Microscopic origin of non-Gaussian distributions of financial returns

In this paper we study the possible microscopic origin of heavy-tailed probability density distributions for the price variation of financial instruments. We extend the standard log-normal process to include another random component in the so-called stochastic volatility models. We study these models under an assumption, akin to the Born-Oppenheimer approximation, in which the volatility has already relaxed to its equilibrium distribution and acts as a background to the evolution of the price process. In this approximation, we show that all models of stochastic volatility should exhibit a scaling relation in the time lag of zero-drift modified log-returns. We verify that the Dow-Jones Industrial Average index indeed follows this scaling. We then focus on two popular stochastic volatility models, the Heston and Hull-White models. In particular, we show that in the Hull-White model the resulting probability distribution of log-returns in this approximation corresponds to the Tsallis (t-Student) distribution. The Tsallis parameters are given in terms of the microscopic stochastic volatility model. Finally, we show that the log-returns for 30 years Dow Jones index data is well fitted by a Tsallis distribution, obtaining the relevant parameters. (c) 2007 Elsevier B.V. All rights reserved.

Sustentabilidade financeira e econômica do gasto público em saúde no nível municipal: reflexões a partir de dados de municípios mato-grossenses

O financiamento do SUS é regido pelo modelo de federalismo fiscal, pelas regras de partilha do Orçamento da Seguridade Social (OSS), por normas do Ministério da Saúde, e pela Emenda Constitucional nº. 29 (EC-29), que vincula à saúde recursos dos entes federados brasileiros. Discute-se aqui a sustentabilidade do gasto público com saúde no nível municipal. Foram estudados 21 municípios, utilizando-se dados dos balanços municipais. De 1996 a 2006 as receitas correntes gerais per capita subiram 280% acima da inflação acumulada e do Produto Interno Bruto (PIB) nacional, variando conforme o porte do município, o qual também definiu a composição dos orçamentos municipais. Já o orçamento que conforma a base da EC-29 elevou-se bem menos (178%), impondo limitações ao incremento da contrapartida municipal em saúde. Acredita-se que o observado nesses municípios se reproduza em milhares de municípios brasileiros e comprometa a capacidade de investimento municipal em saúde, principalmente a partir de 2008. A situação ainda pode se agravar tendo em vista a extinção da Contribuição Provisória sobre a Movimentação ou Transmissão de Valores e de Créditos e Direitos de Natureza Financeira (CPMF), a tramitação dos Projetos de Lei nº. 306/08 e nº. 233/08, e a recessão mundial, a partir da crise do sistema financeiro norte-americano.

Power-law creep behavior of a semiflexible chain

Rheological properties of adherent cells are essential for their physiological functions, and microrheological measurements on living cells have shown that their viscoelastic responses follow a weak power law over a wide range of time scales. This power law is also influenced by mechanical prestress borne by the cytoskeleton, suggesting that cytoskeletal prestress determines the cell's viscoelasticity, but the biophysical origins of this behavior are largely unknown. We have recently developed a stochastic two-dimensional model of an elastically joined chain that links the power-law rheology to the prestress. Here we use a similar approach to study the creep response of a prestressed three-dimensional elastically jointed chain as a viscoelastic model of semiflexible polymers that comprise the prestressed cytoskeletal lattice. Using a Monte Carlo based algorithm, we show that numerical simulations of the chain's creep behavior closely correspond to the behavior observed experimentally in living cells. The power-law creep behavior results from a finite-speed propagation of free energy from the chain's end points toward the center of the chain in response to an externally applied stretching force. The property that links the power law to the prestress is the chain's stiffening with increasing prestress, which originates from entropic and enthalpic contributions. These results indicate that the essential features of cellular rheology can be explained by the viscoelastic behaviors of individual semiflexible polymers of the cytoskeleton.

Precise determination of quantum critical points by the violation of the entropic area law

Finite-size scaling analysis turns out to be a powerful tool to calculate the phase diagram as well as the critical properties of two-dimensional classical statistical mechanics models and quantum Hamiltonians in one dimension. The most used method to locate quantum critical points is the so-called crossing method, where the estimates are obtained by comparing the mass gaps of two distinct lattice sizes. The success of this method is due to its simplicity and the ability to provide accurate results even considering relatively small lattice sizes. In this paper, we introduce an estimator that locates quantum critical points by exploring the known distinct behavior of the entanglement entropy in critical and noncritical systems. As a benchmark test, we use this new estimator to locate the critical point of the quantum Ising chain and the critical line of the spin-1 Blume-Capel quantum chain. The tricritical point of this last model is also obtained. Comparison with the standard crossing method is also presented. The method we propose is simple to implement in practice, particularly in density matrix renormalization group calculations, and provides us, like the crossing method, amazingly accurate results for quite small lattice sizes. Our applications show that the proposed method has several advantages, as compared with the standard crossing method, and we believe it will become popular in future numerical studies.

