Minimize Transaction Costs Research Articles

A toolkit for exploiting contemporaneous stock correlations

Contemporaneous correlations are important for portfolio optimization problems. We propose a newly developed machine learning tool, the OWL shrinkage method, which explicitly exploits stocks’ contemporaneous correlations by assigning similar positions to correlated stocks (the grouping property). We find strong evidence that OWL-based portfolio strategies outperform other benchmark strategies in the literature when stocks exhibit strong correlations. In particular, the OWL shrinkage method bridges the gap between the naive (but well performing) 1 / N portfolio strategy and the portfolio optimization framework: our OWL-based portfolio strategies yield very similar portfolio weights to (yet not the same as) the 1 / N portfolio strategy, but outperform the 1 / N portfolio strategy in terms of both the Sharpe ratio and turnovers. We also show that the superior performance in Sharpe ratio against the 1 / N portfolio is significant. • Exploit stock correlations using newly developed machine learning techniques. • Incorporate various portfolio weight-constraints in the optimization framework. • Our methods yield favorable out-of-sample results. • The superior performance against the equal weighted portfolio is significant. • Our methods produce minimal transaction cost compared to other benchmarks.

TRANSACTION COSTS IN THE ACTIVITIES OF INSURANCE INSTITUTIONS

Introduction. The concept of transaction costs plays an important role in understanding the relationship between insurer and the insured, the principle of mutual good faith in the relations of these participants, the nature of the insurance company, managing insurance relations to increase the size of the insurance portfolio and increase solvency, increase insurer value. The presence of transaction costs in practice leads to a decrease in the efficiency of insurance institutions, as well as to a decrease in the financial results of insurance. The purpose of the study is the theoretical substantiate the nature of transaction costs that arise in the activities of insurance institutions, and development of practical recommendations for their reduction. The methodological basis of the study is a systematic approach, methods of analysis and synthesis, theoretical and abstract-logical generalizations and hypotheses, methods of comparison and grouping, the method of classification. Results. The institutional features inherent in the formation and development of insurance institutions are highlighted. It is determined that the main reason for transaction costs in insurance relations is the existence of asymmetry of information about the object of insurance, the probability of the insured event, the financial stability of the insurer, etc. The main types of transaction costs of insurance institutions are described: information retrieval, negotiation, measurement, costs of specification and protection of property rights, costs of opportunistic behavior. Based on the study, potential ways to minimize transaction costs of insurance institutions are revealed: state policy, vertical integration, reduction of bureaucratization, development of information and communication technologies, transactional analysis, process management model. The practical significance of the study lies in the justification of the need to purposefully influence the amount of transaction costs of insurance institutions in order to minimize them.

Southeast Asia as a region of new pharmaceutical development

The article is dedicatedto the geographical analysis of the pharmaceutical industry in the countries of Southeast Asia, a region that has undergone serious changes over the past twenty years in the context of fierce competition on the international drug market. It was revealed that initially the development of pharmaceutical industry in the region took place under the influence of world multinational corporations, the production of medicines was focused exclusively on an external consumer and had an isolated spatial pattern. Subsidiariesof big pharmaceutical TNCs were located in such a way as to gain a competitive advantage in the form of cheaper labour and, at the same time, to minimize transaction costs for transporting locally produced medicines directly to the points of sale. Subsequently, the growth in the paying capacity of the local population led to the formation of a stable, albeit unevenly distributed intraregional demand, with a high potential for further expansion.Therefore, today the development of pharmaceutical industry in the countries of Southeast Asia is characterised as multi-scaled. As global value chains in the industry become more complex and advanced, there is a steady trend of a gradual deepening of intraregional ties.The countries of Southeast Asia still differ significantly in terms of the degree of maturity of the national pharmaceutical industry and domestic drug markets.These both criteria were used as the basic ones to create the typology of the countries of Southeast Asia according to the level and type of development of their pharmaceutical industry.

