Estimating the stochastic discount factor without a utility function

Using the Pricing Equation in a panel-data framework, we construct a novel consistent estimator of the stochastic discount factor (SDF) which relies on the fact that its logarithm is the serial-correlation ìcommon featureîin every asset return of the economy. Our estimator is a simple function of asset returns, does not depend on any parametric function representing preferences, is suitable for testing di§erent preference speciÖcations or investigating intertemporal substitution puzzles, and can be a basis to construct an estimator of the risk-free rate. For post-war data, our estimator is close to unity most of the time, yielding an average annual real discount rate of 2.46%. In formal testing, we cannot reject standard preference speciÖcations used in the literature and estimates of the relative risk-aversion coe¢ cient are between 1 and 2, and statistically equal to unity. Using our SDF estimator, we found little signs of the equity-premium puzzle for the U.S.

Estimando a aversão ao risco, a taxa de desconto intertemporal, e a substutibilidade intertemporal do consumo no Brasil usando três tipos de função utilidade

Nesse trabalho estima-se, usando o método generalizado dos momentos e dados brasileiros, os parâmetros estruturais do modelo CCAPM (consumption capital asset pricing model) a partir de três classes de funções utilidade distintas: função utilidade potência (CRRA), utilidade com hábito externo, e aversão ao desapontamento (Kreps-Porteus). Estes parâmetros estruturais estão associados à aversão ao risco, à elasticidade de substituição intertemporal no consumo e à taxa de desconto intertemporal da utilidade futura. Os resultados aqui obtidos são analisados e comparados com resultados anteriores para dados brasileiros e americanos. Adicionalmente, testa-se econometricamente todos os modelos estruturais estimados a partir do teste de restrições de sobre-identificação, para investigar, da forma mais abrangente possível, se há ou não equity premium puzzle para o Brasil. Os resultados surpreendem, dado que, em raríssimas ocasiões, se rejeita as restrições implícitas nesses modelos. Logo, conclui-se que não há equity premium puzzle para o Brasil.

Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions

We study the joint determination of the lag length, the dimension of the cointegrating space and the rank of the matrix of short-run parameters of a vector autoregressive (VAR) model using model selection criteria. We consider model selection criteria which have data-dependent penalties for a lack of parsimony, as well as the traditional ones. We suggest a new procedure which is a hybrid of traditional criteria and criteria with data-dependant penalties. In order to compute the fit of each model, we propose an iterative procedure to compute the maximum likelihood estimates of parameters of a VAR model with short-run and long-run restrictions. Our Monte Carlo simulations measure the improvements in forecasting accuracy that can arise from the joint determination of lag-length and rank, relative to the commonly used procedure of selecting the lag-length only and then testing for cointegration.

Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions

We study the joint determination of the lag length, the dimension of the cointegrating space and the rank of the matrix of short-run parameters of a vector autoregressive (VAR) model using model selection criteria. We consider model selection criteria which have data-dependent penalties as well as the traditional ones. We suggest a new two-step model selection procedure which is a hybrid of traditional criteria and criteria with data-dependant penalties and we prove its consistency. Our Monte Carlo simulations measure the improvements in forecasting accuracy that can arise from the joint determination of lag-length and rank using our proposed procedure, relative to an unrestricted VAR or a cointegrated VAR estimated by the commonly used procedure of selecting the lag-length only and then testing for cointegration. Two empirical applications forecasting Brazilian inflation and U.S. macroeconomic aggregates growth rates respectively show the usefulness of the model-selection strategy proposed here. The gains in different measures of forecasting accuracy are substantial, especially for short horizons.

Estimating and forecasting the volatility of Brazilian finance series using arch models (Preliminary Version)

The goal of this paper is to present a comprehensive emprical analysis of the return and conditional variance of four Brazilian …nancial series using models of the ARCH class. Selected models are then compared regarding forecasting accuracy and goodness-of-…t statistics. To help understanding the empirical results, a self-contained theoretical discussion of ARCH models is also presented in such a way that it is useful for the applied researcher. Empirical results show that although all series share ARCH and are leptokurtic relative to the Normal, the return on the US$ has clearly regime switching and no asymmetry for the variance, the return on COCOA has no asymmetry, while the returns on the CBOND and TELEBRAS have clear signs of asymmetry favoring the leverage e¤ect. Regarding forecasting, the best model overall was the EGARCH(1; 1) in its Gaussian version. Regarding goodness-of-…t statistics, the SWARCH model did well, followed closely by the Student-t GARCH(1; 1)

Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions

We study the joint determination of the lag length, the dimension of the cointegrating space and the rank of the matrix of short-run parameters of a vector autoregressive (VAR) model using model selection criteria. We consider model selection criteria which have data-dependent penalties as well as the traditional ones. We suggest a new two-step model selection procedure which is a hybrid of traditional criteria and criteria with data-dependant penalties and we prove its consistency. Our Monte Carlo simulations measure the improvements in forecasting accuracy that can arise from the joint determination of lag-length and rank using our proposed procedure, relative to an unrestricted VAR or a cointegrated VAR estimated by the commonly used procedure of selecting the lag-length only and then testing for cointegration. Two empirical applications forecasting Brazilian in ation and U.S. macroeconomic aggregates growth rates respectively show the usefulness of the model-selection strategy proposed here. The gains in di¤erent measures of forecasting accuracy are substantial, especially for short horizons.

