Results for “high frequency” 120 found
Cryptocurrencies don’t belong in central banks
That is the topic of my latest Bloomberg column. Here is one excerpt:
An additional reason for skepticism stems from the nature of crypto assets. The word “cryptocurrency” is far more common than “crypto asset,” but it’s a misleading term. Bitcoin, for instance, is used only rarely in retail transactions, and for all its success it isn’t becoming more important as a medium of exchange. Bitcoin thus isn’t much of a currency in the literal sense of that term. There is a version of bitcoin, Bitcoin Cash, that changed the initial rules to be better suited as an exchange medium, but it isn’t nearly as popular.
If you think of these assets as “cryptocurrencies,” central bank involvement will seem natural, because of course central banks do manage currencies. Instead, this new class of assets is better conceptualized as ledger systems, designed to create agreement about some states of the world without the final judgment of a centralized authority, which use a crypto asset to pay participants for maintaining the flow and accuracy of information. Arguably these innovations come closer to being substitutes for corporations and legal systems than for currencies.
Put in those terms, an active (rather than merely supervisory) role for central banks in crypto assets is suddenly far from obvious. Consider other financial innovations: Does anyone suggest that central banks should run their own versions of ETFs or high-frequency trading? Is there a need for central banks to start managing the development of accounting and governance systems?
Central banks are too conservative anyway, which of course is how they should be. Don’t forget:
…consider a simple question: Would any central bank have had the inspiration or taken the risk of initiating the bitcoin protocol in the first place?
How to make annoying alarms
The faster an alarm goes, the more urgent it tends to sound. And in terms of pitch, alarms start high. Most adults can hear sounds between 20 Hz and 20,000 Hz—Baldwin uses 1,000 Hz as a base frequency, which is at the bottom of the range of human speech. Above 20,000 Hz, she says, an alarm “starts sounding not really urgent, but like a squeak.”
Harmonics are also important. To be perceived as urgent, an alarm needs to have two or more notes rather than being a pure tone, “otherwise it can sound almost angelic and soothing,” says Baldwin. “It needs to be more complex and kind of harsh.” An example of this harshness is the alarm sound that plays on TVs across the U.S. as part of the Emergency Alert System. The discordant noise is synonymous with impending doom.
After the alarm designers create a range of sounds in the lab, says Baldwin, they will test the annoyance factor of these sounds in a process called “psychophysical matching, or psychophysical ratings.” Yes, this involves subjecting human beings to a bunch of irritating sounds. Participants determine how annoying the sounds are by sorting them into categories ranking them on a scale of one to 100.
Then there’s more testing. “If it’s a medical alarm, for instance, we’ll start using that sound and then we’ll maybe measure people’s physiological response to it—does their heart rate go up, does their skin conductance level go down, what happens to their brain activity,” says Baldwin. Skin conductance measures how much the sound affects the body—skin gets better at conducting electricity when the body is physiologically aroused.
An effective audio alarm is one in which the annoyance factor and perceived urgency of the sound is matched to the hazard level—a soft little chime for the fridge door, say, and a “BREHHHHK BREHHHHK BREHHHHK” for a plane in a tailspin. “We want it to be detectable, so to get your attention, but for you to recognize what it means right away,” says Baldwin.
It turns out this is a problem in hospitals:
In hospitals in particular, there are “so many nuisance alarms going off all the time, that people—nurses, doctors—just tune them out,” says Baldwin. “They don’t even hear them anymore.” The statistics say that most of these alarms are not indications of peril. A 2012 review of medical audio alarms found that in one intensive therapy unit, “of 1455 soundings of alarms, only eight were associated with potentially life-threatening problems.”
Here is the full piece, from the excellent Atlas Obscura, and for the pointer I thank Torsten Kehler.
Coups are less frequent these days, but more likely to succeed
In other words, last night was an outlier. Here is Jonathan M. Powell and Clayton L. Thyne in the Journal of Peace Research:
We also see some interesting trends in the frequency of coup attempts over time. As shown in Figure 2, there is a fairly clear decline in the total frequency of coup attempts over time. The high point for coup attempts came in the mid-1960s, followed by two more bubbles in the mid-1970s and the early 1990s. The number of successful coups has likewise decreased over time. We saw 12 successful coups in both 1963 and 1966. The mid- to late-1970s also saw a brief burst of successful coups (ranging from 3 to 9 for each year). An interesting trend emerges when we look at the percentage of coup attempts that resulted in successful regime changes, which we plot on the right side of the Y-axis. The mean success rate is 48% during the entire time span. This rate saw early peaks around 1970 and 1980, and then a decline until the turn of the century. However, we see another spike in the success rate starting in 2003. Twelve of the 18 (67%) coup attempts since then have been successful, and only one of the most recent four coup attempts has failed. While coups have certainly waned over time, the recent success of coup plotters suggests that coups remain a key element of governmental instability.
