Term Structure and the Estimated Monetary Policy Rule in the Eurozone

Published as an article in: Spanish Economic Review, 2008, vol. 10, issue 4, pages 251-277.

Option-Implied Preferences Adjustments and Risk-Neutral Density Forecasts

The main objective of this paper is to analyse the value of information contained in prices of options on the IBEX 35 index at the Spanish Stock Exchange Market. The forward looking information is extracted using implied risk-neutral density functions estimated by a mixture of two-lognormals and three alternative risk-adjustments: the classic power and exponential utility functions and a habit-based specification that allows for a counter-cyclical variation of risk aversion. Our results show that at four-week horizon we can reject the hypothesis that between October 1996 and March 2000 the risk-neutral densities provide accurate predictions of the distributions of future realisations of the IBEX 35 index at a four-week horizon. When forecasting through risk-adjusted densities the performance of this period is statistically improved and we no longer reject that hypothesis. All risk-adjusted densities generate similar forecasting statistics. Then, at least for a horizon of four-weeks, the actual risk adjustment does not seem to be the issue. By contrast, at the one-week horizon risk-adjusted densities do not improve the forecasting ability of the risk-neutral counterparts.

Does the Term Spread play a role in the FED's reaction function? An Empirical Investigation

Using US data for the period 1967:5-2002:4, this paper empirically investigates the performance of a Fed’s reaction function (FRF) that (i) allows for the presence of switching regimes, (ii) considers the long-short term spread in addition to the typical variables, (iii) uses an alternative monthly indicator of general economic activity suggested by Stock and Watson (1999), and (iv) considers interest rate smoothing. The estimation results show the existence of three switching regimes, two characterized by low volatility and the remaining regime by high volatility. Moreover, the scale of the responses of the Federal funds rate to movements in the rate of inflation and the economic activity index depends on the regime. The estimation results also show robust empirical evidence that the importance of the term spread in the FRF has increased over the sample period and the FRF has been more stable during the term of office of Chairman Greenspan than in the pre-Greenspan period.

The role of the term spread in an augmented Taylor rule: An empirical investigation

Using US data for the period 1967:5-2002:4, this paper empirically investigates the performance of an augmented version of the Taylor rule (ATR) that (i) allows for the presence of switching regimes, (ii) considers the long-short term spread in addition to the typical variables, (iii) uses an alternative monthly indicator of general economic activity suggested by Stock and Watson (1999), and (iv) considers interest rate smoothing. The estimation results show the existence of switching regimes, one characterized by low volatility and the other by high volatility. Moreover, the scale of the responses of the Federal funds rate to movements in the term spread, inflation and the economic activity index depend on the regime. The estimation results also show robust empirical evidence that the ATR has been more stable during the term of office of Chairman Greenspan than in the pre-Greenspan period. However, a closer look at the Greenspan period shows the existence of two alternative regimes and that the response of the Fed funds rate to inflation has not been significant during this period once the term spread is considered.

Identification of a biomarker panel for colorectal cancer diagnosis

Background: Malignancies arising in the large bowel cause the second largest number of deaths from cancer in the Western World. Despite progresses made during the last decades, colorectal cancer remains one of the most frequent and deadly neoplasias in the western countries. Methods: A genomic study of human colorectal cancer has been carried out on a total of 31 tumoral samples, corresponding to different stages of the disease, and 33 non-tumoral samples. The study was carried out by hybridisation of the tumour samples against a reference pool of non-tumoral samples using Agilent Human 1A 60- mer oligo microarrays. The results obtained were validated by qRT-PCR. In the subsequent bioinformatics analysis, gene networks by means of Bayesian classifiers, variable selection and bootstrap resampling were built. The consensus among all the induced models produced a hierarchy of dependences and, thus, of variables. Results: After an exhaustive process of pre-processing to ensure data quality–lost values imputation, probes quality, data smoothing and intraclass variability filtering–the final dataset comprised a total of 8, 104 probes. Next, a supervised classification approach and data analysis was carried out to obtain the most relevant genes. Two of them are directly involved in cancer progression and in particular in colorectal cancer. Finally, a supervised classifier was induced to classify new unseen samples. Conclusions: We have developed a tentative model for the diagnosis of colorectal cancer based on a biomarker panel. Our results indicate that the gene profile described herein can discriminate between non-cancerous and cancerous samples with 94.45% accuracy using different supervised classifiers (AUC values in the range of 0.997 and 0.955).

