Tinbergen Institute Research Articles

Retail Investor Behavior, Cryptocurrencies, and Financial Market Innovation – Insights from the 5th European Retail Investment Conference (ERIC)

Abstract The 5th European Retail Investment Conference was hosted at Börse Stuttgart, Germany, from April 10th to 12th 2019. The conference chairs invited academics and practitioners to participate and discuss empirical and theoretical research focusing on retail investor products and services, the impact of technology on retail investors, investors’ decision-making, investor protection schemes, and market microstructure. Albert Menkveld, Professor of Finance at Vrije Universiteit Amsterdam and Fellow at the Tinbergen Institute, held the keynote about the fundamental value of bitcoin.

Do Higher Salaries Yield Better Teachers and Better Student Outcomes?

José María Cabrera and Dinand Webbink⇑ José María Cabrera works at the Universidad de Montevideo in Uruguay. Dinand Webbink works at the Erasmus School of Economics in Rotterdam. He is affiliated with Tinbergen Institute and IZA. webbink{at}ese.eur.nl

State of the Art Machine Learning Techniques for Time Series Forecasting: A Survey

Time Series Forecasting is vital for wide range of domains such as financial market forecasting, earthquake forecasting, weather forecasting, electric power demand forecasting and etc. The past 25 years of time series forecasting research that has been reviewed in (Tinbergen Institute Discussion Paper: International Journal of Forecasting) for the period of 1985 to 2005. Therefore, the purpose of my paper is continue to review the recent 10 years of different state of the machine learning techniques for time series forecasting . The main contribution of this paper is to supply researchers with a cohesive overview of state of the art machine learning techniques (during the period of 2005 to 2015) and to identify possible opportunities for future research.

Book Reviews

Explores The Wimbledon Championship through the statistical lens. Discusses warming up; the computer program, Richard, and its application to the occurrence of upsets and long matches, as well as rule changes; forecasting; the concept of importance; point data; the method of moments; quality; first and second service; service strategy; within a match—developing a model at point level; special points and games; momentum; and hypotheses revisited. Klaassen is Professor of International Economics in the Amsterdam School of Economics at the University of Amsterdam and a fellow of the Tinbergen Institute. Magnus is Emeritus Professor at Tilburg University.

EDITORS' INTRODUCTION

This issue contains a selection of papers from the Twenty Second European Workshop on Econometrics and Health Economics and the Fourth Australasian Workshop on Econometrics and Health Economics. The European Workshop was organised by the Erasmus School of Economics in Rotterdam and took place on 4–6 September 2013. The meeting was attended by 55 participants from 16 countries, and the programme featured 14 papers. The workshop was supported by the Erasmus School of Economics, Erasmus Happiness Economics Research Organisation (EHERO) and the Tinbergen Institute. The Australasian Workshop was held at Launceston, Tasmania on 3–5 April 2013. Fourteen papers were presented, and 37 participants attended the workshop, and on the day before Professor Stephen Pudney from the University of Essex gave a training day on ‘Response Error and Econometric Analysis’. Sponsorship was provided by the Centre for Health Economics (Monash University), The Melbourne Institute of Applied Economics and Social Research (The University of Melbourne), The Economics Society of Australia, RMIT University, The Australian Health Economics Society and the Centre for Health Economics Research and Evaluation (University of Technology Sydney). All of the papers published in this issue have gone through the usual process of refereeing for Health Economics. This has been carried out on a very tight publication schedule, and we would like to thank all of the referees for their prompt responses. The 2014 European Workshop will be organised by the Department of Economics University of Munich and the Munich Centre for the Economics of Aging (MEA) and held at Starnberg in Germany. For more information about the European workshop series, see the web page http://www.york.ac.uk/economics/postgrad/herc/ews/. The 2014 Australasian Workshop was held in Freemantle, Western Australia 14–16 April 2014. The web page for the series is http://www.buseco.monash.edu.au/centres/che/workshoppage.html

Joint Bayesian Analysis of Parameters and States in Nonlinear, Non-Gaussian State Space Models