Эффективность финансового сектора: существующие концепции и проблема оценки

This article presents classification of existing concepts of the efficiency of the financial sector. Proposed the hypothesis that assessments of the microeconomic and informational efficiency of the financial sector are fundamentally based on the concept of transaction costs. Suggested a number of indicators for assessing the macroeconomic efficiency of the financial market and their approbation on the Russian data. We identified four areas for assessing the effectiveness of the financial sector, differing in the level of consideration, recognition of the principle of rationality, accounting for transaction costs: assessing the macro-efficiency of the financial sector; information-efficient market hypothesis; the concept of adaptive markets. The assumption is formulated that the concepts studying the efficiency of financial systems at the micro level, as well as the efficient market hypothesis, are based on the principle of minimizing transaction costs. While there is a significant theoretical backlog on the issue of macroeconomic efficiency of the financial sector, there is a shortage of quantitative estimates, so we tried to offer a number of such indicators, focusing on the functions of financial markets in a developing economy. The article constructs the estimates of the macroeconomic efficiency of the Russian financial market from two sides of the process of transforming savings into investments (attracting investments by enterprises and placing savings by households).

Institutional Impact of Forestry on the Economy

The problems of the forest sector identified by many researchers are primarily related to the quality of institutions and the lack of effective institutional relations in the industry, according to the authors’ opinion. The results presented in the article, which prove the existence of a causal relationship between the qualitative characteristics of institutions and institutional relations and economic results, are shown for the first time in the case of the forest industry. In order to achieve the objective, the economic interrelations between forest industry entities are analyzed in the context of their institutional environment. It is revealed that the existing institutional structure of the industry supports the conflict of incentives between the owner (state) and the user (tenant) of forest land. The theoretical aspects of the specification of property rights, minimization of transaction costs and costs of contractual relations in the Russian forest industry to increase its economic efficiency are investigated. The transformation of Russian forest industry institutions should be based on the comparative advantages of existing institutions, economic models of successful forest management, objective institutional and economic indicators of sustainable growth, such as the specification of property rights and the minimization of specific transaction costs.

INFORMATION AND CONSULTANCY SUPPORT FOR THE FUNCTIONING OF SMALL AND MEDIUM-SIZED AGRICULTURAL ENTERPRISES

Introduction. Agricultural micro, small and medium-sized enterprises are limited in their access to the best modern agricultural practices due to both objective and subjective factors. Due to the lack of a single information system for collecting, systematizing and disseminating information on the best modern agricultural practices, they are virtually unknown to the general public of micro, small and medium-sized agricultural enterprises, little used in their activities. Methods. The following methods were used to implement the tasks: dialectical, abstract and logical and systems analysis (theoretical generalization and systematization of research results, formation of conclusions); graphic; monographic, indicator, methods of expert evaluation and rank correlation, SWOT-analysis; synthesis (development of conceptual and organizational principles of construction of information and consulting support) and other generally accepted methods of economic research. Results. The online resource center “Best farming practices “farmer to farmer” aims to provide agricultural SMEs with practical knowledge and demonstration base of modern agricultural technologies in Ukraine and the world, which can be implemented in the fruit and vegetable sector, livestock, aquaculture, poultry (except chickens), confectionery and craft products. Such resource should become a communication platform, first of all, between those who implement modern approaches and technologies and their potential followers. In particular, in the course of the study, the feasibility study of the above-mentioned online resource was economically substantiated and its impact on the efficiency of small and medium-sized agricultural enterprises was assessed. Discussion. Using the online platform as a communicator, it is planned to ensure constant and effective communication between agricultural producers, scientists, educators and advisors. Further development of the online platform will include evaluation of the effectiveness of its activities in such areas as outsourcing, advertising, and education. An important area of research is the development of an analytical database based on the resource center “Best Agricultural Practice”, covering the process of production and sale of agricultural products, as well as the creation of a trading platform that will minimize transaction costs. Keywords: agricultural enterprises, online platform, advisory, information resource, agricultural producers.

