nep-fmk New Economics Papers
on Financial Markets
Issue of 2006‒02‒26
fifty-two papers chosen by
Carolina Valiente
London South Bank University

  1. Creating an efficient financial system : challenges in a global economy By Beck, Thorsten
  2. Determinants of deposit-insurance adoption and design By Laeven, Luc; Kane, Edward J.; Demirguc-Kunt, Asli
  3. Banks, Financial Markets and Growth By Luca Deidda; Bassam Fattouh
  4. Determinants of Spreads on Sovereign Bank Loans: The Role of Credit History By Péter Banczúr; Cosmin Ilut
  5. Improved corporate governance: market reaction and liquidity implications By GONZALO CHAVEZ; ANA CRISTINA SILVA
  6. Securitization and the Declining Impact of Bank Finance on Loan Supply: Evidence from Mortgage Acceptance Rates By Elena Loutskina; Philip E. Strahan
  7. Diagnosing Discrimination: Stock Returns and CEO Gender By Justin Wolfers
  8. Listening to the Market: Estimating Credit Demand and Supply from Survey Data By Satoru Kanoh; Chakkrit Pumpaisanchai
  9. Evaluation of macroeconomic models for financial stability analysis By Gunnar Bårdsen; Kjersti-Gro Lindquist; Dimitrios P. Tsomocos
  10. Regional and Global Financial Integration in East Asia By Soyoung Kim; Jong-Wha Lee; Kwanho Shin
  11. Evaluation of macroeconomic models for financial stability analysis By Gunnar Bårdsen; Kjersti-Gro Lindquist; Dimitrios P. Tsomocos
  12. Competitive implications of cross-border banking By Claessens, Stijn
  13. Offshore Financial Centers: Parasites or Symbionts? By Andrew K. Rose; Mark Spiegel
  14. Evaluation of macroeconomic models for financial stability analysis By Gunnar Bardsen; Kjersti-Gro Lindquist; Dimitrios P.Tsomocos
  15. Habit formation and the transmission of financial crises By Melisso Boschi; Aditya Goenka
  16. Exchange rate regimes and exchange market pressure in the new EU member countries By Van Poeck A.; Vanneste J.; Veiner M.
  17. Understanding and Forecasting Stock Price Changes By Pedro N. Rodríguez,; Simón Sosvilla-Rivero
  18. Optimal Market Timing By Erica X. N. Li; Dmitry Livdan; Lu Zhang
  19. The Making of an Investment Banker: Macroeconomic Shocks, Career Choice, and Lifetime Income By Paul Oyer
  20. Optimal Value and Growth Tilts in Long-Horizon Portfolios By Jakub W. Jurek; Luis M. Viceira
  21. Price Linkages between Stock, Bond and Housing Markets - Evidence from Finnish Data By Elias Oikarinen
  22. Monetary Policy in the Euro-Area: An Analysis Using a Stylized New-Keynesian Model By Garretsen H.; Moons C.; van Aarle B.
  23. Subsidiarity portfolios and separation compacts to enhance the governance of state-owned banks By Rodolfo Apreda
  24. Collateral and Risk Sharing in group lending: evidence from an urban microcredit program By Maurice Kugler; Rossella Oppes
  25. Valuation in Over-the-Counter Markets By Darrell Duffie; Nicolae Garleanu; Lasse Heje Pedersen
  26. Five Open Questions About Prediction Markets By Justin Wolfers; Eric Zitzewitz
  27. Life is Cheap: Using Mortality Bonds to Hedge Aggregate Mortality Risk By Leora Friedberg; Anthony Webb
  28. Corporate Responsibility Practices of Emerging Market Companies By Jeremy Baskin; Kathryn Gordon
  29. Modelling Memory of Economic and Financial Time Series By Peter M Robinson
  30. Alternative Tax-Benefit Strategies to Support Children in the European Union. Recent Reforms in Austria, Spain and the UK By Levy, Horacio; Lietz, Christine; Sutherland, Holly
  31. The return to firm investment in human capital By Carneiro, Pedro; Almeida, Rita
  32. Do Hot Hands Persist Among Hedge Fund Managers? An Empirical Evaluation By Ravi Jagannathan; Alexey Malakhov; Dmitry_Novikov
  33. A TWO FACTOR LONG MEMORY STOCHASTIC VOLATILITY MODEL By Helena Veiga
  34. Down or Out: Assessing the Welfare Costs of Household Investment Mistakes By Laurent E. Calvet; John Y. Campbell; Paolo Sodini
  35. Board structure, Ownership structure, and Firm performance : Evidence from Banking By Mohamed Belkhir
  36. An Elementary Model of Price Dynamics in a Financial Market Distribution, Multiscaling & Entropy By Stefan Reimann
  37. Banking with sentiments. A model of fiduciary interactions in micro-credit programs By Vittorio Pelligra
  38. Capital Controls: An Evaluation By Carmen Rienhart
  39. A General Equilibrium Model of Signaling and Exchange By Kjell Hausken
  40. Improving the System of Investor-State Dispute Settlement By Katia Yannaca-Small
  41. Una aproximación a la dinámica de las tasas de interés de corto plazo en Colombia a través de modelos GARCH multivariados By Luis Fernando Melo Velandia; Oscar Reinaldo Becerra Camargo
  42. Does one size fit all? A Taylor-rule based analysis of monetary policy for current and future EMU members By Moons C.; Van Poeck A.
  43. The Importance of Default Options for Retirement Savings Outcomes: Evidence from the United States By John Beshears; James J. Choi; David Laibson; Brigitte C. Madrian
  44. Finance and the Cambridge Equation: A Commentary Note By MAN-SEOP PARK
  45. Portfolio Choice when Managers Control Returns By Egil Matsen
  46. Les marchés des investisseurs institutionnels sont-ils efficients : cas des fonds de pension et des unit trusts britanniques By Kamel Laaradh
  47. The Impact of Foreign Direct Investment in Japan: Case Studies of the Automobile, Finance, and Health Care Industries By Ralph Paprzycki
  48. Informed Capital in a Hostile Environment : The Case of Relational Investors in Germany By Dorothea Schäfer ; Dirk Schilder
  49. Money, credit and Smithian growth in Tokugawa Japan By Osamu Saito; Tokihiko Settsu
  50. Legal-Political Factors and the Historical Evolution of the Finance-Growth Link By Michael D. Bordo; Peter L. Rousseau
  51. Investment and Uncertainty By Christopher F. Baum; Mustafa Caglayan; Oleksandr Talavera
  52. Exchange Rate Targeting in a Small Open Economy By Mette Ersbak Bang Nielsen

  1. By: Beck, Thorsten
    Abstract: Financial sector development fosters economic growth and reduces poverty by widening and broadening access to finance and allocating society ' s savings more efficiently. The author first discusses three pillars on which sound and efficient financial systems are built: macroeconomic stability and effective and reliable contractual and informational frameworks. He then describes three different approaches to government involvement in the financia l sector: the laissez-faire view, the market-failure view and the market-enabling view. Finally, the author analyzes the sequencing of financial sector reforms and discusses the benefits and challenges that emerging markets face when opening their financial systems to international capital markets.
