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3,800
Taxation and Valuation
q-fin.GN
The greatest harm from highway robbers lies not in seized wallets but in inhibited travel. Similarly, incentives for tax-reducing strategies put much sand in the wheels of the economy. Demands to replace our monumental tax code with a simple, graceful one that does not distort economic incentives heat up periodically i...
finance
3,801
Fluctuations of company yearly profits versus scaled revenue: Fat tail distribution of Levy type
q-fin.GN
We analyze annual revenues and earnings data for the 500 largest-revenue U.S. companies during the period 1954-2007. We find that mean year profits are proportional to mean year revenues, exception made for few anomalous years, from which we postulate a linear relation between company expected mean profit and revenue. ...
finance
3,802
Steady coexistence of the subjects of the market representing the private and state capital
q-fin.GN
The sustainability conditions for the market participants with a different ownership model were also determined. It was revealed, that the nonlinear form of the equations describing the market behavior with the prevailing private capital, predetermines the development of such a market according to the subharmonic casca...
finance
3,803
Economic law of increase of Kolmogorov complexity. Transition from financial crisis 2008 to the zero-order phase transition (social explosion)
q-fin.GN
In Maslov (2003), a two level model of the occurrence of financial pyramid (bubbles) has been considered. We also considered the mathematical analogy of this model to Bose condensation. In the present paper, we explain why Ponzi schemes and bubbles result in a crisis in real economics. In Maslov (2005), the law of incr...
finance
3,804
Optimal dividend distribution under Markov-regime switching
q-fin.GN
We investigate the problem of optimal dividend distribution for a company in the presence of regime shifts. We consider a company whose cumulative net revenues evolve as a Brownian motion with positive drift that is modulated by a finite state Markov chain, and model the discount rate as a deterministic function of the...
finance
3,805
Mathematical analysis of Soros's theory of reflexivity
q-fin.GN
The mathematical model proposed by George Soros for his theory of reflexivity is analyzed under the framework of discrete dynamical systems. We show the importance of the notion of fixed points for explaining the behavior of a reflexive system governed by its cognitive and manipulative functions. The interrelationship ...
finance
3,806
The Reality Game
q-fin.GN
We introduce an evolutionary game with feedback between perception and reality, which we call the reality game. It is a game of chance in which the probabilities for different objective outcomes (e.g., heads or tails in a coin toss) depend on the amount wagered on those outcomes. By varying the `reality map', which rel...
finance
3,807
A Conceptual Model for Bidirectional Service, Information and Product Quality in an IS Outsourcing Collaboration Environment
q-fin.GN
This paper advances theory on the process of collaboration between entities and its implications on the quality of services, information, and/or products (SIPs) that the collaborating entities provide to each other. It investigates the scenario of outsourced IS projects (such as custom software development) where the e...
finance
3,808
Time and symmetry in models of economic markets
q-fin.GN
These notes discuss several topics in neoclassical economics and alternatives, with an aim of reviewing fundamental issues in modeling economic markets. I start with a brief, non-rigorous summary of the basic Arrow-Debreu model of general equilibrium, as well as its extensions to include time and contingency. I then ar...
finance
3,809
Mapping markets to the statistical mechanics: the derivatives act against the self-regulation of stock market
q-fin.GN
Mapping the economy to the some statistical physics models we get strong indications that, in contrary to the pure stock market, the stock market with derivatives could not self-regulate.
finance
3,810
The Transfer Pricing Problem with Non-Linearities
q-fin.GN
A number of approaches to solving the well-known transfer pricing problem are known. However, few models satisfactorily resolve the core problem of allowing both the source and receiving divisions to earn a profit on transfers during a period in such a way that sub-optimal output levels are avoided. In 1969, Samuel pro...
finance
3,811
Does economics need a scientific revolution?
q-fin.GN
Economics does not need a scientific revolution. Economics needs accurate measurements according to high standards of natural sciences and meticulous work on revealing empirical relationships between measured variables.
finance
3,812
The Problem of Modeling of Economic Dynamics
q-fin.GN
The correctness of Harrods model in the differential form is studied. The inadequacy of exponential growth of economy is shown; an alternative result is obtained. By example of Phillips model, an approach to correction of macroeconomic models (in terms of initial prerequisites) is generalized. A methodology based on ba...