Formation of the ecosystem of the educational program based on social networking sites technology

The paper investigates the problem of transforming existing approaches to the formation of new effective links between universities and all stakeholders, which becomes the basis for creating competitive educational programs. The purpose of the study is to determine the prerequisites for the formation of an ecosystem and substantiate the concept of interaction between key stakeholders of the educational program based on partnership, network communications and digital transformation. Based on results of the SWOT analysis of the acting master’s educational programs, where the authors work, the feasibility of forming information and communication space of educational program as an ecosystem with the use of all opportunities provided by digital technologies is proved, in particular: the reasons for the inefficiency of existing communication channels within university educational programs are discovered; opportunities and limitations of social networking technology in the deployment of the educational program SMART platform are revealed; the concept of such a virtual space is proposed; benefits of the platform for key stakeholders in the educational program are substantially analyzed. SMART platform architectonics of the educational program is elaborated that describes deciding components of the platform considering the needs of key stakeholders of the educational program and SMART principles of ecosystem formation. The request of members of the educational community for the formation of an open learning space solves the following tasks: 1) students receive direct access to all educational materials, relevant information on cooperation with companies and participation in research projects; 2) expanding the boundaries of educational products, the use of new tools and forms of educational work, the involvement of business experts in the educational process; 3) direct access of employers to program students as potential employees, which minimizes transaction costs for finding personnel with a high level of practical competence, attracting young talents, introducing modern training content in accordance with professional standards. Such collaboration will be able to ensure the relevance of scientific research, enhance its practical significance and facilitate the transfer of innovative technologies into the business environment.

Post-Institutionalism in the XXI Century: Expanding, Experimenting, Philosophizing

Post-institutionalism is a promising direction in the study of institutions, developing the methodological ideas of critical institutionalism to build an extended institutional approach (in G. Hodgson's terminology). The mission of post-institutionalism is the development of interdisciplinary, complexity-centered methodologies for the analysis of institutions, allowing the development of institutional research beyond the framework of both new and original institutional theories. The article briefly outlines the logic of the creation and origins of the post-institutional theory, provides its methodological features, philosophical foundations, and guidelines for the research program. Post-institutionalists proceed from the fact that the methodological tools of both the new institutional economics and the traditional (“old”) institutionalism are inadequate to the tasks of understanding and explaining the qualitatively complicated institutions of late capitalism. Such institutions are internally heterogeneous, highly fluid, combine different coordinating principles (logics), their functions and boundaries are difficult to identify. The focus of special attention in post-institutional economics is assemblages – ​institutional systems that combine heterogeneous institutions with irreducible logics. Institutional assemblages are highly adaptive but also functionally redundant and conflict-prone. Bricolage is considered as the main type of institutional change in post-institutionalism, which is understood as the recombinant creation of institutions by a multitude of actors from the elements available in the access to solve current institutional problems. Institutional change agents are not only institutional entrepreneurs, but also institutional “workers”, i. e. ordinary actors in their daily routine. The main function of institutions from the point of view of post-institutionalism is not the minimization of transaction costs, but the creation of transaction value.

Opportunities and Challenges of Online Banking in Nepal

This descriptive study aims at exploring the challenges and opportunities of e-banking in the Nepalese banking sector. The required data are collected from bank employees by applying a self administered questionnaire, semi-structured interviews and the desktop research. The findings demonstrate that banks expand to e-banking services in order to remain competitive, to update themselves with new technological developments and to minimize transaction cost and to facilitate customers. The major challenges faced the e-banking customers are non-familiarity with advanced technology, internet connection problems, problems regarding security and privacy. These challenges have a negative influence on the adoption of e-banking services by customers in Nepal. To overcome the challenges, Nepalese banking industry should invest on adopting the most secured and trustworthy e-banking system and educating customers on the use and importance of e-banking regularly.

Law and Economics, or Punctum Archimedis in Environmental Law

This article examines the autonomous field of Law and Economics, indicates the importance of integrating the economical methodology in the process of comprehensively understanding the normative order and laments over the undesirable shortage of interdisciplinary education and academic dialogue regarding Law and Economics in Georgia. Moreover, this paper deliberates on the relevance of the Coase theorem for lawyers and policy-makers, displays the specific recommendations of its application in jurisprudence, including elucidating property rights, maximizing economic productivity and minimizing transaction costs. The following article discusses attempts and shortcomings to harmonize a decentralized market solution in environmental law and demonstrates regarding the example of the EU emission trading system that the method of Law and Economics can be used not only for a thorough analysis of the existing model but also as a pragmatic instrument for defining a normative program.

Arbitragem trabalhista na visão econômica do Direito

The article will analyze the labor arbitration institute, from an economic point of view, in relation to the employer, employee and the society itself – art 507-A of the CLT. Aiming for the social growth for all, the rules must bring benefits to the community and be written in a clear and objective way to enable the understanding so that the population fulfills its legal rights and obligations. If a conflict arises, it can use one of the appropriate forms of conflict resolution – conciliation, mediation and arbitration – in order to minimize transaction costs. It is faster, less costly and more informal in relation to the Judiciary system. Economically, the standard in question presents favorable and unfavorable, but more advantageous for the parties involved.

Ecosystem Model of Medical and Recreational Development of the Republic of Crimea

The spread of the new coronavirus infection radically changes the quality of life that defines the need for the formation of the medical and recreational vector of development of the Republic of Crimea and the development of new goals and targets of digital development of territories in conditions of extreme demand fluctuations on the market of recreational services in the Crimea. The authors propose the interpretation of the term “ecosystem”. The authors also give the justification of the concept “ecosystem model of medical and recreational development”. The novelty of the scientific research is the ecosystem model of medical and recreational development based on the element of health management with the function of a closed recreational service “diagnosis – treatment – rehabilitation”. When developing the ecosystem model, the team of authors used the methodology of the platform approach as an innovative business model based on the digital form of organizing interaction between industry providers of the medical and recreational sphere and their consumers, the main goal of which is to minimize transaction costs of all parties involved. The proposed ecosystem model is based on the creation of an effective structure of the health and rehabilitation system with the optimization of the interaction of its elements, which include all types and forms of medical and recreational organizations, including the health management clinic based on the closed recreational service “diagnosis – treatment – rehabilitation”. The ecosystem model will allow accumulating and aggregating data on the interaction of participants in the medical and recreational sphere.

Financial globalization, institutions and economic growth impact on financial sector development in fragile countries using GMM estimator

Purpose- The aim of the research is to predict the impact of financial globalization, institutional quality and economic growth on financial development in fragile economies. In this paper the panel data consists of Turkey, Brazil, India, South Africa, Indonesia, Argentina, Egypt, Pakistan’s annual data from 1995-2017. Methodology –System GMM dynamic panel data approach has been applied to deal with simultaneity bias and endogeneity bias when the explanatory variable is correlated with the residual disturbance term. The System GMM estimator combines regression in differences with regression in levels to get rid of the individual specific effects and along with it any time invariant regressor. The models are estimated by using one step system GMM estimator in other words Arellano and Bover /Blundell and Bond System Generalized Moments Method. Findings- The results show that economic growth and financial development are positively related. Thanks to financial development interest rates can be determined by market conditions and financial intermediaries can minimize transaction costs and information acquisition costs can be minimized. Empirical findings suggest policy guidelines for developing financial sector by using economic growth as an economic instrument. Conclusion- The paper concludes that economic growth have significant impact on financial development so both financial institutions and financial markets development in fragile countries. For less developed countries, developments in institutions are likely to have far greater direct effects on growth than financial development itself. When the financial system is developed, Institutional improvements can also deliver more growth. Since global standards for institutions such as International Country Risk Guide, Global Government Indicators increase, it seems also developing ountries are aware of the importance of institutional quality on economic growth. The findings suggest that financial development is affected by economic growth, inflation and population in fragile countries.

