Racial and spatial interaction for neighborhood dynamics in Chicago

We look at at the empirical validity of Schelling’s models for racial residential segregation applied to the case of Chicago. Most of the empirical literature has focused exclusively the single neighborhood model, also known as the tipping point model and neglected a multineighborhood approach or a unified approach. The multi-neighborhood approach introduced spatial interaction across the neighborhoods, in particular we look at spatial interaction across neighborhoods sharing a border. An initial exploration of the data indicates that spatial contiguity might be relevant to properly analyse the so call tipping phenomena of predominately non-Hispanic white neighborhoods to predominantly minority neighborhoods within a decade. We introduce an econometric model that combines an approach to estimate tipping point using threshold effects and a spatial autoregressive model. The estimation results from the model disputes the existence of a tipping point, that is a discontinuous change in the rate of growth of the non-Hispanic white population due to a small increase in the minority share of the neighborhood. In addition we find that racial distance between the neighborhood of interest and it surrounding neighborhoods has an important effect on the dynamics of racial segregation in Chicago.

Synthetic portfolio for event studies: Estimating the effects of volatility call auctions

We propose a method denoted as synthetic portfolio for event studies in market microstructure that is particularly interesting to use with high frequency data and thinly traded markets. The method is based on Synthetic Control Method and provides a robust data driven method to build a counterfactual for evaluating the effects of the volatility call auctions. We find that SMC could be used if the loss function is defined as the difference between the returns of the asset and the returns of a synthetic portfolio. We apply SCM to test the performance of the volatility call auction as a circuit breaker in the context of an event study. We find that for Colombian Stock Market securities, the asynchronicity of intraday data reduces the analysis to a selected group of stocks, however it is possible to build a tracking portfolio. The realized volatility increases after the auction, indicating that the mechanism is not enhancing the price discovery process.