Financial distress, financial constraint and investment decision: Evidence from Brazil

This paper analyses the presence of financial constraint in the investment decisions of 367 Brazilian firms from 1997 to 2004, using a Bayesian econometric model with group-varying parameters. The motivation for this paper is the use of clustering techniques to group firms in a totally endogenous form. In order to classify the firms we used a hybrid clustering method, that is, hierarchical and non-hierarchical clustering techniques jointly. To estimate the parameters a Bayesian approach was considered. Prior distributions were assumed for the parameters, classifying the model in random or fixed effects. Ordinate predictive density criterion was used to select the model providing a better prediction. We tested thirty models and the better prediction considers the presence of 2 groups in the sample, assuming the fixed effect model with a Student t distribution with 20 degrees of freedom for the error. The results indicate robustness in the identification of financial constraint when the firms are classified by the clustering techniques. (C) 2010 Elsevier B.V. All rights reserved.

Darcy`s law and the differential equation of motion

This note addresses the relation between the differential equation of motion and Darcy`s law. It is shown that, in different flow conditions, three versions of Darcy`s law can be rigorously derived from the equation of motion.

Scaling of structures subject to impact loads when using a power law constitutive equation

It is well known that structures subjected to dynamic loads do not follow the usual similarity laws when the material is strain rate sensitive. As a consequence, it is not possible to use a scaled model to predict the prototype behaviour. In the present study, this problem is overcome by changing the impact velocity so that the model behaves exactly as the prototype. This exact solution is generated thanks to the use of an exponential constitutive law to infer the dynamic flow stress. Furthermore, it is shown that the adopted procedure does not rely on any previous knowledge of the structure response. Three analytical models are used to analyze the performance of the technique. It is shown that perfect similarity is achieved, regardless of the magnitude of the scaling factor. For the class of material used, the solution outlined has long been sought, inasmuch as it allows perfect similarity for strain rate sensitive structures subject to impact loads. (C) 2009 Elsevier Ltd. All rights reserved.

On the Steinmetz hysteresis law

The behavior of the Steinmetz coefficient has been described for several different materials: steels with 3.2% Si and 6.5% Si, MnZn ferrite and Ni-Fe alloys. It is shown that, for steels, the Steinmetz law achieves R(2)> 0.999 only between 0.3 and 1.2 T, which is the interval where domain wall movement dominates. The anisotropy of Steinmetz coefficient for non-oriented (NO) steel is also discussed. It is shown that for a NO 3.2% Si steel with a strong Goss component in texture, the power law coefficient and remanence decreases monotonically with the direction of measurement going from rolling direction (RD) to transverse direction (TD), although coercive field increased. The remanence behavior can be related to the minimization of demagnetizing field at the surface grains. The data appear to indicate that the Steinmetz coefficient increases as magnetocrystalline anisotropy constant decreases. (c) 2008 Elsevier B.V. All rights reserved.

Sampled Control for Mean-Variance Hedging in a Jump Diffusion Financial Market

In this technical note we consider the mean-variance hedging problem of a jump diffusion continuous state space financial model with the re-balancing strategies for the hedging portfolio taken at discrete times, a situation that more closely reflects real market conditions. A direct expression based on some change of measures, not depending on any recursions, is derived for the optimal hedging strategy as well as for the ""fair hedging price"" considering any given payoff. For the case of a European call option these expressions can be evaluated in a closed form.

Bias-corrected Pearson estimating functions for Taylor`s power law applied to benthic macrofauna data

Estimation of Taylor`s power law for species abundance data may be performed by linear regression of the log empirical variances on the log means, but this method suffers from a problem of bias for sparse data. We show that the bias may be reduced by using a bias-corrected Pearson estimating function. Furthermore, we investigate a more general regression model allowing for site-specific covariates. This method may be efficiently implemented using a Newton scoring algorithm, with standard errors calculated from the inverse Godambe information matrix. The method is applied to a set of biomass data for benthic macrofauna from two Danish estuaries. (C) 2011 Elsevier B.V. All rights reserved.