ПРОБЛЕМИ ТА ПЕРСПЕКТИВИ ДЕРЖАВНОГО УПРАВЛІННЯ УКРАЇНИ В УМОВАХ ГЛОБАЛІЗАЦІЇ ЕКОНОМІКИ

Ефективність відповіді системи державного управління на соціально-економічні, політичні та гуманітарні виклики нової глобалізації та четвертої промислової революції буде залежати від її здатності забезпечити адекватну мінливій кон’юнктурі ринку праці систему підготовки фахівців, політику зайнятості з високим горизонтом планування, диференціацією по галузях і кластерах виробництва, а також стратегію інноваційного розвитку, що має мінімізувати транзакційні витрати. Глобалізація означає перехід системи національного господарства в інтегроване світове господарство. Вона призводить не просто до встановлення і розвитку відносин між економічними, соціальними та іншими суб’єктами різних країн, а й до різкого збільшення значущості цих відносин. Водночас вплив глобалізаційних процесів зумовлює необхідність нових теоретичних підходів для обґрунтування структурних зрушень в українській економіці. Розкриті питання спрямовані на формування стійкості до негативних чинників, посилення конкурентоспроможності, реалізація завдань щодо сталого розвитку, забезпечення відповідності встановленим світовим нормам, реагування на загрози посилили актуальність із точки зору гарантування економічної безпеки України в умовах глобалізаційних викликів. Метою дослідження є виокремлення негативних факторів здійснення глобалізаційних процесів в Україні, аналіз індексу глобалізації, надання пропозицій щодо формулювання заходів стимулювання розвитку цифровізації в Україні. Враховуючи зазначене, в ході дослідження розглянуто основні підходи науковців до поняття «глобалізація»; визначено основні фактори, які заважають здійснювати процеси глобалізації в Україні; виокремлено проблеми формування інформаційного суспільства в Україні; охарактеризовано індекс глобалізації та місце України в ньому; проаналізовано цифровізацію в контексті глобалізаційних процесів та сформульовані основні заходи щодо стимулювання цифровізації в Україні.

Enhancing Efficacy of Water Quality Trading with Automation: A Case Study in Virginia’s Nutrient Trading Program

AbstractThe complexity of water quality trading (WQT) policy can lead to the promulgation of regulations that are challenging to comply with and to enforce. As a result, transaction costs may be high and administrators have limited ability to monitor the program outcomes. These concerns can be alleviated in part through increased automation of trading compliance procedures. We present a case study of a pilot system designed for the Virginia Department of Transportation that automates compliance and streamlines brokering processes that are a part of the Virginia nonpoint source WQT program. Outcomes of this work reveal opportunities and challenges for implementing automated systems in WQT and suggest a framework for developing automated programs. We conclude that use of automated procedures to facilitate compliance with WQT rules can help identify gaps in data reporting and availability, amend inconsistency in rule interpretation, and reduce transaction costs for credit purchasers by enabling efficient analysis of trading opportunities. Persistent limitations to automation exist, including lack of standardized, machine accessible, and open data sources. Potential long‐term benefits of automating WQT processes include minimizing transaction costs, enabling new environmental data collection and policy analysis, and ultimately yielding improved WQT program efficacy and water resources outcomes.

The COVID-19 Induced Disruptions across Groundnut Value Chain: Empirical Evidence from South India

We study the effect of the COVID-19 pandemic on the groundnut value chain and all the actors involved in its value chain in Ananthapuramu district of Andhra Pradesh, a leading groundnut producing state in south India. The results revealed that the COVID-19 pandemic created a double burden on farmers by disrupting farm production on one side and decreased diet diversity on the other. Disruption in farm productions resulted in a decline in household income and increased consumer food prices. The effect on farmers snowballed to other actors in the value chain, and all the actors were affected variably. Availability of storage infrastructure would have saved the farmer’s household income to some extent during the pandemic. Supply of diverse nutrient foods through the existing public distribution system, which mostly provides wheat and rice, might have helped tackle the diet diversity issue amongst farmers. Farmer’s collectives were perceived to reduce the negative impact during natural disasters like the COVID-19 pandemic by helping to organise smallholder farmers, minimise transaction costs and increase their bargaining power. In addition, effective farm extension services, including market information, could have benefited farmers during the crisis.

