Degree Dissertation Report Asset Management

L'objectiu d'aquest treball no és oferir els mateixos serveis que els productes comercials, sinó utilitzar el coneixement bàsic en aquest sector per crear una aplicació simple

Equilibrium asset prices and savings of heterogeneous agents in the presence of incomplete markets and portfolio constraints

We study the quantitative properties of a dynamic general equilibrium model in which agents face both idiosyncratic and aggregate income risk, state-dependent borrowing constraints that bind in some but not all periods and markets are incomplete. Optimal individual consumption-savings plans and equilibrium asset prices are computed under various assumptions about income uncertainty. Then we investigate whether our general equilibrium model with incomplete markets replicates two empirical observations: the high correlation between individual consumption and individual income, and the equity premium puzzle. We find that, when the driving processes are calibrated according to the data from wage income in different sectors of the US economy, the results move in the direction of explaining these observations, but the model falls short of explaining the observed correlations quantitatively. If the incomes of agents are assumed independent of each other, the observations can be explained quantitatively.

On the impact of leverage constraints on asset prices and trading volume

Researchers have used stylized facts on asset prices and trading volumein stock markets (in particular, the mean reversion of asset returnsand the correlations between trading volume, price changes and pricelevels) to support theories where agents are not rational expected utilitymaximizers. This paper shows that this empirical evidence is in factconsistent with a standard infite horizon perfect information expectedutility economy where some agents face leverage constraints similar tothose found in todays financial markets. In addition, and in sharpcontrast to the theories above, we explain some qualitative differencesthat are observed in the price-volume relation on stock and on futuresmarkets. We consider a continuous-time economy where agents maximize theintegral of their discounted utility from consumption under both budgetand leverage con-straints. Building on the work by Vila and Zariphopoulou(1997), we find a closed form solution, up to a negative constant, for theequilibrium prices and demands in the region of the state space where theconstraint is non-binding. We show that, at the equilibrium, stock holdingsvolatility as well as its ratio to stock price volatility are increasingfunctions of the stock price and interpret this finding in terms of theprice-volume relation.

Solving non-linear stochastic models by parameterizing expectations: An application to asset pricing with production

A new algorithm called the parameterized expectations approach(PEA) for solving dynamic stochastic models under rational expectationsis developed and its advantages and disadvantages are discussed. Thisalgorithm can, in principle, approximate the true equilibrium arbitrarilywell. Also, this algorithm works from the Euler equations, so that theequilibrium does not have to be cast in the form of a planner's problem.Monte--Carlo integration and the absence of grids on the state variables,cause the computation costs not to go up exponentially when the numberof state variables or the exogenous shocks in the economy increase. \\As an application we analyze an asset pricing model with endogenousproduction. We analyze its implications for time dependence of volatilityof stock returns and the term structure of interest rates. We argue thatthis model can generate hump--shaped term structures.

A unifying approach to the empirical evaluation of asset pricing models

Two main approaches are commonly used to empirically evaluate linear factor pricingmodels: regression and SDF methods, with centred and uncentred versions of the latter.We show that unlike standard two-step or iterated GMM procedures, single-step estimatorssuch as continuously updated GMM yield numerically identical values for prices of risk,pricing errors, Jensen s alphas and overidentifying restrictions tests irrespective of the modelvalidity. Therefore, there is arguably a single approach regardless of the factors being tradedor not, or the use of excess or gross returns. We illustrate our results by revisiting Lustigand Verdelhan s (2007) empirical analysis of currency returns.

Keeping up with the Joneses: An international asset pricing model

We derive an international asset pricing model that assumes local investorshave preferences of the type "keeping up with the Joneses." In aninternational setting investors compare their current wealth with that oftheir peers who live in the same country. In the process of inferring thecountry's average wealth, investors incorporate information from the domesticmarket portfolio. In equilibrium, this gives rise to a multifactor CAPMwhere, together with the world market price of risk, there existscountry-speciffic prices of risk associated with deviations from thecountry's average wealth level. The model performs signifficantly better, interms of explaining cross-section of returns, than the international CAPM.Moreover, the results are robust, both for conditional and unconditionaltests, to the inclusion of currency risk, macroeconomic sources of risk andthe Fama and French HML factor.