    Keywords: Banks & Banking Reform,Financial Intermediation,Financial Crisis Management & Restructuring,Economic Theory & Research,Insurance & Risk Mitigation
    Date: 2006–02–01
    URL: http://d.repec.org/n?u=RePEc:wbk:wbrwps:3856&r=fmk
  2. By: Laeven, Luc; Kane, Edward J.; Demirguc-Kunt, Asli
    Abstract: The authors seek to identify factors that influence decisions about a country ' s financial safety net, using a new dataset on 170 countries covering the 1960-2003 period. Specifically, they focus on how outside influences, economic development, crisis pressures, and political institutions affect deposit insurance adoption and design. Controlling for the influence of economic characteristics and events such as macroeconomic shocks, occurrence and severity of crises, and insti tutional development, they find that pressure to emulate developed-country regulatory frameworks and power-sharing political institutions dispose a country toward adopting design features that inadequately control risk-shifting.
    Keywords: Banks & Banking Reform,Economic Theory & Research,Financial Intermediation,Insurance & Risk Mitigation,Financial Crisis Management & Restructuring
    Date: 2006–02–01
    URL: http://d.repec.org/n?u=RePEc:wbk:wbrwps:3849&r=fmk
  3. By: Luca Deidda; Bassam Fattouh
    Abstract: We analyze the interaction between bank and market finance in a model where bankers gather information through monitoring and screening.We show that,if a market is established characterized by a disclosure law such that entrepreneurs wishing to raise market finance can credibly disclose their sources of financing,this might undermine bankers'incentive to screen,even when screening is effcient.Correspondingly,other things being equal,the change from a bank-based system to one in which market-finance and bank-finance coexist might have an adverse affect on economic growth.Consistent with this result,our empirical findings suggest that,althoug both bank and stock market development have a positive effect on growth, the growth impact of bank development is reduced by the development of the stock market.
    Keywords: Bank-finance, Market-finance, Economic Growth, Monitoring, Screening
    JEL: G10 G20 E44 O40
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:cns:cnscwp:200511&r=fmk
  4. By: Péter Banczúr (Magyar Nemzeti Bank and Central European University); Cosmin Ilut (Northwestern University)
    Abstract: This paper is an empirical investigation into the role of credit history in determining the spread on sovereign bank loans. It employs an error-in-variables approach used in rational-expectations-macro-econometrics to set up a structural model that links sovereign loan spreads to realized repayment behavior. Unlike the existing empirical literature, its instrumental variables method allows for distinguishing a direct influence of past repayment problems (a ”pure reputation” effect) from one that goes through increased default probabilities. Using developing country data from the period 1973-1981 and constructing continuous variables for credit history, we find that past default is a significant determinant of the spread, even after including country fixed effects. Moreover, its reduced-form effect is very similar to its structural form effect, indicating that most of the influence of past repayment problems is through the reputation channel. Overall, past and predicted future default are substantial determinants of sovereign bank loan spreads.
    Keywords: reputation, sovereign bank loan spreads, default risk, rational expectations.
    JEL: F30 F34 G12 G14 G15
    Date: 2006
    URL: http://d.repec.org/n?u=RePEc:mnb:wpaper:2006/1&r=fmk
  5. By: GONZALO CHAVEZ (Instituto de Empresa); ANA CRISTINA SILVA (Instituto de Empresa)
    Abstract: We study the market price reaction and liquidity impact that firms experience when they are incorporated into the differentiated corporate governance listing segments of the Sao Paulo Stock Exchange. The Brazilian market is of special interest since it allows us to analyze the effect of improved governance while keeping the market microstructure unchanged. The market price reaction is positive and significant when a firm announces its decision to commit to greater transparency and minority shareholder protection. We also find that shares with voting rights experience a stronger price reaction than non-voting shares.
    Keywords: Corporate governance, Emerging markets, Event study, Liquidity costs, Special segments
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:emp:wpaper:wp06-08&r=fmk
  6. By: Elena Loutskina; Philip E. Strahan
    Abstract: This paper shows that securitization reduces the influence of bank financial condition on loan supply. Low-cost funding and increased balance-sheet liquidity raise bank willingness to approve mortgages that are hard to sell (jumbo mortgages), while having no effect on their willingness to approve mortgages easy to sell (non-jumbos). Thus, the increasing depth of the mortgage secondary market fostered by securitization has reduced the impact of local funding shocks on credit supply. By extension, securitization has weakened the link from bank funding conditions to credit supply in aggregate, thereby mitigating the real effects of monetary policy.
    JEL: G2
    Date: 2006–01
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11983&r=fmk
  7. By: Justin Wolfers
    Abstract: A vast labor literature has found evidence of a “glass ceiling”, whereby women are under-represented among senior management. A key question remains the extent to which this reflects unobserved differences in productivity, preferences, prejudice, or systematically biased beliefs about the ability of female managers. Disentangling these theories would require data on productivity, on the preferences of those who interact with managers, and on perceptions of productivity. Financial markets provide continuous measures of the market’s perception of the value of firms, taking account of the beliefs of market participants about the ability of men and women in senior management. As such, financial data hold the promise of potentially providing insight into the presence of mistake-based discrimination. Specifically if female-headed firms were systematically under-estimated, this would suggest that female-headed firms would outperform expectations, yielding excess returns. Examining data on S&P 1500 firms over the period 1992-2004 I find no systematic differences in returns to holding stock in female-headed firms, although this result reflects the weak statistical power of our test, rather than a strong inference that financial markets either do or do not under-estimate female CEOs.
    JEL: G14 G3 J16 J4
    Date: 2006–01
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11989&r=fmk
  8. By: Satoru Kanoh; Chakkrit Pumpaisanchai
    Abstract: The literature referring to the credit slowdown has been plagued by the identification problem of whether a decline in a bank's credit is derived from the demand or the supply side. This paper proposes an original approach in directly estimating the credit demand and the credit supply from survey data. Using the TANKAN and the recently published Senior Loan Officer survey data, the paper demonstrates that the observed lending amount did not change much during the period of study; however, the observed lending amount deviated, as one might expect, from the estimated credit demand and credit supply for every firm size. This credit mismatch presents evidence of credit market imperfections and is of interest for further investigation as a possible explanation of firms' liquidity constraints and banks' lending mechanisms.
