Financial support from a weinberg nsf graduate research fellowship, the russell sage foundation and from the nsf. We investigate the hypothesis that macroeconomic fluctuations are primitively the results of many microeconomic shocks. Financial decisions over the life cycle and implications for regulation david laibson, sumit agarwal, xavier gabaix, and john c. International liquidity and exchange rate dynamics, nber working papers 19854, national bureau of economic research, inc.
Xavier gabaix argues that public policies should prioritize alleviating deprivation at the bottom over narrowing the richpoor gap keep up with our latest news our email newsletter shares new events, courses, articles, and will keep you updated on our initiatives. A theory of large fluctuations in stock market activity. In the size of stakes view quantitatively formalised in gabaix and landier quarterly journal of economics, 1211. Optimal taxation with behavioral agents by emmanuel farhi and xavier gabaix. Shrouded attributes, consumer myopia, and information. Finally, the paper proposes a specification that integrate rare disasters with a standard real business cycle economy. The great diversification and its undoing american economic. For helpful comments, we thank the editor, an anonymous referee, viral acharya, raj aggarwal, katharine baker, alon brav, randy cohen, gene davolio, steve figlewski, xavier gabaix, paul gompers, florian heider, laurie hodrick, dirk jenter, kose john, steve kaplan, john long. In section 4, i start with the most tractable models, those that yield deterministic predictions that is, for a given situation, there is a deterministic action. Download this paper open pdf in browser add paper to my library. For full access to this pdf, sign in to an existing account, or purchase an annual subscription.
Littauer center 209 1805 cambridge street cambridge, ma 028 email. Behavioral macroeconomics via sparse dynamic programming working paper. We propose a theory of large movements in stock market activity. May 16, 2006 download this paper open pdf in browser add paper to my library. This paper presents a framework for analyzing how bounded rationality affects monetary and fiscal policy. March 31, 2018 abstract this paper presents a framework for analyzing how bounded rationality a ects monetary and scal policy. The model is a tractable and parsimonious enrichment of the widelyused new keynesian model with one main new parameter, which quanti es how poorly agents understand future economic disturbances. The dynamics of inequality gabaix 2016 econometrica. Gabaix, xavier and gopikrishnan, parameswaran and plerou, vasiliki and stanley, h. Shrouded attributes, consumer myopia, and information suppression in competitive markets xavier gabaix and david laibson bayesian consumers infer that hidden addon prices e. This cited by count includes citations to the following articles in scholar. Xavier gabaix stern school, new york university, new york, ny 10012. Xavier gabaix argues that public policies should prioritize alleviating deprivation at the bottom over narrowing the richpoor gap keep up with our latest news.
We propose a quite general way to construct instruments. A power law pl is the form taken by a large number of surprising empirical regularities in economics and finance. Published in volume 54, issue 4, pages 123287 of journal of economic literature, december 2016, abstract. Optimal taxation with behavioral agents american economic. Our theory is motivated by growing empirical evidence on the powerlaw tailed nature of distributions that characterize large movements of distinct variables describing stock market activity such as returns, volumes, number of trades. Jun 26, 2017 edmans, alex and gabaix, xavier and jenter, dirk, executive compensation.
Shrouded attributes, consumer myopia, and information suppression in competitive markets. Some models rely on the plain notion that more important dimensions should be given more attention this is plain, but. While there is a large number of existing theories of the pareto tail of the long. European corporate governance institute ecgi finance working paper no. The past forty years have seen a rapid rise in top income inequality in the united states. Xavier gabaix is pershing square professor of economics and finance at harvards economics department. This provides a foundation for a behavioral version of basic textbook microeconomics section 5, of the basic theory of taxation farhi and gabaix, 2017, of basic dynamic macroeconomics gabaix, 2016, and macroeconomic fiscal and monetary policy gabaix, 2018a.
