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We model systemic risk using a common factor that accounts for market-wide shocks and a tail dependence factor that accounts for linkages among extreme stock returns. Specifically, our theoretical model allows for firm-specific impacts of…
We study a new model where the potential outcomes, corresponding to the values of a (possibly continuous) treatment, are linked through common factors. The factors can be estimated using a panel of regressors. We propose a procedure to…
We develop cointegration for multivariate continuous-time stochastic processes, both in finite and infinite dimension. Our definition and analysis are based on factor processes and operators mapping to the space of prices and cointegration.…
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
Factor analysis is a flexible technique for assessment of multivariate dependence and codependence. Besides being an exploratory tool used to reduce the dimensionality of multivariate data, it allows estimation of common factors that often…
We study the relationship between two central concepts in the allocation of divisible goods: competitive equilibrium (CE) and allocations that maximize Nash welfare, i.e., allocations where the weighted geometric mean of the utilities is…
We study an Arrow-Debreu economy with externalities generated by multiplex networks. Market equilibrium prices reflect both the preferences and scarcity of goods, consumers' network centralities arising from goods' externalities, as well as…
Many production processes are characterized by numerous and complex cause-and-effect relationships. Since they are only partially known they pose a challenge to effective process control. In this work we present how Structural Equation…
We establish an analogy between the motion of spring whose mass increases linearly with time and volatile stock markets dynamics within an economic model based on simple temporal demand and supply functions [J. Phys. A: Math. Gen. 33, 3637…
This paper studies estimation of linear panel regression models with heterogeneous coefficients, when both the regressors and the residual contain a possibly common, latent, factor structure. Our theory is (nearly) efficient, because based…
With the rapid development of artificial intelligence (AI) technology, socio-economic systems are entering a new stage of "human-AI co-creation." Building upon a previously established multi-level intelligent agent economic model, this…
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…
Is there a general economic pathway recapitulated by individual cities over and over? Identifying such evolution structure, if any, would inform models for the assessment, maintenance, and forecasting of urban sustainability and economic…
We analyze the Rybczynski sign pattern, which expresses the factor endowment - commodity output relationships in a three-factor, two-good general equilibrium trade model. The relationship determines whether a strong Rybczynski result holds.…
The purpose of this paper is to provide a micro-economic foundation for an argument that the direct employment by the government is more desirable than the government purchase of private goods to eliminate unemployment. A general…
In the univariate case, we show that by comparing the individual complexities of univariate cause and effect, one can identify the cause and the effect, without considering their interaction at all. In our framework, complexities are…
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 study productivity dispersions across workers, firms and industrial sectors. Empirical study of the Japanese data shows that they all obey the Pareto law, and also that the Pareto index decreases with the level of aggregation. In order…
Panel data models with unobserved heterogeneity in the form of interactive effects standardly assume that the time effects -- or ``common factors'' -- enter linearly. This assumption is restrictive because it concerns an unobserved…
Recent financial disasters have emphasised the need to accurately predict extreme financial losses and their consequences for the institutions belonging to a given financial market. The ability of econometric models to predict extreme…