Browsing by Author "Parameswaran, Giri"

Now showing 1 - 20 of 22
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    A Political Economy Approach to Optimal Fiscal Policy Under the Imposition of a Debt Ceiling
    (2024) Stein, Nathan; Parameswaran, Giri
    This paper presents an infinite-horizon model describing the amount of debt accrued under different forms of government. The government can raise revenue via taxation or debt, and this revenue is used to finance public goods and accumulated debt. With a dictator (social planner), debt is rolled over each period ad infinitum. With two parties, the debt level continually increases each period. When a debt ceiling is imposed, it is non-binding for the social planner. The debt ceiling is binding for certain levels of debt in the two-party problem, and the government reaches the ceiling in finite time.
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    Calibrating Short-Rate Models to Market-observed Inflation Rates
    (2018) Munir, Isfar; Parameswaran, Giri
    This paper looks at calibrating the volatility parameter in the Hull-White short rate model to observed CPI inflation to better estimate interest rates from 1990 to 2007. Short rate models have the attractive feature of being very simple to implement but as typically used have the weakness of ignoring all macroeconomic state variables in forecasting interest rates. Interest rate models that have been developed since have been highly complex and difficult to implement. This paper thus attempts to bridge the gap between the two paradigms of interest rate models by incorporating inflation, a macroeconomic state variable, into the parameter estimation of a short rate model. To that end, the volatility parameter of the Hull-White model was calculated directly from observed rates of inflation. This volatility parameter was then used in the estimation of the mean-reversion parameter of the same model, thus involving inflation in the estimates of the two parameters of the Hull-White model. Forecasts were then compared at various horizon levels with equivalent forecasts where the parameters were estimated on the Federal Funds rate as opposed to inflation rates, representing a more typical method of calibrating these models. In comparison there was weak evidence that the use of inflation improved forecasting estimates at the 3-year horizon, but there was no evidence at other horizon levels. Further research will be required to determine if other models could benefit from the use of inflation in parameter estimation or if short-rate models could benefit further from a forward-looking as opposed to past-looking measure of inflation.
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    College Major Choice: Impact on Job Aptitude Test Performance
    (2014) Yeung, Hiu Ching Judy; Parameswaran, Giri
    This paper considers the effectiveness of quantitative and non-quantitative majors in preparing students for screening tests routinely used in the job recruitment process. A sample of 209 students from Bryn Mawr and Haverford Colleges completed an online survey that consisted of a 17-minute aptitude test comprising of verbal, logical and numerical reasoning sections, and demographic survey questions. Logistic regression analysis confirms that the primary determinant of students' college major choice is academic interests. Other significant factors include students' self-perceived ability and SAT math scores. When considering the middle-range aptitude test scores, I found compelling evidence that most upperclassmen in quantitative majors perform better in the job aptitude test than other participants. This effect shows that quantitative majors provide average students with a nurturing learning experience and are effective in preparing average students for the transition from college to the workforce. The strong association between SAT scores and job aptitude test also reveals that better aptitude test performance may be attributed to well-develop test-taking skills.
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    Delayed Rewards and Dynamic States in the Multi-Armed Bandit Problem
    (2019) Newman, David; Parameswaran, Giri
    This paper explores a variation of the multi-armed bandit problem and proposes a new strategy, the Pure Unknown strategy, to optimally maximize payoffs. In this game, the player chooses between two arms– one with known probability distributions and the other with unknown probability distributions–and does not realize the payoff of the arm she chooses until the next time period, where the probabilities of each time period are state dependent and those states are determined by a stochastic process. Additionally, elements of ambiguity aversion are incorporated into the model to reflect individuals’ preferences for choices with known probabilities over those with unknown probabilities. Four strategies, including the Pure Unknown strategy, play this game to see which strategy produces the highest average payoff, and the other three strategies are inspired by previous multi-armed bandit literature. Results find that the Pure Unknown strategy is the most optimal strategy when the Normality assumption, which ultimately represents ambiguity averse preferences, is not present.
