Return premiums of sustainable companies listed on the Spanish stock market

The purpose of this paper is to analyze whether companies with a greater commitment to corporate social responsibility (SRI companies) perform differently on the stock market compared to companies that disregard SRI. Over recent years, this relationship has been taken up at both a theoretical and practical level, and has led to extensive scientific research of an empirical nature involving the examination of the relationships existing between the financial and social, environmental and corporate governance performance of a company and the relationship between SRI and investment decisions in the financial market. More specifically, this work provides empirical evidence for the Spanish market as to whether or not belonging to a group of companies the market classes as sustainable results in return premiums that set them apart from companies classed as conventional, and finds no differences in the stock market performance of companies considered to be SRI or conventional.

Interest rate exposure of Spanish banks: A nonparametric analysis

Interest rate risk is one of the major financial risks faced by banks due to the very nature of the banking business. The most common approach in the literature has been to estimate the impact of interest rate risk on banks using a simple linear regression model. However, the relationship between interest rate changes and bank stock returns does not need to be exclusively linear. This article provides a comprehensive analysis of the interest rate exposure of the Spanish banking industry employing both parametric and non parametric estimation methods. Its main contribution is to use, for the first time in the context of banks’ interest rate risk, a nonparametric regression technique that avoids the assumption of a specific functional form. One the one hand, it is found that the Spanish banking sector exhibits a remarkable degree of interest rate exposure, although the impact of interest rate changes on bank stock returns has significantly declined following the introduction of the euro. Further, a pattern of positive exposure emerges during the post-euro period. On the other hand, the results corresponding to the nonparametric model support the expansion of the conventional linear model in an attempt to gain a greater insight into the actual degree of exposure.

A multifactor approach to the social discount rate

This work focuses on the appraisal of public and environmental projects and, more specifically, on the calculation of the social discount rate (SDR) for this kind of very long-term investment projects. As a rule, we can state that the instantaneous discount rate must be equal to the hazard rate of the public good or to the mortality rate of the population that the project is intended to. The hazard can be due to technical failures of the system, but, in this paper, we are going to consider different independent variables that can cause the hazard. That is, we are going to consider a multivariate hazard rate. In our empirical application, the Spanish forest surface will be the system and the forest fire will be the fail that can be caused by several factors. The aim of this work is to integrate the different variables that produce the fail in the calculation of the SDR from a multivariate hazard rate approach.

The US actuarial balance model for the pay-as-you-go system and its application to Spain

The aim of this paper is to formulate an approximation of the US actuarial balance model and apply it to the Spanish public retirement pension system under various scenarios in order to determine a consistent indicator of the system's financial state comparable to those used by the most advanced social security systems. This will enable us to answer the question as to whether there is any justification for reforming the pension system in Spain. This type of actuarial balance uses projections to show future challenges to the financial side of the pension system deriving basically from ageing, the projected increase in longevity and fluctuations in economic activity. If one is compiled periodically it can provide various indicators to help depoliticize the management of the pay-as-you-go system by bringing the planning horizons of politicians and the system itself closer together.

Idiosyncratic risk really drives stock returns; Spanish evidence

Following the theoretical model of Merton (1987), we provide a new perspective of study about the role of idiosyncratic risk in the asset pricing process. More precisely, we analyze whether the idiosyncratic risk premium depends on the idiosyncratic risk level of an asset as well as the vatriation in the market-wide measure of idiosyncratic risk. As expected, we obtain a net positive risk premium for the Spanish stock market over the period 1987-2007. Our results show a positive relation between returns and individual indiosyncratic risk levels and a negative but lower relation with the aggregate measure of idiosyncratic risk. These findings have important implications for portfolio and risk management and contribute to provide a unified and coherent answer for the main and still unsolved question about the idiosyncratic risk puzzle: whether or not there exists a premium associated to this kind of risk and the sign for this risk premium.

Individual pension information: Recommendations for the case of Spain based on the experiences of other countries

The aim of this paper is to establish some basic guidelines to help draft the information letter sent to individual contributors should it be decided to use this model in the Spanish public pension system. With this end in mind and basing our work on the experiences of the most advanced countries in the field and the pioneering papers by Jackson (2005), Larsson et al. (2008) and Sunden (2009), we look into the concept of “individual pension information” and identify its most relevant characteristics. We then give a detailed description of two models, those in the United States and Sweden, and in particular look at how they are structured, what aspects could be improved and what their limitations are. Finally we make some recommendations of special interest for designing the model for Spain.

Spanish society's perceptions about socially responsible investing

The debate surrounding the financial needs of investors and the impact on society of investment is considered to be an important research topic due to the growth of socially responsible financial markets. The objective of this research is to study the perception of the Spanish public about socially responsible investing (SRI) criteria and real-life investment needs. To examine the Spanish perception of SRI, we conducted a field survey. The results show that SRI is in an early stage and Spanish investors need more exact information regarding social, environmental, and governance criteria in order to invest in socially responsible companies and products.

Probabilistic tsunami hazard in the Northeast Atlantic from near- and far-field tectonic sources

In this article, we present the first study on probabilistic tsunami hazard assessment for the Northeast (NE) Atlantic region related to earthquake sources. The methodology combines the probabilistic seismic hazard assessment, tsunami numerical modeling, and statistical approaches. We consider three main tsunamigenic areas, namely the Southwest Iberian Margin, the Gloria, and the Caribbean. For each tsunamigenic zone, we derive the annual recurrence rate for each magnitude range, from Mw 8.0 up to Mw 9.0, with a regular interval, using the Bayesian method, which incorporates seismic information from historical and instrumental catalogs. A numerical code, solving the shallow water equations, is employed to simulate the tsunami propagation and compute near shore wave heights. The probability of exceeding a specific tsunami hazard level during a given time period is calculated using the Poisson distribution. The results are presented in terms of the probability of exceedance of a given tsunami amplitude for 100- and 500-year return periods. The hazard level varies along the NE Atlantic coast, being maximum along the northern segment of the Morocco Atlantic coast, the southern Portuguese coast, and the Spanish coast of the Gulf of Cadiz. We find that the probability that a maximum wave height exceeds 1 m somewhere in the NE Atlantic region reaches 60 and 100 % for 100- and 500-year return periods, respectively. These probability values decrease, respectively, to about 15 and 50 % when considering the exceedance threshold of 5 m for the same return periods of 100 and 500 years.