I cannot readily pull out Figure 2 from the pdf, but it is on p.7 of the document. Note that their data run up through 2010, and thus do not cover the Arab Spring.
Toward a savanna theory of happiness?
We propose the savanna theory of happiness, which suggests that it is not only the current consequences of a given situation but also its ancestral consequences that affect individuals’ life satisfaction and explains why such influences of ancestral consequences might interact with intelligence. We choose two varied factors that characterize basic differences between ancestral and modern life – population density and frequency of socialization with friends – as empirical test cases. As predicted by the theory, population density is negatively, and frequency of socialization with friends is positively, associated with life satisfaction. More importantly, the main associations of life satisfaction with population density and socialization with friends significantly interact with intelligence, and, in the latter case, the main association is reversed among the extremely intelligent. More intelligent individuals experience lower life satisfaction with more frequent socialization with friends. This study highlights the utility of incorporating evolutionary perspectives in the study of subjective well-being.
That is from Li and Kanazawa, via Neuroskeptic, file under speculative.
The CNH Hibor rate
As I write the overnight rate is over sixty-six percent (yikes, although the frequency of reporting that figure is unclear). Hibor, by the way, is the Hong Kong Interbank Offer Rate.
Why so high? The most natural interpretation is that many traders are shorting the renminbi, and in response the Chinese central bank is trying to crush them. There is a short squeeze, and the high overnight rate reflects the need to make good on contracts now.
More generally, it seems both the central bank (PBOC) and the big Chinese banks are buying up yuan like crazy, especially offshore yuan. There is a free (but PBOC-influenced) Hong Kong rate, and the controlled rate internal to China. The freely traded offshore yuan have been cheaper, although about a day ago the two rates converged. The PBOC wants to keep the currency value relatively high, to limit capital flight and to maintain credibility.
In other words, an epic battle is going on. Round one (or is this round three)? goes to PBOC.
Against a financial transactions tax
Maria Coelho, job market candidate at UC Berkeley, studied this topic and came up with this:
This paper analyzes the effect of the introduction of financial transaction taxes in equity markets in France and Italy in 2012 and 2013, respectively, on asset returns, trading volume and market volatility. Using two natural experiments in a difference-in-differences design, I identify bounds on elasticity estimates for three categories of avoidance channels: real substitution away from taxed assets, retiming (anticipation of transaction realizations and portfolio lock-in), and tax arbitrage (cross-platform and financial instrument shifting). I find large responses on all margins, that account for significantly lower revenues than projected. By far the strongest behavioral response comes from high-frequency trading lock-in on regulated exchanges, with a high tax elasticity of this type of turnover in the order of -9. The results shed light on overlooked features of optimal FTT design, suggesting they may be poor instruments for both revenue-raising and Pigouvian objectives.
The paper is called “Dodging Robin Hood.” This is consistent with earlier findings on Sweden’s transactions tax, and that proposal continues to be one of the more overrated ideas in American Progressive political discourse.
The persistence of Italian musical and entertainment traditions
There is a new paper by Karol Jan Borowiecki, published in Oxford Economic Papers:
I investigate the consequences of long-run persistence of a society’s preferences for cultural goods. Historical cultural activity is approximated with the frequency of births of music composers during the Renaissance and is linked with contemporary measures of cultural activity in Italian provinces. Areas with a 1% higher number of composer births nowadays show an up to 0.29% higher supply of classical concerts and 0.16% more opera performances. Classical concerts and opera performances have also rather bigger audiences and obtain greater revenues in provinces that have been culturally active in the past. Today, those provinces also exhibit a somewhat lower supply of other forms of entertainment (e.g., sport events), thereby implying a tantalizing divergence in societies’ cultural preferences that is attributable to events rooted in the past. It is also shown that the geography of composer births is remarkably persistent over a period of seven centuries.
For the pointer I thank Ben Southwood.