Structural change, balance-of-payments constraint, and economic growth: evidence from the multisectoral Thirlwall`s law

This paper contributes to the literature on balance-of-payments constrained growth by investigating how structural change identified with changes in the sectoral composition of exports and imports affects the external constraint We test both the original and a multisectoral version of Thirlwall`s law for a sample of Latin American and Asian countries The original Thirlwall s law is found to hold for all sample countries except South Korea, whereas the multisectoral analogue holds for all of them As the sectoral composition of exports and imports is found to matter for growth we analyze the evolution of each country`s weighted trade income elasticities

Multicollinearity and financial constraint in investment decisions: a Bayesian generalized ridge regression

This paper addresses the investment decisions considering the presence of financial constraints of 373 large Brazilian firms from 1997 to 2004, using panel data. A Bayesian econometric model was used considering ridge regression for multicollinearity problems among the variables in the model. Prior distributions are assumed for the parameters, classifying the model into random or fixed effects. We used a Bayesian approach to estimate the parameters, considering normal and Student t distributions for the error and assumed that the initial values for the lagged dependent variable are not fixed, but generated by a random process. The recursive predictive density criterion was used for model comparisons. Twenty models were tested and the results indicated that multicollinearity does influence the value of the estimated parameters. Controlling for capital intensity, financial constraints are found to be more important for capital-intensive firms, probably due to their lower profitability indexes, higher fixed costs and higher degree of property diversification.

The Controllership Relevance or Risk Management in non-Financial Companies: a study of risk managers` and controllers` perceptions

The purpose of this study is to analyze the Controllership relevance as support risk management in non-financial companies. Risk management is a widely discussed and disseminated subject amongst financial institutions. It is obvious that economic uncertainties and, consequently, prevention and. control must also exist in non-financial companies. To enable managers to take safe-decisions, it is essential for them to be able to count on instrumental support that provides timely and adequate information, to ensure lower levels of mistakes and risk exposure. However, discussion concerning risk management in non-financial companies is still in its early stages in Brazil. Considering this gap, this study aims at assessing how Controllership has been acting in? companies under the insight of risk and how it can contribute to risk management in non-financial companies. To achieve the proposed goal, a field research was. carried-out with non-financial companies that are located in the city Sao Paulo and listed in the Sao Paulo Stock Exchange (Bovespa). The research was carried out using questionnaires, which were sent do Risk Officers and Controllers of those companies with the purpose of evaluating their perception on the subject. The results,of the research allow us to conclude that Controllership offers support to risk management, through information that contributes to the mitigation of the risks in non-financial companies.

Diagnosis of Organizational Soft Problems in a Peruvian Financial Institution by Systemic Thinking

Managing financial institutions in an underdeveloped economic context has become a real challenge nowadays. In order to reach the organization`s planned goals, they have to deal with structural, behavioral and informational problems. From the systemic point of view, this situation gets even worse when the company does not present organizational boundaries and a cohesive identification for their stakeholders. Thus, European countries have some special financial lines in order to help the development of micro credit in Latin communities in an attempt to help the local economy. However, institutions like Caixa dos Andes in Peru present management problems when dealing with this complexity. Based on this, how can the systemic eye help in the diagnosis of soft problems of a Peruvian financial company? This study aims to diagnose soft problems of a Peruvian financial company based on soft variables like identity, communication and autonomy and also intends to identify possible ways to redesign its basic framework. The (VSM--Viable System Model) method from Beer (1967), applied in this diagnostic study, was used in a practical way as a management tool for organizations` analysis and planning. By describing the VSM`s five systems, the creation of a systemic vision or a total vision is possible, showing the organization`s complexity from the inside. Some company`s soft problems like double control, inefficient use of physical and human resources, low information flows, slowness, etc. The VSM presented an organizational diagnosis indicating effective solutions that do integrate its five systems.

Financial leverage and tangibility of assets of Brazilian companies of agribusiness in the post-real plan period

This paper aims to study the relationship between the debt level and the asset structure of Brazilian companies of the agribusiness sector, since it is considered a current and relevant discussion: to evaluate the mechanisms for fund-raising and guarantees. The methodology of Granger`s Causality test and Autoregressive Vectors was used to conduct a comparative analysis, applied to a financial database of companies with open capital of Brazilian agribusiness, in particular the agricultural sector and Fisheries and Food and Beverages in a period of 10 years (1997-2007) from quarterly series available in the database of Economatica(R). The results demonstrated that changes in leverage generate variations in the tangibility of the companies, a fact that can be explained by the large search of funding secured by fiduciary transfer of fixed assets, which facilitates access to credit by business of the Agribusiness sector, increasing the payment time and lowering interest rates.