We propose a new methodology for designing flexible proposal densities for the joint posterior density of parameters and states in a nonlinear, non-Gaussian state space model. We show that a highly efficient Bayesian procedure emerges when these proposal densities are used in an independent Metropolis-Hastings algorithm or in importance sampling. Our method provides a computationally more efficient alternative to several recently proposed algorithms. We present extensive simulation evidence for stochastic intensity and stochastic volatility models based on Ornstein-Uhlenbeck processes. For our empirical study, we analyse the performance of our methods for corporate default panel data and stock index returns.(This paper is an updated version of the paper that appeared earlier as Barra, I., Hoogerheide, L.F., Koopman, S.J., and Lucas, A. (2013) Joint Independent Metropolis-Hastings Methods for Nonlinear Non-Gaussian State Space Models. TI Discussion Paper 13-050/III. Amsterdam: Tinbergen Institute.)

Book Reviews

Charles Sprenger of Stanford University reviews “Individuals and Identity in Economics” by John B. Davis. The EconLit abstract of the reviewed work begins, “Examines the nature and different directions of development in thinking about the human individual in recent economics. Discusses the individual in economics; psychology's challenge to economics--rationality and the individual; multiple selves and self-control--contextualizing individuality; social identity and social preferences in the utility function; the individual in game theory--from fixed points to experiments; multiple selves in interaction- -teams and neuroscience; evolution and the individual--identity through change; evolution and capabilities--human heterogeneity; the identity of individuals and the economics of identity; and economic policy, democracy, and justice. Davis is Professor and Chair of History and Philosophy of Economics at the University of Amsterdam, Professor of Economics at Marquette University, and Fellow at the Tinbergen Institute. Index.”

Putting the cart before the horse. A comment on Wagstaff on inequality measurement in the presence of binary variables

Health EconomicsVolume 20, Issue 10 p. 1161-1165 Comment Putting the cart before the horse. A comment on Wagstaff on inequality measurement in the presence of binary variables Guido Erreygers, Guido Erreygers Department of Economics, University of Antwerp, City Campus Prinsstraat 13, Antwerpen, 2000 BelgiumSearch for more papers by this authorTom Van Ourti, Corresponding Author Tom Van Ourti [email protected] Department of Applied Economics, Erasmus School of Economics, PO Box 1738, Rotterdam, 3000 DR The Netherlands Tinbergen Institute, Burgemeester Oudlaan 50, 3062 PA Rotterdam, The Netherlands Netspar, Postbus 90153, 5000 MB Tilburg, The NetherlandsDepartment of Applied Economics, Erasmus School of Economics, PO Box 1738, Rotterdam 3000 DR, The Netherlands. E-mail:[email protected]Search for more papers by this author Guido Erreygers, Guido Erreygers Department of Economics, University of Antwerp, City Campus Prinsstraat 13, Antwerpen, 2000 BelgiumSearch for more papers by this authorTom Van Ourti, Corresponding Author Tom Van Ourti [email protected] Department of Applied Economics, Erasmus School of Economics, PO Box 1738, Rotterdam, 3000 DR The Netherlands Tinbergen Institute, Burgemeester Oudlaan 50, 3062 PA Rotterdam, The Netherlands Netspar, Postbus 90153, 5000 MB Tilburg, The NetherlandsDepartment of Applied Economics, Erasmus School of Economics, PO Box 1738, Rotterdam 3000 DR, The Netherlands. E-mail:[email protected]Search for more papers by this author First published: 15 June 2011 https://doi.org/10.1002/hec.1754Citations: 29Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Citing Literature Volume20, Issue10October 2011Pages 1161-1165 RelatedInformation

Book Reviews

Nattavudh Powdthavee of University of York reviews “Happiness Quantified: A Satisfaction Calculus Approach” by Bernard Van Praag, Ada Ferrer-i-Carbonell,. The EconLit Abstract of the reviewed work begins “Revised and extended edition examines methods of measuring happiness, focusing on subjective measures as a proxy for welfare and well-being. Discusses the analysis of income satisfaction with an application to family equivalence scales; domain satisfactions; the aggregation of satisfactions--general satisfaction as an aggregate; political satisfaction; males, females, and households; the impact of past and future on present satisfaction; the influence of the reference group on our norms; health and subjective well-being; the effects of climate on welfare and well-being--external effects; how to find compensations for aircraft noise nuisance; taxation and well-being; subjective income inequalities; a generalized approach to subjective inequalities; poverty; and multidimensional poverty. Van Praag is at the University of Amsterdam, the Tinbergen Institute, and SCHOLAR. Ferrer-i-Carbonell is at the Institucio Catalana de Recerca i Estudis Avancats and at the Institut d’ Analisi Economica. Index.”

Book Reviews

Timothy W. Guinnane of Yale University reviews “Contours of the World Economy, 1-2030 AD: Essays in Macro-Economic History” by Angus Maddison,. The EconLit Abstract of the reviewed work begins “Revised and extended edition examines methods of measuring happiness, focusing on subjective measures as a proxy for welfare and well-being. Discusses the analysis of income satisfaction with an application to family equivalence scales; domain satisfactions; the aggregation of satisfactions--general satisfaction as an aggregate; political satisfaction; males, females, and households; the impact of past and future on present satisfaction; the influence of the reference group on our norms; health and subjective well-being; the effects of climate on welfare and well-being--external effects; how to find compensations for aircraft noise nuisance; taxation and well-being; subjective income inequalities; a generalized approach to subjective inequalities; poverty; and multidimensional poverty. Van Praag is at the University of Amsterdam, the Tinbergen Institute, and SCHOLAR. Ferrer-i-Carbonell is at the Institucio Catalana de Recerca i Estudis Avancats and at the Institut d’ Analisi Economica. Index.”

Bootstrap approximation of tail dependence function

For estimating a rare event via the multivariate extreme value theory, the so-called tail dependence function has to be investigated (see [L. de Haan, J. de Ronde, Sea and wind: Multivariate extremes at work, Extremes 1 (1998) 7–45]). A simple, but effective estimator for the tail dependence function is the tail empirical distribution function, see [X. Huang, Statistics of Bivariate Extreme Values, Ph.D. Thesis, Tinbergen Institute Research Series, 1992] or [R. Schmidt, U. Stadtmüller, Nonparametric estimation of tail dependence, Scand. J. Stat. 33 (2006) 307–335]. In this paper, we first derive a bootstrap approximation for a tail dependence function with an approximation rate via the construction approach developed by [K. Chen, S.H. Lo, On a mapping approach to investigating the bootstrap accuracy, Probab. Theory Relat. Fields 107 (1997) 197–217], and then apply it to construct a confidence band for the tail dependence function. A simulation study is conducted to assess the accuracy of the bootstrap approach.

