The market value implications of pension asset allocation

Pension funds have been part of the private sector since the 1850's. Defined Benefit pension plans [DB], where a company promises to make regular contributions to investment accounts held for participating employees in order to pay a promised lifelong annuity, are significant capital markets participants, amounting to 2.3 trillion dollars in 2010 (Federal Reserve Board, 2013). In 2006, Statement of Financial Accounting Standards No.158 (SFAS 158), Employers' Accounting for Defined Benefit Pension and Other Postemployment Plans, shifted information concerning funding status and pension asset/liability composition from disclosure in the footnotes to recognition in the financial statements. I add to the literature by being the first to examine the effect of recent pension reform during the financial crisis of 2008-09. This dissertation is comprised of three related essays. In my first essay, I investigate whether investors assign different pricing multiples to the various classes of pension assets when valuing firms. The pricing multiples on all classes of assets are significantly different from each other, but only investments in bonds and equities were value-relevant during the recent financial crisis. Consistent with investors viewing pension liabilities as liabilities of the firm, the pricing multiples on pension liabilities are significantly larger than those on non-pension liabilities. The only pension costs significantly associated with firm value are actual rate of return and interest expense. In my second essay, I investigate the role of accruals in predicting future cash flows, extending the Barth et al. (2001a) model of the accrual process. Using market value of equity as a proxy for cash flows, the results of this study suggest that aggregate accounting amounts mask how the components of earnings affect investors' ability to predict future cash flows. Disaggregating pension earnings components and accruals results in an increase in predictive power. During the 2008-2009 financial crisis, however, investors placed a greater (and negative) weight on the incremental information contained in the individual components of accruals. The inferences are robust to alternative specifications of accruals. Finally, in my third essay I investigate how investors view under-funded plans. On average, investors: view deficits arising from under-funded plans as belonging to the firm; reward firms with fully or over-funded pension plans; and encourage those funds with unfunded pension plans to become funded. Investors also encourage conservative pension asset allocations to mitigate firm risk, and smaller firms are perceived as being better able to handle the risk associated with underfunded plans. During the financial crisis of 2008-2009 underfunded status had a lower negative association with market value. In all three models, there are significant differences in pre- and post- SFAS 158 periods. These results are robust to various scenarios of the timing of the financial crisis and an alternative measure of funding.

Essays on Exchange Rate Economics

Exchange rate economics has achieved substantial development in the past few decades. Despite extensive research, a large number of unresolved problems remain in the exchange rate debate. This dissertation studied three puzzling issues aiming to improve our understanding of exchange rate behavior. Chapter Two used advanced econometric techniques to model and forecast exchange rate dynamics. Chapter Three and Chapter Four studied issues related to exchange rates using the theory of New Open Economy Macroeconomics. Chapter Two empirically examined the short-run forecastability of nominal exchange rates. It analyzed important empirical regularities in daily exchange rates. Through a series of hypothesis tests, a best-fitting fractionally integrated GARCH model with skewed student-t error distribution was identified. The forecasting performance of the model was compared with that of a random walk model. Results supported the contention that nominal exchange rates seem to be unpredictable over the short run in the sense that the best-fitting model cannot beat the random walk model in forecasting exchange rate movements. Chapter Three assessed the ability of dynamic general-equilibrium sticky-price monetary models to generate volatile foreign exchange risk premia. It developed a tractable two-country model where agents face a cash-in-advance constraint and set prices to the local market; the exogenous money supply process exhibits time-varying volatility. The model yielded approximate closed form solutions for risk premia and real exchange rates. Numerical results provided quantitative evidence that volatile risk premia can endogenously arise in a new open economy macroeconomic model. Thus, the model had potential to rationalize the Uncovered Interest Parity Puzzle. Chapter Four sought to resolve the consumption-real exchange rate anomaly, which refers to the inability of most international macro models to generate negative cross-correlations between real exchange rates and relative consumption across two countries as observed in the data. While maintaining the assumption of complete asset markets, this chapter introduced endogenously segmented asset markets into a dynamic sticky-price monetary model. Simulation results showed that such a model could replicate the stylized fact that real exchange rates tend to move in an opposite direction with respect to relative consumption.

