The equity premium and the risk free rate: A cross country, cross maturity examination

This paper examines the relationship between the equity premium and the risk free rate at three different maturities using post 1973 data fora panel of 7 OECD countries. We show the existence of subsample instabilities,of some cross country differences and of inconsistencies with the expectations theory of the term structure. We perform simulations using a standard consumptionbased CAPM model and demonstrate that the basic features of Mehra and Prescott's(1985) puzzle remain, regardless of the time period, the investment maturity and the country considered. Modifications of the basic setup are also considered.

Are changes in education important for the wage premium and unemployment?

A generalized rise in unemployment rates for both college and high-schoolgraduates, a widening education wage premium, and a sharp increase incollege education participation are characteristic features of thetransformations of the U.S. labor market between 1970 and 1990. This paperinvestigates the interactions between these changes in the labor marketand in educational attainment. First, it develops an equilibrium searchand matching model of the labor market where education is endogenouslydetermined. Second, calibrated versions of the model are used to studyquantitatively whether either a skill-biased change in technology or amismatch shock can explain the above facts. The skill-biased shock accountsfor a considerable part of the changes but fails to produce the increasein unemployment for the educated labor force. The mismatch shock explainsinstead much of the change in the four variables, including the wage premium.

Educational opportunity and the college premium

Since World War II, the United States government has made improved accessto higher education a priority. This e¤ort has substantially increasedthe number of people who complete college. We show that by reducing theeffective interest rate on borrowing for education, such policies canactually increase the gap in wages between those with a college educationand those without. The mechanism that drives our results is the signaling role of education first explored by Spence (1973). We argue that financialconstraints on education reduce the value of education as a signal. Wesolve for the reduced form relationship between the interest rate and thewage premium in the steady state of a dynamic asymmetric information model.In addition, we discuss evidence of decreases in borrowing costs for educationfinancing in the U.S.

On the industry experience premium and labor mobility

[cat] Hi ha evidència que l'experiència es remunera diferentment segons la indústria. Proposem un model teòric que explica aquestes diferències. Suposem que la mobilitat de treballadors aporta coneixement extern a l'empresa i això augmenta la seva productivitat. Els resultats mostren que l'experiència és millor remunerada en les indústries amb costos de mobilitat baixos, amb molt aprenentatge (learning-by-doing) i alt nivell tecnològic. A més, trobem una relació en forma de U entre la remuneració de l'experiència i el nivell d'absorció de coneixement extern, la substitutibilitat entre diferents tipus de treballadors i la varietat de coneixement dins la indústria. Els resultats són consistents amb l'evidència que les indústries intensives en I and D remuneren millor l'experiència.

On the industry experience premium and labor mobility

[cat] Hi ha evidència que l'experiència es remunera diferentment segons la indústria. Proposem un model teòric que explica aquestes diferències. Suposem que la mobilitat de treballadors aporta coneixement extern a l'empresa i això augmenta la seva productivitat. Els resultats mostren que l'experiència és millor remunerada en les indústries amb costos de mobilitat baixos, amb molt aprenentatge (learning-by-doing) i alt nivell tecnològic. A més, trobem una relació en forma de U entre la remuneració de l'experiència i el nivell d'absorció de coneixement extern, la substitutibilitat entre diferents tipus de treballadors i la varietat de coneixement dins la indústria. Els resultats són consistents amb l'evidència que les indústries intensives en I and D remuneren millor l'experiència.

Stock market volatility and learning

Introducing bounded rationality in a standard consumption-based asset pricing model with time separable preferences strongly improves empirical performance. Learning causes momentum and mean reversion of returns and thereby excess volatility, persistence of price-dividend ratios, long-horizon return predictability and a risk premium, as in the habit model of Campbell and Cochrane (1999), but for lower risk aversion. This is obtained, even though our learning scheme introduces just one free parameter and we only consider learning schemes that imply small deviations from full rationality. The findings are robust to the learning rule used and other model features. What is key is that agents forecast future stock prices using past information on prices.

A priori ratemaking using bivariate poisson regression models

In automobile insurance, it is useful to achieve a priori ratemaking by resorting to gene- ralized linear models, and here the Poisson regression model constitutes the most widely accepted basis. However, insurance companies distinguish between claims with or without bodily injuries, or claims with full or partial liability of the insured driver. This paper exa- mines an a priori ratemaking procedure when including two di®erent types of claim. When assuming independence between claim types, the premium can be obtained by summing the premiums for each type of guarantee and is dependent on the rating factors chosen. If the independence assumption is relaxed, then it is unclear as to how the tari® system might be a®ected. In order to answer this question, bivariate Poisson regression models, suitable for paired count data exhibiting correlation, are introduced. It is shown that the usual independence assumption is unrealistic here. These models are applied to an automobile insurance claims database containing 80,994 contracts belonging to a Spanish insurance company. Finally, the consequences for pure and loaded premiums when the independence assumption is relaxed by using a bivariate Poisson regression model are analysed.

How to use the standard model with own data?

In this work discuss the use of the standard model for the calculation of the solvency capital requirement (SCR) when the company aims to use the specific parameters of the model on the basis of the experience of its portfolio. In particular, this analysis focuses on the formula presented in the latest quantitative impact study (2010 CEIOPS) for non-life underwriting premium and reserve risk. One of the keys of the standard model for premium and reserves risk is the correlation matrix between lines of business. In this work we present how the correlation matrix between lines of business could be estimated from a quantitative perspective, as well as the possibility of using a credibility model for the estimation of the matrix of correlation between lines of business that merge qualitative and quantitative perspective.

Price policies and Price dispersion in the private healthcare insurance industry: The Catalan case

We present an overlapping generations model that explains price dispersion among Catalonian healthcare insurance firms. The model shows that firms with different premium policies can coexist. Furthermore, if interest rates are low, firms that apply equal premium to all insureds can charge higher average prices than insurers that set premiums according to the risk of insured. Economic theory, health insurance, health economics.

BCN-Routing : càlcul web de rutes amb pgRouting, OpenStreetMaps i OpenLayers

Es presenta un sistema acurat de càlcul web d'itineraris mínims (per a vianants i per a vehicles) entre dos punts de la ciutat de Barcelona, un dels quals es triat per l'usuari directament a sobre un mapa i l'altre, alternativament, a sobre el mateix mapa o bé a sobre una llista de selecció de les principals atraccions turístiques de Barcelona.El sistema es troba implementat per medi de MapServer (1) com a servidor, OpenLayers (2) per a la interfície d'usuari, una base de dades PostrgreSQL (3)/PostGIS (4) que recull dades d'OpenStreetMaps (5) per a la navegació i dades introduïdes manualment, per a la llista de selecció d'atraccions turístiques. Per al càlcul d'itineraris es fa servir, pgRouting (6) alhora que s'accedeix a la cartografia de CartoCiudad (7) per a mostrar un mapa de base i opcionalment els noms dels carrers i punts d'interès a partir de les capes FondoUrbano, Vial i Topónimo del servidor WMS de CartoCiudad.Tot el sistema corre a sobre Windows 7 Home Premium (8).Així mateix es presenten quatre noves funcions i un tipus definit per l'usuari de PostgreSQL per al càlcul acurat d'itineraris mínims i l'estudi teòric que justifica la seva bondat.

Is there a wage penalty for horizontal and vertical mismatch?

This paper studies how the horizontal and vertical mismatches in the labor market affect wage. We do so by taking into account that by choosing a job, wage and mismatches are simultaneously determined. The Seemingly Unrelated Equations model also allows us to control for any omitted variable that could cause biased estimators. We use REFLEX data for Spain. Results reveal that in most cases being horizontally matched has a wage premium and being over-educated does not affect wage. Results suggest that the modeling strategy successfully accounts for some omitted variable that affects simultaneously the probability of being horizontally matched and the wage. This could explain the existence of a wage penalty for over-educated workers when the omitted variable issue is not dealt with.

L'Envàs : més que una protecció

Aquest és un treball essencialment de camp. Hem volgut investigar la importància de l’envàs mitjançant dues vies d’estudi. Primer des del punt de vista del productor idesprés des del punt de vista del consumidor.Pel primer anàlisi vam realitzar una recol·lecta de dades que ens ha permès demostrar la hipòtesi que els empresaris obtenen una marge de benefici major quan venen un producte presentat en envàs premium (un envàs sofisticat, més ergònomic, de mésqualitat…) en comparació amb el que està en el mercat en envàs estàndard. Nosaltreshem volgut veure si, realment, aquest marge és més gran del que justifica la millorad’envàs estàndard a envàs premium. I pel segon anàlisi vam elaborar unes enquestesque ens han permés donar per vàlida la hipòtesi restant: que existeix una relació entre recta pressupostària i envàs que s’escull i que, per tant, els consumidors, sempre que puguin, escolliran l’envàs premium.

Cyclical Skill-Biased Technological Change

Over the past two decades, technological progress has been biased towards making skilled labor more productive. The evidence for this finding is based on the persistent parallel increase in the skill premium and the supply of skilled workers. What are the implications of skill-biased technological change for the business cycle? To answer this question, we use the CPS outgoing rotation groups to construct quarterly series for the price and quantity of skill. The unconditional correlation of the skill premium with the cycle is zero. However, using a structural VAR with long run restrictions, we find that technology shocks substantially increase the premium. Investment-specific technology shocks are not skill-biased and our findings suggest that capital and skill are (mildly) substitutable in aggregate production.

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.

The skill bias of world trade

Under plausible assumptions about preferences and technology, the model in this papersuggests that the entire volume of world trade matters for wage inequality. Therefore,trade integration, even among identical countries, is likely to increase the skill premium.Further, we argue that empirical evidence of a falling relative price of skill-intensive goods can be reconciled with the fast growth of world trade and that the intersectoral mobility of capital exacerbates the effect of trade on inequality. We provide new empirical evidence in support of our results and a quantitative assessment of the skill bias of world trade.