finance
3,813
An operatorial approach to stock markets
q-fin.GN
We propose and discuss some toy models of stock markets using the same operatorial approach adopted in quantum mechanics. Our models are suggested by the discrete nature of the number of shares and of the cash which are exchanged in a real market, and by the existence of conserved quantities, like the total number of s...
finance
3,814
What are the limits on Commercial Bank Lending?
q-fin.GN
Analysis of the 2007-8 credit crisis has concentrated on issues of relaxed lending standards, and the perception of irrational behaviour by speculative investors in real estate and other assets. Asset backed securities have been extensively criticised for creating a moral hazard in loan issuance and an associated incre...
finance
3,815
La Loi organique relative aux lois de finances (LOLF) dans les institutions culturelles publiques du spectacle vivant en France
q-fin.GN
In a crisis of public finances, France bases all its hopes on the "evaluation of performance" to moderate the effects of a complex crisis. Under the banner of "modernization of the State", a new "financial constitution" called the Organic Law on finance laws (LOLF) became the main lever of reform of public management. ...
finance
3,816
A Markovian Model Market - Akerlof's Lemmons and the Asymmetry of Information
q-fin.GN
In this work we study an economic agent based model under different asymmetric information degrees. This model is quite simple and can be treated analytically since the buyers evaluate the quality of a certain good taking into account only the quality of the last good purchased plus her perceptive capacity \beta . As a...
finance
3,817
Presentation Du Nouvel Accord De Bale Sur Les Fonds Propres
q-fin.GN
In order to adapt to the liberalization of the financial sphere started in the Eighties, marked in particular by the end of the framing of credit, the disappearance of the various forms of protection of the State whose profited the banks, and the privatization of the near total of the establishments in Europe, the bank...
finance
3,818
A la Recherche des Facteurs Déterminants de l'Intégration Internationale des Marchés Boursiers : une Analyse sur Données de Panel
q-fin.GN
The aim of this paper is to identify the determinants of international stock markets integration. Intuitively we selected a great number of factors linked to financial integration. Then, we developed an international asset-pricing model with time-varying degree of integration. This model is estimated for 30 countries (...
finance
3,819
Structural Breaks in the Mexico's Integration into the World Stock Market
q-fin.GN
This article investigates the evolution of the Mexican stock market integration into the world market. First, we estimate the time-varying Mexican degree of market integration using an international conditional version of the CAPM with segmentation effects. Second, we study the structural breaks in this series. Finally...
finance
3,820
A Prediction Market for Toxic Assets Prices
q-fin.GN
We propose the development of a prediction market for forecasting prices for "toxic assets" to be transferred from Irish banks to the National Asset Management Agency (NAMA). Such a market allows market participants to assume a stake in a security whose value is tied to a future event. We propose that securities are cr...
finance
3,821
An example of a stochastic equilibrium with incomplete markets
q-fin.GN
We prove existence and uniqueness of stochastic equilibria in a class of incomplete continuous-time financial environments where the market participants are exponential utility maximizers with heterogeneous risk-aversion coefficients and general Markovian random endowments. The incompleteness featured in our setting - ...
finance
3,822
Improved and Developed Upper Bound of Price of Anarchy in Two Echelon Case
q-fin.GN
Price of anarchy, the performance ratio, which could characterize the loss of efficiency of the distributed supply chain management compared with the integrated supply chain management is discussed by utilizing newsvendor problem in single period which is well-known. In particular, some of remarkable distributed polici...
finance
3,823
A quantum statistical approach to simplified stock markets
q-fin.GN
We use standard perturbation techniques originally formulated in quantum (statistical) mechanics in the analysis of a toy model of a stock market which is given in terms of bosonic operators. In particular we discuss the probability of transition from a given value of the {\em portfolio} of a certain trader to a differ...
finance
3,824
Heterogeneous Beliefs with Partial Observations
q-fin.GN
This paper examines a heterogeneous beliefs model in which there is a process that is only partially observed by the agents. The economy contains a risky asset producing dividends continuously in time. The dividends are observed by the agents. The dividends are assumed to be a known function of some other unobserved pr...
