Do higher moments really matter in portfolio choice?

We present explicit formulas for evaluating the difference between Markowitz weights and those from optimal portfolios, with the same given return, considering either asymmetry or kurtosis. We prove that, whenever the higher moment constraint is not binding, the weights are never the same. If, due to special features of the first and second moments, the difference might be negligible, in quite many cases it will be very significant. An appealing illustration, when the designer wants to incorporate an asset with quite heavy tails, but wants to moderate this effect, further supports the argument.

Finding a maximum skewness portfolio - A general solution to three-moments portfolio choice

Considering the three first moments and allowing short sales, the efficient portfolios set for n risky assets and a riskless one is found, supposing that agents like odd moments and dislike even ones. Analytical formulas for the solution surface are obtained and important geometric properties provide insights on its shape in the three dimensional space defined by the moments. A special duality result is needed and proved. The methodology is general, comprising situations in which, for instance, the investor trades a negative skewness for a higher expected return. Computation of the optimum portfolio weights is feasible in most cases.

Em busca de modelos politico-institucionais para as regioes metropolitanas : o caso da região metropolitana de Fortaleza

Os problemas que a rápida urbanização criou são desafiantes. E são ate cruciais para aqueles de quem dependem as decisões para soluciona-los, enquanto, para a comunidade em geral, representam pesados sacrificios que chegam a causar impacto social muito forte. Os técnicos e estudiosos do assunto deveriam aproveitar esse desafio e buscar fórmulas organizacionais de planejamento e administração metropolitanos que promovam o crescimento urbano de maneira mais adequada e eficiente. Com a presente moonografia, procuramos: (1) estudar os antecedentes das organizações de planejamento e administração metropolitanos no Pais, sob os aspectos econômicos e sociais, políticos e institucionais; (2) analisar, particularmente, a Região Metropolitana de Fortaleza (RMF), descendo essa analise aos obstaculos enfrentados na sua imp1ementação, princ~palmente os polltico-institucionais, bem como, abrir mais possibilidades para o aprofundamento do estado da matéria.

Dynamic hedging with stocastic differential utility

In this paper we study the dynamic hedging problem using three different utility specifications: stochastic differential utility, terminal wealth utility, and we propose a particular utility transformation connecting both previous approaches. In all cases, we assume Markovian prices. Stochastic differential utility, SDU, impacts the pure hedging demand ambiguously, but decreases the pure speculative demand, because risk aversion increases. We also show that consumption decision is, in some sense, independent of hedging decision. With terminal wealth utility, we derive a general and compact hedging formula, which nests as special all cases studied in Duffie and Jackson (1990). We then show how to obtain their formulas. With the third approach we find a compact formula for hedging, which makes the second-type utility framework a particular case, and show that the pure hedging demand is not impacted by this specification. In addition, with CRRA- and CARA-type utilities, the risk aversion increases and, consequently the pure speculative demand decreases. If futures price are martingales, then the transformation plays no role in determining the hedging allocation. We also derive the relevant Bellman equation for each case, using semigroup techniques.

Valuation and performance of firms in complex ownership structures : an application to Korean chaebols

We propose several new metrics to describe the complex ownership structure of business groups, and provide simple formulas and algorithms to compute these metrics. We use these measures to describe in detail the ownership structure of Korean chaebols in the period of 2003 to 2004. In addition, we validate the usefulness of our new metrics by showing empirically that they are important for understanding the valuation and performance of group firms. In particular, we show evidence that firms that are central to the control structure of the chaebol (central firms), firms in cross-shareholdings, and firms that are placed at the bottom of the group (i.e., with lower ultimate ownership) have lower profitability than other group firms. The valuation results suggest that central firms and firms in cross-shareholding loops have lower valuations than other public Chaebol firms. The lower valuation of these firms is not explained by variation in measures of ownership concentration and separation between ownership and control.

Welfare cost of inflation considering adoption decisions and interest-bearing deposits

Attanasio et al. (JPE, 2002) have used microeconomic data on households to provide new estimates of the welfare costs of infiation using Bailey's unidimensional welfare measure as a basis for their calculations. Such a measure does not properly take into consideration lhe fact that the majority of households in their sample (58.7 percent) holds not only bank deposits and currency, but also a second type of interest-bearing assct. This work devises alternative formulas which account for the existence of bank deposits and a sccond interest-bearing asset in the economy, as well as for adoption decisions regarding alternative financiai technologies.