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    Equilibria in Firearm Ownership: Modeling a Partially Coordinated Market
    (2015) Nadel, Joshua; Parameswaran, Giri
    For many individuals, the decision to own a firearm resembles a strategic coordination game. Each individual’s decision is not only determined by their individual beliefs but also by the ownership rate within their community. This theoretical model of a coordinated goods market shows how some markets observe stable equilibria for multiple firearm ownership rates. At the threshold between markets settling on a single equilibrium or facing two distinct equilibria a small policy shift can result in a disproportionately large shift in firearm ownership.
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    Fat Tails: The New Normal Empirical Tests For A Theoretical Model
    (2014) Bohrmann, Ford; Parameswaran, Giri
    Due to its "fat tails", the power law distribution provides an effective model of the tail of stock returns, volume and the distribution of the size of institutional investors, especially in comparison to the normal distribution. Gabaix et al. [2006] put forward a model where fatter tails in the distribution of institutional investors cause fatter tails in the distribution of stock returns and volume. Using data on stock returns, volume, and institutional investors, I apply Granger Causality to show that there is little empirical evidence for the relationship that their model puts forward. Next I discuss the problems with their model that lead to the lack of applicability of the model to empirical data. While these results detract from the legitimacy model, it does not diminish the effectiveness of the power law distribution in financial markets.
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    Home Sharing in New York City: Impact on Hotel, Rental, and Welfare
    (2019) Nguyen, Tai; Parameswaran, Giri
    A major sector under the sharing economy, home sharing is a newly emerged concept. This paper explores how the growth of home sharing influences the temporary accommodation markets in New York City. Using monthly data spanning between 2015-2018 for Airbnb, I quantify the platform short- and long-term impact on hotel and rental housing. Overall, though little substitution effect is discovered between home sharing and hotel, there is evidence of strong competitive pressure. OLS regression results find a 10% increase in Airbnb supply to be associated with a 1.3% decrease in hotel price and a 1.2% decrease in hotel revenue, making the incumbent industry cheaper and less profitable. From a deadweight loss savings perspective, daily welfare benefit created by home sharing is measured around $8,000 during the period, which is not economically significant. Controlling for neighborhood and month, an increase in Airbnb supply is also found to raise median asking price across all types of rental units considered, making rental less affordable. Additionally, a hedonic regression of Airbnb listings uncovers the main price determinants of New York accommodation, including number of reviews and centrality. My paper adds to previous literature by focusing on the impact of home sharing in a large, yet understudied urban area.
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    Impact of demographics and loan characteristics on microfinance outcomes: A cross cultural study evaluating the impact of female borrower percentage and loan type on profit and write off ratio
    (2021) Dai, Xiangruo; Parameswaran, Giri
    Microfinance has since its inception been seen as a way of promoting positive change for the "poorest of the poor" (Navajas et al., 2000); within the last decades especially it has seen a great increase in popularity despite conflicting claims regarding its effectiveness. Though numerous studies exist on how microfinance outcomes are affected by certain demographic variables, such as gender, or program characteristics, such as type of loan secured (group vs individual responsibility), little is known about their combined effects on the success of microfinance ventures. In this paper, I evaluated the degree to which the individual effect of a borrower's gender and the loan type that they secure, along with their combined effects are associated with the outcome variables of loan repayment and profit. This was done by using cross-cultural, programme-level data of several thousand microfinance ventures in over 50 countries from MIX Market databse from the World Bank. The results appear to suggest that an increasing proportion of female borrowers as a proportion of total borrowers and an increasing ratio of group loan numbers and group gross loan amounts tended to have significant effects on repayment rates and venture profits. However, results also appear to show that neither the proportion of female borrowers nor proportion of group borrowers or group gross loans were significant after inclusion of year and MFI fixed effects. Further research may be required to determine the exact nature of the relationship of the variables and their implications for microfinance firms seeking to create win-win scenarios for themselves and clients.