An event study of the recent UK election
Via Jasper Plan, Jonathan K. Pedde has a new paper on this:
Standard zero-lower-bound New Keynesian models generate large fiscal multipliers and expansionary negative supply shocks. Thus, according to these models, a political party that implements fiscal contraction coupled with policies to increase aggregate supply should unambiguously cause economic contraction, compared to a party that implements the opposite policies. I test this prediction using high-frequency prediction- and financial-market data from the night of the 2015 U.K. election, which featured two such parties. By analysing financial-market movements caused by clearly exogenous changes in expectations about the election winner, I find that market participants expected higher equity prices and a stronger exchange rate under a Conservative Prime Minister than under a Labour P.M. There were little to no partisan differences in interest rates, expected inflation, or commodity prices. These results cast doubt on the empirical validity of zero-lower-bound New Keynesian models.
And here is Noah on the UK, he is right, and I call this one pretty much settled.
Square Dancing Bees and Quadratic Voting
It’s well known that bees dance to convey where useful resources are located but how do bees convey the quality of the resource and what makes this information credible? Rory Sutherland and Glen Weyl argue that the bees have hit upon a key idea, quadratic dancing or as I like to put it, square dancing.
Seeley’s research shows that the time they spend on dances grows not linearly but quadratically in proportion to the attractiveness of the site they encountered. Twice as good a site leads to four times as much wiggling, three times as good a site leads to nine times as lengthy a dance, and so forth.
Quadratic dancing has some useful properties which can be duplicated in humans with quadratic voting.
Under Quadratic Voting (QV), by contrast, individuals have a vote budget that they can spread around different issues that matter to them in proportion to the value those issues hold for them. And just as with Seeley’s bees, it becomes increasingly costly proportionately to acquire the next unit of influence on one issue. This approach highlights not only frequency of preferences but also intensity of preferences, by forcing individuals to decide how they will divide their influence across issues, while penalising the single-issue fanatic’s fussiness of putting all one’s weight on a single issue. It encourages individuals to distribute their points in precise proportion to how much each issue matters to them.
They offer a useful application
Consider a firm that wants to learn whether customers care about particular product attributes: colour, quality, price, and so on. Rather than simply ask people what they care about — which leads to notoriously inaccurate results, often where people affect strong views just to maximise their individual influence — a business, or a public service, could supply customers with budgets of credits which they then used to vote, in quadratic fashion, for the attributes they want. This forces the group of respondents, like the swarm of bees, to allocate more resources to the options they care most about.
Weyl’s paper with Eric Posner is a good introduction to quadratic voting and here are previous MR posts on quadratic voting.
How has the language of World Bank reports changed?
From The New Left Review, Moretti and Pestre report:
Three new semantic clusters characterize the language of the Bank from the early 1990s on. The first—and most important—has to do with finance: here, alongside a few predictable adjectives (financial, fiscal, economic) and nouns (loans, investment, growth, interest, lending, debt), we find a landslide of fair value, portfolio, derivative, accrual, guarantees, losses, accounting, assets; a little further down the list, equity, hedging, liquidity, liabilities, creditworthiness, default, swaps, clients, deficit, replenishment, repurchase, cash. In terms of frequency and semantic density, this cluster can only be compared to the material infrastructures of the 1950s–60s; now, however, work in agriculture and industry has been replaced by an overwhelming predominance of financial activities.
…The second cluster has to do with management—a noun that, in absolute terms, is the second most frequent of the last decade (lower than loans, but higher than risk and investment!). In the world of ‘management’, people have goals and agendas; faced with opportunities, challenges and critical situations, they elaborate strategies. To appreciate the novelty, let’s recall that, in the 1950s–60s, issues were studied by experts who surveyed and conducted missions, published reports, assisted, advised and suggested programmes. With the advent of management, the centre of gravity shifts towards focusing, strengthening and implementing; one must monitor, control, audit, rate (Figure 2); ensure that everything is done properly while also helping people to learn from mistakes. The many tools at the manager’s disposal (indicators, instruments, knowledge, expertise, research) enhance effectiveness, efficiency, performance, competitiveness and—it goes without saying—promote innovation.
The concept of governance is another clear winner in more recent times, and furthermore the reports seem to overuse the word “and” relative to the word “the.” That I can believe. The article is interesting throughout, hat tip goes to Avinash Celstine.
