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Stefan Voigt

Publications and source records attributed to Stefan Voigt.

3 recordsLinked to original sources

Culture and constitutional compliance

Constitutions as the formal foundation of a country's legal and political system have important economic and political effects. Yet, we still know little about why constitutions set effective constraints on politicians in some societies, while being largely disregarded in others. Here, we ask if national culture matters for constitutional compliance. We study a cross-section of 115 countries, making use of novel indicators of constitutional compliance. We find that societies with a more individualistic population exhibit higher levels of compliance. These results are robust and extend to instrumental variables estimations. They imply a novel transmission channel from cultural traits to long-term economic development: individualistic national culture increases the credibility of constitutional self-commitments. Our analysis also supports the more general idea that the effects of formal institutions depend on the informal institutional environment in which they are embedded. Regarding religion, our results are consistent with past research that attributes the lack of development in the modern Muslim world to deficient institutional quality.

econ.GN

Building Trust Takes Time: Limits to Arbitrage for Blockchain-Based Assets

A blockchain replaces central counterparties with time-consuming consensus protocols to record the transfer of ownership. This settlement latency slows cross-exchange trading, exposing arbitrageurs to price risk. Off-chain settlement, instead, exposes arbitrageurs to costly default risk. We show with Bitcoin network and order book data that cross-exchange price differences coincide with periods of high settlement latency, asset flows chase arbitrage opportunities, and price differences across exchanges with low default risk are smaller. Blockchain-based trading thus faces a dilemma: Reliable consensus protocols require time-consuming settlement latency, leading to arbitrage limits. Circumventing such arbitrage costs is possible only by reinstalling trusted intermediation, which mitigates default risk.

q-fin.TR

Large-Scale Portfolio Allocation Under Transaction Costs and Model Uncertainty

We theoretically and empirically study portfolio optimization under transaction costs and establish a link between turnover penalization and covariance shrinkage with the penalization governed by transaction costs. We show how the ex ante incorporation of transaction costs shifts optimal portfolios towards regularized versions of efficient allocations. The regulatory effect of transaction costs is studied in an econometric setting incorporating parameter uncertainty and optimally combining predictive distributions resulting from high-frequency and low-frequency data. In an extensive empirical study, we illustrate that turnover penalization is more effective than commonly employed shrinkage methods and is crucial in order to construct empirically well-performing portfolios.

q-fin.PM