Christos Ioannidis

Intercountry Differences in the Relationship between Relative Price Variability and Average Prices

This paper provides new evidence on the relationship between relative price variability and inflation. The model uses a consistently defined data set for nine European countries. It benefits from the inclusion and testing of the effects of macroeconomic variables and the incorporation into the measures of inflation and dispersion adjustments for timeliness, appropriate formulas, and proximity. The general findings of an effect on relative price variability by the macroeconomic environment and negative coefficients on unexpected inflation are supported by their occurrence in models estimated by seemingly unrelated regression and a robust systems estimator.

Investments and Trade-offs in the Economics of Information Security

We develop and simulate a dynamic model of investment in information security. The model is based on the recognition that both IT managers and users appreciate the trade-off between two of the fundamental characteristics of information security, namely confidentiality and availability. The models parameters can be clustered in a manner that allows us to categorize and compare the responses to shocks of various types of organizations. We derive the systems stability conditions and find that they admit a wide choice of parameters. We examine the systems responses to the same shock in confidentiality under different parameter constellations that correspond to various types of organizations. Our analysis illustrates that the response to investments in information security will be uniform in neither size nor time evolution.

Information security trade-offs and optimal patching policies

We develop and simulate a basic mathematical model of the costly deployment of software patches in the presence of trade-offs between confidentiality and availability. The model incorporates representations of the key aspects of the system architecture, the managers’ preferences, and the stochastic nature of the threat environment. Using the model, we compute the optimal frequencies for regular and irregular patching, for both networks and clients, for two example types of organization, military and financial. Such examples are characterized by their constellations of parameters. Military organizations, being relatively less cost-sensitive, tend to apply network patches upon their arrival. The relatively high cost of applying irregular client patches leads both types of organization to avoid deployment upon arrival.

Economics of Information Security and Privacy

The Workshop on the Economics of Information Security was established in 2002 to bring together computer scientists and economists to understand and improve the poor state of information security practice. WEIS was borne out of a realization that security often fails for non-technical reasons. Rather, the incentives of both - fender and attacker must be considered. Earlier workshops have answered questions ranging from?nding optimal levels of security investement to understanding why privacy has been eroded. In the process, WEIS has attracted participation from the diverse?elds such as law, management and psychology. WEIS has now established itself as the leading forum for interdisciplinary scholarship on information security. The eigth installment of the conference returned to the United Kingdom, hosted byUniversityCollegeLondononJune24-25,2009.Approximately100researchers, practitioners and government of?cials from across the globe convened in London to hear presentations from authors of 21 peer-reviewed papers, in addition to a panel and keynote lectures from Hal Varian (Google), Bruce Schneier (BT Co- terpane), Martin Sadler (HP Labs), and Robert Coles (Merrill Lynch). Angela Sasse and David Pym chaired the conference, while Christos Ioannidis and Tyler Moore chaired the program committee.

Information costs and liquidity effects from changes in the FTSE 100 list

Abstract In this paper we examine the stock price effect of changes in the composition of the FTSE 100 over the time period of 1984–2001. Like the S&P 500 listing studies, we find that the price and trading volume of newly listed firms increases. The evidence is consistent with the information cost/liquidity explanation. This is because investors hold stocks with more available information, implying that they have lower trading costs. This explains the increase in the stock price and trading volume of newly listed stocks to the FTSE 100 List. We find the reverse effect for the deletions from the FTSE 100.

Fixed Costs, Investment Rigidities, and Risk Aversion in Information Security: A Utility-theoretic Approach.

This paper addresses the question of determining the optimal timing of interventions in information security management. Using utility theory, we derive the limiting condition under which, given a potential or realized risk, a decision to invest, delay, or abandon can be justified. Our primary focus is on the decision to defer costly deterministic investments, such as the removal of a service or implementation of a security patch, when the costs associated with future security vulnerabilities are uncertain. We outline an investment function with irreversible fixed costs that introduces a rigidity into the investment decision-making profile. This rigidity introduces delay in the implementation of security measures, resulting in cyclical investments in information security, as the decision-maker determines the optimal investment horizon. We therefore show that cycles emerge endogenously given the policy-maker’s chosen trade-offs between investment and the deterioration of the system attributes.

The Relationship Between Bank Efficiency and Stock Returns: Evidence from Asia and Latin America

This paper examines the relationship between bank efficiency change and stock price returns. We first estimate the cost and profit efficiency of a sample of Asian and Latin American listed banks over the period 2000-2006 while controlling for cross-country differences such as regulations and the macroeconomic environment. We then regress the annual efficiency changes on stock returns. The results indicate a positive and robust relationship between profit efficiency changes and stock returns. However, we find no evidence that cost efficiency changes are reflected in stock returns. We also find that profit efficiency better explains bank stock returns compared to traditional accounting profits measures (ROE). Overall, we conclude that profit efficiency measures include useful information for shareholders wishing to explain bank stock returns.

Empirical evidence on the relationship between the term structure of interest rates and future real output changes when there are changes in policy regimes

Abstract In this article we test for the structural stability of an output growth forecasting equation that includes the term structure of interest rates as a regressor, for the USA and Canada. We are able to confirm that there is parameter instability as the coefficient associated with the term structure is reduced in size as the policy maker becomes more averse to inflation. Our empirical results are in accordance with the theoretical predictions.

Estimating exact hedonic indexes: An application to UK television sets

Much attention has been given to the estimation of hedonic regressions given their potential use as a means to adjust consumer and producer price indices for quality changes. However, there has been warranted criticism over the methods used, particularly relating to the econometric specification of the models. Much of the criticism has arisen from the inability of available data to match the requirements of a fully specified model. Using EPOS scanner data for UK television sets we provide reliable hedonic estimates which incorporate several developments. Such data are available for a wide range of product areas and this application illustrates how they might be used. We develop methodology to help surmount problems arising from omitted variables, the coexistence of new and old models, weighting of observations and quality changes common to all models. More specifically we pay particular attention to the neglected area of product markets where pricing is above marginal cost.

Chained, exact and superlative hedonic price changes: estimates from microdata

Scanner data are used to calculate chained, exact (and superlative) hedonic price indexes for television sets. The data source is available for a wide range of goods, the application providing an example of how this method can be more widely applied. The indexes correspond to constant utility, hedonic cost-of-living indexes. The approach improves on the existing direct method, which takes its estimates directly from the coefficients on time dummies in a hedonic regression. It also improves on the matched model method used by statistical agencies. The differences between actual price changes and exact hedonic quality-adjusted price changes are found to be substantial. Base-period and current-period weighted exact hedonic indexes are similar, thus providing good approximations to a superlative index. Estimates from the direct, dummy variable approach were compared to the superlative indexes. The disparities between the results argue for caution in the use of the direct, dummy variable approach to estimating quality-adjusted price changes.