Empirical Anomalies Research Articles

The Dynamic Response of Municipal Budgets to Revenue Shocks

We study the fiscal and tax response to intergovernmental grants, exploiting quasi-experimental variation within Germany's fiscal equalization scheme triggered by census revisions of population counts. Municipal budgets do not adjust instantly. Instead, spending and investments adapt within five years to revenue gains, while the adjustment to losses is more rapid. Yet the long-run response is symmetric. The tax response is particularly slow, stretching over more than a decade. Well-known empirical anomalies such as the so-called flypaper effect may thus reflect a short-run phenomenon, while long-run fiscal behavior appears more consistent with standard theories of fiscal federalism. (JEL E62, H71, H72, H77, R51)

Distinguishing between fractional Brownian motion with random and constant Hurst exponent using sample autocovariance-based statistics.

Fractional Brownian motion (FBM) is a canonical model for describing dynamics in various complex systems. It is characterized by the Hurst exponent, which is responsible for the correlation between FBM increments, its self-similarity property, and anomalous diffusion behavior. However, recent research indicates that the classical model may be insufficient in describing experimental observations when the anomalous diffusion exponent varies from trajectory to trajectory. As a result, modifications of the classical FBM have been considered in the literature, with a natural extension being the FBM with a random Hurst exponent. In this paper, we discuss the problem of distinguishing between two models: (i) FBM with the constant Hurst exponent and (ii) FBM with random Hurst exponent, by analyzing the probabilistic properties of statistics represented by the quadratic forms. These statistics have recently found application in Gaussian processes and have proven to serve as efficient tools for hypothesis testing. Here, we examine two statistics-the sample autocovariance function and the empirical anomaly measure-utilizing the correlation properties of the considered models. Based on these statistics, we introduce a testing procedure to differentiate between the two models. We present analytical and simulation results considering the two-point and beta distributions as exemplary distributions of the random Hurst exponent. Finally, to demonstrate the utility of the presented methodology, we analyze real-world datasets from the financial market and single particle tracking experiment in biological gels.

Gene flow and an anomaly zone complicate phylogenomic inference in a rapidly radiated avian family (Prunellidae)

BackgroundResolving the phylogeny of rapidly radiating lineages presents a challenge when building the Tree of Life. An Old World avian family Prunellidae (Accentors) comprises twelve species that rapidly diversified at the Pliocene–Pleistocene boundary.ResultsHere we investigate the phylogenetic relationships of all species of Prunellidae using a chromosome-level de novo assembly of Prunella strophiata and 36 high-coverage resequenced genomes. We use homologous alignments of thousands of exonic and intronic loci to build the coalescent and concatenated phylogenies and recover four different species trees. Topology tests show a large degree of gene tree-species tree discordance but only 40–54% of intronic gene trees and 36–75% of exonic genic trees can be explained by incomplete lineage sorting and gene tree estimation errors. Estimated branch lengths for three successive internal branches in the inferred species trees suggest the existence of an empirical anomaly zone. The most common topology recovered for species in this anomaly zone was not similar to any coalescent or concatenated inference phylogenies, suggesting presence of anomalous gene trees. However, this interpretation is complicated by the presence of gene flow because extensive introgression was detected among these species. When exploring tree topology distributions, introgression, and regional variation in recombination rate, we find that many autosomal regions contain signatures of introgression and thus may mislead phylogenetic inference. Conversely, the phylogenetic signal is concentrated to regions with low-recombination rate, such as the Z chromosome, which are also more resistant to interspecific introgression.ConclusionsCollectively, our results suggest that phylogenomic inference should consider the underlying genomic architecture to maximize the consistency of phylogenomic signal.

"Ambiguous" Network Monarchy as Problematic Euphoric Couplet

Frequently cited in the literature on recent Thai politics, Duncan McCargo's influential "network monarchy" concept is nonetheless inadequately developed. As such, it has been questioned and challenged by several scholars in recent years. In his 2021 Pacific Affairs article, McCargo rebuts many of these scholars' arguments and defends his concept. His defence is unpersuasive, however. It falls short of elaborating on the scope, composition, and modus operandi of network monarchy, leaving the shortcomings of his original concept unrectified. Most seriously, McCargo now accentuates the "ambiguous" quality of network monarchy—a quality he did not emphasize originally—in order to accommodate new empirical anomalies and counter his critics. By so doing, he renders his argument unfalsifiable. Drawing on Robert Cribb's thoughts, this article first spells out why or how the insu ciently developed network monarchy concept has become so widespread in the first place. It then examines the untenable nature of McCargo's rejoinder to his critics, especially to Eugénie Mérieau.

