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After a short historical perspective on the emergence of robo-advisors and an overview of how they manage other people's money, we evaluate the performance of five German robo-advisors in the period between May 2015 and December 2018. Performance tests are conducted using Sharpe's (1966) and Jensen's (1968) performance methodologies. We also employ the returns-based style analysis of Sharpe (1992) to determine the exposure of robo-advisors to different non-overlapping asset classes. We report the following findings: First, no robo-advisor was able to beat the benchmark before or after considering fees. Second, robo-advisor performance varies greatly in the sample period even for portfolios that should appeal to clients with similar risk preferences. Third, these performance differences remain unexplained after accounting for the different asset allocations.
We compare the pre- and post-2010 Hungarian political regimes through the lens of pension policies. We label the pre-2010 regime as democratic populist because it was characterized by fiscally irresponsible policies, yet it maintained the system of checks and balances and the rule of law. In contrast, we call the post-2010 regime authoritarian populist as it has employed authoritarian political techniques while maintained popular legitimation through regular elections. To substantiate the difference between the two periods from an economic viewpoint, we compare pre- and post-2010 pension policies to find important differences as well as surprising similarities. In particular, we analysed the following five policy aspects: (a) reform and partial privatization of the government-run pension system, (b) policies on the statutory (normal) and the effective (average) pension age, (c) indexation, (d) progression in benefits calculations and progressivity in the personal income tax, and (e) contribution rates. Based on ideological preferences, we argue that one would expect the pension system to become financially more sustainable but less redistributive after 2010 in comparison to the preceding period. Yet, we find that although pro-poor redistribution through the pension system has indeed been curtailed, fiscal sustainability has not improved due to the erratic policies.
This study examines the effect of parental job loss on adolescents' school completion during the secondary school years and the moderating role of home environment in that effect. It uses rich survey data from Hungary on adolescents between 14 and 21 years of age, with detailed measures of parental employment and home environment. The study replicates the average negative effect found in the literature. No effect is found for families with a history of providing a cognitively stimulating home environment, but the negative effect is strong for other families. Home environment matters more than initial income in moderating the effect. The results highlight the protective nature of a cognitively stimulating home environment.
Many papers have analyzed the effects of foreign acquisition on firm productivity, articulating its positive impacts. However, an important issue remains: is there a general foreign acquisition effect, or is there any heterogeneity in the effects? This paper reports on the analysis of over 3,400 majority foreign acquisitions in Hungary. The main result (which exists in a propensity score matching sample as well) of the difference-in-differences analysis is that only acquirers from higher income countries foster labor productivity significantly — and this effect increases with the income gap between Hungary and the country of origin -, while acquirers from lower income countries do not induce statistically significant effects.
Trust in financial institutions can be seen as a foundation for loyalty and profits in the banking industry and is relevant for the macro economy as well. Young customers are more likely to lack trust due to their lack of personal experience in finance, although parental advice may lower their risk. In this paper the authors combine trust measures with intergenerational communication theory and test it on a large dyadic sample using Z-scores. The results show a strong, holistic intergenerational effect on institutional trust, but shed light on heterogeneity in the sample due to gender, financial independence and different communication styles.
A basic principle of economics is that people always prefer a larger set of opportunities. Money illusion can be considered as the phenomenon when people may not correctly perceive their budget constraints, and may act in ways that run counter to this preference. In this interpretation, money illusion is a cognitive bias, worthwhile to overcome. Herein I argue that taking a view of human decision-making based on certain strands of cognitive psychology, one can reinterpret the evidence for money illusion in two ways. First, I claim that money illusion is inescapable to some extent, and saying that we suffer from it is similar to alleging that we experience optical illusions, only because we are unable to see, say, individual atoms. Second, taking a view on “preferences” different from the traditional one, I contend that it may bring little benefit to get rid of money illusion even in the cases where it is possible to do so. To follow up the visual analogy, even if we can improve our eyesight it is not obviously desirable. These arguments seem to lead to a Candidean disposition: there is no possible improvement on the state of affairs as far as “money illusion” is concerned. Nonetheless, I will make some positive proposals concerning economic policy and economics research.
The twenty-first century brought with it the proliferation of new media. We carry mobile devices and smartphones with us nearly everywhere we go. Constantly hooked up to the world by these tools, the bigger question is why we are sometimes not available. Our personal networks have partly migrated to online social networks, and new networks now penetrate our everyday lives in the digital sphere. In this online survey research, the authors searched for insights into how important smartphones and Facebook, the most popular social media site in Hungary, have become in people's lives. The kinds of attitudes that characterise the use of these tools were analysed, especially in the case of privacy and the use of personal data. The aim of this research — by establishing the actual situation — is to show how modern media, publicity, and privacy are linked, and how people reveal themselves by their constant media presence.
The global automotive industry has been exposed to an overproduction crisis for several decades. Under the pressure of restructuring, automotive companies renew both the geographical scope and the technological standardization of their production processes. We analyze the effects this restructuring had on the development of European economies in order to understand whether vertical specializations in the automotive value chain can lead to Central and Eastern European countries’ catching up to advanced economies, or whether such specializations reproduce new forms of core-periphery relations. In order to answer this question, we introduce a new methodological approach to understand vertical specialization in the global value chain from a semi-peripheral perspective. We combine the theory of global value chains with Vernon's product life-cycle theory. In the research we focus on the standardization of the production of electric engines behind the geographical relocation of production between core and periphery.
We set up an agent-based macro-model that focuses on the consumption-saving decision. Agents do not maximize utility, but their behaviour features certain “rational” aspects of human choice based on the idea of ecological rationality. Three qualitatively different saving strategies are defined: 1, buffer stock saving (prudent and forward looking); 2, permanent income saving (forward looking without prudence); and 3, myopic saving (caring only about immediate consumption). It is found that prudent saving behaviour becomes prevalent when the selection pressure is very high, but an economy comprising only prudent households tends to accumulate capital in excess of what is implied by the Golden Rule. Lowering the intensity of evolutionary forces results in more diversity in saver types, and, somewhat puzzlingly, may be socially beneficial in some sense.
In this contribution, we evaluate the performance of the Supreme Audit Office's (SAO) audit activity in the Visegrad Four (V4) countries. We focus on the analysis of the control activities of the SAO of the Slovak Republic and we compare the results with other countries. We focused on the SAO's function control, according to the number of controls undertaken over the period 2014–2016, and evaluated an auditors's burden (the number of controls performed by one inspector). We state the positives, but also the risks of expanding the area of control over the self-government bodies, and we put forward proposals to reduce these risks. Slovakia, the Czech Republic, Hungary and Poland have the same or similar historical trajectories, cultural and intellectual values and they share common roots of religious traditions. Therefore we assume that they may display certain key similarities in institutional development, including in the area of public finance control. We review how these countries have worked in the area today, with a focus on the period between 2014 and 2016.