Explaining intermittent exporting:exit and conditional re-entry in export markets

Intermittent exporting is something of a puzzle. In theory, exporting represents a major commitment, and is often the starting point for further internationalisation. However, intermittent exporters exit and subsequently re-enter exporting, sometimes frequently. We develop a conceptual model to explain how firm characteristics and market conditions interact to affect the decision to exit and re-enter exporting, and model this process using an extensive dataset of French manufacturing firms from 1997 to 2007. As anticipated, smaller and less productive firms are more likely to exit exporting, and react more strongly to changes in both domestic and foreign markets than larger firms. Exit and re-entry are closely linked. Firms with a low exit probability also have a high likelihood of re-entry, and vice versa. However, the way in which firms react to market conditions at the time of exit matters greatly in determining the likelihood of re-entry: thus re-entry depends crucially on the strategic rationale for exit. Our analysis helps explain the opportunistic and intermittent exporting of (mainly) small firms, the demand conditions under which intermittent exporting is most likely to occur, and the firm attributes most likely to give rise to such behavior.

Essays in Industrial Organization

This dissertation extends the empirical industrial organization literature with two essays on strategic decisions of firms in imperfectly competitive markets and one essay on how inertia in consumer choice can result in significant welfare losses. Using data from the airline industry I study a well-known puzzle in the literature whereby incumbent firms decrease fares when Southwest Airlines emerges as a potential entrant, but is not (yet) competing directly. In the first essay I describe this so-called Southwest Effect and use reduced-form analysis to offer possible explanations for why firms may choose to forgo profits today rather than wait until Southwest operates the route. The analysis suggests that incumbent firms are attempting to signal to Southwest that entry is unprofitable so as to deter its entry. The second essay develops this theme by extending a classic model from the IO literature, limit pricing, to a dynamic setting. Calibrations indicate the price cuts observed in the data can be captured by a dynamic limit pricing model. The third essay looks at another concentrated industry, mobile telecoms, and studies how inertia in choice (be it inattention or switching costs) can lead to consumers being on poorly matched cellphone plans and how a simple policy proposal can have a considerable effect on welfare.

International Capital Flows and Monetary Policy Spillovers

This dissertation examines the drivers and implications of international capital flows. The overarching motivation is the observation that countries not at the centre of global financial markets are subject to considerable spillovers from centre countries, notably from their monetary policy. I present new empirical evidence on the determinants of the observed patterns of international capital flows and monetary policy spillovers, and study their effect on both financial markets and the real economy. In Chapter 2 I provide evidence on the determinants of a puzzling negative correlation observed between productivity growth and net capital inflows to developing and emerging market economies (EMEs) since 1980. By disaggregating net capital inflows into their gross components, I show that this negative correlation is explained by capital outflows related to purchases of very liquid assets from the fastest growing countries. My results suggest a desire for international portfolio diversification in liquid assets by fast growing countries is driving much of the original puzzle. In the reminder of my dissertation I pivot to study the foreign characteristics that drive international capital flows and monetary policy spillovers, with a particular focus on the role of unconventional monetary policy in the United States (U.S.). In Chapter 3 I show that a significant portion of the heterogeneity in EMEs' asset price adjustment following the quantitative easing operations by the Federal Reserve (the Fed) during 2008-2014 can be explained by the degree of bilateral capital market frictions between these countries and the U.S. This is true even after accounting for capital controls, exchange rate regimes, and domestic monetary policies. Chapter 4, co-authored with Michal Ksawery Popiel, studies unconventional monetary policy in a small open economy, looking specifically at the case of Canada since the global financial crisis. We quantify the effect Canadian unconventional monetary policy shocks had on the real economy, while carefully controlling for and quantifying spillovers from U.S. unconventional monetary policy. Our results indicate that the Bank of Canada's unconventional monetary policy increased Canadian output significantly from 2009-2010, but that spillovers from the Fed's policy were even more important for increasing Canadian output after 2008.

