scholarly journals Noise, Information, and the Favorite-Longshot Bias in Parimutuel Predictions

2010 ◽  
Vol 2 (1) ◽  
pp. 58-85 ◽  
Author(s):  
Marco Ottaviani ◽  
Peter Norman Sørensen
Keyword(s):  
Private Information ◽  
Expected Return ◽  
Ex Post ◽  
Ex Ante

According to the favorite-longshot bias, the expected return on an outcome tends to increase in the fraction of bets laid on that outcome. We derive testable implications for the direction and extent of the bias depending on the ratio of private information to noise present in the market. We link this ratio to observables such as the number of bettors, the number of outcomes, the amount of private information, the level of participation generated by recreational interest in the event, the divisibility of bets, the presence of ex post noise, as well as ex ante asymmetries across outcomes. (JEL D81, D83)

scholarly journals The Small-Sized Premium: Is It Really Relevant? Evidence from the European Equity Market

2020 ◽  
Vol 9 (3) ◽  
pp. 85
Author(s):  
Renato Salvatore Camodeca ◽  
Christian Prinoth ◽  
Umberto Sagliaschi
Keyword(s):  
Cost Of Capital ◽  
Global Financial Crisis ◽  
Expected Return ◽  
Valuation Model ◽  
Relevant Evidence ◽  
Size Premium ◽  
Implied Cost Of Capital ◽  
Ex Post ◽  
Asset Pricing Anomalies ◽  
Ex Ante

The valuation of a company reflects the expected return or equivalently, the cost of capital that investors demand in exchange for the risk assumed. Despite the ex-ante nature of the problem, the majority of empirical analysis has focused on factors explaining expected returns from an ex-post perspective. In this paper, we take a different approach and try to identify which factors are ex-ante included in discount rates, with particular attention to the so-called size premium. Starting from observed market capitalisations and company fundamentals, we obtain the implied cost of capital from the reverse engineering of a carefully designed fundamental valuation model. Panel data regressions are used to investigate the existence of a relation between the implied cost of capital and the firm’s size, including other control variables representative of the most cited asset pricing “anomalies”. Our sample comprises European non-financial stocks listed on primary markets, with half-yearly observations starting from the aftermath of the 2008 global financial crisis. Contrary to common wisdom, we find that the firm’s size has no tangible impact to explain the implied cost of capital. 

DISCUSSION OF: Knowing Versus Telling Private Information About a Rival

2013 ◽  
Vol 25 (1) ◽  
pp. 59-63
Author(s):  
Dhananjay (DJ) Nanda
Keyword(s):  
Private Information ◽  
Product Market ◽  
Bertrand Competition ◽  
Information Quantity ◽  
Accounting Disclosure ◽  
Product Heterogeneity ◽  
Ex Post ◽  
Ex Ante ◽  
Future Work

ABSTRACT Bagnoli and Watts (2013) show that a firm will always disclose its private information when this information solely affects its rival's product market decisions. This result is robust to different competitive scenarios (Cournot or Bertrand competition), features (product heterogeneity or private information quantity), and levels of commitment (ex ante or ex post). I highlight how this result fits in the accounting disclosure literature, describe the intuition behind the theory, and discuss its implications for future work.

Preventives Versus Treatments *

2015 ◽  
Vol 130 (3) ◽  
pp. 1167-1239 ◽  
Author(s):  
Michael Kremer ◽  
Christopher M. Snyder
Keyword(s):  
Private Information ◽  
Vaccine Development ◽  
Disease Risk ◽  
Disease Status ◽  
Heart Attacks ◽  
Ex Post ◽  
Producer Surplus ◽  
Ex Ante ◽  
Consumer Values ◽  
The Difference

Abstract Preventives are sold ex ante, before disease status is realized, while treatments are sold ex post. Even if the mean of the ex ante distribution of consumer values is the same as that ex post, the shape of the distributions may differ, generating a difference between the surplus each product can extract. If, for example, consumers differ only in ex ante disease risk, then a monopolist would have more difficulty extracting surplus with a preventive than with a treatment because treatment consumers, having contracted the disease, no longer differ in disease risk. We show that the ratio of preventive to treatment producer surplus can be arbitrarily small, in particular when the distribution of consumer values has a Zipf shape and the disease is rare. The firm’s bias toward treatments can be reversed, for example, if the source of private information is disease severity learned ex post. The difference between the producer surplus earned from the products can result in distorted R&D incentives; the deadweight loss from this distortion can be as large as the entire producer-surplus difference. Calibrations for HIV and heart attacks based on risk factors in the U.S. population suggest that the distribution of disease risk is sufficiently Zipf-similar to generate substantial differences between producer surplus from preventives and treatments. Empirically, we find that proxies for the Zipf-similarity of the disease-risk distribution are associated a significantly lower likelihood of vaccine development but not drug development.

scholarly journals The enemy votes: Weapons improvisation and bargaining failure

2018 ◽  
Vol 13 (1) ◽  
Author(s):  
Garrett Wood
Keyword(s):  
Private Information ◽  
Relevant Information ◽  
Information Revelation ◽  
Local Resources ◽  
Ex Post ◽  
Ex Ante

Belligerents could in principle avoid the ex post costs of conflict by revealing all private information about their violent capabilities and then calculating odds of success ex ante. Incentives to misrepresent private information for strategic gain, however, can cause miscalculations that lead to war. I argue some private information can lead to miscalculation not because it is purposefully misrepresented for strategic gain but because it is too decentralized to be easily revealed. The decentralized private information that produces improvised weapons requires a process of discovering suitable local resources and battlefield testing driven by local military entrepreneurs which frustrates information revelation. Decentralized private information used to improvise new weapons and capabilities like those which emerged in Afghanistan and Iraq show that it can take many years, decades, or even an indeterminate amount of time for fighting to reveal relevant information about violent capabilities.

Ex-Ante and Ex-Post Performance of Optimal REIT Portfolios

CFA Digest ◽  
2003 ◽  
Vol 33 (3) ◽  
pp. 8-9
Author(s):  
Ann C. Logue
Keyword(s):  
Ex Post ◽  
Ex Ante

Erreurs de prévision ex ante et ex post

1993 ◽  
Vol 108 (2) ◽  
pp. 135-138
Author(s):  
Pierre Malgrange ◽  
Silvia Mira d'Ercole
Keyword(s):  
Ex Post ◽  
Ex Ante
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