finance
3,825
Heterogeneous Beliefs with Finite-Lived Agents
q-fin.GN
This paper will examine a model with many agents, each of whom has a different belief about the dynamics of a risky asset. The agents are Bayesian and so learn about the asset over time. All agents are assumed to have a finite (but random) lifetime. When an agent dies, he passes his wealth (but not his knowledge) onto ...
finance
3,826
A note on heterogeneous beliefs with CRRA utilities
q-fin.GN
This note will extend the research presented in Brown & Rogers (2009) to the case of CRRA agents. We consider the model outlined in that paper in which agents had diverse beliefs about the dividends produced by a risky asset. We now assume that the agents all have CRRA utility, with some integer coefficient of relative...
finance
3,827
Optimal intervention in the foreign exchange market when interventions affect market dynamics
q-fin.GN
We address the problem of optimal Central Bank intervention in the exchange rate market when interventions create feedback in the rate dynamics. In particular, we extend the work done on optimal impulse control by Cadenillas and Zapatero to incorporate temporary market reactions, of random duration and level, to Bank i...
finance
3,828
Weighted Trade Network in a Model of Preferential Bipartite Transactions
q-fin.GN
Using a model of wealth distribution where traders are characterized by quenched random saving propensities and trade among themselves by bipartite transactions, we mimic the enhanced rates of trading of the rich by introducing the preferential selection rule using a pair of continuously tunable parameters. The biparti...
finance
3,829
Diagnostics of Rational Expectation Financial Bubbles with Stochastic Mean-Reverting Termination Times
q-fin.GN
We propose two rational expectation models of transient financial bubbles with heterogeneous arbitrageurs and positive feedbacks leading to self-reinforcing transient stochastic faster-than-exponential price dynamics. As a result of the nonlinear feedbacks, the termination of a bubble is found to be characterized by a ...
finance
3,830
Credit derivatives: instruments of hedging and factors of instability. The example of ?Credit Default Swaps? on French reference entities
q-fin.GN
Through a long-period analysis of the inter-temporal relations between the French markets for credit default swaps (CDS), shares and bonds between 2001 and 2008, this article shows how a financial innovation like CDS could heighten financial instability. After describing the operating principles of credit derivatives i...
finance
3,831
About Some Applications of Kolmogorov Equations to the Simulation of Financial Institutions Activity
q-fin.GN
The goal of this article is to describe the concepts of system dynamics and its applications to the simulation modeling of financial institutions daily activity. The hybrid method of the re-engineering of banking business processes based upon combination of system dynamics, queuing theory and tools of ordinary differen...
finance
3,832
Modelling and predicting labor force productivity
q-fin.GN
Labor productivity in Turkey, Spain, Belgium, Austria, Switzerland, and New Zealand has been analyzed and modeled. These counties extend the previously analyzed set of the US, UK, Japan, France, Italy, and Canada. Modelling is based on the link between the rate of labor participation and real GDP per capita. New result...
finance
3,833
Inflation and unemployment in Japan: from 1980 to 2050
q-fin.GN
The evolution of inflation, p(t), and unemployment, UE(t), in Japan has been modeled. Both variables were represented as linear functions of the change rate of labor force, dLF/LF. These models provide an accurate description of disinflation in the 1990s and a deflationary period in the 2000s. In Japan, there exists a ...
finance
3,834
What is Fair Pay for Executives? An Information Theoretic Analysis of Wage Distributions
q-fin.GN
The high pay packages of U.S. CEOs have raised serious concerns about what would constitute a fair pay.
finance
3,835
Regulation Simulation
q-fin.GN
A deterministic trading strategy by a representative investor on a single market asset, which generates complex and realistic returns with its first four moments similar to the empirical values of European stock indices, is used to simulate the effects of financial regulation that either pricks bubbles, props up crashe...
finance
3,836
Arbitrage strategy
q-fin.GN
An arbitrage strategy allows a financial agent to make certain profit out of nothing, i.e., out of zero initial investment. This has to be disallowed on economic basis if the market is in equilibrium state, as opportunities for riskless profit would result in an instantaneous movement of prices of certain financial ins...