Gabaix, xavier, behavioral inattention december 2017. Institutional investors and stock market volatility by. A unified theory of ten financial puzzles by xavier gabaix. These posterior expectations exhibit asif discounting. An exactly solved framework for ten puzzles in macrofinance farhi, emmanuel and xavier gabaix, rare disasters and exchange rates. Eugene, institutional investors and stock market volatility october 2, 2005. Apr 01, 2007 using the recent technique of linearitygenerating processes gabaix 2007, the model is very tractable, and all prices are in closed form. Dynamic ceo compensation by alex edmans, xavier gabaix. This article surveys welldocumented empirical power laws concerning income and wealth, the size of cities and firms, stock market returns, trading volume, international trade, and executive pay. Xavier gabaix born august 1971 is a french economist, currently the pershing square professor of economics and finance at harvard university. The great diversification and its undoing with vasco m. Abstract limits of arbitrage theories hypothesize that the marginal investor in a particular asset market is.
The years 200411 were not part of the initial study and offer a laboratory to examine the theory with new positive and negative shocks. Read the latest chapters of handbook of behavioral economics. A sparsitybased model of bounded rationality xavier gabaix. Myopia and discounting xavier gabaix and david laibson december 31, 2017 abstract we assume that perfectly patient agents estimate the value of future events by generating noisy, unbiased simulations and combining those signals with priors to form posteriors. Sep 11, 2003 gabaix, xavier and gopikrishnan, parameswaran and plerou, vasiliki and stanley, h. Consumer myopia, and information suppression in competitive markets, the quarterly journal of economics, volume 121, issue 2. The ones marked may be different from the article in the profile. Pdf the seven properties of good models1 researchgate. Institutional investors and stock market volatility. The great diversification and its undoing by vasco carvalho and xavier gabaix. The model is a tractable and parsimonious enrichment of the widelyused new keynesian model with one main new cognitive discounting parameter, which quantifies how poorly agents understand future economic disturbances. International liquidity and exchange rate dynamics, cepr discussion papers 9842, c. Behavioral macroeconomics via sparse dynamic programming.
View enhanced pdf access article on wiley online library html view download pdf for offline viewing. Hultens theorem appendix b motivates the use of sales rather than value added. This article studies traditional and modern theories of executive compensation, bringing them together under a simple u. Department of finance stern school of business new york university 44 west fourth st. Crash risk in currency markets by emmanuel farhi, samuel p. Xavier gabaix pershing square professor of economics and finance. He has been listed among the top 8 young economists in the world by the economist. National bureau of economic research, new york university. Xavier and sadzik, tomasz and sannikov, yuliy, dynamic ceo compensation september 30, 2011.
Bio xavier gabaix is pershing square professor of economics and finance at harvards economics department. Power laws in economics and finance new york university. This article studies traditional and modern theories of executive compensation, bringing them together under a unifying framework. Xavier gabaix, parameswaran gopikrishnan, vasiliki plerou, h. Working paper 24096 national bureau of economic research. Handbook of behavioral economics foundations and applications 2.
Littauer center 209 1805 cambridge street cambridge, ma 028. Our email newsletter shares new events, courses, articles, and will keep you updated on our initiatives. A sparsitybased model of bounded rationality, the quarterly journal of economics, oxford university press, vol. He received his undergraduate degree in mathematics from the ecole normale superieure paris and obtained his phd in economics from harvard university. The survey then takes a more theoretical turn, and explores in greater depth the determinants of attention. Edmans, alex and gabaix, xavier and jenter, dirk, executive compensation. The great diversification and its undoing american. The past forty years have seen a rapid rise in top income inequality in the united. The years 200411 were not part of the initial study and offer a laboratory to examine the theory with new positive. A power law is the form taken by a large number of surprising empirical regularities in economics and finance. The granular origins of aggregate fluctuations gabaix. Alex and gabaix, xavier and sadzik, tomasz and sannikov, yuliy, dynamic. Our theory is motivated by growing empirical evidence on the powerlaw tailed nature of distributions that characterize large movements of distinct variables describing stock market activity such as returns, volumes, number of trades, and order flow.
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