    Keywords: Credit demand, Credit supply, Survey data, Japanese Economy
    JEL: C42 C51 E10 O53
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-137&r=fmk
  9. By: Gunnar Bårdsen (NTNU, Department of Economics and Norges Bank (Central Bank of Norway)); Kjersti-Gro Lindquist (Norges Bank (Central Bank of Norway)); Dimitrios P. Tsomocos (Saïd Business School and St. Edmund Hall, Oxford University)
    Abstract: As financial stability has gained focus in economic policymaking, the demand for analyses of financial stability and the consequences of economic policy has increased. Alternative macroeconomic models are available for policy analyses, and this paper evaluates the usefulness of some models from the perspective of financial stability. Financial stability analyses are complicated by the lack of a clear and consensus definition of ‘financial stability’, and the paper concludes that operational definitions of this term must be expected to vary across alternative models. Furthermore, since assessment of financial stability in general is based on a wide range of risk factors, one can not expect one single model to satisfactorily capture all the risk factors. Rather, a suite of models is needed. This is in particular true for the evaluation of risk factors originating and developing inside and outside the financial system respectively.
    Keywords: Financial stability; Banks; Default; Macroeconomic models; Policy
    JEL: E1 E4 E5 G1 G2
    Date: 2006–02–15
    URL: http://d.repec.org/n?u=RePEc:bno:worpap:2006_01&r=fmk
  10. By: Soyoung Kim; Jong-Wha Lee; Kwanho Shin
    Abstract: We examine the degree of regional vs. global financial integration of East Asian countries in three ways; (1) comparing the size of cross-border assets such as securities and bank claims (2) estimating the gravity model of bilateral financial asset holdings (3) estimating consumption risk sharing model. The results suggest that East Asian financial markets, particularly compared to the European ones, are relatively less integrated with each other than to global markets. We also find relatively more evidence of regional financial integration in bank claim markets than portfolio asset markets. The low financial integration within East Asia is attributed to the low incentives for portfolio iversification within the region, the low degree of development and deregulation of financial markets, and the instability in monetary and exchange rate regime.
    URL: http://d.repec.org/n?u=RePEc:iek:wpaper:0602&r=fmk
  11. By: Gunnar Bårdsen (Department of Economics, Norwegian University of Science and Technology, Norway); Kjersti-Gro Lindquist (Bank of Norway); Dimitrios P. Tsomocos (Saïd Business School and St. Edmund Hall, Oxford University, United Kingdom)
    Abstract: As financial stability has gained focus in economic policymaking, the demand for analyses of financial stability and the consequences of economic policy has increased. Alternative macroeconomic models are available for policy analyses, and this paper evaluates the usefulness of some models from the perspective of financial stability. Financial stability analyses are complicated by the lack of a clear and consensus definition of ‘financial stability’, and the paper concludes that operational definitions of this term must be expected to vary across alternative models. Furthermore, since assessment of financial stability in general is based on a wide range of risk factors, one can not expect one single model to satisfactorily capture all the risk factors. Rather, a suite of models is needed. This is in particular true for the evaluation of risk factors originating and developing inside and outside the financial system respectively.
    Keywords: Financial stability; Banks; Default; Macroeconomic models; Policy
    JEL: E1 E4 E5 G1 G2
    Date: 2006–02–14
    URL: http://d.repec.org/n?u=RePEc:nst:samfok:6806&r=fmk
  12. By: Claessens, Stijn
    Abstract: This paper reviews the recent literature on cross-border banking, with a focus on policy implications. Cross-border banking has increased sharply in recent decades, particularly in the form of entry, and has affected the development of financial systems, access to financial services, and stability. Reviewing the empirical literature, the author finds much, although not uniform, evidence that cross-border banking supports the development of an efficient and stable financial system that offers a wide access to quality financial services at low cost. But as better financial systems have more cross-border banking, the relationship between cross-border banking and competitiveness has to be carefully judged. While developing countries have some special conditions, provided a minimum degree of oversight is in place, they experience effects similar to industrial countries. There are some questions, though, on the effects of cross-border banking on lending based on softer information and on stability. Relevant experiences from capital markets show that the degree of cross-border financial activities can affect local market sustainability and there can be path dependency when opening up to cross-border competition. Reviewing the fast changing landscape of financial services provision, the author argues that cross-border banking highlights the increased importance of competition policy in financial services provision. This competition policy cannot be traditional, institutional based, but will need to resemble that used in other network industries. Fu rthermore, with globalization accelerating, competition policy will need to be global, supported by greater cross-border institutional collaboration and using the General Agreement on Trade in Services (GATS) process and the disciplines of the World Trade Organization. GATS can be of special value to developing countries as it provides a binding, pro-competition framework that has proven more difficult to establish otherwise.
    Keywords: Banks & Banking Reform,Economic Theory & Research,Financial Intermediation,Knowledge Economy,Education for the Knowledge Economy
    Date: 2006–02–01
    URL: http://d.repec.org/n?u=RePEc:wbk:wbrwps:3854&r=fmk
  13. By: Andrew K. Rose; Mark Spiegel
    Abstract: This paper analyzes the causes and consequences of offshore financial centers (OFCs). Since OFCs are likely to be tax havens and money launderers, they encourage bad behavior in source countries. Nevertheless, OFCs may also have unintended positive consequences for their neighbors, since they act as a competitive fringe for the domestic banking sector. We derive and simulate a model of a home country monopoly bank facing a representative competitive OFC which offers tax advantages attained by moving assets offshore at a cost that is increasing in distance between the OFC and the source. Our model predicts that proximity to an OFC is likely to have pro-competitive implications for the domestic banking sector, although the overall effect on welfare is ambiguous. We test and confirm the predictions empirically. OFC proximity is associated with a more competitive domestic banking system and greater overall financial depth.
    JEL: F23 F36
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12044&r=fmk
  14. By: Gunnar Bardsen; Kjersti-Gro Lindquist; Dimitrios P.Tsomocos
    Abstract: As financial stability has gained focus in economic policymaking, the demand for analyses of financial stability and the consequences of economic policy has increased. Alternative macroeconomic models are available for policy analyses, and this paper evaluates the usefulness of some models from the perspective of financial stability. Financial stability analyses are complicated by the lack of a clear and consensus definition of =91financial stability=92, and the paper concludes that operational definitions of this term must be expected to vary across alternative models. Furthermore, since assessment of financial stability in general is based on a wide range of risk factors, one can not expect one single model to satisfactorily capture all the risk factors. Rather, a suite of models is needed. This is in particular true for the evaluation of risk factors originating and developing inside and outside the financial system respectively.
    Date: 2006
    URL: http://d.repec.org/n?u=RePEc:sbs:wpsefe:2006fe01&r=fmk
  15. By: Melisso Boschi; Aditya Goenka
    Abstract: We study how external habit formation by investors affects the transmission of financial crises. Habit formation increases the effective risk premium on assets when there is a negative wealth shock and introduces non-linearities which can lead to multiple equilibria. We embed this investor’s behavior in the Jeanne (1997) model which allows for a competitiveness effect and for contagion through changes in fundamentals. Habit formation, however, can lead to transmission of financial crises even in the absence of the competitiveness effect, and makes multiple equilibria more likely. The possible stabilization effects of capital controls and a Tobin tax on the international transmission of financial crises are also discussed.
