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.

Human capital distribution, growth and convergence

This paper studies the dynamic relationship between distribution and endogenous growth in an overlapping generations model with accumulation of human and physical capital. It is shown how human capital can determine a relationship between per capita growth rates and inequality in the distribution of income. Family background effects and spillovers in the transmission of human capital generate a dynamics in which aggregate variables depend not only on the stock, but also on the distribution of human capital. The evolution of this distribution over time is then characterized under different assumptions on private returns and the form of the externality in the technology for humancapital. Conditions for existence, uniqueness and stability of a constant growth equilibrium with a stationary distribution are derived. Increasing returns, idiosyncratic abilities and the possibility of poverty traps are explicitely characterized in a closed form solution of the equilibrium dynamics, showing the role played by technology and preferences parameters.

Contrasting the functional properties of GABAergic axon terminals with single and multiple synapses in the thalamus

Diverse sources of GABAergic inhibition are a major feature of cortical networks, but distinct inhibitory input systems have not been systematically characterized in the thalamus. Here, we contrasted the properties of two independent GABAergic pathways in the posterior thalamic nucleus of rat, one input from the reticular thalamic nucleus (nRT), and one "extrareticular" input from the anterior pretectal nucleus (APT). The vast majority of nRT-thalamic terminals formed single synapses per postsynaptic target and innervated thin distal dendrites of relay cells. In contrast, single APT-thalamic terminals formed synaptic contacts exclusively via multiple, closely spaced synapses on thick relay cell dendrites. Quantal analysis demonstrated that the two inputs displayed comparable quantal amplitudes, release probabilities, and multiple release sites. The morphological and physiological data together indicated multiple, single-site contacts for nRT and multisite contacts for APT axons. The contrasting synaptic arrangements of the two pathways were paralleled by different short-term plasticities. The multisite APT-thalamic pathway showed larger charge transfer during 50-100 Hz stimulation compared with the nRT pathway and a greater persistent inhibition accruing during stimulation trains. Our results demonstrate that the two inhibitory systems are morpho-functionally distinct and suggest and that multisite GABAergic terminals are tailored for maintained synaptic inhibition even at high presynaptic firing rates. These data explain the efficacy of extrareticular inhibition in timing relay cell activity in sensory and motor thalamic nuclei. Finally, based on the classic nomenclature and the difference between reticular and extrareticular terminals, we define a novel, multisite GABAergic terminal type (F3) in the thalamus.

Pay-as-you-go social security and the distribution of bequests

This paper studies the impact of an unfunded social security system on the distribution of bequests in a framework where savings are due both by life cycle and by random altruistic motivations. We show that the impact of social security on the distribution of bequests depends crucially on the importance of the bequest motive in explaining savings behavior. If the bequest motive is strong, then an increase in the social security tax raises the bequests left by altruistic parents. On the other hand, when the importance of bequests in motivating savings is sufficiently low, theincrease in the social security tax could result in a reduction of the bequests left by altruistic parents under some conditions on the attitude of individuals toward risk and on the relative returns associated with private saving and social security. Some implications concerning the transitional effects of introducing an unfunded social security scheme are also discussed.

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.

Flexible multivariate GARCH modeling with an application to international stock markets

The goal of this paper is to estimate time-varying covariance matrices.Since the covariance matrix of financial returns is known to changethrough time and is an essential ingredient in risk measurement, portfolioselection, and tests of asset pricing models, this is a very importantproblem in practice. Our model of choice is the Diagonal-Vech version ofthe Multivariate GARCH(1,1) model. The problem is that the estimation ofthe general Diagonal-Vech model model is numerically infeasible indimensions higher than 5. The common approach is to estimate more restrictive models which are tractable but may not conform to the data. Our contributionis to propose an alternative estimation method that is numerically feasible,produces positive semi-definite conditional covariance matrices, and doesnot impose unrealistic a priori restrictions. We provide an empiricalapplication in the context of international stock markets, comparing thenew estimator to a number of existing ones.

Generation of the primary hair follicle pattern.

