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Determinants of Automobile Demand and Implications for Hybrid-Electric Market Penetration
by Sruthi M Thatchenkery
Abstract
This paper investigates market receptivity to hybrid-electric vehicles by using cross-sectional data on vehicle registrations to estimate demand functions for the overall market, the hybrid market, and specialized vehicle segments. Each specification features intrinsic product attributes such as fuel efficiency and horsepower, while the hybrid specification also includes external influences on demand, such as government incentives, demographics, and environmentalism. I find that a preference for greater fuel efficiency is fairly consistent across most markets, but is typically overshadowed by stronger affinities for horsepower and weight. Certain external influences, such as convenience-based incentives and environmentalism, boost explanatory power but do not outweigh the effects of vehicle attributes.
Professor Arie Beresteanu, Faculty Advisor
Undue Burdens: The Effect of Abortion Restrictions on Foster Care Entry Rates
by Sara Sutherland
Abstract
Since the 1973 ruling of Roe v Wade, the Supreme Court has permitted a new abortion law enforced at the state level that requires parental consent or notification for unmarried minors seeking abortion. This paper uses a panel of pooled state-level foster care entry rates over the years 1990 through 2005 and considers the impact of parental involvement restrictions on the foster care entry rates. Adding state and year fixed effects to control for changing unobservable variables, the results suggest a statistically significant positive correlation between enforced parental consent laws and foster care entry rates during these years. The results provide evidence that the presence of enforced parental consent laws can explain some of the increase in foster care entries. In opposition to previous results testing alternative outcomes, these results point to the ineffectiveness of notice laws (as opposed to consent laws) when considering foster care entry as the tested outcome.
Professor Marjorie McElroy, Faculty Advisor
Patterns Within the Trading Day: Volatility and Jump Discontinuities in High Frequency Equity Price Series
by Peer Van Tassel
Abstract
This paper identities systematic patterns within the trading day by analyzing high frequency data from a market index and nine individual stocks. Empirical results expand on the previously documented U-shape in intraday equity volatility by implementing non-parametric statistics to test for patterns in the jump and diffusive components of volatility. Additional results indicate that a recently developed non-parametric jump detection scheme may under-report the number of returns flagged as statistically significant jumps in the middle of the day while exaggerating the number of statistically significant jumps in the early morning and late afternoon. The paper concludes by investigating whether incorporating the observed patterns into a historical forecasting model can improve performance.
Professor George Tauchen, Faculty Advisor
Marketing Laboratory Experiments: The Resistible Rise of Laboratory Markets
by Paul Slattery
Abstract
This paper will endeavor to develop a history of market experimentation. It will begin with a discussion of its earliest manifestations in the work of Edward Chamberlin, tracing its development through the dominance of Vernon Smith, Charles Plott and their students, and ending with its prospects for the future. It will pay particular attention to the iterative process by which market experimentation developed and gained presence in a changing disciplinary context. In the earlier period of market experimentation, spanning from Edward Chamberlin’s work in the 1940s through the mid 1970s, the substantial research will lend itself to rather comprehensive analysis. However, from the mid 1970s on, the proliferation of market experimentation will require restricting the purview to only the most substantial developments.
Professor Craufurd Goodwin, Faculty Advisor
The VIX as a Fix: Equity Volatility as a Lifelong Investment Enhancer
by Michael Sloyer and Ryan Tolkin
Abstract
The VIX, a measure of the implied volatility of S&P 500 index options, is the premier gauge of investor sentiment and market volatility. This analysis examines the effectiveness of adding the VIX to passively managed equity-bond portfolios. Furthermore, this study extends the existing literature by examining the efficacy of the VIX in a life-cycle investing context. Due to the large negative correlation between the VIX and the major equity indices, we find that a relatively small allocation to the VIX would have significantly improved the risk-return profile of standard equity-bond portfolios from 1986 through 2007. Additionally, we find that younger investors (i.e. investors with higher risk tolerances and thus more exposure to equities rather than fixed income) will benefit from having greater exposure to the VIX.