finance
3,837
Free Lunch
q-fin.GN
The concept of absence of opportunities for free lunches is one of the pillars in the economic theory of financial markets. This natural assumption has proved very fruitful and has lead to great mathematical, as well as economical, insights in Quantitative Finance. Formulating rigorously the exact definition of absence...
finance
3,838
The Problem of Modeling of Economic Dynamics (new version)
q-fin.GN
The correctness of Harrods model in the differential form is studied. The inadequacy of exponential growth of economy is shown; an alternative result is obtained. By example of Phillips model, an approach to correction of macroeconomic models (in terms of initial prerequisites) is generalized. A methodology based on ba...
finance
3,839
Diversity and Arbitrage in a Regulatory Breakup Model
q-fin.GN
In 1999 Robert Fernholz observed an inconsistency between the normative assumption of existence of an equivalent martingale measure (EMM) and the empirical reality of diversity in equity markets. We explore a method of imposing diversity on market models by a type of antitrust regulation that is compatible with EMMs. T...
finance
3,840
Diagnosis and Prediction of Market Rebounds in Financial Markets
q-fin.GN
We introduce the concept of "negative bubbles" as the mirror image of standard financial bubbles, in which positive feedback mechanisms may lead to transient accelerating price falls. To model these negative bubbles, we adapt the Johansen-Ledoit-Sornette (JLS) model of rational expectation bubbles with a hazard rate de...
finance
3,841
L'effet de levier de trésorerie
q-fin.GN
The effect of leverage on liquidity is a tool for analysing the level of liquidity for a given production process. It measures the sensitivity of the level of liquidity that results from changes in the volume of production and unit operating margin. A commercial activity is liquid at the moment when all costs are cover...
finance
3,842
Quantum Portfolios of Observables and the Risk Neutral Valuation Model
q-fin.GN
Quantum Portfolios of quantum algorithms encoded on qbits have recently been reported. In this paper a discussion of the continuous variables version of quantum portfolios is presented. A risk neutral valuation model for options dependent on the measured values of the observables, analogous to the traditional Black-Sch...
finance
3,843
Fundamental defect of the macroeconomic thinking as one of the main causes of the crisis endured
q-fin.GN
The main points of the first section of the article written by S.I. Chernyshov, A.V. Voronin and S.A. Razumovsky arXiv:1003.4382), which deals with the fundamental bases of the macroeconomic theory, have been analyzed. An incorrectness of the Harrod's model of the economical growth in its generally accepted interpretat...
finance
3,844
A discussion of stock market speculation by Pierre-Joseph Proudhon
q-fin.GN
The object of this contribution is to present the ideas behind the thinking of the French economist Pierre-Joseph Proudhon (1809-1865) in relation to the causes and effects of Stock market speculation. It is based upon the works of this author but particularly on his "Manuel du sp\'eculateur \`a la Bourse" (Stock Marke...
finance
3,845
Stable-1/2 Bridges and Insurance
q-fin.GN
We develop a class of non-life reserving models using a stable-1/2 random bridge to simulate the accumulation of paid claims, allowing for an essentially arbitrary choice of a priori distribution for the ultimate loss. Taking an information-based approach to the reserving problem, we derive the process of the condition...
finance
3,846
GDP Trend Deviations and the Yield Spread: the Case of Five E.U. Countries
q-fin.GN
Several studies have established the predictive power of the yield curve in terms of real economic activity. In this paper we use data for a variety of E.U. countries: both EMU (Germany, France, Italy) and non-EMU members (Sweden and the U.K.). The data used range from 1991:Q1 to 2009:Q1. For each country, we extract t...
finance
3,847
Two-sided estimates for stock price distribution densities in jump-diffusion models
q-fin.GN
We consider uncorrelated Stein-Stein, Heston, and Hull-White models and their perturbations by compound Poisson processes with jump amplitudes distributed according to a double exponential law. Similar perturbations of the Black-Scholes model were studied by S. Kou. For perturbed stochastic volatility models, we obtain...
finance
3,848
Inequality reversal: effects of the savings propensity and correlated returns
q-fin.GN
In the last decade, a large body of literature has been developed to explain the universal features of inequality in terms of income and wealth. By now, it is established that the distributions of income and wealth in various economies show a number of statistical regularities. There are several models to explain such ...