A contract design perspective on balancing the goals of utility regulation

Designing utility regulation involves trade-offs between different goals of contract design. Prioritising one objective may come at the cost of assigning a lower priority to another objective. This study compares four regulatory frameworks in terms of how they each prioritise different goals of contract design. While revenue-cap regulation can be said to minimise transaction costs, it also assigns a lower priority to coordination of production. Conversely, the frameworks that explicitly incorporate stakeholder engagement or negotiation prioritise coordination of production while assigning a lower priority to minimisation of transaction costs.

ТЕРРИТОРИАЛЬНАЯ ИНТЕГРАЦИЯ ПРЕДПРИНИМАТЕЛЬСКИХ СТРУКТУР

The article on the example of the shipbuilding industry revealed the main patterns of economic relations of business structures, which consist in the gradual implementation of economic relations through specialization and industrial cooperation. It has been established that by implementing economic relations, business structures interact with the external environment, which directly and indirectly can influence the regularity of the development of economic relations of business structures. As a result of the results of the studies, it is determined that cluster interaction is one of the promising forms of territorial integration of entrepreneurial structures, allows to optimize the mechanism of industry and inter-industry integration. This form creates favorable conditions for entrepreneurial structures, to gain additional benefits through the growth of internal specialization and standardization, minimizing transaction costs, reducing the cost of development and innovation. In addition, it allows to attract highly skilled personnel from related sectors of the economy to the shipbuilding industry, which contributes to the additional economic and social effect.

The concept of minimization of transaction costs of functioning of the dual market of agricultural lands

This article provides the concept of minimizing transaction expenses for farmland market functioning, based on principles for minimizing transaction expenses on the property rights market developed by R. Coase, O. Williamson, D. North, J. Hodgson, E. Furubotn, original provisions on the dual structure of Russian agricultural land market with full and limited property rights transactions. The comparative institutional analysis of the dual market, transactors of various property types and transaction expense types demonstrates that three stages of full and limited property rights market transaction are characterized by high permanent transaction expenses related to providing data on property rights transaction, negotiations, preparing and signing contracts, as well as formal regulations. Due to high rates of transaction formalization, the full property rights market demonstrates higher expenses than the limited rights market, where expenses for long-term contractual relations are caused mainly by subjective factors and informal restrictions. The amount of expenses is unevenly distributed between transactors depending on land ownership type and form: expenses for state and municipal lands transaction, as well as for shared land ownership, are higher compared to transaction of private property rights. Some high transaction expenses are permanent and establish property rights specification and value, possible to be minimized only with time by amending legal standards and regulations in order to improve market transaction terms. Other expenses are established independently by transactors during the market exchange and can be minimized through indirect regulators changing behavioral aspects of market participants and direct regulators aimed at developing institutional and infrastructural market elements to enhance more effective usage of land resources and improve adaptive efficiency and flexibility of farmland market.

Problems and Prospects of the Single Financial Market and the Common Currency of the EAEU

The EAEU Treaty assumes that by 2025 the community countries will complete the construction of a single financial market and will be able to move to supranational regulation. This will increase the overall competitiveness and attractiveness of small markets, optimize processes and cooperation. The article examines the existing obstacles and incentives for the formation of a single financial market, substantiates the thesis about the limits of minimizing transaction costs and the possibility of negative effects of the de-dollarization policy in the EAEU space for mutual trade in the existing economic conditions. From the position of the theory of optimal currency areas, the importance of the transition to a single currency for the development of the economies of the EAEU member states is justified.