Equilibrium Search with Time‐Varying Unemployment Benefits

We show how time-varying unemployment benefits can generate equilibrium wage dispersion when identical firms post wages and homogeneous risk-averse workers search for jobs. We model a two-tier system similar to real-world UI programmes. The unemployed initially receive benefit b. Eventually, if a worker does not find a job, the benefit falls to s. The duration of high benefits is treated as an exponential random variable, so the model is stationary. We characterise the equilibrium and derive the comparative statics effects of changes in the two benefit levels and the expected duration of the high-benefit state on equilibrium wages and unemployment. In this article, we analyse the implications of time-varying unemployment insurance in an equilibrium search model. We consider a two-tier system, i.e., a system with a high and a low benefit level. This is the form taken by most real-world UI programmes. Unemployed workers initially receive unemployment compensation but eventually, if a worker does not find a job in the meantime, this benefit is terminated. The worker then has access only to lower social assistance benefits or in some countries to no benefits at all. Specifically, we consider an economy in which newly unemployed workers initially receive unemployment benefits at rate b. Eventually, if a worker does not find and accept a job in the meantime, the unemployment benefit falls to a lower level, s. We assume the event that triggers the fall from b to s occurs at Poisson rate k. 1 This allows us to do our equilibrium analysis in a stationary framework while focusing on the most important aspect of time-varying unemployment compensation, namely, that after some point the benefit falls. This representation of time-varying unemployment compensation enables us to derive a two-point equilibrium wage distribution in a simple stationary setting. We derive this equilibrium distribution using a wage-posting model of sequential search. We allow for free entry and exit of jobs and for matching frictions in the sense that the rate at which unemployed workers and vacant jobs contact one another depends on overall labour market tightness. The use of a matching function to determine the job contact rate for workers (and the worker contact rate for jobs) is relatively unusual in wage-posting models, which typically assume a fixed contact rate. Our model can thus be viewed * We thank participants at the Tinbergen Institute’s Conference on Search and Assignment for useful comments. In particular, we thank Gerard van den Berg, who shared notes with us on an alternative approach to the topic of this paper. We also thank Lucas Navarro for valuable research assistance. 1 Our model can be interpreted as one in which the search activity of unemployed workers is imperfectly monitored by a government agency. Suppose unemployed workers are punished by a reduction in their benefits from b to s when found to be putting forth less search effort than required and that detection of insufficient search effort occurs at Poisson rate k. If all workers choose to put forth less than the required effort ‐ and this is a plausible assumption, given that workers are homogeneous ‐ then this sanctions model is equivalent to our model with time-varying benefits. That is, our model can

Herding, a-synchronous updating and heterogeneity in memory in a CBS

This paper considers a simple continuous beliefs system (CBS) to investigate the effects on price dynamics of several behavioural assumptions: (i) herd behaviour; (ii) a-synchronous updating of beliefs; and (iii) heterogeneity in time horizons (memory) among agents. The recently introduced concept of a CBS allows one to model the co-evolution of prices and the beliefs distribution explicitly, while keeping track of the unpredictable nature of individual preferences (Technical Report. CeNDEF working paper 03-05, University of Amsterdam. Tinbergen Institute Discussion Paper 2003-073/1). As a benchmark model we take a simple CBS, which in a market with many traders exhibits a random walk driven by news. Using the explicit nature of the dynamics of the CBS we show that the introduction of herding modifies the random walk to an ARIMA(0,1,1) process, which is observationally equivalent to a reduction of the number of market participants. In terms of returns the model predicts MA(1) structure with a negative coefficient. A-synchronous updating leads to an MA(1) model for returns with GARCH(1,1) innovations, and predicts a relation between the ARCH and GARCH coefficients. Heterogeneity in memory leads to long-range dependence in returns. In the empirical section we perform a modest `reality check' concerning the predicted sign of the MA coefficient and the relation between the ARCH and GARCH coefficients for exchange rate data.

Why the Preaching Must Never Stop: Henry George’s and Paul Krugman’s Respective Contributions to the Free Trade Debate

