When Can Social Media Lead Financial Markets?

When Can Social Media Lead Financial Markets?

Social media analytics is showing promise for the prediction of financial markets. However, the true value of such data for trading is unclear due to a lack of consensus on which instruments can be predicted and how. Current approaches are based on the evaluation of message volumes and are typically assessed via retrospective (ex-post facto) evaluation of trading strategy returns. In this paper...

Pareto Improving Social Security Reform when Financial Markets are Incomplete!?¤

This paper studies an overlapping generations model with stochastic production and incomplete markets to assess whether the introduction of an unfunded social security system leads to a Pareto improvement. When returns to capital and wages are imperfectly correlated a system that endows retired households with claims to labor income enhances the sharing of aggregate risk between generations. Ou...

Measuring Money Growth When Financial Markets

Media Frenzies in Markets for Financial Information

Promising emerging equity markets often witness investment herds and frenzies, accompanied by an abundance of media coverage. Complementarity in information acquisition can explain these anomalies. Because information has a high fixed cost of production, its equilibrium price is low when quantity is high. Investors all buy the most popular information because it has the lowest price. Given two ...

Social Security Reform and Financial Markets

Social Security is in trouble. With declining population growth and rising life expectancy, the cost of Social Security benefits is rising relative to payroll tax revenues. As a result, the Social Security retirement fund is expected to run out around 2030.1 Recently, the 1994–1996 Advisory Council on Social Security (1997) proposed three different plans to address the problem. Interestingly, a...