6 ICEF students received top grades for diploma theses

Diploma theses defenses of BSc 4 year students took place at ICEF

132 students successfully defended their theses, 49 students received excellent marks. Following 6 students received top grades (10 out of 10):

1) Maria Maricheva

Topic: “Extrapolative Investors with Predictable Behavior and Bubbles”
Supervisor: Dmitry Makarov, PhD London Business School, UK

Abstract: This work presents a model that shows how bubbles can emerge in the presence of investors with extrapolative expectations. The motivation for including extrapolators into an otherwise standard asset pricing setting is substantial evidence of extrapolative behavior among real investors. This fact motivates me to include extrapolation as the mechanism of forming investors’ expectations in my work. I adopt a setting similar to the one of Barberis et al.(2015) with two groups of investors: sophisticated investors and extrapolators, where extrapolators’ demand for the risky asset depends on the past changes of the asset price. The key novelty of my model is that I consider sophisticated investors who take into account this specification of extrapolators’ demand when forming their expectations. I analytically characterize and examine the equilibrium prices and find that a sequence of positive dividend shocks leads to the overvaluation of the asset, the extent of which depends positively on the proportion of extrapolators. I also show that the bubble in my model is associated with high trading volume consistent with empirical features of the bubbles. Finally, I find that the ability of sophisticated investors to predict the extrapolators’ behavior has important implications for the magnitude of the bubble as well as for the lengths of the time period in which the stock price returns to the fundamental level after the shock.

2) Dmitry Kasantsev

Topic: “Stability in Financial Networks”
Supervisor: Roman Chuhay, PhD Universidad de Alicante, Spain

Abstract: In the modern financial system banks are linked by the complex web of financial claims into a network structure. As shown by the financial crisis, especially after the failure of Lehman Brothers, these interdependencies have created the possibility to amplified responses to shocks to the financial system. This complex system of financial links has also made it hard to assess the potential for contagion arising from the insolvency of several banks. The main purpose of this paper is to investigate the effect of the network topology properties on the default contagion process. More precisely, in this paper following Gai and Kapadia (2010), we derived the condition under which the default contagion spreads across a significant part of the network. Theoretical and simulation comparisons of the contagion conditions for the Poisson and Scale Free networks were made. Secondly, theoretically and by simulations it was shown that the empirical phenomena of positive correlation between the number of banks-borrowers and banks-lenders of a bank in the Financial Network ("in/out" degree correlation) reduces the likelihood of contagion. Thirdly, the expressions for the probability of default contagion conditional on the default of a random bank and the extent of default contagion were derived and verified by comparison with simulations results. The "robust-yet-fragile" property of the financial network was verified. Fourthly, the model was adjusted allowing the exogenous probability of "cure" of a defaulted bank at any period of time, and interpreted as a SIS model. The solution for the final fraction of insolvent banks and contagion condition were derived via Mean Field analysis. In the adjusted set up the effect of "in/out" degree correlation on the default contagion condition was investigated. In the adjusted setup the nonmonotonic effect of the variance of the degree distribution on the likelihood of contagion was deduced.

3) Ekaterina Pushkareva

Topic: “Stock Market Liquidity When Some Investors are Not Working”
Supervisor: Sergey Gelman, PhD University of Muenster, Germany

Abstract: Stock market liquidity is important for market participants, as it provides basis for making a prompt buy or sell. The existing literature, however, states that liquidity may be worsened due to presence of informed players on the market. In the following work the hypothesis about liquidity changes of stock traded on MOEX due to exclusion of various investor groups was tested. Namely, Russian (assumed to be informed) and foreign (assumed to be not informed) groups of investors were considered. It was supposed, that the absence of informed traders would improve the liquidity benchmarks. The exclusion of investor groups was done in a natural way via unique foreign holidays and time lags. For Russia holidays during which MOEX works were considered. The analysis was performed on high-frequency trading data. Results obtained partially supported the hypothesis testes. Indeed, exclusion of Russian investors from continuous trading improved liquidity measures. At the same time, exclusion of uninformed foreign investors also improved liquidity. As the extension of work and search for possible reasons of partial unconformity to hypothesis, it was suggested to extend the data sample and test the impact of the lack of news on liquidity, which happens during holidays and in hours when stock exchanges do not work simultaneously.

4) Pavel Taranin

Topic: “Empirical Test of Threshold Utility Functions”
Supervisor: Alexis Belyanin, PhD University of Manchester, UK

Abstract: This paper hinges on and brings together two strands of the literature: representations of preferences allowing for nontransitive indifferences, and structural econometric estimation of individual utility functionals. Our analysis showed that even for the mentally demanding tasks, high proportion of people never doubts and always chooses some alternative. On the other hand people who sometimes doubt doubt differently from each other. In terms of threshold function, subjects showed considerable diversity with additive and multiplicative models occurring more frequently in comparison with constant threshold. The most widespread model of preferences is semiorder (33% of all respondents) with biorder holding the second place (22%). Interval order performed rather poorly on our data set, almost never appearing as the best fit model. In the second part of our research we supported these findings by direct examination of the complete graph of preferences of individuals. Almost all subjects had some degree of intransitivity in their preferences and it was discovered that the degree of intransitivity is statistically different for the subject with primary model of biorder comparing to semiorder, which is predicted by theoretical models. Furthermore, in order to check the statistical difference, we created our own index of transitive rationality, which is easy to compute, is independent of any preference or utility model and can be easily reproduced.

5) Дударева Юлия

Topic: “Growth and Intergenerational Debt”
Supervisor: Udara Peiris, PhD Oxford University, UK

Abstract: The aim of this study is to extend our knowledge of the nature of intergenerational transfers between parents and children. The paper develops the model that captures parents` two separate motives for transfers to children: altruism towards their children and “parental repayment hypothesis” with bequests replaced by implicit debt contracts between parents and children with endogenous rate of return. Using a three-period OLG model, we found that, firstly, private intergenerational transfer is inefficient; secondly, publicly funded social security system may be welfare enhancing; finally, calibration to the Philippines data show the reasonable level of rate of return, but higher optimal tax rate than the Philippine economy had from 1980 to 2000. This paper suggests the reason of the fact that parents invest in children’s education in developing countries followed by upwards transfers from adult children to elderly parents. It proposes that parent`s decisions to invest in human capital of their children is motivated by two separated motives: altruistic motive, because parents want ``a better life`` for their children that could be provided by education and self-interest that return to children`s education that generates transfer to the elderly parents, because of the reliance of parents on their children for support in old age. The model is expected to be useful to assess the effects of the social security system, the conditions of technology and preferences and shocks to the variables in countries without fundamental technological growth such as primitive hunter-gathering societies or more advanced de-trended economies with underdeveloped social security system. The result is expected to shed light on how the family support system will respond to government programs targeted to improvement of welfare.

6) Костырина Ангелина

Topic: “Winners And Losers in the Race of Sanctions”
Supervisor: Luca Gelsomini, PhD University of Warwick, UK

Abstract: This paper uses framework of Computable General Equilibrium models to isolate and estimate effect of counter-sanctions imposed by Russian Federation mainly on welfare of Russian citizens. GTAP8inGAMS is used for this sake and embargo is modeled through changes of import tariffs in relevant production sectors. Output of the model also allowed evaluating changes in domestic production and price levels, as well as movements in trade flows from countries outside the ban-list.

ICEF congratulates students and their supervisors with their great achievement!