About the Stabilization of a Nonlinear Perturbed Difference Equation

This paper investigates the local asymptotic stabilization of a very general class of instable autonomous nonlinear difference equations which are subject to perturbed dynamics which can have a different order than that of the nominal difference equation. In the general case, the controller consists of two combined parts, namely, the feedback nominal controller which stabilizes the nominal (i.e., perturbation-free) difference equation plus an incremental controller which completes the stabilization in the presence of perturbed or unmodeled dynamics in the uncontrolled difference equation. A stabilization variant consists of using a single controller to stabilize both the nominal difference equation and also the perturbed one under a small-type characterization of the perturbed dynamics. The study is based on Banach fixed point principle, and it is also valid with slight modification for the stabilization of unstable oscillatory solutions.

Consumption and portfolio rules whit stochastic hyperbolic discounting

We extend the classic Merton (1969, 1971) problem that investigates the joint consumption-savings and portfolio-selection problem under capital risk by assuming sophisticated but time-inconsistent agents. We introduce stochastic hyperbolic preferences as in Harris and Laibson (2013) and find closed-form solutions for Merton's optimal consumption and portfolio selection problem in continuous time. We find that the portfolio rule remains identical to the time-consistent solution with power utility and no borrowing constraints. However,the marginal propensity to consume out of wealth is unambiguously greater than the time-consistent, exponential case and,importantly, it is also more responsive to changes in risk. These results suggest that hyperbolic discounting with sophisticated agents offers promise for contributing to explaining important aspects of asset market data.

An austerity-driven energy reform

In July 2013, the government approved a major overhaul of the Spanish electricity sector to correct existing imbalances that have led to an exponential increase of regulated electricity costs and a huge tariff deficit. The reform addresses the problem of financial sustainability of the sector, severely affected by weak demand and overcapacity. Previous regulation introduced in 2012 and early 2013, also aimed at restoring financial stability of the sector, failed to correct the tariff shortfall and new regulatory measures were needed to reduce the 4.5 billion euros forecasted deficit for 2013. The frequent change of the rules of the game in the sector has created regulatory uncertainty, more so as it is not clear that the present reform will be sufficient to eliminate the deficit. Moreover, the government has left the door open to new regulation that would deal with the price formation system. In general, short run financial criteria have prevailed, while efficiency principles and a long run perspective have little weight in the reform.

Kalman Filtering in R

Support in R for state space estimation via Kalman filtering was limited to one package, until fairly recently. In the last five years, the situation has changed with no less than four additional packages offering general implementations of the Kalman filter, including in some cases smoothing, simulation smoothing and other functionality. This paper reviews some of the offerings in R to help the prospective user to make an informed choice.

La aplicación empresarial del marketing viral y el efecto boca-oreja electrónico. Opiniones de las empresas

[ES] La práctica tradicional del boca-oreja, natural desde hace años como modo de publicidad efectiva sin recurrir a grandes inversiones ni contrataciones en medios masivos se ha convertido en una nueva posibilidad de marketing con la llegada de las nuevas tecnologías e Internet. Así ha aparecido una nueva estrategia de marketing que consiste en explotar las redes sociales preexistentes para producir incrementos exponenciales en conocimiento de marca, denominada marketing viral. El efecto "boca-oreja online" que genera es una herramienta poderosa para las empresas, aunque su verdadero potencial está aún por descubrir. El objetivo del presente trabajo de investigación es analizar este fenómeno a través de una amplia revisión bibliográfica del término, así como un estudio empírico consistente en una entrevista en profundidad realizada a una muestra de importantes empresas españolas. Los resultados indican que el marketing viral puede ser empleado para el beneficio, tanto de grandes empresas con grandes presupuestos, como de pequeños negocios. Las experiencias exitosas de su utilización demuestran que, cuando se usa integrado en el resto de estrategias comerciales de la empresa, puede mejorar la recomendación de la marca e incrementar su notoriedad en el mercado. El marketing viral puede ser ventajoso a la hora de lanzar un nuevo producto al mercado, sin embargo, la efectividad y la medición de las campañas son vistas por muchos académicos y profesionales como un punto débil de la estrategia.