Asset pricing implications of benchmarking: A two-factor CAPM

In this paper we consider the equilibrium effects of an institutionalinvestor whose performance is benchmarked to an index. In a partialequilibrium setting, the objective of the institutional investor is modeledas the maximization of expected utility (an increasing and concave function,in order to accommodate risk aversion) of final wealth minus a benchmark.In equilibrium this optimal strategy gives rise to the two-beta CAPM inBrennan (1993): together with the market beta a new risk-factor (that wecall active management risk) is brought into the analysis. This new betais deffined as the normalized (to the benchmark's variance) covariancebetween the asset excess return and the excess return of the market overthe benchmark index. Different to Brennan, the empirical test supports themodel's predictions. The cross-section return on the active management riskis positive and signifficant especially after 1990, when institutionalinvestors have become the representative agent of the market.

Asset pricing with idiosyncratic risk and overlapping generations

A number of existing studies have concluded that risk sharing allocations supported by competitive, incomplete markets equilibria are quantitatively close to first-best. Equilibrium asset prices in these models have been difficult to distinguish from those associated with a complete markets model, the counterfactual features of which have been widely documented. This paper asks if life cycle considerations, in conjunction with persistent idiosyncratic shocks which become more volatile during aggregate downturns, can reconcile the quantitative properties of the competitive asset pricing framework with those of observed asset returns. We begin by arguing that data from the Panel Study on Income Dynamics support the plausibility of such a shock process. Our estimates suggest a high degree of persistence as well as a substantial increase in idiosyncratic conditional volatility coincident with periods of low growth in U.S. GNP. When these factors are incorporated in a stationary overlapping generations framework, the implications for the returns on risky assets are substantial. Plausible parameterizations of our economy are able to generate Sharpe ratios which match those observed in U.S. data. Our economy cannot, however, account for the level of variability of stock returns, owing in large part to the specification of its production technology.

Asset prices and the measurement of wealth and saving

The paper defines concepts of real wealth and saving which take into account the intertemporal index number problem that results from changing interest rates. Unlike conventional measures of real wealth, which are based on the market value of assets and ignore the index number problem, the new measure correctly reflects the changes in the welfare of households over time. An empirically operational approximation to the theoretical measure is provided and applied to US data. A major empirical finding is that US real financial wealth increased strongly in the 1980s, much more than is revealed by the market value of assets.

Job search and asset accumulation under borrowing constraints

In this paper I show how borrowing constraints and job search interact.I fit a dynamic model to data from the National Longitudinal Survey(1979-cohort) and show that borrowing constraints are significant. Agentswith more initial assets and more access to credit attain higher wagesfor several periods after high school graduation. The unemployed maintaintheir consumption by running down their assets, while the employed saveto buffer against future unemployment spells. I also show that, unlikein models with exogenous income streams, unemployment transfers, byallowing agents to attain higher wages do not 'crowd out' but increasesaving.

Monetary policy and rational asset price bubbles

I examine the impact of alternative monetary policy rules on arational asset price bubble, through the lens of an overlapping generations model with nominal rigidities. A systematic increase in interestrates in response to a growing bubble is shown to enhance the fluctuations in the latter, through its positive effect on bubble growth. Theoptimal monetary policy seeks to strike a balance between stabilization of the bubble and stabilization of aggregate demand. The paper'smain findings call into question the theoretical foundations of the casefor "leaning against the wind" monetary policies.