Professor Emma Rasiel, Faculty Advisor
Tracking Decisions in North Carolina’s Public High Schools
by Michael Harris
Abstract
This paper analyzes the criteria employed to assign students into tracked English and Mathematics classes across public high schools in North Carolina. Specifically, I examine the probability of high track placement moving from eighth grade to ninth grade classrooms based upon both achievement and demographic factors. Analysis is performed at both the school and district level. Although student performance does affect placement at both levels, there are other personal characteristics that are significant factors in determining track assignment. The main finding is that being black has a positive effect on high track placement at the district level, but a negative effect at the school level. The former appears to be linked to residential segregation, while the latter suggests a within-school bias that has important policy implications.
Professor Thomas Nechyba, Faculty Advisor
Merrill Lynch Consults® Program: An Analysis of Performance
by Megha Bisarya
Abstract
Compared to mutual funds, separately managed accounts are a relatively new product for the financial services industry. They are customized portfolios of stocks or bonds that are monitored by professional investment managers but owned by the individual. This study analyzes the performance of Merrill Lynch’s separately managed accounts program, known as the Consults® program. I find that on average, the funds in the Consults® program generated lower returns than their respective style indices during July 2005 to June 2006. The funds also under performed a Vanguard basket of index funds during this same time period. Moreover, I find that there is a significant relationship between the returns for the funds in the Consults® program for the first half of July 2005 to June 2006 with the second half.
Professor Edward Tower, Faculty Advisor
Predicting Financial Debt Crises: A Case Study of India
by Matthew Sperber
Abstract
The following paper develops a qualitative and quantitative model for predicting financial debt crises. The qualitative model breaks down the balance sheet of emerging market countries to identify weaknesses in the country’s assets and liabilities. The values of the items on a country’s balances sheet are then compared to the pre-crisis conditions of the East Asian and South American crises that occurred in the late 1990’s and early 2000’s. The quantitative model consists of a logistic function that uses economic variables to determine the probability that a country will face a financial crisis the following year. The logistic function is developed using a comprehensive set of data which consists of forty different variables from forty-three countries over the past ten years. The logistic model developed in the paper is further analyzed to identify the economic variables that have the greatest impact on a country having a financial crisis. The marginal effect each of the variables is identified by increasing each of the variables by one standard deviation while keeping the other variables constant. The variables with the greatest marginal effect have the largest impact on a financial crisis and policy reform is recommended based on keeping these variables at sustainable levels. The paper concludes with a case study that applies the models to India. Using the balance sheet analysis and the logistic model, India’s strengths and weaknesses are identified. The paper concludes that India is not in danger of a financial debt crisis but there are still many areas where the economy can improve.
Professor Kent Kimbrough, Faculty Advisor
Time-Zone Arbitrage in Vanguard International Index Funds
By Katelyn Rae Donnelly
Historically, mutual funds have often calculated their asset values for international mutual funds using stale prices, because some fund components register their last trades before the market close. These stale prices have caused daily fund returns to be predictable. This allows an arbitrage opportunity for investors who move their money at the end of the US trading day to reflect the next day change in European equities. The thesis quantitatively traces the history of this phenomenon, known as time zone arbitrage, in various mutual funds, particularly the Vanguard Fund Family, before and after the
phenomenon became well known.
Professor Edward Tower, Faculty Advisor
The Role of Conflict Diamond Sanctions in Postwar Peace Commitment
by Karin Sun
Abstract
This paper models post-civil war conflict recurrence in Africa as a two-player sequential game. I treat the two “players” in my model, an incumbent government and a rebel group, as profit-maximizing firms who must each allocate a fixed supply of labor between diamond production and armed warfare. I then analyze the impact of conflict diamond sanctions on the players’ optimal labor allocations and on the likelihood that the Rebel will choose to demobilize after a civil war rather than return to armed conflict. I find that the minimum level of sanction needed to achieve demobilization is larger when the world price of diamonds is higher, and when the Rebel controls a smaller proportion of the country’s labor resources. The results of this study could inform policymakers about the value of diamond sanctions as a preventive tool against post-war conflict recurrence, as well as the most cost effective sanction that a mediator could impose given a certain set of circumstances.
Professor Bahar Leventoglu, Faculty Advisor