    Date: 2006–02–22
    URL: http://d.repec.org/n?u=RePEc:esx:essedp:608&r=fmk
  16. By: Van Poeck A.; Vanneste J.; Veiner M.
    Date: 2005–06
    URL: http://d.repec.org/n?u=RePEc:ant:wpaper:2005015&r=fmk
  17. By: Pedro N. Rodríguez,; Simón Sosvilla-Rivero
    Abstract: Previous empirical studies have shown that predictive regressions in which model uncertainty is assessed and propagated generate desirable properties when predicting out-of-sample. However, it is still not clear (a) what the important conditioning variables for predicting stock returns out-of-sample are, and (b) how composite weighted ensembles outperform model selection criteria. By comparing the unconditional accuracy of prediction regressions to the conditional accuracy conditioned on specific explanatory variables masked), we find that cross-sectional premium and term spread are robust predictors of future stock returns. Additionally, using the bias-variance decomposition for the 0/1 loss function, the analysis shows that lower bias, and not lower variance, is the fundamental difference between composite weighted ensembles and model selection criteria. This difference, nevertheless, does not necessarily imply that model averaging techniques improve our ability to describe monthly up-and-down movements' behavior in stock markets.
    URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2006-03&r=fmk
  18. By: Erica X. N. Li; Dmitry Livdan; Lu Zhang
    Abstract: We use a fully-specified neoclassical model augmented with costly external equity as a laboratory to study the relations between stock returns and equity financing decisions. Simulations show that the model can simultaneously and in many cases quantitatively reproduce: procyclical equity issuance; the negative relation between aggregate equity share and future stock market returns; long-term underperformance following equity issuance and the positive relation of its magnitude with the volume of issuance; the mean-reverting behavior in the operating performance of issuing firms; and the positive long-term stock price drift of firms distributing cash and its positive relation with book-to-market. We conclude that systematic mispricing seems unnecessary to generate the return-related evidence often interpreted as behavioral underreaction to market timing.
    JEL: E13 E22 E32 E44
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12014&r=fmk
  19. By: Paul Oyer
    Abstract: New graduates of elite MBA programs flock to Wall Street during bull markets and start their careers elsewhere when the stock market is weak. Given the transferability of MBA skills, it seems likely that any effect of stock returns on MBA placement would be short-lived. In this paper, I use a survey of Stanford MBAs from the classes of 1960 through 1997 to analyze the relationship between the state of the stock market at graduation, initial job placement, and long-term labor market outcomes. Using stock market conditions at graduation as an instrument for first job, I show that there is a strong causal effect of initial placement in investment banking on the likelihood of working on Wall Street anywhere from three to twenty years later. I then measure the investment banking compensation premium relative to other jobs and estimate the additional income generated by an MBA cohort where a higher fraction starts in higher-paid jobs relative to a cohort that starts in lower-paid areas. The results lead to several conclusions. First, random factors play a large role in determining the industries and incomes of members of this high-skill group. Second, there is a deep pool of potential investment bankers in any given Stanford MBA class. During the time these people are in school, factors beyond their control sort them into or out of banking upon graduation. Finally, industry-specific or task-specific human capital appears to be important for young investment bankers.
    JEL: M5 J31 J44
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12059&r=fmk
  20. By: Jakub W. Jurek; Luis M. Viceira
    Abstract: We develop an analytical solution to the dynamic portfolio choice problem of an investor with power utility defined over wealth at a finite horizon who faces an investment opportunity set with time-varying risk premia, real interest rates and inflation. The variation in investment opportunities is captured by a flexible vector autoregressive parameterization, which readily accommodates a large number of assets and state variables. We find that the optimal dynamic portfolio strategy is an affine function of the vector of state variables describing investment opportunities, with coefficients that are a function of the investment horizon. We apply our method to the optimal portfolio choice problem of an investor who can choose between value and growth stock portfolios, and among these equity portfolios plus bills and bonds. For equity-only investors, the optimal mean allocation of short-horizon investors is heavily tilted away from growth stocks regardless of their risk aversion. However, the mean allocation to growth stocks increases dramatically with the investment horizon, implying that growth is less risky than value at long horizons for equity-only investors. By contrast, long-horizon conservative investors who have access to bills and bonds do not hold equities in their portfolio. These investors are concerned with interest rate risk, and empirically growth stocks are not particularly good hedges for bond returns. We also explore the welfare implications of adopting the optimal dynamic rebalancing strategy vis a vis other intuitive, but suboptimal, portfolio choice schemes and find significant welfare gains for all long-horizon investors.
    JEL: G12
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12017&r=fmk
  21. By: Elias Oikarinen
    Abstract: There are a number of reasons to assume that significant interdependences exist between the financial asset markets and the housing market. Identifying the linkages between stock, bond and housing markets may improve return forecasts in different asset markets. Interdependence and predictability of different asset prices is of importance concerning portfolio diversification and allocation, especially from long-term investors’ point of view. Furthermore, linkages between asset classes are likely to have significant policy implications. The purpose of this paper is to study the long- and short-term dynamic interdependences between stock, bond and housing markets using time series econometrics and utilizing a quarterly dataset from Finland over 1970-2005. In addition to short-term dynamics, there also appears to be long-run interrelations between the asset prices according to cointegration analysis. There is clearly a structural break in the long-run relationship between stock and housing prices in the early 1990s. Interaction between the markets seems to have diminished after the break. In line with the theory and previous research, it is found that stock appreciation Granger caused housing price changes prior to 1993. Since 1993, in turn, stock appreciation seems to have Granger caused housing only through a cointegrating long-run relation. Co-movement of bond price changes with stock and housing appreciation is found to be weak, although bond prices belong to a long-run relation including also stock and housing prices.
    Keywords: asset prices, housing, co-movement, cointegration
    JEL: G10 G11
    Date: 2006–02–17
    URL: http://d.repec.org/n?u=RePEc:rif:dpaper:1004&r=fmk
  22. By: Garretsen H.; Moons C.; van Aarle B.
    Abstract: This paper analyses monetary policy in the Euro-Area using a stylized new-Keynesian model. A number of issues are focused upon: (i) optimal monetary policy under commitment and discretion, (ii) a comparison of optimal monetary policies and ad-hoc monetary policies, (iii) the effects of fiscal policies and foreign variables on monetary policy in the model. Using numerical simulations, it is analyzed how these aspects affect monetary policy of the ECB in particular and macro economic fluctuations in the Euro-Area in general.
    Date: 2005–12
    URL: http://d.repec.org/n?u=RePEc:ant:wpaper:2005032&r=fmk
  23. By: Rodolfo Apreda
    Abstract: This paper sets forth a new approach to state-owned banks grounded on portfolio theory and the principle of subsidiarity, so as to improve the governance of such institutions. Firstly, it defines what is meant by portfolio of portfolios and the separation feature, which leads to setting up what we call a separation compact. Next, the principle of subsidiarity is introduced, highlighting the pathways to its uses and misuses when we deal with state-owned banks. Afterwards, we bring forward the notion of subsidiarity portfolio, stressing how such construct can foster to a great degree key governance variables, namely accountability, control, transparency, management, checks and balances, as well as the fulfillment of the fiduciary role. Finally, it is laid down a new viewpoint for state-owned banks, from which they come to be regarded as separation compacts.
    Keywords: state-owned banks, portfolios, governance, principle of subsidiarity, separation compact, subsidiarity portfolios
    JEL: H10 H20 H5 G11 G21
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:cem:doctra:317&r=fmk
  24. By: Maurice Kugler; Rossella Oppes
    Abstract: Empirical research on the impact and determinants of group lending is by now substantial. However, very little is known about the possible role of collateral to mitigate incentive problems in group lending. This is because microcredit programs have normally been implemented in rural areas of developing countries. Indeed, the reason for this choice is lack of credit access since agents with collateral are very rare. Also, to the extent that rural communities have tight-knit hierarchical structures information about borrowers is accessible and the enforcement of sanctions via social networks makes collateral superfluous for default mitigation. Yet, in an urban setting in which information is more atomized and social sanctions are not as powerful, collateral may have an important role in group lending. First, we illustrate in a model the role of collateral to mitigate group default. Second, we use data from a group lending program implemented in 2001 in Cotonou, the largest city in Benin with more than one million inhabitants. We empirically explore the risk profile of individual borrowers and resulting group heterogeneity to identify the role of personal contributions to investment projects. Our evidence suggests that while diversification within groups facilitates risk pooling, it also increases expected bailout or group default costs for low risk borrowers. Collateral helps offset and alleviate potential negative spillovers from group default induced by membership of borrowers with risky projects. The presence of borrowers with collateral facilitates access to credit for group members without collateral, who in turn provide insurance against group default. We find joint liability to be a mechanism for risk sharing in a setting where poor households lack resources for collateral and insurance markets are missing.
    Keywords: Group lending, mutual cosigners, collateral, risk sharing, strategic
    JEL: O12 O17 G20 D82
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:cns:cnscwp:200509&r=fmk
  25. By: Darrell Duffie; Nicolae Garleanu; Lasse Heje Pedersen
    Abstract: We provide the impact on asset prices of search-and-bargaining frictions in over-the-counter markets. Under certain conditions, illiquidity discounts are higher when counterparties are harder to find, when sellers have less bargaining power, when the fraction of qualified owners is smaller, or when risk aversion, volatility, or hedging demand are larger. Supply shocks cause prices to jump, and then "recover" over time, with a time signature that is exaggerated by search frictions. We discuss a variety of empirical implications.
    JEL: G0 G1 G12
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12020&r=fmk
  26. By: Justin Wolfers; Eric Zitzewitz
    Abstract: Interest in prediction markets has increased in the last decade, driven in part by the hope that these markets will prove to be valuable tools in forecasting, decision-making and risk management -- in both the public and private sectors. This paper outlines five open questions in the literature, and we argue that resolving these questions is crucial to determining whether current optimism about prediction markets will be realized.
    JEL: C9 D7 D8 G1 M2
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12060&r=fmk
  27. By: Leora Friedberg; Anthony Webb
    Abstract: Using the widely-cited Lee-Carter mortality model, we quantify aggregate mortality risk as the risk that the average annuitant lives longer than is predicted by the model, and we conclude that annuity business exposes insurance companies to substantial mortality risk. We calculate that a markup of 3.7% on an annuity premium (or else shareholders’ capital equal to 3.7% of the expected present value of annuity payments) would reduce the probability of insolvency resulting from uncertain aggregate mortality trends to 5% and a markup of 5.4% would reduce the probability of insolvency to 1%. Using the same model, we find that a projection scale commonly referred to by the insurance industry underestimates aggregate mortality improvements. Annuities that are priced on that projection scale without any conservative margin appear to be substantially underpriced. Insurance companies could deal with aggregate mortality risk by transferring it to financial markets through mortality-contingent bonds, one of which has recently been offered. We calculate the returns that investors would have obtained on such bonds had they been available over a long period. Using both the Capital and the Consumption Capital Asset Pricing Models, we determine the risk premium that investors would have required on such bonds. At plausible coefficients of risk aversion, annuity providers should be able to hedge aggregate mortality risk via such bonds at a very low cost.
    JEL: G12 G22 G23 J11 J14
    Date: 2006–01
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11984&r=fmk
  28. By: Jeremy Baskin; Kathryn Gordon
    Abstract: Emerging market companies make up 3.8 per cent of the FT500, the 500 largest global traded companies1 and 4.6 per cent of the Dow Jones Global Index of 2,500 companies. OECD statistics show that, while the bulk of international investment flows originate in the OECD, non-OECD countries are increasingly important sources of investment flows. This paper presents a fact finding study of the...
    Date: 2005–09
    URL: http://d.repec.org/n?u=RePEc:oec:dafaaa:2005/3-en&r=fmk
  29. By: Peter M Robinson
    Abstract: Much time series data are recorded on economic and financial variables. Statistical modelling of such data is now very well developed, and has applications in forecasting. We review a variety of statistical models from the viewpoint of 'memory', or strength of dependence across time, which is a helpful discriminator between different phenomena of interest. Both linear and nonlinear models are discussed.
    Keywords: Long memory, short memory, stochastic volatility
    JEL: C22
    Date: 2005–03
    URL: http://d.repec.org/n?u=RePEc:cep:stiecm:/2005/487&r=fmk
  30. By: Levy, Horacio (University of Essex); Lietz, Christine (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Sutherland, Holly (University of Essex and DIW Berlin)
    Abstract: We compare three EU countries that have recently experienced substantial but very different reforms of their family support systems: Austria, Spain and the UK. The structure of these systems is different: Austria emphases universal benefits, Spain tax concessions and the UK means-tested benefits. First the paper compares the distributional implications of these three approaches. The recent reforms have reinforced existing structures while increasing the amount of spending for children. The second step is to ask: What would have happened if these countries had transformed the architecture of their systems in either of the other two directions? We use EUROMOD, the European tax-benefit microsimulation model that is designed for making cross-country comparisons and answering “what if” questions such as these. We find that the three factors that can be distinguished – the level of spending, its structure, and the way it impacts in a national context – are all important to varying degrees.
    Keywords: Children, European Union, Policy Reform, Microsimulation
    JEL: C8 I3
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:ihs:ihsesp:185&r=fmk
  31. By: Carneiro, Pedro; Almeida, Rita
    Abstract: In this paper the authors estimate the rate of return to firm investments in human capital in the form of formal job training. They use a panel of large firms with unusually detailed information on the duration of training, the direct costs of training, and several firm characteristics such as their output, workforce characteristics, and capital stock. Their estimates of the return to training vary substantially across firms. On average it is -7 percent for firms not providing training and 24 percent for those providing training. Formal job training is a good investment for many firms and the economy, possibly yielding higher returns than either investments in physical capital or investments in schooling. In spite of this, observed amounts of formal training are small.
    Keywords: Primary Education,Education For All,Access & Equity in Basic Education,Tertiary Education,Economic Theory & Research
    Date: 2006–02–01
    URL: http://d.repec.org/n?u=RePEc:wbk:wbrwps:3851&r=fmk
  32. By: Ravi Jagannathan; Alexey Malakhov; Dmitry_Novikov
    Abstract: In this paper we empirically demonstrate that both hot and cold hands among hedge fund managers tend to persist. While measuring performance, we use statistical model selection methods for identifying style benchmarks for a given hedge fund and allow for the possibility that hedge fund net asset values may be based on stale prices for illiquid assets. We are able to eliminate the backfill bias by deleting all the backfill observations in our dataset. We also take into account the self-selection bias introduced by the fact that both successful and unsuccessful hedge funds stop reporting information to the database provider. The former stop accepting new money and the latter get liquidated. We find statistically as well as economically significant persistence in the performance of funds relative to their style benchmarks. It appears that half of the superior or inferior performance during a three year interval will spill over into the following three year interval.
    JEL: I1
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12015&r=fmk
  33. By: Helena Veiga
    Abstract: In this paper we fit the main features of financial returns by means of a two factor long memory stochastic volatility model (2FLMSV). Volatility, which is not observable, is explained by both a short-run and a long-run factor. The first factor follows a stationary AR(1) process whereas the second one, whose purpose is to fit the persistence of volatility observable in data, is a fractional integrated process as proposed by Breidt et al. (1998) and Harvey (1998). We show formally that this model (1) creates more kurtosis than the long memory stochastic volatility (LMSV) of Breidt et al. (1998) and Harvey (1998), (2) deals with volatility persistence and (3) produces small first order autocorrelations of squared observations. In the empirical analysis, we use the estimation procedure of Gallant and Tauchen (1996), the Efficient Method of Moments (EMM), and we provide evidence that our specification performs better than the LMSV model in capturing the empirical facts of data.
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:cte:wsrepe:ws061303&r=fmk
  34. By: Laurent E. Calvet; John Y. Campbell; Paolo Sodini
    Abstract: This paper investigates the efficiency of household investment decisions in a unique dataset containing the disaggregated wealth and income of the entire population of Sweden. The analysis focuses on two main sources of inefficiency in the financial portfolio: underdiversification of risky assets ("down") and nonparticipation in risky asset markets ("out"). We find that while a few households are very poorly diversified, the cost of diversification mistakes is quite modest for most of the population. For instance, a majority of participating Swedish households are sufficiently diversified internationally to outperform the Sharpe ratio of their domestic stock market. We document that households with greater financial sophistication tend to invest more efficiently but also more aggressively, so the welfare cost of portfolio inefficiency tends to be greater for these households. The welfare cost of nonparticipation is smaller by almost one half when we take account of the fact that nonparticipants would be unlikely to invest efficiently if they participated in risky asset markets.
    JEL: D5 D9 E3 O1
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12030&r=fmk
  35. By: Mohamed Belkhir (LEO - Laboratoire d'économie d'Orleans - http://www.univ-orleans.fr/DEG/LEO - CNRS : FRE2783 - Université d'Orléans)
    Abstract: This paper examines the interrelations among five ownership and board characteristics in a sample of 260 bank and savings-and-loan holding companies. These governance characteristics, designed to reduce agency problems between shareholders and managers, are insider ownership, blockholder ownership, the proportion of outside directors, board leadership structure, and board size. Using two-stage least squares regressions, we present evidence of interdependencies between board and ownership structures. The results suggest that banks substitute between governance mechanisms that align the interests of managers and shareholders. These findings suggest that cross-sectional OLS regressions of bank performance on single governance mechanisms may be misleading. Indeed, we find statistically significant relationships between performance and insider ownership and blockholder ownership when using OLS regressions. However, these statistically significant relationships disappear when the simultaneous equations framework is used. Together, these findings are consistent with optimal use of each governance mechanism by banks.
    Keywords: Corporate governance ; board structure ; ownership structure ; performance ; banking ; simultaneous equations
    Date: 2006–02–16
    URL: http://d.repec.org/n?u=RePEc:hal:papers:halshs-00009115_v1&r=fmk
  36. By: Stefan Reimann
    Abstract: Stylized facts of empirical assets log-returns include the existence of semi heavy tailed distributions and a non-linear spectrum of Hurst exponents. Empirical data considered are daily prices from 10 large indices from 01/01/1990 to 12/31/2004. We propose a stylized model of price dynamics which is driven by expectations. The model is a multiplicative random process with a stochastic, state-dependent growth rate which establishes a negative feedback component in the price dynamics. This 0-order model implies that the distribution of log-returns is Laplacian, whose single parameter can be regarded as a measure for the long-time averaged liquidity in the respective market. A comparison with the (more general) Weibull distribution shows that empirical log returns are close to being Laplacian distributed. The spectra of Hurst exponents of both, empirical data and simulated data due to our model, are compared. Due to the finding of non-linear Hurst spectra, the Renyi entropy is considered. An explicit functional form of the RE for an exponential distribution is derived. Theoretical of simulated asset return trails are in good agreement with the estimated from empirical returns.
    Keywords: stylized facts, empirical asset returns, multiscaling, Renyi information
    JEL: C22 C5 G14
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:zur:iewwpx:271&r=fmk
  37. By: Vittorio Pelligra
    Abstract: The success of many micro-credit initiatives is difficult to account for in the traditional economic framework, where, mainly because of the assumption of self-interested behaviour, credit is rationed and provided only to those able to back it with collaterals. Having analysed different alternative explanations for such a success, the paper introduces the concept of trust responsiveness in the lender-borrower relationship and formalises it in a psychological game-theoretical model aimed at explaining the unusually high rate of repayment experienced in micro-credit programs. Three well-known psychological effects are introduced to discuss the factors that may positively or negatively affect borrowers’ trustworthiness. This model provides important normative implications for institutional design.
    Keywords: Microfinance; Trust responsiveness; Psychological Game Theory
    JEL: C72 O12
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:cns:cnscwp:200503&r=fmk
  38. By: Carmen Rienhart
    Abstract: The literature on capital controls has (at least) four very serious apples-to-oranges problems: (i) There is not unified theoretical framework to analyze the macroeconomic consequences of controls; (ii) there is significant heterogeneity across countries and time in the control measures implemented; (iii) there are multiple definitions of what constitutes a "success" and (iv) the empirical studies lack a common methodology -- furthermore these are significantly "overweighter" by a couple of country cases (Chile and Malaysia). In this paper, we attempt to address some of these shortcomings by: being very explicit about what measures are construed as capital controls. Also, given that success is measured so differently across studies, we sought to "standardize" the results of over 30 empirical studies we summarize in this paper. The standardization was done by constructing two indices of capital controls: Capital Controls Effectiveness Index (CCE Index), and Weighted Capital Control Effectiveness Index (WCCE Index). The difference between them lies only in that the WCCE controls for the differentiated degree of methodological rigor applied to draw conclusions in each of the considered papers. Inasmuch as possible, we bring to bear the experiences of less well known episodes than those of Chile and Malaysia.
    JEL: F21 F31
    Date: 2006–01
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11973&r=fmk
  39. By: Kjell Hausken
    Date: 2006–02–20
    URL: http://d.repec.org/n?u=RePEc:cla:levarc:618897000000001035&r=fmk
  40. By: Katia Yannaca-Small
    Abstract: Investor-state dispute settlement mechanisms embodied in most investment treaties provide rights to foreign investors to seek redress for damages arising out of alleged breaches by host governments of investment-related obligations. The system of investment dispute settlement has borrowed its main elements from the system of commercial arbitration despite the fact that investor-state disputes often raise public interest issues which are usually absent from international commercial...
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:oec:dafaaa:2006/1-en&r=fmk
  41. By: Luis Fernando Melo Velandia; Oscar Reinaldo Becerra Camargo
    Abstract: Este documento estudia una parte relevante del mecanismo de transmisión de la política monetaria asociado con el crédito bancario. Con tal objeto se estima un modelo VARXGARCH multivariado para establecer la relación, en frecuencia diaria, entre dos tasas de interés de corto plazo, la CDT y la TIB y una de las tasas de intervención del Banco de la República, la tasa de subasta de expansión, SEXP, en el periodo enero de 2001 - septiembre de 2005. Este tipo de modelos tiene la ventaja de que no solo incorpora las interacciones entre los niveles (o variaciones) de estas series, si no que también modela las relaciones entre las volatilidades de las variables endógenas del modelo. Posteriormente, se realizan análisis de impulso respuesta en niveles (IRF y MA) y en volatilidades (VIRF). En niveles, se encuentra que la variable que más responde a choques sobre variables endógenas y exógenas del modelo, es la TIB. La respuesta de la tasa CDT ante un choque de 100 puntos básicos (p.b.) en SEXP oscila alrededor de 7 p.b., mientras que la respuesta de la TIB ante ese mismo choque es inicialmente de 68 p.b. y finalmente se estabiliza en 38 p.b.. Sin embargo, cuando se consideran muestras más recientes el efecto de SEXP sobre la TIB aumenta, lo cual indica una relación más estrecha entre los instrumentos de política y la meta operativa del BR. Para la muestra 2003-2005 la respuesta de la TIB a un choque en SEXP es inicialmente de 82 p.b. y converge a 56 p.b. Analizando los efectos cruzados, se observa que la respuesta de la TIB ante choques en la CDT es casi nula, mientras la CDT responde de manera significativa a choques en la TIB. Es así, como un aumento de 100 p.b. en la TIB incrementa aproximadamente 8.5 p.b. la tasa CDT. Todos estos efectos son permanentes. El análisis VIRF es realizado para diferentes tipos de choques. Sin embargo, los resultados muestran que no existen patrones claramente diferenciables para los distintos tipos de choques analizados. Esto indica que con respecto a otros tipos de choques, los que realiza el Banco Central a través de cambios en la tasa de subasta de expansión no afectan de manera diferente las volatilidades de las series. También se encuentra que en términos de volatilidad la variable que presenta una mayor respuesta ante diferentes choques al igual que en choques en niveles es la TIB, con un efecto aproximado de tres meses. Adicionalmente, al comparar los efectos sobre la volatilidad de la TIB con los de la CDT, se observa que aunque la magnitud de respuesta de la volatilidad de la tasa CDT es menor, su persistencia es más alta.
    Keywords: Modelos VARX, modelos GARCH multivariados, función de impulso respuesta en varianza (VIRF).
    JEL: C32 C52 E43
    URL: http://d.repec.org/n?u=RePEc:bdr:borrec:366&r=fmk
  42. By: Moons C.; Van Poeck A.
    Abstract: This paper uses the Taylor rule to examine the appropriateness of ECB interest rate policy for the initial EMU members and the ten new EMU member states some of whom are expected to join the Eurozone in 2006-7. Specifically it addresses three questions. (1) Are there differences between the interest rate aggregated from the Taylor interest rates of individual member states in the euro area and the interest rate set by the ECB? (2) For which countries do the desired interest rates according to the original Taylor rule and the interest rate of the euro area differ most and in which respect? (3) The last question is whether the interest rate gaps change over time. We find that the ECB’s policy does not fit individual EMU members equally well and this result is unlikely to be changed with the addition of the ten new members, which will have only a marginal effect on the ECB interest rate stance.
    Date: 2005–10
    URL: http://d.repec.org/n?u=RePEc:ant:wpaper:2005026&r=fmk
  43. By: John Beshears; James J. Choi; David Laibson; Brigitte C. Madrian
    Abstract: This paper summarizes the empirical evidence on how defaults impact retirement savings outcomes. After outlining the salient features of the various sources of retirement income in the U.S., the paper presents the empirical evidence on how defaults impact retirement savings outcomes at all stages of the savings lifecycle, including savings plan participation, savings rates, asset allocation, and post-retirement savings distributions. The paper then discusses why defaults have such a tremendous impact on savings outcomes. The paper concludes with a discussion of the role of public policy towards retirement saving when defaults matter.
    JEL: D0 E21 G23
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12009&r=fmk
  44. By: MAN-SEOP PARK
    Abstract: Ciccarone (2004) attempts to show that the Pasinetti theorem allows for the profit-making financial sector. In this effort, however, he ends up with unwittingly associating the theorem with the Wicksellian monetary theory. The present note traces the origin of this uncomfortable association to his incomplete understanding of the income of financial capitalists, and tries on its part to demonstrate that the Pasinetti theorem is in the tradition of the 'monetary analysis' of the (Post) Keynesian monetary theory, in contrast to the 'real analysis' of the Wicksellian theory.
    URL: http://d.repec.org/n?u=RePEc:iek:wpaper:0504&r=fmk
  45. By: Egil Matsen (Department of Economics, Norwegian University of Science and Technology)
    Abstract: This paper investigates the allocation decision of an investor with two projects. Separate managers control the mean return from each project, and the investor may or may not observe the managers’ actions. We show that the investor’s risk-return trade-off may be radically different from a standard portfolio choice setting, even if managers’ actions are observable and enforceable. In particular, feedback effects working through optimal contracts and effort levels imply that expected terminal wealth is nonlinear in initial wealth allocation. The optimal portfolio may involve very little diversification, despite projects that are highly symmetric in the underlying model. We also show that moral hazard in one of the projects need not imply lower allocation to that project. Expected returns are generally lower than under the first-best, but the optimal contract shifts more of the idiosyncratic risk in the hidden action project to the manager in charge of it. The minimum-variance position of the investor’s (net) terminal wealth would in most cases involve a portfolio shift towards the hidden action project, and there are plausible cases where this would dominate the overall effect on the second-best optimal portfolio when comparing with the first-best.
    Keywords: Portfolio choice; diversification; optimal contracts
    JEL: D81 D82 G11
    Date: 2006–02–05
    URL: http://d.repec.org/n?u=RePEc:nst:samfok:6606&r=fmk
  46. By: Kamel Laaradh (LEO - Laboratoire d'économie d'Orleans - http://www.univ-orleans.fr/DEG/LEO - CNRS : FRE2783 - Université d'Orléans)
    Abstract: L'objectif de cet article est de tester l'efficience des marchés des investisseurs institutionnels britanniques. Pour ce faire, nous proposons d'étudier la persistance de la performance de deux échantillons de fonds (de pension et mutuels) investissant, l'un, sur le marché des actions et, l'autre, sur le marché des obligations. Ces fonds, pratiquant une gestion active, investissent sur le marché britannique entre mars 1990 et février 2005. <br />Globalement, et pour les deux types de marché, l'efficience semble être conservée. En effet, à long terme, et en investissant sur le marché des actions, les fonds de pension ne semblent pas avoir une stabilité de leur performance alors qu'à moyen terme (5 ans), ces fonds deviennent plus stables, surtout à la fin de la période. Les fonds mutuels ont tendance à avoir une persistance plus significative que celle des fonds de pension quel que soit la période d'étude. Mais, en moyenne, cette persistance est peut évidente. A long terme, les performances des fonds de pension obligataires ne sont pas stables même si elles le sont par rapport à celles des unit trusts investissant dans les mêmes actifs. Néanmoins, à moyen terme, ces deux types d'investisseurs institutionnels semblent avoir une certaine persistance surtout à la fin de la période.
    Keywords: Mesures non conditionnelles et conditionnelles de Performance ; Persistance
    Date: 2006–02–16
    URL: http://d.repec.org/n?u=RePEc:hal:papers:halshs-00009117_v1&r=fmk
  47. By: Ralph Paprzycki
    Abstract: Having historically received very little foreign direct investment, Japan has experienced a substantial increase in such inflows in recent years. This paper analyzes the impact of the growing presence of foreign firms on the Japanese economy through detailed case studies on the automobile, finance, and health care industries. The wholesale & retail and the telecommunications sector are also briefly examined. The case studies show that in the sectors considered, foreign firms in one way or another are contributing to a greater degree of competition, are exposing domestic firms to global best practice, and are increasing the range of products and services available in Japan. In many of the sectors, they are also contributing to changes in industry structure and employment practices. The case studies thus illustrate that foreign direct investment - even at its present levels, which, although large by Japanese standards, are still low in international comparison - can be an important catalyst for change and hence help to reinvigorate the Japanese economy.
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-141&r=fmk
  48. By: Dorothea Schäfer ; Dirk Schilder
    URL: http://d.repec.org/n?u=RePEc:diw:diwwpp:dp549&r=fmk
  49. By: Osamu Saito; Tokihiko Settsu
    Abstract: In the latter half of the Tokugawa period economic growth, however sluggish its pace was, took place in the form of rural industrialisation and the expansion of inter-regional trade. This paper addresses the following questions: how capital was mobilised for such rural-centred growth in production and commerce, and how the quasi-capital markets worked in both the Osaka economy and in the countryside, with special reference to trends in interest rates over time, in a pre-modern setting of market segmentation. The paper will argue that although Tokugawa Japan's formal institutions were far from ideal, the credit systems did function as quasi-capital markets reasonably well within each commercial network formed through relational contracting, and that for the Smithian process of early modern growth to work, inter-regional competition mattered more than institutional maturity of the nation's market environment.
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-139&r=fmk
  50. By: Michael D. Bordo; Peter L. Rousseau
    Abstract: Recent cross-country investigations of the role of institutional fundamentals such as the protection of property rights in promoting financial development have extended a literature that has for decades maintained that financial factors can affect real outcomes. In this paper we pursue this new direction by considering relationships between finance, growth, legal origin, and political environment in a historical cross-section of 17 countries covering the period from 1880 to 1997. We find that relationships between a county's legal origin (i.e., English, French, German, or Scandinavian) and financial development are roughly consistent with earlier findings but are not persistent. At the same time, political variables such as proportional representation election systems, frequent elections, universal female suffrage, and infrequent revolutions or coups seem linked to larger financial sectors and higher conditional rates of economic growth. Despite the explanatory power of some of our measures of the deeper "fundamentals," however, a significant part of the growth-enhancing role of financial development remains unexplained by them.
    JEL: E44 F3 N1 N2
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12035&r=fmk
  51. By: Christopher F. Baum (Boston College); Mustafa Caglayan (University of Glasgow); Oleksandr Talavera (DIW Berlin)
    Abstract: In this paper we investigate the linkages between firms' capital investment behavior and uncertainty. In our empirical investigation, we use measures of uncertainty derived from firms' daily stock returns and S\&P 500 index returns along with a CAPM-based risk measure. Using a panel of U.S. manufacturing firm data obtained from COMPUSTAT over the 1984-2003 period, we specifically find that increases in both intrinsic and CAPM-based measures of uncertainty have a significant negative impact on firms' investment spending. Our investigation also provides evidence that the relationship is nonlinear and more complex than previously considered.
    Keywords: capital investment, uncertainty, CAPM, dynamic panel data
    JEL: E22 D81 C23
    Date: 2006–02–15
    URL: http://d.repec.org/n?u=RePEc:boc:bocoec:638&r=fmk
  52. By: Mette Ersbak Bang Nielsen
    Abstract: The paper develops a New Keynesian Small Open Economy Model charac- terized by external habit formation and Calvo price setting with dynamic inflation updating. The model is used to analyze the e¤ect of nominal ex- change rate targeting on optimal policy and impulse responses. It is found that even moderate exchange rate concerns are capable of changing both sign and magnitude of the optimal instrument response to variables, and that whether the concern is with respect to the level or first di¤erence has much impact on monetary policy. Also, the cost of exchange rate stabilization in terms of output and inflation is evident in the model, and impulse responses under moderate exchange rate targeting are not simple combinations of those under a float and a regime that cares almost only for meeting the exchange rate target.
    Keywords: Flexible inflation targeting, exchange rates, fear of floating
    JEL: E52 F41
    URL: http://d.repec.org/n?u=RePEc:bdr:borrec:367&r=fmk

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