Characterizing Higher-Order Ross More Risk Aversion by Comparison of Risk Compensation
Zhen Huang, Guoqiang Tian, Yougong Tian
Abstract: This paper characterizes higher-order Ross more risk aversion by means of risk compensation rather than the traditional risk premium. Our approach extends the willingness-to-accept (WTA) framework of Denuit and Eeckhoudt (2013) to a broader class of risk changes. In addition, we provide a characterization of the strength of precautionary saving based on precautionary compensation, thereby complementing the analysis of Liu (2014), which is based on the precautionary premium.
Xuanyi Shi, Wenjun Wu, Yifan Chen, Chunyang Wang
Abstract: To explore the real effect of banking globalisation on bank liquidity creation, we investigate plausibly exogenous variations in the expectation of further banking globalisation under the Belt and Road Initiative (BRI), which further opens the gate to foreign investors. Using data from both listed and unlisted commercial banks in China from 2007 to 2022, we obtain the results showing that implementation of the BRI enhances the on-balance sheet liquidity creation of banks with foreign investors. Further analysis shows that the BRI has more significant positive economic effects on state-owned commercial banks and foreign banks. Additionally, banks with foreign ownership that are small, unlisted, or located in eastern coastal regions create more liquidity since the implementation of the BRI. Our findings indicate that deepening banking globalisation plays an outstanding role in China's banking industry.
On the Evolution of the Stock Market Efficiency: Evidence From Emerging Markets
Júlio Lobão, Luís Pacheco, Nuno Cruz
Abstract: The study of market efficiency is one of the most covered topics in the field of financial markets, with the Efficient Market Hypothesis gathering devotees as well as several critics. The perception of markets as agents with an adaptive nature gave rise to the Adaptive Market Hypothesis (AMH). This paper aims to combine this evolutionary view of market efficiency with the need to assess the behavior of emerging markets over the years. The empirical method selected was the Adjusted Market Inefficiency Magnitude. The sample consists of daily returns between 2005 and 2023 for six stock indices, namely the Indian (BSESN), Brazilian (BVSP), Chinese (CSI300), South African (JALSH), South Korean (KS11), and Taiwanese (TWII), representing the emerging economies bloc. Our findings show greater proximity to the efficiency framework proposed by the AMH, with the emerging markets evidencing an evolutionary behavior, combining a state of generalized efficiency with periods of remarkable inefficiency. Also, the observable synchronization between evolutionary moments and the occurrence of major economic events, both systemic and related to a particular economy, reinforces the need to frame the study of the efficiency of this category of markets within the global economic framework.
Land Use Policy and Racial Segregation
Ling Huang
Abstract: Land use policies, though seemingly race-neutral, can inadvertently contribute to racial segregation. Our study focuses on examining the impact of minimum lot size regulations on the likelihood of ethnic minorities integrating into a community, which reveals compelling evidence suggesting that black households exhibit a preference for smaller minimum lot sizes compared to white households. Specifically, our findings indicate that black households are willing to pay $934 to $2126 less annually for every additional acre of minimum lot size, accounting for approximately 3.36%–7.65% of the average house value, after controlling for various other factors influencing housing preferences. The result suggests that minimum lot size regulations can contribute to racial segregation not solely through income disparities but also voluntary choices made by different racial groups. With smaller minimum lot size requirements, communities can foster greater inclusivity and reduce the extent of racial segregation from housing policies.
Realistic Representation, Dynamic Evolution and Determinants of Institutional Quality in China
Susu Wang, Qidi Zhang, Jing Fang
Abstract: The paper delves into the role of institutional quality in bolstering China's economic resilience post-COVID-19, CITIC-Entropy. It divides institutions into basic and changeable categories, establishing an index system via the CITIC-Entropy TOPSIS model. Through Markov chain analysis, a consistent uptrend in institutional quality is observed. Notably, a club convergence pattern emerges, indicating gradual progress with limited leaps. The study underscores the pivotal influence of basic economic institutions on disparities in institutional quality, with a diminishing impact from north to south. By refining the evaluation of institutional quality, the research sheds light on its significance in economic resilience while offering guidance for harmonizing market efficiency with governmental efficacy in policy formulation.
Impact of Geography on Institutions in Agricultural and Nomadic Societies
Haiwen Zhou
Abstract: How geography affects the choice of institutions is studied in a theoretical model. In this model, nations are located around a circle. Rulers compete through choosing tax rates, the level of military spending, and the degree of formality of institutions. Geographic condition is captured by population density. It is shown that societies with higher population densities choose lower tax rates, establish more formal institutions, and give government officials lower levels of autonomies than those with lower population densities do. A higher level of external threats induces a ruler to choose a higher level of autonomy for officials. The model is illustrated by comparing institutions of agricultural and nomadic regimes in ancient China.