Mitigate DoS and DDoS Attack in Ad Hoc Networks

This paper proposes a technique to defeat Denial of Service (DoS) and Distributed Denial of Service (DDoS) attacks in Ad Hoc Networks. The technique is divided into two main parts and with game theory and cryptographic puzzles. Introduced first is a new client puzzle to prevent DoS attacks in such networks. The second part presents a multiplayer game that takes place between the nodes of an ad hoc network and based on fundamental principles of game theory. By combining computational problems with puzzles, improvement occurs in the efficiency and latency of the communicating nodes and resistance in DoS and DDoS attacks. Experimental results show the effectiveness of the approach for devices with limited resources and for environments like ad hoc networks where nodes must exchange information quickly.

Female employment from the household. Towards a comprehensive analysis of work-life articulation

Research on women’s employment has proliferated over recent decades, often under a perspective that conceptualizes female labour market activity as independent of male presences and absences in the productive and reproductive spheres. In the face of these approaches, the article argues the need to focus on the couple as the unit of analysis of work-life articulation. After referring to the main theoretical arguments that, from a gender perspective within labour studies, have pointed out the relevance of placing the household as the central space for the analysis of the sexual division of labour, the article reviews different empirical contributions that have incorporated such perspective in the international literature. Next, the state of the art in the Spanish literature is presented, before arguing the desirability of applying such framework of analysis to the study of employment and care work in Spanish households, which are at present undergoing major transformations.

Back to the failure: an analytic narrative of the De Lorean debacle

There has been a recent identification of a need for a New Business History. This discussion connects with the analytic narrative approach. By following this approach, the study of business history provides important implications for the conduct and institutional design of contemporary industrial policy. The approach also allows us to solve historical puzzles. The failure of the De Lorean Motor Company Limited (DMCL) is one specific puzzle. Journalistic accounts that focus on John De Lorean's alleged personality defects as an explanation for this failure miss the crucial institutional component. Moreover, distortions in the rewards associated with industrial policy, and the fact that the objectives of the institutions implementing the policy were not solely efficiency-based, led to increased opportunities for rent-seeking. Political economy solves the specific puzzle; by considering institutional dimensions, we can also solve the more general puzzle of why activist industrial policy was relatively unsuccessful in Northern Ireland.

Pratiques parentales coercitives, anxiété et traitement de la peur chez les jeunes en bonne santé: corrélats neuronaux, biologiques, physiologiques et comportementaux

