Models and Reflexivity

2019 ◽  
pp. 73-97
Author(s):  
Daniel Beunza
Keyword(s):  
Stock Prices ◽  
Economic Models ◽  
Mathematically Gifted ◽  
Merger Arbitrage ◽  
Use Of Models

This chapter considers what the distinctive advantages of using economic formulas on a trading floor are. It introduces Max, a senior trader at the merger arbitrage desk and a mathematically gifted trader. Max bet on whether announced mergers would actually be completed. More importantly, he was able to combine stock prices with economic models, plot them on a Bloomberg terminal, and estimate his rivals' expectations about a pending merger. He then used these inferred expectations to refine his own estimates of merger probability. This allowed him to test his own hypothesis against the rest of the market, question his assumptions, or ponder what he might be missing. Such possibilities reduced the risk of mistakes in Max's bets, allowing him to take larger positions and realize higher returns. The case of Max revealed what was truly new, different, and to some extent magical, about the use of models in trading.

scholarly journals Financial Media, Price Discovery, and Merger Arbitrage

2020 ◽  
Author(s):  
Matthias M M Buehlmaier ◽  
Josef Zechner
Keyword(s):  
Standard Deviation ◽  
Computational Linguistics ◽  
Stock Prices ◽  
High Yield ◽  
Standard Deviation Increase ◽  
Yield Spreads ◽  
Percentage Points ◽  
The Media ◽  
Financial Media ◽  
Merger Arbitrage

Abstract Using merger announcements and applying methods from computational linguistics we find strong evidence that stock prices underreact to information in financial media. A one standard deviation increase in the media-implied probability of merger completion increases the subsequent 12-day return of a long-short merger strategy by 1.2 percentage points. Filtering out the 28% of announced deals with the lowest media-implied completion probability increases the annualized alpha from merger arbitrage by 9.3 percentage points. Our results are particularly pronounced when high-yield spreads are large and on days when only few merger deals are announced.

Economic Models of Parenting

PsycCRITIQUES ◽  
2005 ◽  
Vol 50 (4) ◽  
Author(s):  
Richard Niolon
Keyword(s):  
Economic Models

On the Methodology of Cartel agreements analysis

2014 ◽  
pp. 53-64 ◽  
Author(s):  
E. Andreyashchenko ◽  
A. Zazdravnykh
Keyword(s):  
Economic Models ◽  
Social Consequences ◽  
Positive Effects ◽  
Industrial Markets

This article is an attempt of summarizing key economic approaches to cartel agreements analysis, its stability, ways of estimating social consequences of cartel agreements. It is alleged that the traditional way of understanding the cartels’ role as completely negative is not accurate; this type of inter-corporate agreements may also bring positive effects on industrial markets. Typical limits of analytical apparatus, contradictions that appear while interpreting results of specific economic models are also represented in the article, as well as substantiation of a discrete role of pricing factor within the analysis of anti-competitive agreements.

Economic models of Environment monitoring under imperfect information and high Costs

2014 ◽  
pp. 99-122
Author(s):  
M. Levin ◽  
K. Matrosova
Keyword(s):  
Environmental Monitoring ◽  
Environmental Regulation ◽  
Environmental Economics ◽  
Imperfect Information ◽  
Central Element ◽  
Economic Models ◽  
Environment Monitoring ◽  
Nature Protection ◽  
Protection Measures ◽  
Effective System

The paper considers monitoring of environmental change as the central element of environmental regulation. Monitoring, as each kind of principalagent relations, easily gives rise to corruptive behavior. In the paper we analyze economic models of environmental monitoring with high costs, incomplete information and corruption. These models should be the elements of environmental economics and are needed to create an effective system of nature protection measures.

Kornai, Schumpeter, and Economic Theory

2012 ◽  
pp. 145-152 ◽  
Author(s):  
V. Maevsky
Keyword(s):  
Economic Theory ◽  
Economic System ◽  
Evolutionary Theory ◽  
Economic Models ◽  
Macro Level ◽  
Mainstream Economic ◽  
Level Of Analysis

The author claims that J. Kornai in his paper Innovation and Dynamism (Voprosy Ekonomiki. 2012. No 4) ignored the understanding of socialism as a specific type of culture and not just as an economic system. He also shows profound differences between Schumpeters theory and mainstream economic models. Evolutionary theory, he claims, may itself become mainstream if Schumpeters legacy is not interpreted straightforwardly and if evolutionary economists consider not only micro-, but also macro-level of analysis in studying macrogenerations of capital of a different age.

Sign in / Sign up

Export Citation Format

Share Document