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Browsing by Author "Tsang, Kwok Ping"

Now showing 1 - 20 of 32
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    Asset Prices under Random Risk Preferences
    Tsang, Kwok Ping; Tserenjigmid, Gerelt (2016-12-05)
    We consider an overlapping-generations model with two types of investors: the stable investors have constant risk aversion, but the unstable investors have random levels of risk aversion across different generations. Investors are not sure about how risk averse future investors are. We show that i) a small amount of randomness in the risk aversion or ii) a small population of the unstable investors generates a large deviation from fundamental price and a high price volatility.
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    Confronting Theory with Data: the Case of DSGE Modeling
    Poudyal, Niraj (Virginia Tech, 2012-12-07)
    The primary objective of this is to confront the DSGE model (Ireland, 2011) with data in an attempt to evaluate its empirical adequacy. The perspective used for this evaluation is based on unveiling the statistical model (structural VAR) behind the DSGE model, with a view to test its probabilistic assumptions vis-a-vis the data. It is shown that the implicit statistical model is seriously misspecified and the information from mis-specification (M-S) testing is then used to respecify the original structural VAR in an attempt to achieve statistical adequacy. The latter provides a precondition for the reliability of any inference based on the statistical model. Once the statistical adequacy of the respecified model is secured through thorough M-S testing, inferences like the likelihood-ratio test for the overidentifying restrictions, forecasting, impulse response analysis are applied to the original DSGE model to evaluate its empirical adequacy. At the end, the same inferential procedure is applied to the CAPM model.
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    Consumer Economic Behavior and the Role of Information: Three Case Studies
    Vinoles Gomez, Maria V. (Virginia Tech, 2014-10-13)
    The economics of information is a relatively new and important field of economics. This dissertation analyzes the role of information in three case studies within three different branches of economics: health economics, environmental economics, and finance and banking. First I analyze parental nutritional label usage and its effect of children's dietary outcomes (i.e. Health Eating Index and Body Mass Index). I show that parental usage of nutritional labels is associated with a better quality of their children's diet as well as an overall improvement in their health as measured by their Body Mass Index. Secondly, I study the behavioral effect of length of residency on water demand in the arid cities of Reno and Sparks in Nevada. In this case, I observe that social interaction among households affects their water usage. In particular, newcomers' watering behaviors are influenced by the prevailing social norms among neighbors that have lived in the arid area for a longer period of time. Finally, I compare the performance of local versus larger national and regional lending institutions in the years leading to the 2007 mortgage crisis. I find that local or community lenders have a significantly lower foreclosure rate during these years. Local lenders presumably base their origination decisions on an interpersonal relationship with their customers. This provides them with information that is not contained within the standard risk metrics generally used in loan applications. I discuss the policy implications of these results for each case study.
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    Credible Granger-Causality Inference with Modest Sample Lengths: A Cross-Sample Validation Approach
    Ashley, Richard A.; Tsang, Kwok Ping (MDPI, 2014-03-25)
    Credible Granger-causality analysis appears to require post-sample inference, as it is well-known that in-sample fit can be a poor guide to actual forecasting effectiveness. However, post-sample model testing requires an often-consequential a priori partitioning of the data into an “in-sample” period – purportedly utilized only for model specification/estimation – and a “post-sample” period, purportedly utilized (only at the end of the analysis) for model validation/testing purposes. This partitioning is usually infeasible, however, with samples of modest length – e.g., T ≤ 150 – as is common in both quarterly data sets and/or in monthly data sets where institutional arrangements vary over time, simply because there is in such cases insufficient data available to credibly accomplish both purposes separately. A cross-sample validation (CSV) testing procedure is proposed below which both eliminates the aforementioned a priori partitioning and which also substantially ameliorates this power versus credibility predicament – preserving most of the power of in-sample testing (by utilizing all of the sample data in the test), while also retaining most of the credibility of post-sample testing (by always basing model forecasts on data not utilized in estimating that particular model’s coefficients). Simulations show that the price paid, in terms of power relative to the in-sample Granger-causality F test, is manageable. An illustrative application is given, to a re-analysis of the Engel andWest [1] study of the causal relationship between macroeconomic fundamentals and the exchange rate; several of their conclusions are changed by our analysis.
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    The Economics of Cryptocurrencies
    Yang, Zichao (Virginia Tech, 2021-04-26)
    This paper has four chapters. The first chapter serves as an introduction. The second chapter studies the transaction fees in the bitcoin system. The transaction fees and transaction volume in the bitcoin system increase whenever the network is congested and results from a simple VAR show that it is indeed the case. To account for the empirical findings, we build a model where users and miners together determine the transaction fee and transaction volume endogenously. Even though the fluctuating transaction fee mechanism in bitcoin introduces the extra cost of uncertainty to users, a back-of-envelope calculation shows that the cost of using the bitcoin network for transactions is still smaller than the cost of using the current conventional payment system with a fix transaction fee rate. The second chapter studies the time-varying price dispersion among different bitcoin exchanges. We identify the sources of price dispersion using a standard time-varying vector autoregression model with stochastic volatility. The results show that shocks to transaction fees and bitcoin price growth explain on average 20%, and sometimes more than 60%, of the variation of price dispersion. The third chapter studies the relationship between connections and returns in the bitcoin investor network. Using transaction data from the bitcoin blockchain, we reach three conclusions. First, on average, the annualized returns of connected addresses in the network are 20.75% above those of their unconnected peers. Second, returns also differ among those connected addresses. By dividing the connected ad- dresses into ten deciles based on their centrality, we find that addresses in the two most-connected deciles earn higher returns than the other connected addresses. Third, eigenvector centrality is more related than degree centrality to higher returns, implying that quality of connections matters.
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    Empirical Analyses of a Spatial Model of Voter Preferences
    Matje, Thorsten (Virginia Tech, 2016-12-06)
    To properly analyze the advantages and disadvantages of voting rules, and how well the outcomes that they yield reflect voters' preferences, one needs very large data sets, since paradoxes that occur very rarely may have large impacts. Since such amounts of election data are currently unavailable, it is important to be able to use random procedures to generate data that have the same statistical characteristics as real election data. It is the purpose of this work to identify a statistical characterization of voting data, to empower researchers to use random procedures to generate data that is statistically indistinguishable from real voting data.
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    Essays in Labor and Development Economics
    Mostafavi Dehzooei, Mohammad Hadi (Virginia Tech, 2016-10-06)
    This dissertation provides program evaluation and policy analysis evidence from USA and Iran. The first chapter studies the impact of paid leave legislation on women employment. We employ California’s first-in-the-nation Paid Family Leave program to draw inference using difference-in-differences and triple differences methods. The change in the employment outcomes for women before and after this program is compared to the change in similar outcomes for a set of control groups. We find that women’s employment increased in the intensive margin but not extensive margin. We also find that wages increased for married prime-age and decreased for highly educated young women. The second chapter provides evidence on the impact of a nation-wide unconditional cash transfer program in Iran on labor supply. As compensation for the removal of bread and energy subsidies in 2011, the government of Iran started monthly deposits of cash into individual family accounts amounting to 29% of the median household income. A popular outcry against the subsidy reform program has focused on the negative labor supply effects of the cash transfers on the poor. We use panel data to study the impact of these transfers on the labor supply of poor households and individuals during the first two years of the program, before inflation reduced their value. We use the exogenous variation in the value of the cash transfers relative to household income to estimate the impact of the transfers on labor supply of individuals using fixed effects method. We also use a difference-in-differences methodology using the variation in the time households first started receiving transfers. Although everyone was eligible to receive cash transfers starting January 2011, about 20 percent of the households who for one reason or another did not submit their application in time, started receiving it three months later. Neither set of results support the hypothesis that cash transfers reduced labor supply as measured by hours of work or probability of employment. The third chapter analyses what happens to the welfare of households and the budget of the government if it implements further price reforms in Iran. Five years into the reform, energy prices in Iran were still well below international levels. The impacts of a gradualist approach to price increase versus a one-off approach are simulated in this chapter. Under the gradualist approach government savings (reduction in foregone earnings) from selling subsidized items will increase by 20.2 trillion Rials or 0.18 percent of GDP in 2014. Half of these savings is needed as transfers to households to keep the poverty rate constant by paying each person 17,059 Rials per month. A one-off price increase would have a large effect on poverty and would require transfers equivalent to 203,775 Rials per person per month. Government savings after transfers would equal 96.4 trillion Rials or 0.87 percent of GDP.
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    Essays on DSGE Models and Bayesian Estimation
    Kim, Jae-yoon (Virginia Tech, 2018-06-11)
    This thesis explores the theory and practice of sovereignty. I begin with a conceptual analysis of sovereignty, examining its theological roots in contrast with its later influence in contestations over political authority. Theological debates surrounding God’s sovereignty dealt not with the question of legitimacy, which would become important for political sovereignty, but instead with the limits of his ability. Read as an ontological capacity, sovereignty is coterminous with an existent’s activity in the world. As lived, this capacity is regularly limited by the ways in which space is produced via its representations, its symbols, and its practices. All collective appropriations of space have a nomos that characterizes their practice. Foucault’s account of “biopolitics” provides an account of how contemporary materiality is distributed, an account that can be supplemented by sociological typologies of how city space is typically produced. The collective biopolitical distribution of space expands the range of practices that representationally legibilize activity in the world, thereby expanding the conceptual limits of existents and what it means for them to act up to the borders of their capacity, i.e., to practice sovereignty. The desire for total authorial capacity expresses itself in relations of domination and subordination that never erase the fundamental precarity of subjects, even as these expressions seek to disguise it. I conclude with a close reading of narratives recounting the lives of residents in Chicago’s Englewood, reading their activity as practices of sovereignty which manifest variously as they master and produce space.
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    Essays on Housing Markets and Monetary Policy
    Sun, Xiaojin (Virginia Tech, 2015-06-01)
    This dissertation consists of three essays on housing markets and monetary policy. The first essay focuses on the impact of monetary policy on U.S. local housing markets and finds that monetary policy has uneven impacts on local housing markets, and that the magnitude of the impacts are correlated with housing supply regulations. The second essay studies the optimal interest rate rule in a DSGE model with housing market spillovers and finds that the optimal interest rate rule responds to house price inflation even when the stabilization of house price is not among the objectives of the policymaker. The third essay is the core of this dissertation. I construct a dynamic stochastic general equilibrium (DSGE) model in this paper to study the fluctuations in the U.S. housing markets. The model features a market for newly built houses, a secondary market for old houses, and an endogenous term structure of nominal interest rates. Negative technological progress in the housing sector explains the upward trend in house prices over the past four decades. Housing preference and technology innovations explain about 80% of the volatility of housing investment, real price of new houses, and the old-to-new house price ratio. Monetary factors explain about 15% of the volatility of housing investment, but do not significantly contribute to the price fluctuations of either new or old houses. The preference innovation to old houses is the leading determinant of the run-up in the price of old houses relative to the price of new houses during the 10-year period before the Great Recession. The term structure is endogenous in this paper, and the intertemporal preference innovation makes a non-negligible contribution to the variations in nominal interest rates. Housing market conditions do not contribute much to the fluctuations of interest rates, but significantly affect the shape of the yield curve.
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    Essays on Inequality and Education
    Vahidmanesh, Atiyeh (Virginia Tech, 2017-03-02)
    This dissertation provides evidence of the return to education in Iran as well as measurement of inequality of opportunity and the Human Opportunity Index using cross-section data of Trends in Mathematics and Science Studies and Harmonized Household Income and Expenditure Surveys of several Middle Eastern Countries. The first chapter studies the return to education and the effect of school availability on education attainment in Iran. The Census 2006 allows us to get closer to the district of schooling by focusing on non-migrants. We estimate the return to education and the effect of school availability both for migrant and non-migrant sub-samples. We employ school availability as an instrument to correct the ability bias. We find availability of school increases women's education attainment more than men's and it is higher among the non-migrant sample. Using instrumental variable, the return to education is 6.50% in 2012 suggesting an upward bias in OLS. The second chapter provides estimates of Human Opportunity Index (HOI) in the Middle East and North Africa. Our estimates show the HOI improve over time in MENA region and compare favorably with similar measures computed for other regions, notably Latin America. Using Shapley decomposition, we find that parental background and place of living are the most important circumstances explaining inequality of opportunity to access in basic opportunities. Understanding the change in HOI and factors that influence it most complement existing analyses of inequality of opportunity in education, earning, and consumption for MENA countries because they focus on aspects of inequality of opportunity that are largely provided by the state. The third chapter provides estimates of inequality of educational opportunity using TIMSS dataset. We estimate the index of IOP using the ex-ante approach both for the fourth and eighth grade. The computed index of IOP shows that there is an improvement in IOP both for mathematics and science from grade four to eight. The investigations about relevant inputs suggest that there is a negative relationship between educational expenditure and the level of IOP. The relationship between the index of IOP and average economic growth as well as GDP per capita is positive.
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    Essays on Taxation, Marriage, and Labor Supply
    Zhang, Yonghui (Virginia Tech, 2015-09-28)
    My dissertation consists of three essays on labor supply responses, along the extensive margin (participation into the labor force) and along the intensive margin (intensity of work on the job). The first two essays focus on the labor supply responsiveness of single women with children to taxation and welfare programs. The third essay investigates the effects of marriage, the wage rate, and the associated tax rate on men's labor supply. In the first essay, to avoid bias from the fact that labor supply outcomes are being driven by self-selection, I build a dynamic stochastic discrete choice model to investigate the long run effects of the earned income tax credit and welfare policies on single mothers' labor supply. Simulated method of moments is used to estimate parameters of this dynamic model, based on March CPS data files from 1964 to 2013. I compare the performance of the dynamic stochastic discrete choice model, a static model, and a reduced-form model. My analysis concludes that the dynamic stochastic discrete choice model captures the simultaneous impact of the state variables on the predicted employment decision. My study provides evidence of the long-run positive effect of public policy on low income families in a life-cycle setting. This essay also emphasizes the importance of education in increasing single mothers' labor supply. The second essay is designed to identify factors that help single mothers leave TANF within a short span of time. I find strong evidence for the importance of child support assistance to single mothers' success in exiting TANF with a job. I uncover evidence that work-related activities do not induce TANF participants to leave within a short span of time. My analysis also suggests that health issues significantly limit the ability of single mothers to exit TANF. In the third essay, the main research question is how marital status affects the elasticity of the labor supply of males with respect to wages and taxes, in a life-cycle setting. A dynamic panel data model, which extends the literature on dynamic labor supply, indicates that the elasticity of men's labor supply with respect to wages and taxes is affected by marital status. The empirical results using the Panel Study of Income Dynamics (PSID) data show that men who are continuously married to the same wife have a lower average Frisch elasticity than others.
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    Essays on Women's Empowerment and Economic Development in Iran
    Taghvatalab, Sara (Virginia Tech, 2015-08-31)
    This dissertation consists of three essays on women empowerment in Iran. In the first two chapters, we examine the impact of the rapid expansion of electricity to rural areas of Iran after the 1979 revolution on two important determinants of women's empowerment, fertility and female literacy. We use the timing of provision of electricity to villages to identify its impact on the child-woman ratio and the literacy rate of adult women and men. We use difference-in-differences (DID) method as well as instrumental variables (IV) to account for the potential endogeneity of electrification. Our findings for the impact of electricity on fertility is highly sensitive to the method of identification. The DID results imply that electrification lowers fertility whereas the IV estimates suggest the opposite. The results on literacy are consistent across estimation methods, both showing that electrification increases female literacy. In the third chapter, we focus on the role of education in the empowerment of women. The positive effects of education on female empowerment through lower fertility and greater labor force participation are well known. Female empowerment is also closely identified with greater participation in market work and access to an independent source of income. In the past two decades Iranian women have increased their education, lowered their fertility, but their labor force participation remains low. In this chapter we examine the role of education in the empowerment of Iranian women through their allocation of time between domestic work, child education, and market work. We find evidence that more educated women spend more time in market related activities and child education, but less in domestic work. The behavior of women in time allocation to market work and childcare exhibits similar patterns and both are quite different from house or domestic work. These findings are consistent with the hypothesis that education empowers women by increasing their ability to earn more income as well as through their ability to invest in the education of their children.
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    Experiential and Neurobiological Influences on Economic Preferences and Risky Decision Making
    Zhang, Xiaomeng (Virginia Tech, 2020-07-16)
    Economic preferences are fundamental to risky decision making and other economic decision- making. Unlike traditional economics, which routinely assumes that individuals are endowed with stable preferences and try to maximize the expected utility when facing risky decision-making problems, behavioral economics and neuroeconomics offer research strategies that help us explore the factors that influence economic preferences and risky decision-making process. This dissertation consists of three essays studying the underlying experiential influences on economic preferences and neurobiological effects on risky decision making. Chapter 2 examines whether experiences during adolescence have a long-term effect on economic preferences. Between 1966 and 1976, China's Sent-Down Movement required seventeen million urban teenagers to spend several years living and working in rural areas. The program had a number of goals for participants, including learning empathy for rural laborers and developing collectivist values. The sent-down movement can be regarded as a natural experiment, which allows us to investigate whether this government policy was successful in effecting a lasting change to economic preferences. Using a modified Global Preference Survey and employing a regression discontinuity design, we find that the experience of being Sent-Down significantly changed participants' risk preferences, other-regarding preferences, and attitudes toward government. Chapter 3 explores how the arousal system modulates attention and investment behavior. Experimental research shows that human decision making is shaped by emotions associated with an outcome's success or failure. Regret, for example, is a powerful predictor of future investment decisions in asset markets. Using a fictive learning model to capture regret, we examine changes in pupil diameter of participants performing a sequential investing task. By manipulating task uncertainty, we show that pupil dilation is positively correlated with both asset price variance and regret. In addition, pupil linked arousal is positively associated with the learning rate. We conclude that the pupil–linked arousal system helps regulate investment behavior in a dynamic market environment. Chapter 4 explores the complex process by which people make risky choices. While traditional models, like expected utility theory, model choice as the selection of the outcome with the highest probability-weighted value, research shows that in some environments these models do a poor job of describing behavior. This study explores the role of attention, pupil-linked arousal, and salience in risky choice. First, we replicate earlier findings that those choices are consistent with expected utility theory when the calculation is easy, however, as the calculation becomes harder, they make decisions by comparing unweighted payoffs and are attend to the salient option. Further, we find that pupil-linked arousal is associated with the level of cognitive effort needed to calculate expected utility. Finally, we show that arousal reflects cognitive effort associated with resisted selecting a more salient option.
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    Generalized Principal Component Analysis
    Solat, Karo (Virginia Tech, 2018-06-05)
    The primary objective of this dissertation is to extend the classical Principal Components Analysis (PCA), aiming to reduce the dimensionality of a large number of Normal interrelated variables, in two directions. The first is to go beyond the static (contemporaneous or synchronous) covariance matrix among these interrelated variables to include certain forms of temporal (over time) dependence. The second direction takes the form of extending the PCA model beyond the Normal multivariate distribution to the Elliptically Symmetric family of distributions, which includes the Normal, the Student's t, the Laplace and the Pearson type II distributions as special cases. The result of these extensions is called the Generalized principal component analysis (GPCA). The GPCA is illustrated using both Monte Carlo simulations as well as an empirical study, in an attempt to demonstrate the enhanced reliability of these more general factor models in the context of out-of-sample forecasting. The empirical study examines the predictive capacity of the GPCA method in the context of Exchange Rate Forecasting, showing how the GPCA method dominates forecasts based on existing standard methods, including the random walk models, with or without including macroeconomic fundamentals.
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    Global Effects of U.S. Dividend Income Tax
    Lai, Tat-kei; Ng, Travis; Tsang, Kwok Ping (Virginia Tech, 2016-07-27)
    Do non-U.S. firms respond to the U.S. dividend income tax? To explore this question, we examine the 2003 dividend tax cut which only applies to certain non-U.S. firms depending on both tax treaties and corresponding foreign withholding taxes. We find that 1) foreign firms from which U.S. investors enjoy the full tax cut become more likely to initiate or increase their dividends; 2) such changes are stronger across those foreign firms that are bigger, index-included and with higher credit rating; and 3) these firms also respond consistently to the expiry of the tax cut.
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    International Evidence On The Oil Price-Real Output Relationship: Does Persistence Matter?
    Ashley, Richard A.; Tsang, Kwok Ping (Virginia Tech, 2013-08-28)
    The literature on the relationship between real output growth and the growth rate in the price of oil, including an allowance for asymmetry in the impact of oil prices on output, continues to evolve. Here we show that a new technique, which allows us to control for both this asymmetry and also for the persistence of oil price changes, yields results implying that such control is necessary for a statistically adequate specification of the relationship. The new technique also yields an estimated model for the relationship which is more economically interpretable. In particular, using quarterly data from 1976 – 2007 on each of six countries which are essentially net oil importers, we find that changes in the growth rate of oil prices which persist for more than four years have a large and statistically significant impact on future output growth, whereas less persistent changes (lasting more than one year but less than four years) have no significant impact on output growth. In contrast, ‘temporary’ fluctuations in the oil price growth rate – persisting for only a year or less – again have a large and statistically significant impact on output growth for most of these countries. The results for the single major net oil producer in our sample (Norway) are distinct in an interesting way.
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    Labor Migration in China
    Jin, Shan (Virginia Tech, 2021-06-04)
    With the transition of the economy in China, migrants start holding a more and more important position in the labor market. Therefore, from this dissertation, we try to explore different topics related to the migrants in China. This dissertation consists of three essays on who chooses to migrate, how networks affect migrants' outcomes, and what is the intergenerational impact of parental migration on children's risk preferences. In the first chapter, we briefly introduce the motivation and contribution, and then we provide the methods and detailed findings in the following chapters. Chapter 2 examines the impact of the endogeneity of the decision to migrate on the wage differentials between migrants and non-migrants in China. We find that migrants are self-selected from the upper tail of the income distribution in their home location. Consistent with a theoretical model of migration choice, we show that the size of the selection effect on wage depends on the wage differences between the prefectures of origin and destination as well as migration cost. The selection effect also differs among workers with different education and in different cities. Chapter 3 studies how networks affect migrants' migration decisions, employment, and wage levels by using 2005 China's mini-census. Different from existing studies, this paper takes into account the existence of self-selection in the labor market. With the help of a theoretical model, we have a better understanding of the mechanism of networks as well as the different network effects on rural and urban migrants. We find out that networks affect both rural and urban migrants' migration decisions positively. In terms of employment, networks exert positive impacts on rural migrants but not on urban ones, which is due to the different quality drops between rural and urban migrants when the networks increase. Such employment effects also lead rural migrants to face a more severe negative wage impact than urban migrants. Chapter 4 investigates how parental migration affects left-behind underage children's risk preferences. By focusing on migrant parent groups, we are able to estimate whether the influence of nurture could also affect children's risk preference levels or not. The findings suggest that besides the intergenerational transmission of risk preferences between parents and children, parental migrations do have an influence on girls' risk preference levels. In addition, in terms of adult children's risk-related outcomes, we are able to find a positive parental migration impact on daughters' self-employment decisions. Findings help us have a better understanding of the relevant factors of risk preferences, and also confront the impact of the separation of parents and children.
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    Macro Economics Essays on Technological Change
    Qian, Tiefeng (Virginia Tech, 2014-06-16)
    The essay consists of three chapters. In chapter 1, I find that wages in U.S. regions have been diverging instead of converging from 1975 onward. This coincides with the period of accelerating skill-biased technological change. A decomposition of the divergence rate indicates three channels underlying the divergence: (1) an ever-widening wage gap between college graduates and high school graduates, (2) an increasing within-education group wage differential across regions, and (3) a concentration of skill composition across local labor markets. I then developed an endogenous skill-biased technology adoption model in which firms invest capital more intensively in regions with higher employment share of college graduates, explaining these three channels jointly. Finally I quantitatively assess the model by separately calibrating the regional aggregate production function; the results show that the relative skilled-labor efficiency has been persistently higher in skill-abundant regions, nevertheless the countrywide skill-biased technological change, is the main force making divergence happening. Chapter 2 studies energy-saving technological change in U.S. manufacturing sector, whose intensive margin and extensive margins are identified. I find that energy and capital are mostly complementary to each other, while labor is substitutive to energy-capital composite. However, a Cobb-Douglas nesting of labor is rejected. Quantitative exercise shows that in the post-crisis period, within in industry energy-saving technological change accounts for the largest proportion of the aggregate sectoral energy efficiency promotion in the long run. In contrast, in the short run, factor adjustment combined with sectoral shift accounts for the largest proportion of energy intensity reduction. Lastly, I provide evidence that structural change has taken place around the oil crisis in 1970s, which is consistent with the existing literature. In chapter 3, I documented the increasing dispersion of skill composition across different areas in the U.S. Meanwhile, the U.S. Housing Market has experienced a dramatic increase in the housing price, as well as a similarly increase in its dispersion across metropolitan areas. A set of related stylized facts are documented in this paper. First, the real wage goes similarly as real housing prices, but quantitatively different. Second, the rents and housing prices have not been going in the exactly same way, in terms of first two moments. Third, we find that local income inequality is positively correlated to the local housing price level. Based on these observations, we build a model where a dispersed skill-biased technology change can account for all the phenomena at the same time.
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    Market Sentiments and the Housing Markets
    Huang, Yao (Virginia Tech, 2020-04-03)
    This paper has three chapters. In the first chapter, we develop a measure of housing sentiment for 24 cities in China by parsing through newspaper articles from 2006 to 2017.We find that the sentiment index has strong predictive power for future house prices even after controlling for past price changes and macroeconomic fundamentals. The index leads price movements by nearly 9 months, and it is highly correlated with other survey expectations measures that come with a significant time lag. In the second chapter, we show that short term house price movement is predictable by solely using newspaper and historical price change. In the last chapter, using the sentiment index constructed from newspaper, we got empirical results to show that some people are forward-looking when deciding default and a positive sentiment (anticipated house price appreciation) will lower the Z score of probability of default by 0.028.
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    Model Uncertainty & Model Averaging Techniques
    Amini Moghadam, Shahram (Virginia Tech, 2012-07-16)
    The primary aim of this research is to shed more light on the issue of model uncertainty in applied econometrics in general and cross-country growth as well as happiness and well-being regressions in particular. Model uncertainty consists of three main types: theory uncertainty, focusing on which principal determinants of economic growth or happiness should be included in a model; heterogeneity uncertainty, relating to whether or not the parameters that describe growth or happiness are identical across countries; and functional form uncertainty, relating to which growth and well-being regressors enter the model linearly and which ones enter nonlinearly. Model averaging methods including Bayesian model averaging and Frequentist model averaging are the main statistical tools that incorporate theory uncertainty into the estimation process. To address functional form uncertainty, a variety of techniques have been proposed in the literature. One suggestion, for example, involves adding regressors that are nonlinear functions of the initial set of theory-based regressors or adding regressors whose values are zero below some threshold and non-zero above that threshold. In recent years, however, there has been a rising interest in using nonparametric framework to address nonlinearities in growth and happiness regressions. The goal of this research is twofold. First, while Bayesian approaches are dominant methods used in economic empirics to average over the model space, I take a fresh look into Frequentist model averaging techniques and propose statistical routines that computationally ease the implementation of these methods. I provide empirical examples showing that Frequentist estimators can compete with their Bayesian peers. The second objective is to use recently-developed nonparametric techniques to overcome the issue of functional form uncertainty while analyzing the variance of distribution of per capita income. Nonparametric paradigm allows for addressing nonlinearities in growth and well-being regressions by relaxing both the functional form assumptions and traditional assumptions on the structure of error terms.