LAURENCE S. Moss (*) Introduction THE TINBERGEN ARCHIVES in Los Angeles, California are a monument comprised of books, lectures, and films--a monument that exists for sole purpose of honoring dead. Established to inform succeeding generations about this century's greatest crime, destruction of most of Europe's Jewish community, it preserv[es] history of Holocaust and blessed memory of Six Million who lost their lives so cruelly and unjustly. Mr. Cal Tinbergen, Director of Archives, has assembled media of all types to fortify the fight against bigotry and (1) In this never-ending battle Tinbergen and others are driven to spread ideas about tolerance and understanding over bigotry and hatred, so that peace and respect for human dignity someday might prevail in world. I admire clarity of Mr. Tinbergen's vision about who he is and what he does. I imagine he is a man who gets up each morning and sets out on a business routine calculated to fight bigotry and hatred and keep memory of victims of Nazi genocide alive. I, myself, get up each morning, but with less clear goals. My college hires me to teach students how economic theory helps to make world intelligible, especially for business decision makers. Along way, I must qualify extreme principles in various ways and then challenge my students with examinations and term paper reports about my lectures. Deep down, however, I want to preach tolerance as well, but economists are not supposed to preach at all (Stigler 1982). Indeed, there is a long tradition in economic theory that promotes tolerance--based not on religious and moral duty, but on value of capturing gains from open trade and exchange. (2) That tradition exalts middleman or entrepreneur, who discovers new and more valued combinations of resources and legal rights and sees nation-states as administrative regions that can provide frameworks for interregional trade, without themselves becoming salespeople for trading groups and firms in their regions. When I get this message across to my students, I do indeed teach my students something worthy of comparison with Mr. Tinbergen's crusade against bigotry and hatred. I teach gospel of free trade. As a member of a discipline that dates back more than 300 years, I manage to advance several steps beyond Mr. Tinbergen's call for mere tolerance of other peoples, races, and regional cultures. I use a variety of arguments to encourage government officials, politicians, business leaders, trade unionists, and even spiritual leaders to appreciate importance of commercial exchange and to stop punishing people for engaging in trade and exchange. The Nazi round-up of Jewish merchants and shop owners for supposedly profiting at expense of German people, slaughter of Armenian merchants during first World War for their middleman activities, which had long aroused suspicion among Turks, and current tensions in Indonesia directed against Chinese business community accused of causing Asian currency crisis--all are examples of merchant hatred. (3) As a student of market process, I have kind words for middleman trader who pioneers new trade routes and profits from integrating regions (Block 1976:186-191; Sowell 1998; Lerner 1961:41-48). As an economist, I take work of Tinbergen Institute one important step further: I address what happens to living standards in each respective region when trade and commerce are allowed to emerge and take shape in market settings. To an economist it is not enough that inhabitants of Region A stop slaughtering those of Region B. For people to live dignified lives, they must have comforts. They must have materials to fuel their creative labors so that new shapes can emerge, and they must connect with each other for mutual interest and gain. Because free trade and exchange are so obviously advantageous, officials should tolerate economic activity and not tax, prohibit, or crush improvements it makes possible. …

Effects of Active Labor Market Programs on the Transition Rate from Unemployment into Regular Jobs in the Slovak Republic

Lubyova, Martina, and van Ours, Jan C.—Effects of Active Labor Market Programs on the Transition Rate from Unemployment into Regular Jobs in the Slovak RepublicThe system of active labor market policies (ALMP) in the Slovak Republic consists, to a large extent, in the creation of socially purposeful and publicly useful jobs and in retraining unemployed workers. The effects of these types of active labor market policies are analyzed. This paper uses a unique administrative data from 20 Slovak districts to analyze to what extent it is beneficial for unemployed workers who want a regular job to accept a temporary ALMP job or enter a retraining program. We find that, indeed, it is beneficial for workers to do so.J. Comp. Econom.,March 1999, 27(1), pp. 90–112. Slovak Academy of Sciences, Sancova 56, 813 64 Bratislava, Slovak Republic, Tinbergen Institute, and CERGE-EI, Charles University, 111 21 Prague 1, Czech Republic, and CentER for Economic Research, Tilburg University, 5000 LE Tilburg, The Netherlands, William Davidson Institute, and CEPR

Abstracts. Sixth World Peace Science Congress, Tinbergen Institute, Amsterdam Netherlands, May 24-26, 1999

Article Abstracts. Sixth World Peace Science Congress, Tinbergen Institute, Amsterdam Netherlands, May 24-26, 1999 was published on April 1, 1999 in the journal Peace Economics, Peace Science and Public Policy (volume 5, issue 2).

Accumulating Knowledge over the Economist's Lifetime

KyklosVolume 51, Issue 3 p. 359-378 Accumulating Knowledge over the Economist's Lifetime Hendrik P. van Dalen, Hendrik P. van Dalen Netherlands Interdisciplinary Demographic Institute (NIDI), P.O. Box 11650, 2.502 AR The Hague, the Netherlands; Tinbergen Institute and the Research Centre for Economic Policy (OCFEB) of the Erasmus University Rotterdam, P.O. Box 1738, 3000 DR Rotterdam. Email: dalen@nidi.nl. The research was carried out with the support of the Netherlands Organisation for Scientific Research (NWO), grant # 18.071. Comments by Evert van Imhoff, Otto Swank and an anonymous referee are gratefully acknowledged.Search for more papers by this author Hendrik P. van Dalen, Hendrik P. van Dalen Netherlands Interdisciplinary Demographic Institute (NIDI), P.O. Box 11650, 2.502 AR The Hague, the Netherlands; Tinbergen Institute and the Research Centre for Economic Policy (OCFEB) of the Erasmus University Rotterdam, P.O. Box 1738, 3000 DR Rotterdam. Email: dalen@nidi.nl. The research was carried out with the support of the Netherlands Organisation for Scientific Research (NWO), grant # 18.071. Comments by Evert van Imhoff, Otto Swank and an anonymous referee are gratefully acknowledged.Search for more papers by this author First published: 05 May 2007 https://doi.org/10.1111/j.1467-6435.1998.tb01425.xCitations: 4 AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat Citing Literature Volume51, Issue3August 1998Pages 359-378 RelatedInformation

New models explaining regional evolution in Europe. Contributions to an international conference in honour of Professor J.H.P. Paelinck Tinbergen Institute, Rotterdam, June 16-17, 1995

At the end of the academic year 1994-95, Professor J.Paelinck left the chair of spatial theory he occupied at the Erasmus University in Rotterdam for several decades. On this occasion, his disciples – in particular, Hans KUIPER and Riccardo GIRARDI - and numerous colleagues and friends organised on June 16-17 an International Conference held at the Tinbergen Institute. About forty spatial analysts and regional science specialists, belonging to 10 different countries, were present at this even...

Book Reviews

Journal Article Book Reviews Get access J. SijmFood Security and Policy Interventions in Sub-Saharan Africa - Lessons from the Past Two Decades Tinbergen Institute Research Series No. 166 Thesis Publishers Amsterdam , 1997 . ISBN: 90 5538 025 3 729 pp. MANFRED ZELLER MANFRED ZELLER International Food Policy Research InstituteWashington D.C Search for other works by this author on: Oxford Academic Google Scholar European Review of Agricultural Economics, Volume 25, Issue 2, 1998, Pages 271–273, https://doi.org/10.1093/erae/25.2.271 Published: 01 June 1998

Book Reviews

Gromicho, Joaquim Antonio Dos Santos 1995, Quasiconvex Optimization and Location Theory, Tinbergen Institute Research Series, Amsterdam, The Netherlands, 196 pp., $25.00—reviewed by Mahyar A. Amouzegar Birolini, Alessandro 1994, Quality and Reliability of Technical Systems: Theory—Practice—Management, Springer-Verlag, Berlin, 524 pp. (including 9 appendices), $114.00—reviewed by Ralph L. Disney Harris, Douglas H., ed. 1994, Organizational Linkages: Understanding the Productivity Paradox, National Academy Press, Washington, DC, 328 pp., $44.95—reviewed by Gary P. Schneider Bushnell, P. Timothy 1995, Transformation of the American Manufacturing Paradigm, Garland, New York, 274 pp., $46.00—reviewed by Jasmit Singh Kochhar Schleifer, Arthur Jr., and Bell, David E. 1995, Data Analysis, Regression, and Forecasting, Course Technology, Inc., Cambridge, Massachusetts, 248 pp., paper $19.95—reviewed by Carl Glass Ragsdale, Cliff T. 1995, Spreadsheet Modeling and Decision Analysis: A Practical Introduction to Management Science, Course Technology, Cambridge, Massachusetts, 718 pp., $46.95—reviewed by A. A. Elimam Kalpazidou, Sophia L. 1995, Cycle Representations of Markov Processes. Springer-Verlag, New York, 165 pp., $49.95—reviewed by Ralph L. Disney