finance
3,849
Business fluctuations in a credit-network economy
q-fin.GN
We model a network economy with three sectors: downstream firms, upstream firms, and banks. Agents are linked by productive and credit relationships so that the behavior of one agent influences the behavior of the others through network connections. Credit interlinkages among agents are a source of bankruptcy diffusion...
finance
3,850
Econophysics: A new discipline
q-fin.GN
This paper debates the contribution of Econophysics to the economic or financial domains. Since the traditional approach performed by Economics or Finance has revealed to be insufficient in fully characterizing and explaining the correspondingly phenomena, we discuss whether Econophysics can provide a new insight onto ...
finance
3,851
Is an historical economic crisis upcoming?
q-fin.GN
In this work, the time chart of Dow Jones Industrial Average (DJIA) index is analyzed and approach of recession time term is predicted, which may be hallmark of a worldwide economic crisis. However, the methods used for the prediction will be disclosed a few years from now. On the other hand, this work will be updated ...
finance
3,852
Incomplete Continuous-time Securities Markets with Stochastic Income Volatility
q-fin.GN
In an incomplete continuous-time securities market with uncertainty generated by Brownian motions, we derive closed-form solutions for the equilibrium interest rate and market price of risk processes. The economy has a finite number of heterogeneous exponential utility investors, who receive partially unspanned income ...
finance
3,853
Fifteen Years of Econophysics Research
q-fin.GN
Econophysics is a new research field, which makes an attempt to bring economics in the fold of natural sciences or specifically attempts for a "physics of economics". The term Econophysics was formally born in Kolkata in 1995. The entry on Econophysics in The New Palgrave Dictionary of Economics, 2nd Ed., Vol 2, Macmil...
finance
3,854
How to predict and avert economic crisis
q-fin.GN
Our study shows that many firms would accumulate at zero output level (namely, Bankruptcy status) if a perfectly competitive market reaches full employment (namely, those people who should obtain employment have obtained employment). As a result, appearance of economic crisis is determined by two points; that is, (a). ...
finance
3,855
Entering New Markets-a Challenge in Times of Crisis
q-fin.GN
After September 2008, the advanced economies severe decline caused demand for emerging economies' exports to drop and the crisis became truly global, much deeper and broader than expected. In these times of global depression, most countries and companies are affected, some more than others. The financial crisis has tur...
finance
3,856
A note comprising a negative resolution of the Efficient Market Hypothesis
q-fin.GN
This note comprises a negative resolution of the Efficient Market Hypothesis.
finance
3,857
Leverage Bubble
q-fin.GN
Leverage is strongly related to liquidity in a market and lack of liquidity is considered a cause and/or consequence of the recent financial crisis. A repurchase agreement is a financial instrument where a security is sold simultaneously with an agreement to buy it back at a later date. Repurchase agreements (repos) ma...
finance
3,858
Inferring Fundamental Value and Crash Nonlinearity from Bubble Calibration
q-fin.GN
Identifying unambiguously the presence of a bubble in an asset price remains an unsolved problem in standard econometric and financial economic approaches. A large part of the problem is that the fundamental value of an asset is, in general, not directly observable and it is poorly constrained to calculate. Further, it...
finance
3,859
Comprehending environmental and economic sustainability: Comparative analysis of stability principles in the biosphere and free market economy
q-fin.GN
Using the formalism of Lyapunov potential function it is shown that the stability principles for biomass in the ecosystem and for employment in economics are mathematically similar. The ecosystem is found to have a stable and an unstable stationary state with high (forest) and low (grasslands) biomass, respectively. In...
finance
3,860
Equilibrium notions and framing effects
q-fin.GN
Experimental economics has repeatedly demonstrated that the Nash equilibrium makes inaccurate predictions for a vast set of games. Instead, several alternative theoretical concepts predict behavior that is much more in tune with observed data, with the quantal response equilibrium as the most prominent example. However...
finance
3,861
Preliminaries to an investigation of reduced product set finance
q-fin.GN
Principles of financial product synthesis from a few basic financial products constitute an interesting research topic inspired by Islamic finance. We make an effort to answer general questions that should be answered before starting to investigate the main issues concerning this topic with the formalization of financi...
finance
3,862
An almost linear stochastic map related to the particle system models of social sciences
q-fin.GN
We propose a stochastic map model of economic dynamics. In the last decade, an array of observations in economics has been investigated in the econophysics literature, a major example being the universal features of inequality in terms of income and wealth. Another area of inquiry is the formation of opinion in a socie...
finance
3,863
Leverage efficiency
q-fin.GN
Peters (2011a) defined an optimal leverage which maximizes the time-average growth rate of an investment held at constant leverage. It was hypothesized that this optimal leverage is attracted to 1, such that, e.g., leveraging an investment in the market portfolio cannot yield long-term outperformance. This places a str...
finance
3,864
Dynamics of a Service Economy Driven by Random Transactions
q-fin.GN
Agents buy and sell services. All services are of equal quality. Buyers choose sellers at random. Monetary and fiscal policies are imposed by a central bank and a central government. Credit is supplied by a commercial banking system. Propensities to buy, sell, and lend depend on account balances, interest rates, tax ra...
finance
3,865
Gaussian Noise Effects on the Evolution of Wealth in a Closed System of n-Economies
q-fin.GN
Based on the stochastic model proposed by Patriarca-Kaski-Chakraborti that describes the exchange of wealth between $n$ economic agents, we analyze the evolution of the corresponding economies under the assumption of a Gaussian background, modeling the exchange parameter $\epsilon$. We demonstrate, that within Gaussian...
finance
3,866
The Australian Phillips curve and more
q-fin.GN
A quantitative model is presented linking the rate of inflation and unemployment to the change in the level of labor force. The link between the involved variables is a linear one with all coefficients of individual and generalized models obtained empirically. To achieve the best fit between measured and predicted time...
finance
3,867
Non - Randomness Stock Market Price Model
q-fin.GN
A new model for the stock market price analysis is proposed. It is suggested to look at price as an everywhere discontinuous function of time of bounded variation.
finance
3,868
Inflation and unemployment in Switzerland: from 1970 to 2050
q-fin.GN
An empirical model is presented linking inflation and unemployment rate to the change in the level of labour force in Switzerland. The involved variables are found to be cointegrated and we estimate lagged linear deterministic relationships using the method of cumulative curves, a simplified version of the 1D Boundary ...
finance
3,869
Shocks in financial markets, price expectation, and damped harmonic oscillators
q-fin.GN
Using a modified damped harmonic oscillator model equivalent to a model of market dynamics with price expectations, we analyze the reaction of financial markets to shocks. In order to do this, we gather data from indices of a variety of financial markets for the 1987 Black Monday, the Russian crisis of 1998, the crash ...
finance
3,870
Noise, risk premium, and bubble
q-fin.GN
The existence of the pricing kernel is shown to imply the existence of an ambient information process that generates market filtration. This information process consists of a signal component concerning the value of the random variable X that can be interpreted as the timing of future cash demand, and an independent no...
finance
3,871
A win-win monetary policy in Canada
q-fin.GN
The Lucas critique has exposed the problem of the trade-off between changes in monetary policy and structural breaks in economic time series. The search for and characterisation of such breaks has been a major econometric task ever since. We have developed an integral technique similar to CUSUM using an empirical model...
finance
3,872
An Application Specific Informal Logic for Interest Prohibition Theory
q-fin.GN
Interest prohibition theory concerns theoretical aspects of interest prohibition. We attempt to lay down some aspects of interest prohibition theory wrapped in a larger framework of informal logic. The reason for this is that interest prohibition theory has to deal with a variety of arguments which is so wide that a li...
finance
3,873
If Entry Strategy and Money go Together, What is the Right Side of the Coin?
q-fin.GN
The goal of this study is to determine which strategic model, either IO or RBV, allows firms to generate the highest performance on a competitive market. Contrasting with classical studies that mobilize analyses as VARCOMP, we deploy a multi-agent system simulating the behavior of firms adopting RBV or IO strategic mod...
finance
3,874
Non - Randomness Stock Market Price Model (Amended)
q-fin.GN
A new model for the stock market price analysis is proposed. It is suggested to look at price as an everywhere discontinuous function of time of bounded variation.
finance
3,875
Interest Rates and Inflation
q-fin.GN
A relation between interest rates and inflation is presented using a two component economic model and a simple general principle. Preliminary results indicate a remarkable similarity to classical economic theories, in particular that of Wicksell.
finance
3,876
Interest prohibition and financial product innovation
q-fin.GN
We give a rough sketch of the Judaic, Greek, Islamic and Christian positions in the matter of interest prohibition during the last few millennia and discuss the way in which interest prohibition is dealt with in Islamic finance, the problems with authority-based arguments for interest prohibition, and the prospects of ...
finance
3,877
Why Money Trickles Up - Wealth & Income Distributions
q-fin.GN
This paper combines ideas from classical economics and modern finance with the general Lotka-Volterra models of Levy & Solomon to provide straightforward explanations of wealth and income distributions. Using a simple and realistic economic formulation, the distributions of both wealth and income are fully explained. B...
finance
3,878
The Bowley Ratio
q-fin.GN
The paper gives a simple algebraic description, and background justification, for the Bowley Ratio, the relative returns to labour and capital, in a simple economy.
finance
3,879
Dialectical Roots for Interest Prohibition Theory
q-fin.GN
It is argued that arguments for strict prohibition of interests must be based on the use of arguments from authority. This is carried out by first making a survey of so-called dialectical roots for interest prohibition and then demonstrating that for at least one important positive interest bearing financial product, t...
finance
3,880
Pricing, liquidity and the control of dynamic systems in finance and economics
q-fin.GN
The paper discusses various practical consequences of treating economics and finance as an inherently dynamic and chaotic system. On the theoretical side this looks at the general applicability of the market-making pricing approach to economics in general. The paper also discuses the consequences of the endogenous crea...
finance
3,881
Chaos structures. Multicurrency adviser on the basis of NSW model and social-financial nets
q-fin.GN
Algorithm of multicurrency trading at the market of Forex is realized on the basis of nonlinear stochastic wavelets. The distinctive feature of the algorithm is the possibility of weakly- and strongly connected horizontal self-assemblies, as well as use of nested structures. On-line trading with eight currency couples ...
finance
3,882
Revenue diversification in emerging market banks: implications for financial performance
q-fin.GN
Shaped by structural forces of change, banking in emerging markets has recently experienced a decline in its traditional activities, leading banks to diversify into new business strategies. This paper examines whether the observed shift into non-interest based activities improves financial performance. Using a sample o...
finance
3,883
Role of Diversification Risk in Financial Bubbles
q-fin.GN
We present an extension of the Johansen-Ledoit-Sornette (JLS) model to include an additional pricing factor called the "Zipf factor", which describes the diversification risk of the stock market portfolio. Keeping all the dynamical characteristics of a bubble described in the JLS model, the new model provides additiona...
finance
3,884
Finance Without Probabilistic Prior Assumptions
q-fin.GN
We develop the fundamental theorem of asset pricing in a probability-free infinite-dimensional setup. We replace the usual assumption of a prior probability by a certain continuity property in the state variable. Probabilities enter then endogenously as full support martingale measures (instead of equivalent martingale...
finance
3,885
Keynesian Economics After All
q-fin.GN
It is demonstrated that the US economy has on the long-term in reality been governed by the Keynesian approach to economics independent of the current official economical policy. This is done by calculating the two-point correlation function between the fluctuations of the DJIA and the US public debt. We find that the ...
finance
3,886
Clarifications to Questions and Criticisms on the Johansen-Ledoit-Sornette Bubble Model
q-fin.GN
The Johansen-Ledoit-Sornette (JLS) model of rational expectation bubbles with finite-time singular crash hazard rates has been developed to describe the dynamics of financial bubbles and crashes. It has been applied successfully to a large variety of financial bubbles in many different markets. Having been developed fo...
finance
3,887
Detection of Crashes and Rebounds in Major Equity Markets
q-fin.GN
Financial markets are well known for their dramatic dynamics and consequences that affect much of the world's population. Consequently, much research has aimed at understanding, identifying and forecasting crashes and rebounds in financial markets. The Johansen-Ledoit-Sornette (JLS) model provides an operational framew...
finance
3,888
A Stable and Robust Calibration Scheme of the Log-Periodic Power Law Model
q-fin.GN
We present a simple transformation of the formulation of the log-periodic power law formula of the Johansen-Ledoit-Sornette model of financial bubbles that reduces it to a function of only three nonlinear parameters. The transformation significantly decreases the complexity of the fitting procedure and improves its sta...
finance
3,889
Heterogeneity, correlations and financial contagion
q-fin.GN
We consider a model of contagion in financial networks recently introduced in the literature, and we characterize the effect of a few features empirically observed in real networks on the stability of the system. Notably, we consider the effect of heterogeneous degree distributions, heterogeneous balance sheet size and...
finance
3,890
The efficient index hypothesis and its implications in the BSM model
q-fin.GN
This note studies the behavior of an index I_t which is assumed to be a tradable security, to satisfy the BSM model dI_t/I_t = \mu dt + \sigma dW_t, and to be efficient in the following sense: we do not expect a prespecified trading strategy whose value is almost surely always nonnegative to outperform the index greatl...
finance
3,891
Okun's law revisited. Is there structural unemployment in developed countries?
q-fin.GN
Okun's law for the biggest developed countries is re-estimated using the most recent data on real GDP per capita and the rate of unemployment. Our results show that the change in unemployment rate can be predicted with a high accuracy. The link needs the introduction of a structural break which might be caused by the c...
finance
3,892
Employment, unemployment and real economic growth
q-fin.GN
We have modeled the employment/population ratio in the largest developed countries. Our results show that the evolution of the employment rate since 1970 can be predicted with a high accuracy by a linear dependence on the logarithm of real GDP per capita. All empirical relationships estimated in this study need a struc...
finance
3,893
Quis pendit ipsa pretia: facebook valuation and diagnostic of a bubble based on nonlinear demographic dynamics
q-fin.GN
We present a novel methodology to determine the fundamental value of firms in the social-networking sector based on two ingredients: (i) revenues and profits are inherently linked to its user basis through a direct channel that has no equivalent in other sectors; (ii) the growth of the number of users can be calibrated...
finance
3,894
A Modified GHG Intensity Indicator: Toward a Sustainable Global Economy based on a Carbon Border Tax and Emissions Trading
q-fin.GN
It will be difficult to gain the agreement of all the actors on any proposal for climate change management, if universality and fairness are not considered. In this work, a universal measure of emissions to be applied at the international level is proposed, based on a modification of the Greenhouse Gas Intensity (GHG-I...
finance
3,895
Conservative self-organized extremal model for wealth distribution
q-fin.GN
We present a detailed numerical analysis of the modified version of a conservative self-organized extremal model introduced by Pianegonda et. al. for the distribution of wealth of the people in a society. Here the trading process has been modified by the stochastic bipartite trading rule. More specifically in a trade o...
finance
3,896
Integration and Contagion in US Housing Markets
q-fin.GN
This paper explores integration and contagion among US metropolitan housing markets. The analysis applies Federal Housing Finance Agency (FHFA) house price repeat sales indexes from 384 metropolitan areas to estimate a multi-factor model of U.S. housing market integration. It then identifies statistical jumps in metrop...
finance
3,897
Entrepreneurship: what's happening?
q-fin.GN
Much has been said lately about entrepreneurship, so it seems important to leave here some personal analysis on this topic. The issues outlined here result from a work in about a year in which because a personal and professional obligations it was doing some research on these issues. This is an interesting topic that h...
finance
3,898
Entrepreneurship: some considerations
q-fin.GN
In this work it is presented some considerations about entrepreneurship. Most of these questions are linked with Portuguese context. Portugal has some particularities, namely because the asymmetries between the littoral and the interior. This situation carried out some problems that complicate and prevent the appearanc...
finance
3,899
Agglomeration and Interregional Mobility of Labor in Portugal
q-fin.GN
The aim of this paper is to analyze the relationship between inter-industry, intra-industry and inter-regional clustering and demand for labor by companies in Portugal. Is expected at the outset that there is more demand for work where the agglomeration is greater. It should be noted, as a summary conclusion, the resul...
finance