock price adjustment to market-wide information. We argue that investor inattention and slow dissemination of information are two leading causes for underreaction, but the challenge lies at finding suitable empirical proxies to test these competing hypotheses. This paper also suggests and justifies a comparative study to assess whether the reactions to global market information vary widely across countries and why.","PeriodicalId":400873,"journal":{"name":"Microeconomics: Information","volume":"61 4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-05-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124092513","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Complex Dynamics of Sponsored Search Advertising Markets","authors":"V. Robu, J. A. La Poutré, S. Bohté","doi":"10.2139/ssrn.1433030","DOIUrl":"https://doi.org/10.2139/ssrn.1433030","url":null,"abstract":"This paper provides a comprehensive study of the structure and dynamics of online advertising markets, mostly based on techniques from the emergent discipline of complex systems analysis. First, we look at how the display rank of a URL link influences its click frequency, for both sponsored search and organic search. Second, we study the market structure that emerges from these queries, especially the market share distribution of different advertisers. We show that the sponsored search market is highly concentrated, with less than 5% of all advertisers receiving over 2/3 of the clicks in the market. Furthermore, we show that both the number of ad impressions and the number of clicks follow power law distributions of approximately the same coefficient. However, we find this result does not hold when studying the same distribution of clicks per rank position, which shows considerable variance, most likely due to the way advertisers divide their budget on different keywords. Finally, we turn our attention to how such sponsored search data could be used to provide decision support tools for bidding for combinations of keywords. We provide a method to visualize keywords of interest in graphical form, as well as a method to partition these graphs to obtain desirable subsets of search terms.","PeriodicalId":400873,"journal":{"name":"Microeconomics: Information","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132368002","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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