> In general, all models discussed here have characteristics that make them more or less suited to one economic environment versus another. It normally refers to the sensitivity of an estimator with respect to the violation of certain assumptions of the model, especially in finite samples. It is tempting to dismiss the approach for that reason, although we see no other empirical methodology with which to replace it. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 A central theme is that of (non-)robustness, i.e., the fact that the presence of heavy tails can either reinforce or reverse the The economic intuition of this result stems from the fact that we are studying a market equilibrium ag- ... we derive robust comparative static results with respect to changes in the discount factor, borrowing limits, the parameters of the utility function ðe.g., the level of risk aversionÞ, and the parameters of … The adaptive control problem 5 is aimed at eliminating the commitment to a time-invariant benchmark model. /FontDescriptor 7 0 R Michael P. Keane, ... Kenneth I. Wolpin, in Handbook of Labor Economics, 2011. Variables within the panel-VAR are estimated alphas by country and by year (from Table 5); HHI = logarithm of Herfindahl Index; DCPC = logarithm of the domestic credit to the private sector as a percent of GDP; sovereign = sovereign lending rate. Re: Robustness of an economy: Quoted from this wikipedia article: "robustness is the ability of a financial trading system to remain effective under different markets and different market conditions" Effectiveness is the key concept in this definition. It is also noteworthy that the private investors did not indicate significant alterations to their contract structures across financing rounds (since they felt that the negotiation and transactions costs would outweigh any benefits). Finally, note that our empirical analysis in this chapter is specific to the venture capital context in which investment is invariably made with a view toward exit in the form of an IPO or acquisition. 1. Fig. 3. Robustness to distributional assumptions is an important consideration throughout statistics, so it is important to emphasize that quantile regression inherits robustness properties of the ordinary sample quantiles. 250 278 500 500 500 500 500 500 500 500 500 500 278 278 0 564 President-elect Joe Biden on Tuesday urged Congress to pass a “robust package” to deal with the economic crisis wrought by the coronavirus pandemic. Out-of-sample validation: Out-of-sample validation relies on there being sample data not used in estimation, but that is assumed to come from the same underlying population. Also reported in Table 6 are the variance ratio and variance reduction. Keane and Wolpin (2007) estimated a model of welfare participation, schooling, labor supply, marriage and fertility on a sample of women from five US states and validated the model based on a forecast of those behaviors on a sixth state. /LastChar 122 All approaches fall short of an assumption-free ideal that does not and is likely never to exist. /FontDescriptor 9 0 R If the coefficients are plausible and robust, this is commonly interpreted as evidence of structural validity. However, there may theoretically be cases in which the entrepreneur faces a trade-off when he knows the venture capitalists preplanned exit strategy is an acquisition: if he gives the venture capitalist more control, the firm is going to have a higher exit value but at the same time he loses his private benefits; if he gives the venture capitalist less control, the firm is going to have a lower exit value but the entrepreneur is able to retain his private benefits. (2002a,b)Manigart et al. stream 3 0 obj >> /FontBBox [-568 -307 2000 1007] Robust data processing techniques – i.e., techniques that yield results minimally affected by outliers – and their applications to real-life economic and financial situations are the main focus of this book. It concludes that it is a mistake to equate self-sufficiency with robustness – putting all the eggs in one basket is still not a good idea. Turning to the VDCs results (Table 12), we observe that 1.4% of alpha’s forecast error variance after 20 years is explained by Herfindahl Index’s disturbances and another 1.4% by disturbances of the domestic credit ratio. If the coefficients are plausible and robust, this is commonly interpreted as evidence of structural validity. The first is the view that knowledge is absolute, that is, there exists a “true” decision-theoretic model from which observed data are generated. Robustness definition at Dictionary.com, a free online dictionary with pronunciation, synonyms and translation. robust statistics, which worries about the properties of . Interestingly, when the uncertainty surrounding the impact of CSR is concerned, the CSR event type seems to be of little importance, if any. Abstract. Table 6.5. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 500 0 611 611 667 0 611 611 722 722 333 444 667 556 833 A separate, though related, issue is how the regulator should respond when the true underlying cost of capital enters a volatile period, for example, following the recent financial crisis. This assumes that the decision maker trusts the model completely. /MaxWidth 2000 We nevertheless outline a number of suggestions for future work. Many regulators review estimates from multiple models before arriving at a decision on which cost of capital to allow. Thus, robust control and prediction combines Bayesian learning (about an unknown state vector) with robust control, while adaptive control combines flexible learning about parameters with standard control methods. /FontBBox [-628 -376 2000 1010] /Filter [/FlateDecode] Put differently, how can DCDP models be validated and choices be made among competing models? Examples are pervasive, appearing in almost every area of applied econometrics. More recently, Todd and Wolpin (2006) used data from a large-scale school subsidy experiment in Mexico, where villages were randomly assigned to control and treatment groups. 5 0 obj As advocated by previous literature, this length may be of importance. All economic models involve abstractions and idealisations. The “suburb” type happens to be the most important one with a negative impact on the uncertainty. Variables within the panel-VAR are estimated alphas by country and by year (from Tables 5 and 6). The results are reported in Table 6.5. If the financial crisis increases the cost of capital, failure to recognize this increase shortchanges investors. In economics, robustness is the ability of a financial trading system to remain effective under different markets and different market conditions, or the ability of an economic model to remain valid under different assumptions, parameters and initial conditions. /BaseFont /TimesNewRomanPSMT The aim of the conference, “Robustness in Economics and Econometrics,” is to bring together researchers engaged in … Further empirical work in this regard might also consider sources of funds in the spirit of Mayer et al. Note: Figure presents impulse response functions (IRFs), which show the responses of a variable of interest to a shock of one plus/minus standard deviation of the same variable or another variable within the panel-VAR. So, at best, robustness checks “some” assumptions for how they impact the conclusions, and at worst, robustness becomes just another form of the garden of forked paths. The second approach is based on a pragmatic epistemological view, in which it is acknowledged that all models are necessarily simplifications of agents’ actual decision-making behavior. ‎This book focuses on general frameworks for modeling heavy-tailed distributions in economics, finance, econometrics, statistics, risk management and insurance. In Lien and Luo (1994) it is shown that, although GARCH may characterize price behavior, the cointegrating relation is the only truly indispensable component when comparing ex post performance of various hedging strategies. /CapHeight 716 Keane and Moffitt (1998) estimated a model of labor supply and welfare program participation using data after federal legislation (OBRA 1981) that significantly changed the program rules. Robustness. The uncertainty about the baseline models estimated effect size increases of the robustness test model obtains different point estimates and/or gets larger standard errors. /Type /Font Surprisingly, philosophers of economics have only recently become interested in robustness. Broll et al. /AvgWidth 479 /Encoding /WinAnsiEncoding If the unusual circumstances are instead believed to be temporary, the regulator may wish to take this into account in setting rates that will be reasonable over the entire regulatory period. (2007) and Drusch and Lioui (2010), CSR event type is likely to matter for the impact of CSR on firm value. As a robustness test and in order to deal with potential issues of endogeneity bias, we also employ a panel-VAR model to examine the relationship between bank management preferences and various banking sector characteristics.19 The main advantage of this methodology is that all variables enter as endogenous within a system of equations, which enables us to reveal the underlying causality among them.20 We specify a panel-VAR model where the key variable is alpha, the shape parameter of the managerial behavior function; we also include the main right side variables of the previous section. 0 0 0 333 333 444 444 0 500 0 0 0 0 0 0 0 /BaseFont /Arial-BoldMT It is not only about the use of an error correction model as opposed to a first-difference model, as various other model specifications have been suggested to estimate the hedge ratio. The objective is to find out that if the estimation method or model specification makes any difference for hedging effectiveness. Setting rates based on a transitory blip (up or down) in the cost of capital can lead to rates that will be expected to provide too much or too little return over most of the rate's life (before the next rate setting). Mcvitie's Rich Tea Lights, Haribo Primavera Erdbeeren, Oversized Polo Shirt, Lars Peter Hansen Nobel Prize, Pantene Dry Shampoo Never Tell, Vietnamese Pronunciation Rules, Canon Eos 5ds R Release Date, Kasundi Sauce Online, " /> > In general, all models discussed here have characteristics that make them more or less suited to one economic environment versus another. It normally refers to the sensitivity of an estimator with respect to the violation of certain assumptions of the model, especially in finite samples. It is tempting to dismiss the approach for that reason, although we see no other empirical methodology with which to replace it. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 A central theme is that of (non-)robustness, i.e., the fact that the presence of heavy tails can either reinforce or reverse the The economic intuition of this result stems from the fact that we are studying a market equilibrium ag- ... we derive robust comparative static results with respect to changes in the discount factor, borrowing limits, the parameters of the utility function ðe.g., the level of risk aversionÞ, and the parameters of … The adaptive control problem 5 is aimed at eliminating the commitment to a time-invariant benchmark model. /FontDescriptor 7 0 R Michael P. Keane, ... Kenneth I. Wolpin, in Handbook of Labor Economics, 2011. Variables within the panel-VAR are estimated alphas by country and by year (from Table 5); HHI = logarithm of Herfindahl Index; DCPC = logarithm of the domestic credit to the private sector as a percent of GDP; sovereign = sovereign lending rate. Re: Robustness of an economy: Quoted from this wikipedia article: "robustness is the ability of a financial trading system to remain effective under different markets and different market conditions" Effectiveness is the key concept in this definition. It is also noteworthy that the private investors did not indicate significant alterations to their contract structures across financing rounds (since they felt that the negotiation and transactions costs would outweigh any benefits). Finally, note that our empirical analysis in this chapter is specific to the venture capital context in which investment is invariably made with a view toward exit in the form of an IPO or acquisition. 1. Fig. 3. Robustness to distributional assumptions is an important consideration throughout statistics, so it is important to emphasize that quantile regression inherits robustness properties of the ordinary sample quantiles. 250 278 500 500 500 500 500 500 500 500 500 500 278 278 0 564 President-elect Joe Biden on Tuesday urged Congress to pass a “robust package” to deal with the economic crisis wrought by the coronavirus pandemic. Out-of-sample validation: Out-of-sample validation relies on there being sample data not used in estimation, but that is assumed to come from the same underlying population. Also reported in Table 6 are the variance ratio and variance reduction. Keane and Wolpin (2007) estimated a model of welfare participation, schooling, labor supply, marriage and fertility on a sample of women from five US states and validated the model based on a forecast of those behaviors on a sixth state. /LastChar 122 All approaches fall short of an assumption-free ideal that does not and is likely never to exist. /FontDescriptor 9 0 R If the coefficients are plausible and robust, this is commonly interpreted as evidence of structural validity. However, there may theoretically be cases in which the entrepreneur faces a trade-off when he knows the venture capitalists preplanned exit strategy is an acquisition: if he gives the venture capitalist more control, the firm is going to have a higher exit value but at the same time he loses his private benefits; if he gives the venture capitalist less control, the firm is going to have a lower exit value but the entrepreneur is able to retain his private benefits. (2002a,b)Manigart et al. stream 3 0 obj >> /FontBBox [-568 -307 2000 1007] Robust data processing techniques – i.e., techniques that yield results minimally affected by outliers – and their applications to real-life economic and financial situations are the main focus of this book. It concludes that it is a mistake to equate self-sufficiency with robustness – putting all the eggs in one basket is still not a good idea. Turning to the VDCs results (Table 12), we observe that 1.4% of alpha’s forecast error variance after 20 years is explained by Herfindahl Index’s disturbances and another 1.4% by disturbances of the domestic credit ratio. If the coefficients are plausible and robust, this is commonly interpreted as evidence of structural validity. The first is the view that knowledge is absolute, that is, there exists a “true” decision-theoretic model from which observed data are generated. Robustness definition at Dictionary.com, a free online dictionary with pronunciation, synonyms and translation. robust statistics, which worries about the properties of . Interestingly, when the uncertainty surrounding the impact of CSR is concerned, the CSR event type seems to be of little importance, if any. Abstract. Table 6.5. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 500 0 611 611 667 0 611 611 722 722 333 444 667 556 833 A separate, though related, issue is how the regulator should respond when the true underlying cost of capital enters a volatile period, for example, following the recent financial crisis. This assumes that the decision maker trusts the model completely. /MaxWidth 2000 We nevertheless outline a number of suggestions for future work. Many regulators review estimates from multiple models before arriving at a decision on which cost of capital to allow. Thus, robust control and prediction combines Bayesian learning (about an unknown state vector) with robust control, while adaptive control combines flexible learning about parameters with standard control methods. /FontBBox [-628 -376 2000 1010] /Filter [/FlateDecode] Put differently, how can DCDP models be validated and choices be made among competing models? Examples are pervasive, appearing in almost every area of applied econometrics. More recently, Todd and Wolpin (2006) used data from a large-scale school subsidy experiment in Mexico, where villages were randomly assigned to control and treatment groups. 5 0 obj As advocated by previous literature, this length may be of importance. All economic models involve abstractions and idealisations. The “suburb” type happens to be the most important one with a negative impact on the uncertainty. Variables within the panel-VAR are estimated alphas by country and by year (from Tables 5 and 6). The results are reported in Table 6.5. If the financial crisis increases the cost of capital, failure to recognize this increase shortchanges investors. In economics, robustness is the ability of a financial trading system to remain effective under different markets and different market conditions, or the ability of an economic model to remain valid under different assumptions, parameters and initial conditions. /BaseFont /TimesNewRomanPSMT The aim of the conference, “Robustness in Economics and Econometrics,” is to bring together researchers engaged in … Further empirical work in this regard might also consider sources of funds in the spirit of Mayer et al. Note: Figure presents impulse response functions (IRFs), which show the responses of a variable of interest to a shock of one plus/minus standard deviation of the same variable or another variable within the panel-VAR. So, at best, robustness checks “some” assumptions for how they impact the conclusions, and at worst, robustness becomes just another form of the garden of forked paths. The second approach is based on a pragmatic epistemological view, in which it is acknowledged that all models are necessarily simplifications of agents’ actual decision-making behavior. ‎This book focuses on general frameworks for modeling heavy-tailed distributions in economics, finance, econometrics, statistics, risk management and insurance. In Lien and Luo (1994) it is shown that, although GARCH may characterize price behavior, the cointegrating relation is the only truly indispensable component when comparing ex post performance of various hedging strategies. /CapHeight 716 Keane and Moffitt (1998) estimated a model of labor supply and welfare program participation using data after federal legislation (OBRA 1981) that significantly changed the program rules. Robustness. The uncertainty about the baseline models estimated effect size increases of the robustness test model obtains different point estimates and/or gets larger standard errors. /Type /Font Surprisingly, philosophers of economics have only recently become interested in robustness. Broll et al. /AvgWidth 479 /Encoding /WinAnsiEncoding If the unusual circumstances are instead believed to be temporary, the regulator may wish to take this into account in setting rates that will be reasonable over the entire regulatory period. (2007) and Drusch and Lioui (2010), CSR event type is likely to matter for the impact of CSR on firm value. As a robustness test and in order to deal with potential issues of endogeneity bias, we also employ a panel-VAR model to examine the relationship between bank management preferences and various banking sector characteristics.19 The main advantage of this methodology is that all variables enter as endogenous within a system of equations, which enables us to reveal the underlying causality among them.20 We specify a panel-VAR model where the key variable is alpha, the shape parameter of the managerial behavior function; we also include the main right side variables of the previous section. 0 0 0 333 333 444 444 0 500 0 0 0 0 0 0 0 /BaseFont /Arial-BoldMT It is not only about the use of an error correction model as opposed to a first-difference model, as various other model specifications have been suggested to estimate the hedge ratio. The objective is to find out that if the estimation method or model specification makes any difference for hedging effectiveness. Setting rates based on a transitory blip (up or down) in the cost of capital can lead to rates that will be expected to provide too much or too little return over most of the rate's life (before the next rate setting). Mcvitie's Rich Tea Lights, Haribo Primavera Erdbeeren, Oversized Polo Shirt, Lars Peter Hansen Nobel Prize, Pantene Dry Shampoo Never Tell, Vietnamese Pronunciation Rules, Canon Eos 5ds R Release Date, Kasundi Sauce Online, " />

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Imad Moosa, Vikash Ramiah, in Emerging Markets and the Global Economy, 2014. Some researchers have deliberately held out data to use for validation purposes. The independent variables are the lagged volatility, the event type (Type), and an indicator of the market conditions, that is VIX in Panel A, Market volatility in Panel B, and ICS in Panel C. All the coefficients have been multiplied by 100 for readability. The estimation results are presented in Table 6, which reports the estimated value of the hedge ratio, its t statistic, and the coefficient of determination. /Descent -216 For example, estimates of beta (the measure of risk in the CAPM) for North American utility stocks were very close to zero in the aftermath of the collapse of the tech bubble in 2000, suggesting a near risk-free rate of return for these securities and indicating (obviously wrongly) that investors were willing to invest in these companies' stocks at expected returns lower than those same companies' individual costs of debt! If T is above 0.841, the returns are said to be significantly positive at the critical threshold of 20 per cent (that is, 5 per cent and 20 per cent probability, respectively, that this conclusion is incorrect). /Subtype /TrueType Our dataset provided some new control variables for entrepreneurial firm quality and venture capital fund quality; future work might consider more refined control variables with more detailed data. ^�fM��&�W肦"~����iX�������Eߍ7�v6��Q��*M�CЦI� �mnƝx�kP�^����������e�r��cK���Xaےq����k7�ؖ��H8w׉��+���po�]�x��x]�{\�K��[�T�?�O������_��� Syndicated investors almost invariably used the same securities as those used by the investors that provided these data. It can be defined as: with N number of (daily) observations, R the average (daily) rule returns and σR the standard deviation of (daily) rule returns. 2 presents the IRFs diagrams for the case that the panel-VAR includes; alpha, the Fraser Index on regulation, an index capturing supervisory disciplinary power, and the risk variable (z-score). << The robustness of Bayesian updating is tied to the notion of an approximating model (A, B, C) and perturbations around that model. (2008) and Moosa (2011). Note: Table presents the variance decompositions (VDC), which show the components of the forecasts error variance of all variables within the panel-VAR. 3. They used the model to predict behavior prior to that policy change. /Widths [ 250 0 408 0 0 0 778 180 333 333 0 564 250 333 /AvgWidth 402 Model specifications and estimation methods. In economics, robustness is attributed to financial markets that continue to perform despite alterations in market conditions. /Type /Font All economic models involve abstractions and idealisations. Is it the case that the cost of capital has changed significantly, or is it a problem with the models and how they are implemented in the current environment? Fig. endobj President-elect Joe Biden urged Congress on Tuesday to pass a “robust package” to deal with the economic crisis wrought by the coronavirus pandemic. Jamie O’Brien, in Shaping Knowledge, 2014. /Ascent 905 >> In general, all models discussed here have characteristics that make them more or less suited to one economic environment versus another. It normally refers to the sensitivity of an estimator with respect to the violation of certain assumptions of the model, especially in finite samples. It is tempting to dismiss the approach for that reason, although we see no other empirical methodology with which to replace it. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 A central theme is that of (non-)robustness, i.e., the fact that the presence of heavy tails can either reinforce or reverse the The economic intuition of this result stems from the fact that we are studying a market equilibrium ag- ... we derive robust comparative static results with respect to changes in the discount factor, borrowing limits, the parameters of the utility function ðe.g., the level of risk aversionÞ, and the parameters of … The adaptive control problem 5 is aimed at eliminating the commitment to a time-invariant benchmark model. /FontDescriptor 7 0 R Michael P. Keane, ... Kenneth I. Wolpin, in Handbook of Labor Economics, 2011. Variables within the panel-VAR are estimated alphas by country and by year (from Table 5); HHI = logarithm of Herfindahl Index; DCPC = logarithm of the domestic credit to the private sector as a percent of GDP; sovereign = sovereign lending rate. Re: Robustness of an economy: Quoted from this wikipedia article: "robustness is the ability of a financial trading system to remain effective under different markets and different market conditions" Effectiveness is the key concept in this definition. It is also noteworthy that the private investors did not indicate significant alterations to their contract structures across financing rounds (since they felt that the negotiation and transactions costs would outweigh any benefits). Finally, note that our empirical analysis in this chapter is specific to the venture capital context in which investment is invariably made with a view toward exit in the form of an IPO or acquisition. 1. Fig. 3. Robustness to distributional assumptions is an important consideration throughout statistics, so it is important to emphasize that quantile regression inherits robustness properties of the ordinary sample quantiles. 250 278 500 500 500 500 500 500 500 500 500 500 278 278 0 564 President-elect Joe Biden on Tuesday urged Congress to pass a “robust package” to deal with the economic crisis wrought by the coronavirus pandemic. Out-of-sample validation: Out-of-sample validation relies on there being sample data not used in estimation, but that is assumed to come from the same underlying population. Also reported in Table 6 are the variance ratio and variance reduction. Keane and Wolpin (2007) estimated a model of welfare participation, schooling, labor supply, marriage and fertility on a sample of women from five US states and validated the model based on a forecast of those behaviors on a sixth state. /LastChar 122 All approaches fall short of an assumption-free ideal that does not and is likely never to exist. /FontDescriptor 9 0 R If the coefficients are plausible and robust, this is commonly interpreted as evidence of structural validity. However, there may theoretically be cases in which the entrepreneur faces a trade-off when he knows the venture capitalists preplanned exit strategy is an acquisition: if he gives the venture capitalist more control, the firm is going to have a higher exit value but at the same time he loses his private benefits; if he gives the venture capitalist less control, the firm is going to have a lower exit value but the entrepreneur is able to retain his private benefits. (2002a,b)Manigart et al. stream 3 0 obj >> /FontBBox [-568 -307 2000 1007] Robust data processing techniques – i.e., techniques that yield results minimally affected by outliers – and their applications to real-life economic and financial situations are the main focus of this book. It concludes that it is a mistake to equate self-sufficiency with robustness – putting all the eggs in one basket is still not a good idea. Turning to the VDCs results (Table 12), we observe that 1.4% of alpha’s forecast error variance after 20 years is explained by Herfindahl Index’s disturbances and another 1.4% by disturbances of the domestic credit ratio. If the coefficients are plausible and robust, this is commonly interpreted as evidence of structural validity. The first is the view that knowledge is absolute, that is, there exists a “true” decision-theoretic model from which observed data are generated. Robustness definition at Dictionary.com, a free online dictionary with pronunciation, synonyms and translation. robust statistics, which worries about the properties of . Interestingly, when the uncertainty surrounding the impact of CSR is concerned, the CSR event type seems to be of little importance, if any. Abstract. Table 6.5. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 500 0 611 611 667 0 611 611 722 722 333 444 667 556 833 A separate, though related, issue is how the regulator should respond when the true underlying cost of capital enters a volatile period, for example, following the recent financial crisis. This assumes that the decision maker trusts the model completely. /MaxWidth 2000 We nevertheless outline a number of suggestions for future work. Many regulators review estimates from multiple models before arriving at a decision on which cost of capital to allow. Thus, robust control and prediction combines Bayesian learning (about an unknown state vector) with robust control, while adaptive control combines flexible learning about parameters with standard control methods. /FontBBox [-628 -376 2000 1010] /Filter [/FlateDecode] Put differently, how can DCDP models be validated and choices be made among competing models? Examples are pervasive, appearing in almost every area of applied econometrics. More recently, Todd and Wolpin (2006) used data from a large-scale school subsidy experiment in Mexico, where villages were randomly assigned to control and treatment groups. 5 0 obj As advocated by previous literature, this length may be of importance. All economic models involve abstractions and idealisations. The “suburb” type happens to be the most important one with a negative impact on the uncertainty. Variables within the panel-VAR are estimated alphas by country and by year (from Tables 5 and 6). The results are reported in Table 6.5. If the financial crisis increases the cost of capital, failure to recognize this increase shortchanges investors. In economics, robustness is the ability of a financial trading system to remain effective under different markets and different market conditions, or the ability of an economic model to remain valid under different assumptions, parameters and initial conditions. /BaseFont /TimesNewRomanPSMT The aim of the conference, “Robustness in Economics and Econometrics,” is to bring together researchers engaged in … Further empirical work in this regard might also consider sources of funds in the spirit of Mayer et al. Note: Figure presents impulse response functions (IRFs), which show the responses of a variable of interest to a shock of one plus/minus standard deviation of the same variable or another variable within the panel-VAR. So, at best, robustness checks “some” assumptions for how they impact the conclusions, and at worst, robustness becomes just another form of the garden of forked paths. The second approach is based on a pragmatic epistemological view, in which it is acknowledged that all models are necessarily simplifications of agents’ actual decision-making behavior. ‎This book focuses on general frameworks for modeling heavy-tailed distributions in economics, finance, econometrics, statistics, risk management and insurance. In Lien and Luo (1994) it is shown that, although GARCH may characterize price behavior, the cointegrating relation is the only truly indispensable component when comparing ex post performance of various hedging strategies. /CapHeight 716 Keane and Moffitt (1998) estimated a model of labor supply and welfare program participation using data after federal legislation (OBRA 1981) that significantly changed the program rules. Robustness. The uncertainty about the baseline models estimated effect size increases of the robustness test model obtains different point estimates and/or gets larger standard errors. /Type /Font Surprisingly, philosophers of economics have only recently become interested in robustness. Broll et al. /AvgWidth 479 /Encoding /WinAnsiEncoding If the unusual circumstances are instead believed to be temporary, the regulator may wish to take this into account in setting rates that will be reasonable over the entire regulatory period. (2007) and Drusch and Lioui (2010), CSR event type is likely to matter for the impact of CSR on firm value. As a robustness test and in order to deal with potential issues of endogeneity bias, we also employ a panel-VAR model to examine the relationship between bank management preferences and various banking sector characteristics.19 The main advantage of this methodology is that all variables enter as endogenous within a system of equations, which enables us to reveal the underlying causality among them.20 We specify a panel-VAR model where the key variable is alpha, the shape parameter of the managerial behavior function; we also include the main right side variables of the previous section. 0 0 0 333 333 444 444 0 500 0 0 0 0 0 0 0 /BaseFont /Arial-BoldMT It is not only about the use of an error correction model as opposed to a first-difference model, as various other model specifications have been suggested to estimate the hedge ratio. The objective is to find out that if the estimation method or model specification makes any difference for hedging effectiveness. Setting rates based on a transitory blip (up or down) in the cost of capital can lead to rates that will be expected to provide too much or too little return over most of the rate's life (before the next rate setting).

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