Assorted links
Street harassment and social cohesion in Mexico City
For all the chatter about that recent video where the woman walks through New York City and is repeatedly harassed, I thought it worth mentioning there is a systematic study of this question going on at MIT economics (and elsewhere), conducted in part by job market candidate Sara Hernández, with numerous co-authors. The paper isn’t ready yet, but here is the abstract:
This study seeks to document the frequency of street harassment and preventive measures women take to avoid it. It explores the association between experiences of street harassment and perceptions of social cohesion among women currently presenting for health care at public health clinics. The study was conducted in Mexico City, the most populous city in North America, which has a high documented prevalence of gender-based violence against women, ranging from 20-30% in a woman’s lifetime. Despite the pervasiveness of gender-based violence in the city, little is known about experiences related to street harassment. Data were drawn from a baseline survey among women currently participating in a randomized controlled trial in Mexico City (N=952). Current findings underscore the needs for programs and policies to promote the safety and well being of women and addressing community and structural-level forms of gender discrimination and violence.
I believe this issue will continue to receive more attention in the future. The “flexibility” of the behavior of men — depending on social expectations for one thing — remains an underexplored topic in economics.
Stock returns over the FOMC cycle
I find this paper (pdf), by Anna Cieslak, Adair Morse, and Annette Vissing-Jorgensen, quite scary. Do you?:
We document that since 1994 the US equity premium follows an alternating weekly pattern measured in FOMC cycle time, i.e. in time since the last Federal Open Market Committee meeting. The equity premium is earned entirely in weeks 0, 2, 4 and 6 in FOMC cycle time (with week 0 starting the day before a scheduled FOMC announcement day). We show that this pattern is likely to reflect a risk premium for news (about monetary policy or the macro economy) coming from the Federal Reserve: (1) The FOMC calendar is quite irregular and changes across sub-periods over which our finding is robust. (2) Even weeks in FOMC cycle time do not line up with other macro releases. (3) Volatility in the fed funds futures market and the federal funds market (but not to the same extent in other markets) peaks during even weeks in FOMC cycle time. (4) Information processing/decision making within the Fed tends to happen bi-weekly in FOMC cycle time: Before 1994, when changes to the Fed funds target in between meetings were common, they disproportionately took place during even weeks in FOMC cycle time. In addition, after 2001 Board of Governors discount rate meetings (at which the board aggregates policy requests from regional federal reserve banks and receives staff briefings) tend to take place bi-weekly in FOMC cycle time. As for how the information gets from the Federal Reserve to the market, we rule out the Federal Reserve signaling policy via open market operations post-1994. Furthermore, the high return weeks do not systematically line up with official information releases from the Federal Reserve or with the frequency of speeches by Fed officials. We end with a discussion of quiet policy communications and unofficial information flows.
Say it ain’t so!
The pointer is from BH, a loyal MR commentator.
Assorted links
1. Will you hire someone to do your grocery shopping for you?
2. New DSGE blog.
3. The Philadelphia Eagles are now targeting college graduates. Educational signaling comes to NFL football.
4. Can conservatives be funny?
5. Bill Gates on Jeffrey Sachs.
Facts about livestock theft in Punjab, Pakistan
There is yet another paper on this topic, I know you are weary of it, but I remain glued to the screen, so here goes:
Stock theft is an endemic crime particularly affecting deep rural areas of Pakistan. Analysis of a series of cases was conducted to describe features of herds and farmers who have been the victims of cattle and/buffalo theft in various villages of Punjab in Pakistan during the year 2012. A structured interview was administered to a sample of fifty three affected farmers. The following were the important findings: i) incidents of theft were more amongst small scale farmers, ii) the rate of repeat victimization was high, iii) stealing was the most common modus operandi, iv) the majority of animals were adult, having high sale values, v) more cases occurred during nights with crescent moon, vi) only a proportion of victims stated to have the incident reported to the police, vii) many farmers had a history of making compensation agreements with thieves, viii) foot tracking failed in the majority of the cases, ix) all the respondents were willing to invest in radio frequency identification devices and advocated revision of existing laws. The study has implications for policy makers and proposes a relationship between crime science and veterinary medicine.
The link is here, and for the pointer I thank Ben Southwood. This is in fact a significant and understudied topic in development economics, namely small-scale predation in rural settings.
Not surprisingly, that piece appeared in the Berliner und Münchener tierärztliche Wochenschrift.