Disseny, implementació i avaluació d'un joc tangible basat en puzles per aprendre concepte de les enginyeries TIC

L'interès per les carreres relacionades amb les enginyeries del camp de les Tecnologies de la Informació i la Comunicació (TIC) va caient any rere any i això es tradueix en menys matriculacions per cada any que passa. Una de les causes principals és la falta de motivació i interès envers aquestes carreres. Aquest problema s’atribueix a que les metodologies d’aprenentatge tradicionals no s’adeqüen a les necessitats i requeriments dels estudiants d’avui dia, que han crescut envoltats de tecnologia, i se’ls coneix amb el nom en anglès de digitalnatives.L’aprenentatge basat en jocs sorgeix com a una possible solució per afrontar aquesta falta d’interès per les àrees del coneixement relacionades amb les enginyeries TIC. Aquest mètode d'aprenentatge consisteix en que els estudiants aprenguin conceptes de les TIC mentre estan jugant a un joc. Per tant, en el context d’aquest PFC, ens centrarem en el disseny i implementació d’un joc per aprendre conceptes bàsics de les enginyeries TIC. En concret, el disseny d’aquest joc segueix les característiques definides per un model conceptual que descriuquins són els elements necessaris per crear jocs basats en puzles: quins són els elements principals que componen aquests tipus de joc i quines pistes es poden afegir per guiar a l’estudiant en el procés d’aprenentatge amb el joc. Per altra banda, pel que fa a laimplementació del joc, s’utilitzarà tecnologia basada en interfícies tangibles.Per tal d’analitzar el joc basat en puzles que s’ha dissenyat i implementat per aprendre conceptes basics de les Enginyeries TIC, s’ha portat a terme una avaluació amb estudiants d’un centre educatiu. Aspectes com el disseny de pistes, l’experiència dels estudiants amb el joc il’aprenentatge amb el joc seran analitzats per extreure les conclusions oportunes.

Disseny, implementació i avaluació d'un joc tangible basat en puzles per a l'aprenentatge d'arquitectura d'ordinadors

Actualment existeix una falta d'interès per part dels estudiants a l'àrea de les enginyeries en Tecnologies de la Informació i la Comunicació (TIC) que es pot veure reflectida en el descens de les matriculacions universitàries en aquest àmbit. Aquest fet està relacionat amb que la nova generació d‟estudiants està constantment en contacte amb tota mena d'aparells tecnològics estimulants i a l‟hora de l‟estudi poden sofrir una falta d‟interès per l‟ús d‟una metodologia d'aprenentatge més tradicional. En aquest sentit s'ha investigat que l‟ús de jocs com a eina educativa pot ser una bona solució per afrontar aquesta falta d'interès. No obstant això, actualment no existeixen gaires jocs destinats a aprendre conceptes relacionats amb les enginyeries TIC i que proporcionin als estudiants els mecanismes d'ajuda necessaris per donar-los suport durant l'aprenentatge d‟aquests nous conceptes. En aquest projecte es desenvoluparà un joc educatiu per a estudiants amb l‟objectiu de proporcionar uns primers coneixements sobre les TIC. Per una banda, per al disseny del joc s‟utilitzarà un model conceptual que defineix els elements necessaris per a dissenyar jocs basats en resoldre puzles. A més, aquest model conceptual permet el disseny no només de jocs per a PCs, sinó també de jocs tangibles i exploratius (mitjançant tecnologia mòbil). En el nostre cas, ens centrarem en la implementació d‟un joc tangible. Per altra banda, pel que fa a la implementació, tindrem en compte l‟estàndard educatiu d‟IMS Learning Design, demostrant d‟aquesta manera que aquest tipus de jocs es poden beneficiar dels avantatges que aporten els estàndards educatius. Per tant, en aquest PFC es dissenyarà i implementarà un joc tangible basat en puzles dintre de l‟àrea d‟arquitectura d‟ordinadors. El joc constarà de tres mini-jocs que es presentaran com jocs de realitat augmentada amb el suport d‟un ordinador i unes peces físiques amb les que interactuaran els usuaris. El sistema proporcionarà un sistema d‟ajuda i un sistema de puntuació. Per últim, avaluarem el joc en un centre escolar amb estudiants de 4t d‟ESO amb la finalitat d'analitzar les valoracions dels estudiants respecte el joc i les pistes proporcionades.