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    Insider Holdings and Open-Market Share Repurchases in Corporate America
    (2016) Stevens, Henry; Parameswaran, Giri
    This research investigates what effect insider ownership has on U.S. firms’ decisions to repurchase shares, as well as on the behavior of those firms’ stock prices following such a decision. I use firm level quarterly panel data stretching from 2011 to 2015, which will include 93 firms from the S&P 100 stock market index to test for the effect that insider holdings has on the decision to announce a buyback, and the outcomes of those announcements. The sample is comprised of firms with relatively large market capitalizations. Using a logistic model to answer the first question and an OLS to answer the second, I do not find evidence that supports insider holdings as a predictor of announcement decisions or returns following an announcement among the firms in our sample. I do not find that many of the other relevant factors cited in the literature prove explanatory either. My results suggest that the nature of the firms in our sample (large and under intense scrutiny) may dispel some of the effects of insider holdings, as well as those of the other relevant factors.
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    Investigating the Effect of Stock Split on Short-term Stock Returns: The Case for Chinese Shanghai Stock Market
    (2016) Hu, Haoyang; Parameswaran, Giri
    This paper investigates the effect of magnitude of split size on short-term post-split returns as well as the effect of split announcement on post-split returns, using stocks data from Shanghai Stock Exchange. The study uses OLS model to test for the relationship, controlling for stock characteristics and the market effect. The main regression models find positive significant effect of split size on post-split returns, but no significant effect of split announcement on post-split returns. The results from robustness checks reject the positive significance of split size on returns. One possible explanation for the significance in the main regression is that the outlier points created biases in OLS model. Overall, this study finds no significant effect of split size on short-term post-split returns nor that of split announcement on returns.
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    Is Internet Restriction a Feasible Counterterrorism Strategy? An Empirical Analysis
    (2018) Jones, Madison; Parameswaran, Giri
    Terror attacks have steadily increased in correlation with increasing internet penetration rates and social media usage for over a decade. This correlation is not mere coincidence, as literature cites terrorist organizations’ increasing use of the internet and social media for communication, financing, planning, recruitment, and execution of attacks. Stemming from this evidence, it would seem logical that enacting more restrictive internet policies could either deter or possibly prevent the planning, funding, and execution of terror attacks. However, no empirical research or theoretical consensus exists on whether international governments’ increased efforts to create more restrictive internet policies could be an effective counterterrorism strategy. This thesis uses data from the Global Terrorism Database and Freedom House’s “Freedom on the Net” reports to analyze 65 countries from 2011 to 2016. I use a two-stage least squares instrumental variables regression to identify whether there is a direct causal relationship between a country’s more restrictive internet policies and a decrease in the incidence or magnitude of terror attacks. I find no significant correlational or causational relationships between a country’s internet freedom score and the incidence or magnitude of terror attacks.
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    Measuring Quality in College Football
    (2021) Lynch, Allyson; Parameswaran, Giri
    This paper looks at the effect of college coaches on player development and in the process explores the development of a model using imperfect measures of quality. I constructed a model that created a continuous measure of player quality based on the ordinal measure of player quality that is available in high school recruit ranks and professional draft ranks. The model also includes a significant correction for attenuation bias. The regression results showed a small effect of college coaches on player development.Overall, this paper addresses the larger questions about how to evaluate value added when performance is mis-measured.
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    Monopolistic Screening in Ride-Pooling Platforms
    (2018) Meninato, Lorenzo; Parameswaran, Giri
    While research interest in ride-sharing has grown in the past decade, the problem of ride-pooling has garnered relatively little attention. Ride-pooling is defined as rides purchased on a ride-sharing platform where with some probability a low-quality ride is delayed by pooling multiple riders into a single ride-share service sold by a driver. I solve for the optimal profit structure of a monopolist platform which hosts buyers (riders) who seek to purchase rides from sellers (drivers). I show that the market is two-sided and that optimal pooling is necessary for the platform's optimal profit.
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    Policy Drivers for Battery Storage Deployment
    (2020) Akin, Jeremy B.; Parameswaran, Giri
    Battery storage supports grid stability and the success of variable renewable energy generation. While prior literature has addressed the political economics of lithium-ion battery storage, this thesis represents one of the earliest empirical contributions on policy drivers for the technology's deployment. Through thirteen regressions, this work assesses supportive regulations from FERC and the state of California. Confirming previous academic theories, policies establishing wholesale market access and fair compensation for battery storage were shown to strongly determine its deployment (FERC Order 841and 825). For California, renewable energy and energy storage targets also contributed significantly. These findings reinforce preceding literature while also informing energy regions looking to stimulate maximal lithium-ion battery storage development.
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    Preferences Among NFL Fans: Skin Tone and Merchandise Sales
    (2023) Mutai, Kennedy Kiplangat; Parameswaran, Giri
    This paper investigates discrimination against black NFL players by looking at sales of licensed merchandise from the year 2013 to 2021. When controlling for player and team performance, results strongly show that black players are less likely to be among the top merchandise sellers. Using a structural model, I find that for every level of merchandise sales, white players are 84% more likely to achieve sales above that level compared to black players.
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    Product Differentiation in Rideshare Industry: An Analysis in Southeast Asia Market
    (2018) Nguyen, Linh Cam; Parameswaran, Giri; Jilani, Saleha
    All of the empirical evidence and statistics raised to a question: How does product differentiation help Grab to win its market share in a market like Southeast Asia? This thesis seeks to examine the impact of introducing a new product at lower quality and lower price to the market with the lower-income customer in the ride-sharing economy. I will first build a model to illustrate firms’ profit maximization with the differentiated product. I will then solve for firms’ best response functions and examine the impact of differentiated products on firms’ profits.
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    Reserve Prices for the Graphical Valuations Model
    (2014) Villalta, Edwin; Parameswaran, Giri; Lindell, Steven
    Combinatorial auctions are economically efficient mechanisms to allocate multiple, potentially synergistic or substitutable items. Despite their economic advantages, however, computational difficulties in implementation have kept them from becoming widely used. The literature has proposed several methods of circumventing the computational barriers combinatorial auctions pose. One such approach is the graphical valuations model presented by Daron Acemoglu in 2012. Ozan Candogan then designs a computationally feasible iterative auction using the graphical valuations model. This paper builds on the work presented in [Acemoglu et al. 2012] and [Candogan 2013] as well as the broader combinatorial auctions literature by presenting an analysis of the revenue performance of Candogan's iterative auction. In particular, this paper explores salient revenue and allocative efficiency results after implementing reserve prices in Candogan's auction mechanism.
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    The Dynamic Link Between Inequality and Economic Growth: A Stochastic Approach
    (2015) Small, Raphael; Parameswaran, Giri
    In this thesis I present a theoretical, neoclassical growth model with a rigorous microeconomic foundation that examines the bidirectional dynamic link between inequality and economic growth. I take a standard Real Business Cycle model and augment the production function to incorporate human capital in accordance with the Mankiw, Romer, and Weil (1992) extension to the standard Solow Growth Model. My thesis contributes to the scope and detail of the existing literature, adding a spectrum of heterogeneous households differentiated in size, asset holdings, and stock of human capital. I utilize a Markov Transition Matrix to capture the stochastic and persistent nature of the business cycle and extend investment in human capital at the microeconomic level. I introduce two frictions to propagate inequality shocks from the microeconomic to the macroeconomic level: imperfect capital markets and discrete human capital. Results indicate that the relationship between inequality and growth is complex, but that stable growth occasionally decreases the income Gini Coefficient. The introduced frictions and nature of the model combine to generate patterns of investment shocks and capital depreciation that prevent the economy from reaching the steady-state achieved by the social planner or competitive markets, indicating that reducing the severity of frictions leads to economic stability and a Pareto Efficient improvement for the economy in the long-run.
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    The European Sovereign Debt Crisis and the Safe Asset Mechanism: A Markov-Switching Approach to Analyzing Sovereign Spreads
    (2014) Stackman, Daniel; Parameswaran, Giri
    The recent history of macroeconomics has been characterized by a series of crises and anomalies. After several decades of a stable paradigm, a flurry of new research is being produced by macro- and financial economists in order to better understand the circumstances we find ourselves in. One strand of this recent literature, pioneered by Ricardo Caballero, focuses on the role that the supply of, and demand for, safe assets can play in driving macroeconomic outcomes. In this literature, model economies switch abruptly from a normal regime into a regime where the spread between the interest rates on risky and safe assets is high, and output is low. I attempt to take Caballero's theory to the data, by estimating a set of Markov-switching models on European sovereign bond spreads and output gaps. While I do find evidence of regime-switching behavior in the time series, specific evidence in favor of Caballero's theory is lacking.