Market expectations of future return volatility play a crucial role in nance; so too does our understanding of the process by which information is incorporated in security prices through the trading process. This paper seeks to learn something about both of these issues by investigating empirically the role of trading volume (a) in predicting the relative informativeness of volatility forecasts...

This paper presents a political economy model of in‡ation as a result of social con‡ict. Agents are heterogeneous in terms of income. Agents’income levels determine their ability to hedge against the e¤ects of in‡ation. The interaction of heterogeneous cash holdings and preferences over …scal policy leads to con‡ict over how to …nance government expenditure. The model makes a number of predicti...

In a second-best optimal growth setup with only factor taxes as available instruments, is it optimal to fully replace capital by labor income taxation? The answer is generally positive based on Chamley, Judd, Lucas, and many follow-up studies. In the present paper, we revisit this important tax reform-related issue by developing a human capitalbased endogenous growth framework with frictional l...

My research is in applied theory. My objective has been to develop models of individual behavior that incorporate realistic constraints (such as transactions costs or social networks) and study their aggregate and welfare implications both theoretically and empirically. This summary groups my work into four topics. (1) Networks. I combine models, experiments and data to study social capital, so...

The present study examines framing e ects in taxation. In October 1994 the German Minister of Family A airs, Mrs. R onsch, expectedly withdrew her candidacy for a second term after she had triggered o a storm of public indignation, owing to her plan to introduce tax surcharges for childless households in order to nance higher tax reliefs for families with children. Using data of 219 employees ...

Details are given for a Fortran implementation of an algorithm that uses stochastic spherical-radial rules for the numerical computation of multiple integrals over unbounded regions with Gaussian weight. The implemented rules are suitable for high dimensional problems. A high dimensional example from a computational nance application is used to illustrate the use of the rules.

The arbitrage pricing principle has been used to derive price relations like the Black-Scholes formula and Heath-Jarrow-Morton models in the context of frictionless markets and unconstrained trading. These relations may or may not be good approximations to reality. Even if, they are certainly not enforced by real world arbitrage because of transaction costs and trading constraints. Recently, re...

“S many, I had not thought death had undone so many.” These words about the precariousness of the early years of the 20th century referred to lives lost in war. T.S. Eliot and other poets and writers, along with many in the arts and sciences, were grappling with growing cities and their beleaguered populations and with technological advancements that allowed the killing of unprecedented numbers...