Inference for Lévy‐Driven Stochastic Volatility Models via Adaptive Sequential Monte Carlo

Abstract. We investigate simulation methodology for Bayesian inference in Lévy‐driven stochastic volatility (SV) models. Typically, Bayesian inference from such models is performed using Markov chain Monte Carlo (MCMC); this is often a challenging task. Sequential Monte Carlo (SMC) samplers are methods that can improve over MCMC; however, there are many user‐set parameters to specify. We develop a fully automated SMC algorithm, which substantially improves over the standard MCMC methods in the literature. To illustrate our methodology, we look at a model comprised of a Heston model with an independent, additive, variance gamma process in the returns equation. The driving gamma process can capture the stylized behaviour of many financial time series and a discretized version, fit in a Bayesian manner, has been found to be very useful for modelling equity data. We demonstrate that it is possible to draw exact inference, in the sense of no time‐discretization error, from the Bayesian SV model.     

EFFICIENT DURABLE GOOD PRICING AND AFTERMARKET TIE-IN SALES

The conditions under which a durable good supplier employs a tying arrangement that binds aftermarket purchases to the original sale was a central issue in the Kodak case. Two competing theories were presented in that case. Importantly, neither of these provides an efficiency-based explanation for the observed behavior. Subsequent theories provide several efficiency-driven motivations for aftermarket tying. None of these, however, rely upon efficient contracting between the buyer and the seller of the durable good. This article demonstrates the conditions under which such a contract will contain an aftermarket tie-in provision. ( JEL L42)     

Zero-Bias Locally Adaptive Density Estimators

Strategies for improving fixed non-negative kernel estimators have focused on reducing the bias, either by employing higher-order kernels or by adjusting the bandwidth locally. Intuitively, bandwidths in the tails should be relatively larger in order to reduce wiggles since there is less data available in the tails. We show that in regions where the density function is convex, it is theoretically possible to find local bandwidths such that the pointwise bias is exactly zero. The corresponding pointwise mean squared error converges at the parametric rate of O ( n ⁻¹ ) rather than the slower O ( n ^−4/5). These so-called zero-bias bandwidths are constant and are usually orders of magnitude larger than the optimal locally adaptive bandwidths predicted by asymptotic mean squared error analysis. We describe data-based algorithms for estimating zero-bias bandwidths over intervals where the density is convex. We find that our particular density estimator attains the usual O ( n ^−4/5) rate. However, we demonstrate that the algorithms can provide significant improvement in mean squared error, often clearly visually superior curves, and a new operating point in the usual bias-variance tradeoff.     

SURVEY EVIDENCE ON EXCESSIVE PUBLIC PESSIMISM ABOUT THE FUTURE BEHAVIOR OF UNEMPLOYMENT

Two of the questions in the Surveys of Consumer Attitudes undertakenby the Survey Research Center of the University of Michigandeal with households' expectations about inflation and the changein unemployment. We compare quarterly time series of the meanresponses with the actual behavior of inflation and unemploymentto see whether households are overly optimistic or pessimisticabout the future behavior of inflation and unemployment. Wefind an asymmetry. Over the 21 years of our analysis, on averagethe public is neither overly optimistic nor overly pessimisticabout future inflation. However, the public has been significantlytoo pessimistic about the future behavior of unemployment. Theseresults have an important implication for macroeconomic policy.If politicians respond to complaints from the public about inflationand unemployment they will target policy instruments at unemploymentto a greater extent than if the public was not so pessimisticabout the behavior of unemployment. The result may be a higherrate of inflation than if the public were not mistakenly pessimisticabout the behavior of unemployment.     

Artisanal Cooperation, Forms of Labor, and the Global Economy, Chachapoyas, 1930s to the 1990s

Abstract Since the 1960s students of agrarian society have interpreted the existence of putatively "capitalist" economic practices and relations (e.g., commoditization, wage capitalist nature of the economies concerned. The present paper challenges this interpretation. Based on an analysis of artisanal production in the northern Peruvian Andes, the paper shows that purportedly "capitalist" economic practices may be fully commensurable with "non-capitalist" relations (e.g., forms of cooperation in the production process, kin ties, etc.), and may even act as an obstacle to capital accumulation. "Non-capitalist" forms of organizing the production process and of remunerating labor, on the other hand, may be essential to the accumulation process.     

Interpretive Historical Sociology: discordances of Weber, Dilthey and others

Abstract Relations of several notions of historical understanding to issues of explanation, historical complexity, practical and moral reason, and the differentiation of historical and natural science are discussed. Examination of the historical context of the German Methodenstreit exhibits similarities with current disjunctions within historical sociology and allows specification of crucial questions about its methods and cognitive goals. Max Weber and Wilhelm Dilthey are discussed as proponents of radically opposed methodological positions. Claims about Weber's reliance on Dilthey are dispelled as it is shown that Weber neither developed nor practiced a 'method' of verstehen , while Weber's congruence with Heinrich Rickert is upheld. Oppositions within historiography (Droysen vs.Buckle) and economics (Schmoller vs. Menger) are analyzed as prefigurations of the Weber-Dilthey rivalry. Finally, contemporary historical strategies are summarized with reference to pertinent issues extracted from earlier debates.     

Evaluating the Use of Residential Mailing Addresses in a Metropolitan Household Survey

On-site enumeration is generally regarded as the most comprehensivemethod for developing sampling frames for area household surveys.However, the time and expense associated with on-site enumerationoften precludes it from being a viable option for many householdsurveys. Residential mailing lists provide an alternative thatenables in-person surveys to be done cheaper and faster thanis possible with on-site enumeration. The primary drawback ofmailing lists is that the completeness of the lists is unknown.In this article, we evaluate the coverage of mailing addressesthat were used as a sampling frame for a probability-based surveyof 15,000 households in Dallas County, TX. The addresses wereobtained from the Delivery Sequence File (DSF) offered by theU.S. Postal Service (USPS) through a nonexclusive license agreementwith private companies. The DSF is a computerized file thatcontains all delivery point addresses serviced by the USPS,with the exception of general delivery. To evaluate the coverageof the mailing addresses, we used Kish's Half-Open Interval(HOI) procedure to search for missed housing units in the intervalbetween the selected address and the next address in deliverysequence order. A total of 46 missed addresses (1.9 percent)were found among the 2,380 HOIs randomly selected for examination.In addition, we discovered that the vast majority of personswho maintained a residential P.O. box also have mail deliveredto their street address. Finally, the mailing addresses yieldeda 90 percent occupancy rate, which is consistent with metropolitanhousehold surveys that use on-site enumeration methods.     

VOTING BEHAVIOR, DISCRIMINATION AND THE NATIONAL BASEBALL HALL OF FAME

We investigate whether black, Latin, and white major league baseball players receive the same consideration by the Baseball Writers' Association of America in voting for membership into The National Baseball Hall of Fame. The first stage of Heckman's two-step procedure indicates that the probability a black player will ever receive at least one vote is significantly lower than that for his white counterpart. The second stage suggests that race or ethnicity sometimes matter in determining the number of votes a candidate receives for Hall of Fame membership. (JEL J7, D72)