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We develop a model for markets for catastrophic risk. The model explains why insurance providers may choose not to offer insurance for catastrophic risks and not to participate in reinsurance markets, even though there is a large enough market capacity to reach full risk sharing through...
Persistent link: https://www.econbiz.de/10012757776
Despite the availability of more sophisticated methods, a popular way to estimate a Pareto exponent is still to run an OLS regression: log(Rank) = <italic>a</italic> - <italic>b</italic> log(Size), and take <italic>b</italic> as an estimate of the Pareto exponent. The reason for this popularity is arguably the simplicity and robustness of this...
Persistent link: https://www.econbiz.de/10010975862
A popular way to estimate a Pareto exponent is to run an OLS regression: log (Rank) = c - blog (Size), and take b as an estimate of the Pareto exponent. Unfortunately, this procedure is strongly biased in small samples. We provide a simple practical remedy for this bias, and argue that, if one...
Persistent link: https://www.econbiz.de/10005633749
Despite the availability of more sophisticated methods, a popular way to estimate a Pareto exponent is still to run an OLS regression: log(Rank)=a-b log(Size), and take b as an estimate of the Pareto exponent. The reason for this popularity is arguably the simplicity and robustness of this...
Persistent link: https://www.econbiz.de/10005248991
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The sophistication of financial decisions varies with age: middle-aged adults borrow at lower interest rates and pay fewer fees compared to both younger and older adults. We document this pattern in ten financial markets. The measured effects cannot be explained by observed risk characteristics....
Persistent link: https://www.econbiz.de/10012751183
We measure learning and forgetting dynamics using a panel with four million monthly credit card statements. Through negative feedback -- i.e. paying a fee -- consumers learn to avoid future fees. Paying a fee last month reduces fee payment in the current month by 40%. Monthly fee payments fall...
Persistent link: https://www.econbiz.de/10012711239
We present a theory of excess stock market volatility, in which market movements are due to trades by very large institutional investors in relatively illiquid markets. Such trades generate significant spikes in returns and volume, even in the absence of important news about fundamentals. We...
Persistent link: https://www.econbiz.de/10012717840