Assorted topics in monetary economics

Esta tese é uma coleção de quatro artigos em economia monetária escritos sob a supervisão do Professor Rubens Penha Cysne. O primeiro desses artigos calcula o viés presente em medidas do custo de bem-estar da inflação devido a não se levar em conta o potencial substitutivo de moedas que rendem juros, como depósitos bancários.[1] O segundo se concentra na questão teórica de se comparar os escopos dos tradicionais modelos money-in-the-utility-function e shopping-time através do estudo das propriedades das curvas de demanda que eles geram.[2] O terceiro desses trabalhos revisita um artigo clássico de Stanley Fischer sobre a correlação entre a taxa de crescimento da oferta monetária e a taxa de acumulação de capital no caminho de transição.[3] Finalmente, o quarto diz respeito à posição relativa de cada uma de seis medidas do custo de bem-estar da inflação (uma das quais é nova) em relação às outras cinco, e uma estimativa do erro relativo máximo em que o pesquisador pode incorrer devido a sua escolha de empregar uma dessas medidas qualquer vis-à-vis as outras.[4] This thesis collects four papers on monetary economics written under the supervision of Professor Rubens Penha Cysne. The first of these papers assesses the bias occuring in welfare-cost-of-inflation measures due to failing to take into consideration the substitution potential of interest-bearing monies such as bank deposits.[1] The second one tackles the theoretical issue of comparing the generality of the money-in-the-utility-function- and the shopping-time models by studying the properties of the demand curves they generate.[2] The third of these works revisits a classic paper by Stanley Fischer on the correlation between the growth rate of money supply and the rate of capital accumulation on the transition path.[3] Finally, the fourth one concerns the relative standing of each one of six measures of the welfare cost of inflation (one of which is new) with respect to the other five, and an estimate of the maximum relative error one can incur by choosing to employ a particular welfare measure in place of the others.[4] [1] Cysne, R.P., Turchick, D., 2010. Welfare costs of inflation when interest-bearing deposits are disregarded: A calculation of the bias. Journal of Economic Dynamics and Control 34, 1015-1030. [2] Cysne, R.P., Turchick, D., 2009. On the integrability of money-demand functions by the Sidrauski and the shopping-time models. Journal of Banking & Finance 33, 1555-1562. [3] Cysne, R.P., Turchick, D., 2010. Money supply and capital accumulation on the transition path revisited. Journal of Money, Credit and Banking 42, 1173-1184. [4] Cysne, R.P., Turchick, D., 2011. An ordering of measures of the welfare cost of inflation in economies with interest-bearing deposits. Macroeconomic Dynamics, forthcoming.

Reality check for volatility models

Asset allocation decisions and value at risk calculations rely strongly on volatility estimates. Volatility measures such as rolling window, EWMA, GARCH and stochastic volatility are used in practice. GARCH and EWMA type models that incorporate the dynamic structure of volatility and are capable of forecasting future behavior of risk should perform better than constant, rolling window volatility models. For the same asset the model that is the ‘best’ according to some criterion can change from period to period. We use the reality check test∗ to verify if one model out-performs others over a class of re-sampled time-series data. The test is based on re-sampling the data using stationary bootstrapping. For each re-sample we check the ‘best’ model according to two criteria and analyze the distribution of the performance statistics. We compare constant volatility, EWMA and GARCH models using a quadratic utility function and a risk management measurement as comparison criteria. No model consistently out-performs the benchmark.

Stochastic modelling considering ionospheric scintillation effects on GNSS relative and point positioning

Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (CAPES)

A theoretical study on cytosine tautomers in aqueous media by using continuum models

B3LYP/6-31 + + G** and MP2/6-31 + + G** calculations have been carried out to study six tautomers of the nucleic acid base cytosine in aqueous media. Solvent effects have been analyzed using the self-consistent reaction field theory with two continuum methods. Relative stabilities and optimized geometries have been calculated for the tautomers and compared with experimental data. The present results show the importance of electrostatic solvent effects in determining observable properties of the cytosine tautomers. The amino-oxo form (C1) is the most abundant tautomer in aqueous media while the other amino-oxo form (C4) is the most energetically favored when solvent effects are included. These results can be justified by the larger values of the dipole moments for both C1 and C4 tautomers. Theoretical and experimental results of the harmonic vibrational frequencies and rotational constants show good agreement. (C) 2000 Elsevier B.V. B.V. All rights reserved.

2D evaluation of crack openings using smeared and embedded crack models

Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)

Hymenaea stigonocarpa Mart. ex Hayne: A Brazilian medicinal plant with gastric and duodenal anti-ulcer and antidiarrheal effects in experimental rodent models

Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (CAPES)

Effect of green Coffea arabica L. seed oil on extracellular matrix components and water-channel expression in in vitro and ex vivo human skin models

Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)

Partitioning the relative fitness effects of diet and trophic morphology in the threespine stickleback

Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (CAPES)

Comparison between univariate and bivariate geostatistical models for estimating catch per unit of effort (cpue): A simulation study

Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq)