In this paper we motivate, specify and estimate a model in which the intra-day volatilty process affects the inter-transaction duration process and vice versa. In order to solve the estimation problems implied by this interdependent formulation, we first propose a GMM estimation procedure for...

For the Euro 2000 Soccer Championships an experimental asset market was condueted, with traders buying and selling contracts on the winners of individual matches. Market-generated probabilities are compared to professional bet quotas, and factors that are responsible for the quality of the...

Political stock markets (PSM) are sometimes seen as substitutes for opinion polls. On the bases of a behavioral model, specific preconditions were drawn out under which manipulation in PSM can weaken this argument. Evidence for manipulation is reported from the data of two separate PSM during...

In a meta study of 25 political stock markets conducted in Germany in the last decade we analyze their predictive success. Although the predictions of political stock markets are highly correlated with the corresponding polls, the markets are able to aggregate additional information. One...

The efficient market hypothesis implies that asset prices cannot be cointegrated. On the other hand, arbitrage processes prevent prices of fundamentally related assets from drifting far away. An attractive model that reconciles these two conflicting facts is the nonlinear error correction...

This paper tests the validity of Present Value (PV) models of stock prices by employing a two-step strategy for testing the null hypothesis of no cointegration against alternatives which are fractionally cointegrated. Monte Carlo simulations are conducted to evaluate the power and size...

The influence of heterogeneous time preferences on the term structure is investigated. Motivated by the Preferred Habitat Theory of Modigliani and Sutch, a model for intertemporal preferences accounting for preferred habitats is proposed. In a heterogeneous world, preferred habitats can explain...

In this paper a two-sector growth model allowing indeterminacy to occur at relatively mild degrees of increasing returns is developed. It is shown that these economies of scale need only be present in one sector of the economy (investment). This feature of the model, therefore, builds on...

In this paper a dynamic model of monopolistic competition with entry and exit has been presented and examined. It is shown that the model displays indeterminacy at modest degrees of increasing returns in cases where the market power in the consumption goods market and in the investment goods...

We apply a dynamic general equilibrium model to the period of the Great Depression. In particular, we examine a modification of the real business cycle model in which the possibility of indeterminacy of equilibria arises. In other words, agents' self-fulfilling expectations can serve as a...