Research

Heterogeneous Intermediary Asset Pricing: Privately-owned vs. State-owned

with Monireh Ravanbakhsh  

Emerging Markets Finance and Trade. DOI: https://doi.org/10.1080/1540496X.2023.2266113, October 2023. Temporary free access link to the published article: https://www.tandfonline.com/eprint/PXCH2HM9CKWXZYJJYA6N/full?target=10.1080/1540496X.2023.2266113.

Abstract: In Iran's stock market, this paper examines a new dimension of heterogeneity: ownership type, using an intermediary asset pricing model. When only state-owned intermediaries are considered, the price for exposure to capital ratio shocks is negative; thus, the group is not a marginal investor. Considering only privately-owned intermediaries has greater explanatory power than considering both types, and the price for capital risk is positive in both cases. We propose a new criterion to represent the sector with even greater explanatory power: a group of privately-owned intermediaries with positive capital risk prices when tested individually.

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Impact of International Lobby Groups on International Environmental Agreements

with Peymaneh Safaynikoo 

Environmental Economics and Policy Studies. Volume 23, Issue 2, Pages 441-466, DOI: https://doi.org/10.1007/s10018-020-00292-5, April 2021. The final authenticated version is available or online at: https://rdcu.be/caISR 

Abstract: Economists have long argued over the political economy of tradable emission permits, especially the political pressure of lobby groups on international environmental agreements. However, little attention has been paid to the effects of cross-national lobbying on this market. Here, we examine how an international lobby group can affect national and international climate policies concerning international market for emission permits. It extends the common agency model of policy-making to multiple-agency relationships in the context of international environment agreements. The main questions are: 1) to what extent are governments' rent-seeking incentives affected through international lobbying?; 2) how do domestic and global emissions change in the presence of an international lobby group? We present a three-stage non-cooperative game in which international and national lobbies try to influence governments both when the governments decide on the formation of the international market and when each country chooses the number of permits. We find the condition under which the formation of an international lobby group can raise the contributions of national lobbies which support an international market and hence bring more benefits to the government. We also show that domestic and total emission levels not only depend on the aggregate levels of organized stakes in all countries but also on the distribution of stakes among individual lobby groups that form an international lobby group.

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Public and Private Intermediaries Asset Pricing: Evidence from Capital Market of Iran

with Monireh Ravanbakhsh 

Abstract: This paper studies the different roles of public and private financial intermediary institutions in asset pricing in the Tehran Stock Exchange (TSE) and Iran Fara Bourse (IFB) markets. Investment companies active in the capital market of Iran were selected to represent the financial intermediary sector. The intermediary asset pricing model is estimated for two distinct groups of public and private intermediaries using quarterly data. The estimated price of capital factor has been positive and significant at the 5 percent level and less for most of the private intermediary institutions. At a 95 percent level of confidence, a unit of increase in the risk sensitivity of stock returns to capital shocks of the whole private sector coincides with a 3.156 to 3.159 percent increase in seasonal stock return. Accordingly, capital shocks of private intermediaries should be seen as an effective factor in asset pricing in the capital market of Iran. For the public intermediaries, the capital factor price has not been positive and significant at the 5 percent level, neither for individual institutions nor for the whole sector. Therefore, capital shocks of public intermediaries cannot be seen as an effective factor in stock pricing in the capital market of Iran. 

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Investment under Uncertainty and Correlated Privately Known Sunk Costs

Abstract: This paper studies the behavior of two firms after a new investment opportunity arises. Examples of such an investment are technology adoption or market entry. Firms either invest immediately or wait until market uncertainty is resolved. Two types of separating equilibrium are possible when investment costs are private information. In the first type, the firm with lower cost invests first. In the second type, the firm with higher cost invests first leading to a smaller industry surplus. The results indicate that the second type is possible only for strictly negatively correlated costs. Numerical analyses illustrate that when first-mover advantage is large, the firm that delays the investment should be almost certain about the rival's cost. When market risk increases, the equilibria can exist only when the firm is less certain.

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Strategic Investment under Incomplete Information

Abstract: This paper studies how hiding sunk cost of investment would affect investment strategies in a duopoly. The investment would improve profit. If this improvement is larger for the first mover than the second mover, this study finds a unique symmetric equilibrium for a subset of such cases. On the other hand, a larger improvement for the second mover results in a class of symmetric equilibria. For the first case, the surplus to sharing information increases with higher volatility of profit flow and lower uncertainty about the investment cost. For the second case, this surplus grows with both mentioned types of uncertainty.

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Strategic Technology Adoption under Technological Uncertainty

Abstract: This paper studies technology adoption in a duopoly where the unbiased technological change improves production efficiency. Technological progress is exogenous and modeled as a jump process with a drift. There is always a Markov perfect equilibrium in which the firm with more efficient technology never preempts its rival. Also, a class of equilibria may exist that lead to a smaller industry surplus. In these equilibria, either of the firms may preempt its rival in a set of technology efficiency values. The first investment does not necessarily happen at the boundary of this set due to the discrete nature of the technology progress. The set shrinks and eventually disappears when the difference between firms’ efficiencies increases.

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Policy Uncertainty and Technology Adoption

The B.E. Journal of Economic Analysis & Policy. Volume 14, Issue 4, Pages 1405–1430, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: http://doi.org/10.1515/bejeap-2013-0167, Oct 2014. The final publication is available at www.degruyter.com.

Presented in:

Midwest Economic Theory and Trade Meetings, Madison, WI, September 2010

CU Environmental and Resource Economics Workshop, Vail, CO, September 2010

Abstract: This paper considers technology adoption under both technological and subsidy uncertainties. Uncertainty in subsidies for green technologies is considered as an example. Technological progress is exogenous and modeled as a jump process with a drift. The analytical solution is presented for cases when there is no subsidy uncertainty and when the subsidy changes once. The case when the subsidy follows a time-invariant Markov process is analyzed numerically. The results show that improving the innovation process raises the investment thresholds. When technological jumps are small or rare, this improvement reduces the expected time before technology adoption. However, when technological jumps are large or abundant, this improvement may raise this expected time.

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Heterogeneous Firms and the Decision to Sell through the Intermediary

Abstract: This paper studies how firms make the decision to sell through an intermediary. It explains why firms with lower costs, such as low-cost airlines, have a tendency not to use intermediaries in an environment where some consumers have a positive search cost. I consider a game between two firms and one intermediary. Firms have different costs and have the option to open their own stores for a fixed cost. First, they decide whether to sell through the intermediary or not, then they set the prices. I characterize the equilibrium in which firms mix prices and consumers play a mixed strategy as well. I show that, for certain parameters, the low-cost firm decides not to sell through the intermediary while the other firm does.