L’adversité tôt dans la vie est associée au développement de symptômes anxieux pouvant perdurer jusqu’à l’âge adulte (Casey et el, 2010, Pine 2003). Des études chez l’adulte suggèrent que ces liens pourraient être associés à des altérations du « circuit de la peur » qui inclut l’amygdale, l’hippocampe antérieur, l’insula et le cortex préfrontal (Marek, 2013, Etkin & Wager, 2007). Ceci a cependant peu été étudié chez les jeunes. L’objectif principal de cette thèse était de définir les corrélats comportementaux, physiologiques, biologiques et neuronaux du traitement de la peur chez les jeunes en bonne santé, en lien ou non avec un historique d’adversité -- sous la forme de pratiques parentales coercitives -- et d’anxiété. D’abord, puisque nous nous intéressions aux pratiques parentales coercitives chroniques, nous avons examiné leur évolution et facteurs de risque, en nous concentrant sur la période de 17 à 72 mois. Un total de 2045 dyades mère-enfant ont été incluses dans une analyse de courbe de croissance latente. Nous avons démontré que la coercition maternelle suit une évolution non linéaire durant cette période et atteint un sommet à 42 mois. Les facteurs de risque relatifs à l’enfant et à la mère, mesurés à 17 mois, permettent de prédire les niveaux de coercition à 42 mois. Finalement, les prédicteurs relatifs à l’enfant et l’efficacité maternelle prédisent l’évolution des pratiques parentales coercitives entre 17 et 72 mois. Ensuite, afin de définir une méthodologie solide pour étudier le traitement de la peur chez des jeunes, nous avons adapté une tâche développée par Lau et ses collaborateurs (2008), employant des visages féminins comme stimuli. Le sexe des participants et des visages employés comme stimuli pouvant potentiellement moduler le traitement de la peur (Kret & de Gelder, 2012; McClure, 2000), nous avons étudié leurs influences respectives sur les réponses électrodermales et subjectives de peur durant le conditionnement et l’extinction de la peur chez 117 jeunes. Nous avons démontré que les stimuli féminins suscitent des réponses davantage comparables entre les garçons et les filles que les stimuli masculins. De plus, nous avons observé un effet du « même sexe », caractérisé par un conditionnement différentiel uniquement face aux stimuli du même sexe que le participant. Finalement, nous avons exploré les différences individuelles et conjointes associées aux différents niveaux de pratiques parentales coercitives et d’anxiété en termes de réponses de peur et d’activité cérébrale, durant le conditionnement et l’extinction de la peur chez 84 jeunes. Nous avons démontré que la coercition est spécifiquement associée au fonctionnement du lobe temporal médian et aux interactions entre l’amygdale et l’insula, durant le conditionnement. Durant l’extinction, les niveaux d’anxiété étaient associés à des différences spécifiques d’activation du gyrus cingulaire antérieur (GCA) dorsal. Enfin, les pratiques parentales coercitives et l’anxiété interagissent et viennent moduler la connectivité fonctionnelle amygdale - GCA rostral, l’activation d’une sous-région du GCA dorsal et les réponses subjectives de peur. Ces résultats ajoutent une pièce au casse-tête des neurosciences développementales et fournissent des pistes intéressantes pour le développement d’interventions futures.

Exploring the World's Visual History

Thesis (Ph.D.)--University of Washington, 2016-08

The Meanings of New Money: Social Constructions of Value in the Rise of Digital Currencies

Thesis (Ph.D.)--University of Washington, 2016-07

Building peace by supporting post-conflict electoral processes

Les élections post-conflit ou élections de sortie de crise organisées sous l’égide de la communauté internationale en vue de rétablir la paix dans les pays sortant de violents conflits armés ont un bilan mixte caractérisé par le succès ou l’échec selon les cas. Ce bilan mitigé représente le problème principal auquel cette recherche tente de répondre à travers les questions suivantes : l’assistance électorale étrangère est-elle efficace comme outil de rétablissement de la paix dans les sociétés post-conflit? Qu’est ce qui détermine le succès ou l’échec des élections post-conflit à contribuer efficacement au rétablissement de la paix dans les sociétés déchirées par la guerre? Pour résoudre cette problématique, cette thèse développe une théorie de l’assistance électorale en période post-conflit centrée sur les parties prenantes à la fois du conflit armé et du processus électoral. Cette théorie affirme que l’élément clé pour le succès des élections post-conflit dans le rétablissement de la paix est le renforcement de la capacité de négociation des parties prenantes à la fois dans le processus de paix et dans le processus électoral post-conflit. Dans les situations post-conflit, une assistance électorale qui se voudrait complète et efficace devra combiner à la fois le processus électoral et le processus de paix. L’assistance électorale sera inefficace si elle se concentre uniquement sur les aspects techniques du processus électoral visant à garantir des élections libres, transparentes et équitables. Pour être efficace, l’accent devra également être mis sur les facteurs supplémentaires qui peuvent empêcher la récurrence de la guerre, tels que l’habilité des individus et des groupes à négocier et à faire des compromis sur les grandes questions qui peuvent menacer le processus de paix. De fait, même des élections transparentes comme celles de 1997 au Liberia saluées par la communauté internationale n’avaient pas réussi à établir des conditions suffisantes pour éviter la reprise des hostilités. C’est pourquoi, pour être efficace, l’assistance électorale dans les situations de post-conflit doit prendre une approche globale qui priorise l’éducation civique, la sensibilisation sur les droits et responsabilités des citoyens dans une société démocratique, le débat public sur les questions qui divisent, la participation politique, la formation au dialogue politique, et toute autre activité qui pourrait aider les différentes parties à renforcer leur capacité de négociation et de compromis. Une telle assistance électorale fera une contribution à la consolidation de la paix, même dans le contexte des élections imparfaites, comme celles qui se sont détenues en Sierra Leone en 2002 ou au Libéria en 2005. Bien que la littérature sur l’assistance électorale n’ignore guère l’importance des parties prenantes aux processus électoraux post-conflit (K. Kumar, 1998, 2005), elle a fortement mis l’accent sur les mécanismes institutionnels. En effet, la recherche académique et professionnelle est abondante sur la réforme des lois électorales, la reforme constitutionnelle, et le développement des administrations électorales tels que les commissions électorales, ainsi que l’observation électorale et autres mécanismes de prévention de la fraude électorale, etc. (Carothers & Gloppen, 2007). En d’autres termes, les décideurs et les chercheurs ont attribué jusqu’à présent plus d’importance à la conception et au fonctionnement du cadre institutionnel et des procédures électorales. Cette thèse affirme qu’il est désormais temps de prendre en compte les participants eux-mêmes au processus électoral à travers des types d’assistance électorale qui favoriseraient leur capacité à participer à un débat pacifique et à trouver des compromis aux questions litigieuses. Cette approche plus globale de l’assistance électorale qui replace l’élection post-conflit dans le contexte plus englobant du processus de paix a l’avantage de transformer le processus électoral non pas seulement en une expérience d’élection de dirigeants légitimes, mais aussi, et surtout, en un processus au cours duquel les participants apprennent à régler leurs points de vue contradictoires à travers le débat politique dans un cadre institutionnel avec des moyens légaux et légitimes. Car, si le cadre institutionnel électoral est important, il reste que le résultat du processus électoral dépendra essentiellement de la volonté des participants à se conformer au cadre institutionnel et aux règles électorales.

A Cultural Approach to a Canadian Tragedy: The Indian Residential Schools as a Sacred Enterprise

For over a century, the Canadian state funded a church-run system of residential schools designed to assimilate Aboriginal children into Euro-Canadian culture. In addition to the problems associated with its ethnocentric philosophy, the school system was also characterised by terrible health conditions and physical and sexual abuse of the students was widespread. Recently, the schools have been the object of the most successful struggle for redress in Canadian history. One particularly puzzling aspect about the school system is that it persisted for so long, despite that many of its failings were known very early in its operation. In this article, this puzzle is addressed via a cultural analysis of a political struggle over the residential schools that occurred within Canadian Anglicanism at the outset of the twentieth century. The article concludes that the meaning of the school system as a sacred enterprise contributed to its persistence.

What Does Value Matter? The Interest-Relational Theory of the Semantics and Metaphysics of Value

Value and reasons for action are often cited by rationalists and moral realists as providing a desire-independent foundation for normativity. Those maintaining instead that normativity is dependent upon motivation often deny that anything called '"value" or "reasons" exists. According to the interest-relational theory, something has value relative to some perspective of desire just in case it satisfies those desires, and a consideration is a reason for some action just in case it indicates that something of value will be accomplished by that action. Value judgements therefore describe real properties of objects and actions, but have no normative significance independent of desires. It is argued that only the interest-relational theory can account for the practical significance of value and reasons for action. Against the Kantian hypothesis of prescriptive rational norms, I attack the alleged instrumental norm or hypothetical imperative, showing that the normative force for taking the means to our ends is explicable in terms of our desire for the end, and not as a command of reason. This analysis also provides a solution to the puzzle concerning the connection between value judgement and motivation. While it is possible to hold value judgements without motivation, the connection is more than accidental. This is because value judgements are usually but not always made from the perspective of desires that actually motivate the speaker. In the normal case judgement entails motivation. But often we conversationally borrow external perspectives of desire, and subsequent judgements do not entail motivation. This analysis drives a critique of a common practice as a misuse of normative language. The "absolutist" attempts to use and, as philosopher, analyze normative language in such a way as to justify the imposition of certain interests over others. But these uses and analyses are incoherent - in denying relativity to particular desires they conflict with the actual meaning of these utterances, which is always indexed to some particular set of desires.

Incomplete information games of conflict and collective action

My thesis consists of three essays that investigate strategic interactions between individuals engaging in risky collective action in uncertain environments. The first essay analyzes a broad class of incomplete information coordination games with a wide range of applications in economics and politics. The second essay draws from the general model developed in the first essay to study decisions by individuals of whether to engage in protest/revolution/coup/strike. The final essay explicitly integrates state response to the analysis. The first essay, Coordination Games with Strategic Delegation of Pivotality, exhaustively analyzes a class of binary action, two-player coordination games in which players receive stochastic payoffs only if both players take a ``stochastic-coordination action''. Players receive conditionally-independent noisy private signals about the normally distributed stochastic payoffs. With this structure, each player can exploit the information contained in the other player's action only when he takes the “pivotalizing action”. This feature has two consequences: (1) When the fear of miscoordination is not too large, in order to utilize the other player's information, each player takes the “pivotalizing action” more often than he would based solely on his private information, and (2) best responses feature both strategic complementarities and strategic substitutes, implying that the game is not supermodular nor a typical global game. This class of games has applications in a wide range of economic and political phenomena, including war and peace, protest/revolution/coup/ strike, interest groups lobbying, international trade, and adoption of a new technology. My second essay, Collective Action with Uncertain Payoffs, studies the decision problem of citizens who must decide whether to submit to the status quo or mount a revolution. If they coordinate, they can overthrow the status quo. Otherwise, the status quo is preserved and participants in a failed revolution are punished. Citizens face two types of uncertainty. (a) non-strategic: they are uncertain about the relative payoffs of the status quo and revolution, (b) strategic: they are uncertain about each other's assessments of the relative payoff. I draw on the existing literature and historical evidence to argue that the uncertainty in the payoffs of status quo and revolution is intrinsic in politics. Several counter-intuitive findings emerge: (1) Better communication between citizens can lower the likelihood of revolution. In fact, when the punishment for failed protest is not too harsh and citizens' private knowledge is accurate, then further communication reduces incentives to revolt. (2) Increasing strategic uncertainty can increase the likelihood of revolution attempts, and even the likelihood of successful revolution. In particular, revolt may be more likely when citizens privately obtain information than when they receive information from a common media source. (3) Two dilemmas arise concerning the intensity and frequency of punishment (repression), and the frequency of protest. Punishment Dilemma 1: harsher punishments may increase the probability that punishment is materialized. That is, as the state increases the punishment for dissent, it might also have to punish more dissidents. It is only when the punishment is sufficiently harsh, that harsher punishment reduces the frequency of its application. Punishment Dilemma 1 leads to Punishment Dilemma 2: the frequencies of repression and protest can be positively or negatively correlated depending on the intensity of repression. My third essay, The Repression Puzzle, investigates the relationship between the intensity of grievances and the likelihood of repression. First, I make the observation that the occurrence of state repression is a puzzle. If repression is to succeed, dissidents should not rebel. If it is to fail, the state should concede in order to save the costs of unsuccessful repression. I then propose an explanation for the “repression puzzle” that hinges on information asymmetries between the state and dissidents about the costs of repression to the state, and hence the likelihood of its application by the state. I present a formal model that combines the insights of grievance-based and political process theories to investigate the consequences of this information asymmetry for the dissidents' contentious actions and for the relationship between the magnitude of grievances (formulated here as the extent of inequality) and the likelihood of repression. The main contribution of the paper is to show that this relationship is non-monotone. That is, as the magnitude of grievances increases, the likelihood of repression might decrease. I investigate the relationship between inequality and the likelihood of repression in all country-years from 1981 to 1999. To mitigate specification problem, I estimate the probability of repression using a generalized additive model with thin-plate splines (GAM-TPS). This technique allows for flexible relationship between inequality, the proxy for the costs of repression and revolutions (income per capita), and the likelihood of repression. The empirical evidence support my prediction that the relationship between the magnitude of grievances and the likelihood of repression is non-monotone.