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on Risk Management |
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Issue of 2005‒04‒09
six papers chosen by |
| By: | Jesús Fernández-Villaverde; Juan F. Rubio-Ramirez; Thomas J. Sargent |
| Date: | 2005–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levrem:172782000000000096&r=rmg |
| By: | Jan Willem van den End; Mostafa Tabbae |
| Abstract: | Models which integrate various financial stability risks are still in an early stage of development. Inthis paper we use the Macrofinancial Risk model (MfRisk) to construct a measure for financial stability. MfRisk applies the Merton option model in a multi-sector framework. We argue that this method satisfies the macro-prudential approach. On the basis of the MfRisk model we construct a system-wide financial stability measure for the Netherlands, which builds on the put options of the banking, insurance and pension sectors. This measure approximates the probability and the potential loss of stress in the financia l system. The measure is tested against various indicators of default risk, from which we conclude that it is a reliable proxy. Finally, it is shown how the measure can be used for stress testing. |
| JEL: | G12 G13 G28 G32 G33 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:030&r=rmg |
| By: | Fernandez, Pablo (IESE Business School); Villanueva, Alvaro (IESE Business School) |
| Abstract: | During 2004, 64% of the companies in the S&P 500 created value, while in 2003 the figure was 87%. The market value of the 500 companies was $11.2 trillion in 2004, compared to $10.1 trillion in 2003. The top shareholder value creators in 2004 were Exxon, General Electric, Ebay, Johnson & Johnson and Qualcomm. We define created shareholder value and provide the ranking of created shareholder value for the 500 companies. We also calculate the created shareholder value of the 500 companies during the twelve-year period 1993-2004. General Electric was the top shareholder value creator and AT&T was the top shareholder value destroyer during the twelve-year period. On average, the small market capitalization companies of the S&P were more profitable. Between 1998 and 2004, the volatility of the S&P as a whole fell, but the volatility of its components increased on the average. |
| Keywords: | shareholder value creation; created shareholder value; equity market value; shareholder value added; shareholder return; required return to equity; |
| JEL: | G12 G31 M21 |
| Date: | 2005–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0580&r=rmg |
| By: | Fernandez, Pablo (IESE Business School); Villanueva, Alvaro (IESE Business School) |
| Abstract: | 2004 was a good year for the shareholders of the companies in the Euro Stoxx 50: the shareholder value creation of these 50 companies was €42,880 million. It was not as good as 2003, however, when their value creation reached slightly over €160,000 million. The companies that created most value for their shareholders were Enel (€13,364 million), ENI (11,855) and TIM (9,891). The companies that destroyed most value were Nokia (-€15,239 million), L'Oréal (-9,095) and Philips (-7,823). In 2004, the Euro Stoxx 50 was much more volatile than either the S&P 500 or the Dow Jones. Shareholder value destruction in the three-year period 2002-2004 was €-0.9 trillion. The market value of the companies included in the Euro Stoxx 50 was €1.5 trillion in 2004 and €1.4 trillion in 2003. We also calculate the created shareholder value of the 50 companies during the seven-year period 1997-2004. ENI was the top shareholder value creator and Vivendi, the top shareholder value destroyer during that period. A portfolio long in the companies that entered the index and short in the companies that abandoned the index had on average a 7.2% return in the 20 days prior to the index recomposition and a 2.3% return in the 20 days after the index recomposition. |
| Keywords: | shareholder value creation; created shareholder value; shareholder value added; shareholder return; required return to equity; |
| JEL: | G12 G31 M21 |
| Date: | 2005–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0583&r=rmg |
| By: | Fousseni Chabi-Yo; René Garcia; Eric Renaul |
| Abstract: | The authors examine the ability of economic models with regime shifts to rationalize and explain the risk-aversion and pricing-kernel puzzles put forward in Jackwerth (2000). They build an economy where investors' preferences or economic fundamentals are state-dependent, and simulate prices for a market index and European options on that index. Based on the original nonparametric methodology, the risk-aversion and pricing-kernel functions obtained across wealth states with these artificial data exhibit the same puzzles found with the actual data, but within each regime the puzzles disappear. This suggests that state dependence potentially explains the puzzles. |
| Keywords: | Financial markets; Market structure and pricing |
| JEL: | G12 G13 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:05-9&r=rmg |
| By: | Andrew W. Lo; Dmitry V. Repin; Brett N. Steenbarger |
| Abstract: | We investigate several possible links between psychological factors and trading performance in a sample of 80 anonymous day-traders. Using daily emotional-state surveys over a five-week period as well as personality inventory surveys, we construct measures of personality traits and emotional states for each subject and correlate these measures with daily normalized profits-and-losses records. We find that subjects whose emotional reaction to monetary gains and losses was more intense on both the positive and negative side exhibited significantly worse trading performance. Psychological traits derived from a standardized personality inventory survey do not reveal any specific %u201Ctrader personality profile%u201D, raising the possibility that trading skills may not necessarily be innate, and that different personality types may be able to perform trading functions equally well after proper instruction and practice. |
| JEL: | G12 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11243&r=rmg |