Articles

(Interstate) banking and (interstate) trade: Does real integration follow financial integration?

T. K. MICHALSKI, E. ÖRS

Journal of Financial Economics

April 2012, vol. 104, n°1, pp.89-117

Departments: Economics & Decision Sciences, GREGHEC (CNRS), Finance

Keywords: Trade; Banking deregulation; Finance'growth nexus


We examine whether financial sector integration leads to real sector integration through trade. Our conjecture is that financial sector integration between two regions leads to higher trade flows between them. In our stylized model, this happens because banks with presence in the two regions are better able to assess risks and charge the appropriate premiums for trade-related projects pertinent for the two markets; whereas the same banks charge higher average interest rates for projects that involve trade to other markets from which they are absent. We use the deregulation of the inter-state banking in the U.S. as a natural experiment to test the implication of our theory model with the state-level Commodity Flow Survey data. Our empirical evidence, based on difference-in-difference and GMM2S-IV estimates, indicates that there is a trade channel associated with the finance-growth nexus: the trade share of state-pairs that have opened their banking market to each other's financial institutions increases by 9.2% relative to the trade shares of state-pairs that did not. Looking at actual entry data, we estimate that bank entry within a trading pair increases trade in this pair by 54% relative to those that do not have such a bank link. This is probably the lower bound estimate for international trade barriers stemming from the lack of a unified banking system.

A folk theorem for repeated games played in a network

M. LACLAU

Games and Economic Behavior

2012, vol. 76, n°2, pp.711-737


A generalized single product and single period problem with nonlinear parameters

K. Luo, L. KERBACHE, M. Menezes, C. VAN DELFT

International Transactions in Operational Research

May 2012, vol. 19, n°3, pp.421-433

Departments: Informations Systems and Operations Management, GREGHEC (CNRS)

Keywords: Optimization, Perishable items, Production, Supply chain management


In this paper, we extend the study of the classical single-period newsboy inventory problem by considering Q1 costs that are non-linear functions of the decision variable. We assume that the demand probability density function is known to the decision maker.We prove that, under some much more relaxed conditions, the total expected profit function remains concave and classical optimization methods can thus be used to get the global optimal solution. After that, we provide numerical examples for illustrative purpose

A Global Equilibrium Asset Pricing Model with Home Preference

L. Zuo, B. SOLNIK

Management Science

February 2012, vol. 58, n°2, pp.273-292

Departments: Finance

Keywords: International asset pricing, Home bias, Familiarity, Regret

http://dx.doi.org/10.2139/ssrn.1778662


We develop a global equilibrium asset pricing model assuming that investors suffer from foreign aversion, a preference for home assets based on familiarity. Using a utility formulation inspired by regret theory, we derive closed-form solutions. When the degree of foreign aversion is high in a given country, investors place a high valuation on domestic equity, which results in a lower expected return. Thus, the model generates the simple prediction that a country’s degree of home bias and the expected return of its domestic assets should be inversely related. Our predicted relation between the degree of home bias and a country’s expected return has the opposite sign predicted by models that assume some form of market segmentation. Using IMF portfolio data we find that expected returns are negatively related to home bias

A Heterogeneous Bayesian Regression Model for Cross-sectional Data Involving a Single Observation per Response Unit

D. K. H. Fong, P. EBBES, W. DeSarbo

Psychometrika

April 2012, vol. 77, n°2, pp.293-314

Departments: Marketing, GREGHEC (CNRS)

Keywords: Bayesian estimation, Cross-sectional analysis, Heterogeneity, Consumer psychology

http://ssrn.com/abstract=1919482


pas sous affiliation HECAbstract: Multiple regression is frequently used across the various social sciences to analyze cross-sectional data. However, it can often times be challenging to justify the assumption of common regression coefficients across all respondents. This manuscript presents a heterogeneous Bayesian regression model that enables the estimation of individual-level-regression coefficients in cross-sectional data involving a single observation per response unit. A Gibbs sampling algorithm is developed to implement the proposed Bayesian methodology. A Monte Carlo simulation study is constructed to assess the performance of the proposed methodology across a number of experimental factors. We then apply the proposed method to analyze data collected from a consumer psychology study that examines the differential importance of price and quality in determining perceived value evaluations.


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