Temporal Optionality in Share Buyback Execution: An Empirical Anomaly and Value Optimization Approach

Temporal Optionality in Share Buyback Execution: An Empirical Anomaly and Value Optimization Approach

Rethinking Share Buyback Execution: Insights into Temporal Optionality and Empirical Anomalies

Rethinking Share Buyback Execution: Insights into Temporal Optionality and Empirical Anomalies

Rethinking Share Buyback Execution: Insights into Temporal Optionality and Empirical Anomalies

Rethinking Share Buyback Execution: Insights into Temporal Optionality and Empirical Anomalies

The Magic of Ad Hoc Solutions

AbstractWhen a theory is confronted with a problem such as a paradox, an empirical anomaly, or a vicious regress, one may change part of the theory to solve that problem. Sometimes the proposed solution is considered ad hoc. This paper gives a new definition of ‘ad hoc solution’ as used in both philosophy and science. I argue that a solution is ad hoc if it fails to live up to the explanatory requirements of a theory because the solution is not backed by an explanation or because it does not diagnose the problem. Ad hoc solutions are thus magical: they solve a problem without providing insight. This definition helps to explain both why ad hoc solutions are bad and why there may be disagreement about cases.

Tech on the ROC: export threshold and technology adoption interacted

This paper aims at identifying the potential mismatch between the conditions required for a firm to become an exporter and the pattern of technology adoption within its industry. In particular, we obtain a new taxonomy of exporting and non-exporting firms by using a “technology line” and an “export threshold” (estimated using the Receiver Operating Characteristics – ROC methodology). The export threshold is the minimum combination of productivity and economic size that firms need to achieve in order to access international markets; the technology line is the technology which the export threshold firm would have if its combination of productivity and economic size was consistent with a higher-than-average technology within the industry. By this way, we are able to highlight the presence of “potential” exporters (firms that do not export even if they have the technological characteristics to do it) and “fragile” exporters (firms that do export despite their technology gap). This empirical approach allows to better qualify “empirical anomalies”, paving the way to a more precise targeting for industrial policies.

Market efficiency and volatility within and across cryptocurrency benchmark indexes

With initial coin offerings and token offerings remaining at the forefront of alternative investments, the study of peer groups can be important for comparing investors’ tastes and preferences for particular classes of cryptocurrency on a more equal footing. The aim of this paper is to identify violations of the weak-form market efficiency hypothesis for comparable cryptoassets that are conditional on market segmentation and those conditional on benchmarks. We use daily frequency data of 57 cryptocurrencies that account for more than 90% of the total market capitalization (market cap). We construct seven thematic market cap indexes that are able to represent the whole cryptocurrency universe. Against this background, we test for the presence of four empirical anomalies: risk premium, leverage, regime switch and calendar effects, both across and within these benchmark indexes. The main results support the existence of a switch between two states and positive excess returns toward the end of the week for both cases. Our methodology and findings contribute to the emerging literature on introducing active and passive portfolio management strategies that track benchmark crypto indexes.

Ethnography, Tactical Responsivity and Political Utility.

In this article, we address issues of attribution, utility, and accountability in ethnographic research. We examine the two main analytical approaches that have structured the debate on data collection and theorization in ethnography over the last five decades: an inductivist approach, with grounded theory as its main analytic strategy; and a deductivist stance, which uses field sites to explore empirical anomalies that enable an ethnographer to test and build upon pre-existing theories. We engage recent reformulations of this classical debate, with a specific focus on abductive and reflexive approaches in ethnography, and then weigh into these debates, ourselves. drawing on our own experiences producing and using research in non-academic settings. In so doing, we highlight the importance of strategy and accountability in one’s ethnographic practices and accounts, advocating for an approach to ethnographic research that is reflexive and overtly responsive to the knowledge needs and change goals articulated by non-academic collaborators. Ultimately, we argue for a research stance that we describe as tactical responsivity, whereby researchers work with key collaborators and stakeholders to identify the strategic aims and audiences for their research, and develop ethnographic, analytic, and communicative practices that enable them to generate and mobilize the knowledge required to actualize their shared aims.

Statistical test for anomalous diffusion based on empirical anomaly measure for Gaussian processes

Gaussian processes with anomalous diffusion behavior are considered. A new statistical test for the model identification that is based on the empirical anomaly measure (EAM) is introduced. This measure is considered as the distance between the anomalous and normal diffusion. In particular, the main properties of the EAM based on the quadratic form representation of Gaussian processes are investigated. The effectiveness of the test is evaluated for the fractional Brownian motion. Theoretical results and simulation studies are supported by the analysis of experimental data describing the sub-diffusive motion of microspheres in agarose hydrogels.

The flypaper sticks even when aid travels overseas

This paper extends the current literature by considering the existence of the flypaper effect internationally, with donor countries supplying foreign aid to recipient countries. The flypaper effect refers to the empirical anomaly associated with intergovernmental grants stimulating government expenditures more than can be explained by a pure income effect. The results reveal evidence of flypaper behavior such that for recipient countries one dollar of foreign aid raises public spending by $0.21-$0.42, whereas an equal increase in domestic income raises government expenditures by only $0.09-$0.16. Furthermore, we exploit variation in political institutions across countries and find that the flypaper effect is most pronounced in less democratic countries and find no flypaper effect in more democratic countries. This suggests that government officials are more likely to behave as expected by the median voter model when they are held accountable. Furthermore, countries with proportional, rather than majority/plurality, voting mechanisms do not display flypaper behavior.

Introduction to PNAS special issue on evolutionary models of financial markets

One of the longest debates in economics involves the existence of a rare Hominid “species” known as Homo economicus , the economic human. H. economicus is able to determine the optimal use of its resources to maximize its well-being as defined by the assumptions of neoclassical economics, leading to behavior that has come to be known as economic rationality. When interacting with other members of this species in market settings, such behavior leads to a magical outcome. The participants’ self-interested efforts to exploit their disparate pieces of information aggregates, distills, and compresses their information into a single number: the price. And because no piece of information is left unused or uninterpreted in the process of price discovery, this market is deemed “efficient.” Prices fully reflect all available information, as Eugene Fama concluded in his first articulation of the efficient markets hypothesis (1). Modern financial theory and practice are built on the foundation of H. economicus and efficient markets. However, booms, busts, and financial crises have created stress fractures in that foundation, implying that investors are not fully rational, that markets are not infallible, and that their failure can be catastrophic for the global financial system. Behavioral economists, on the other hand, view investors and markets as fundamentally irrational and inefficient. From their perspective, H. economicus is a case study in cryptozoology, as relevant to scientific discourse as Sasquatch and the Loch Ness monster. Nevertheless, it is an empirical fact that markets behave well most of the time, and when they do break down, it is often for understandable and predictable reasons. In recent years, the two sides of this debate have moved closer as more sophisticated models of investor behavior and macroeconomic dynamics have been developed to rationalize empirical anomalies, such as the equity risk premium, excess stock market … [↵][1]1To whom correspondence may be addressed. Email: slevin{at}princeton.edu. [1]: #xref-corresp-1-1

The Dynamic Response of Municipal Budgets to Revenue Shocks

We study the fiscal and tax response to intergovernmental grants, exploiting quasi-experimental variation within Germany's fiscal equalization scheme triggered by Census revisions of official population counts. Municipal budgets do not adjust instantly. Instead, spending and investments adapt within five years to revenue gains, while adjustment to revenue losses is more rapid. Yet, the long-run response is symmetric. The tax response is particularly slow, stretching over more than a decade. Well-known empirical anomalies in public finance such as the flypaper effect are thus primarily a short-run phenomenon, while long-run fiscal behavior appears more consistent with standard theories of fiscal federalism.

The Dynamic Response of Municipal Budgets to Revenue Shocks

We study the fiscal and tax response to intergovernmental grants, exploiting quasi-experimental variation within Germany's fiscal equalization scheme triggered by Census revisions of official population counts. Municipal budgets do not adjust instantly. Instead, spending and investments adapt within five years to revenue gains, while adjustment to revenue losses is more rapid. Yet, the long-run response is symmetric. The tax response is particularly slow, stretching over more than a decade. Well-known empirical anomalies in public finance such as the flypaper effect are thus primarily a short-run phenomenon, while long-run fiscal behavior appears more consistent with standard theories of fiscal federalism.

Empirical anomaly measure for finite-variance processes

Anomalous diffusion phenomena are observed in many areas of interest. They manifest themselves in deviations from the laws of Brownian motion (BM), e.g. in the non-linear growth (mostly power-law) in time of the ensemble average mean squared displacement (MSD). When we analyze the real-life data in the context of anomalous diffusion, the primary problem is the proper identification of the type of the anomaly. In this paper, we introduce a new statistic, called empirical anomaly measure (EAM), that can be useful for this purpose. This statistic is the sum of the off-diagonal elements of the sample autocovariance matrix for the increments process. On the other hand, it can be represented as the convolution of the empirical autocovariance function with time lags. The idea of the EAM is intuitive. It measures dependence between the ensemble-averaged MSD of a given process from the ensemble-averaged MSD of the classical BM. Thus, it can be used to measure the distance between the anomalous diffusion process and normal diffusion. In this article, we prove the main probabilistic characteristics of the EAM statistic and construct the formal test for the recognition of the anomaly type. The advantage of the EAM is the fact that it can be applied to any data trajectories without the model specification. The only assumption is the stationarity of the increments process. The complementary summary of the paper constitutes of Monte Carlo simulations illustrating the effectiveness of the proposed test and properties of EAM for selected processes.

Explaining stock market returns in Sub-Saharan Africa using an alternate uncovered interest rate parity framework

PurposeSub-Saharan African (SSA) stock exchanges are imperfect and inefficient. Therefore, orthodox finance theories are unable to completely explain their market returns. Such models mainly identify anomalies when applied to the sub-region. Consequently, this paper develops an original theoretical model to better explain market returns on the sub-continent.Design/methodology/approachThis paper develops an alternate analytical framework that combines adaptive expectations, Keynesian LM model and modified uncovered interest parity (UIP) formulations to address empirical anomalies identified by previous literature when analyzing SSA's inefficient stock markets. Using panel data, the study first computes the fixed as well as random effects regressions and, later, a Generalized Method of Moments (GMM) dynamic panel regression for further empirical analysis.FindingsBoth the fixed and random effects regression results indicate that the relative output-money supply disparity and foreign inflation-money supply growth rate spread have positive effects on market returns in SSA. On the other hand, foreign interest rates have an inverse effect. Although the GMM dynamic panel regression has similar results, it additionally finds that market returns in SSA are autoregressive. This suggests that past returns are persistent.Research limitations/implicationsA key implication is that multipliers and transmission mechanisms in SSA may take longer to adjust, thereby limiting short-run market returns. Also, policymakers must encourage a critical mass of firms to list in order to enhance efficiency. Additionally, policy variables significantly influence returns. One limitation is the high market segmentation in SSA. This heightens heterogeneity, emphasizing fixed effects.Practical implicationsAlso, the findings of this study may not apply to all emerging economies as SSA economies are highly heterogeneous.Social implicationsThe segmented nature of SSA stock markets may have implications for income inequality and the distribution of resources within the economy. Also, it indicates that there are limits to how firms use capital markets on the sub-continent.Originality/valueThis paper abstracts from the strict ideal market conditions prescribed by modern finance theories and develops an original modified UIP model. It finds that SSA stock markets may be more sensitive to policy variables, instead of determinants postulated by orthodox finance concepts. The study offers opportunities for further critical examination of returns in imperfect frontier markets.

Теория научных революций Томаса Куна в социальном контексте времен холодной войны

The concepts of “scientific paradigm” and “scientific revolution” have received many interpretations in philosophical tradition. They are taken as a starting point in studies of scientific theories change. However, the uncertainty of notions and stan­dards for demarcation between normal and revolutionary sciences influence the pro­liferation of philosophical ideas, though it does not contribute to the better under­standing of “Structure”. The truth is that scientific revolutions do not possess the strict structure. They start from theoretical or empirical anomalies and end as a social ceremony – by accepting the new basic theories and research strategies within a scientific community. Kuhn intentionally uses the term “revolution”, mean­ing a radical social activity for rebuilding the existing order of things. Moreover, par­adigms reproduce the features of competing social systems and political camps at the cold war period. Analogy between the change of scientific paradigms and social sys­tems is not absolutely strict. While it contributes to understanding of the nature of in­commensurability and “gestalt switch” which accompany scientific development. What was more important for Kuhn – the image of revolutionary or normal science? The paradigm change appears as a natural order of things. Each type of science is not more normal than another one. But the revolutionary science is more creative and confesses the principle of “creative destruction”. Regimes of normal science might be described in terms and images of virtue epistemology. Only if Thomas Kuhn does not resist to these normative prescriptions of the philosophers of science.

How raising interest rates can cause inflation and currency depreciation

ABSTRACT In this paper we derive a new model on exchange rate response to a lasting higher interest rate level. Contemporary models do not provide a convincing explanation for this relationship, but recent research suggests that models based on demand-pull effects to be somewhat confined to small funding cost increases. This would make cost-push effects more relevant when the interest rate differential (IRD) is larger and longer-lasting. The new model accounts for cost-push effects and suggests that a persistent higher IRD can evoke multiple responses, including currency depreciation, specialization, inflation, and wage drift. The model suggests that excessive long-lasting IRD can spark a chronic interaction between inflation and currency depreciation. Empirical data substantiate the prediction capability of the new model. We also demonstrate how the uncovered interest rate parity (UIP) principle is a special case, which can explain its empirical research anomalies, and when carry trade is a profitable investment strategy.