Hair follicles are spaced apart from one another at regular intervals through the skin. Although follicles are predominantly epidermal structures, classical tissue recombination experiments indicated that the underlying dermis defines their location during development. Although many molecules involved in hair follicle formation have been identified, the molecular interactions that determine the emergent property of pattern formation have remained elusive. We have used embryonic skin cultures to dissect signaling responses and patterning outcomes as the skin spatially organizes itself. We find that ectodysplasin receptor (Edar)-bone morphogenetic protein (BMP) signaling and transcriptional interactions are central to generation of the primary hair follicle pattern, with restriction of responsiveness, rather than localization of an inducing ligand, being the key driver in this process. The crux of this patterning mechanism is rapid Edar-positive feedback in the epidermis coupled with induction of dermal BMP4/7. The BMPs in turn repress epidermal Edar and hence follicle fate. Edar activation also induces connective tissue growth factor, an inhibitor of BMP signaling, allowing BMP action only at a distance from their site of synthesis. Consistent with this model, transgenic hyperactivation of Edar signaling leads to widespread overproduction of hair follicles. This Edar-BMP activation-inhibition mechanism appears to operate alongside a labile prepattern, suggesting that Edar-mediated stabilization of beta-catenin active foci is a key event in determining definitive follicle locations.

When in peril, retrench: Testing the portfolio channel of contagion

One plausible mechanism through which financial market shocks may propagate across countriesis through the impact that past gains and losses may have on investors risk aversion and behavior. This paper presents a stylized model illustrating how heterogeneous changes in investors risk aversion affect portfolio allocation decisions and stock prices. Our empirical findings suggest that when funds returns are below average, they adjust their holdings toward the average (or benchmark) portfolio. In so doing, funds tend to sell the assets of countries in which they were overweight , increasing their exposure to countries in which they were underweight. Based on this insight, the paper constructs an index of financial interdependence which reflects the extent to which countries share overexposed funds. The index helps in explain the pattern of stock market comovement across countries. Moreover, a comparison of this interdependence measure to indices of trade or commercial bank linkages indicates that our index can improve predictions about which countries are more likely to be affected by contagion from crisis centers.

Betting on Hitler: The value of political connections in Nazi Germany

This paper examines the value of connections between German industry andthe Nazi movement in early 1933. Drawing on previously unused contemporarysources about management and supervisory board composition and stock returns,we find that one out of seven firms, and a large proportion of the biggest companies,had substantive links with the National Socialist German Workers Party. Firmssupporting the Nazi movement experienced unusually high returns, outperformingunconnected ones by 5% to 8% between January and March 1933. These resultsare not driven by sectoral composition and are robust to alternative estimatorsand definitions of affiliation.

On the timing of balance of payments crises: Disaggregated information and interest rate policy

This paper proposes a dynamic framework to study the timing of balance of paymentscrises. The model incorporates two main ingredients: (i) investors have private information; (ii)investors interact in a dynamic setting, weighing the high returns on domestic assets against the incentives to pull out before the devaluation. The model shows that the presence of disaggregated information delays the onset of BOP crises, giving rise to discrete devaluations. It also shows that high interest rates can be eective in delaying and possibly avoiding the abandonment of the peg. The optimal policy is to raise interest rates sharply as fundamentals become very weak. However, this policy is time inconsistent, suggesting a role for commitment devices such as currency boards or IMF pressure.

Firms vs. insiders as traders of last resort

We explore the role of corporate insiders vs. firms as traders of last resort. We develop a simple model of insider trading in which insiders provide price support, as well as liquidity, in security markets. Consistent with the model predictions we find that in the US markets insiders trading activities have a clear impact on return distributions. Furthermore, we provide empirical evidence on insiders transactions and firm transactions affecting returns in a different manner. In particular, while insiders transactions (both purchases and sales) have a strong impact on skewness in the short run and to a lesser extent in short run volatility, company repurchases only have a clear impact on volatility, both in the short and the long run. We provide explanations for this asymmetry.

Conglomeration with bankruptcy costs: Separate or joint financing?

The paper analyzes the determinants of the optimal scope of incorporation in the presenceof bankruptcy costs. Bankruptcy costs alone generate a non-trivial tradeoff between thebenefit of coinsurance and the cost of risk contamination associated to joint financing corporate projects through debt. This tradeoff is characterized for projects with binary returns,depending on the distributional characteristics of returns (mean, variability, skewness, heterogeneity, correlation, and number of projects), the bankruptcy recovery rate, and the taxrate advantage of debt relative to equity. Our testable predictions are broadly consistentwith existing empirical evidence on conglomerate mergers, spin-offs, project finance, andsecuritization.

Partial melting of basic dykes in the contact aureoles of two shallow-level, gabbro-pyroxenite intrusions, Fuerteventura

THESIS ABSTRACT Low-pressure anatexis of basic dykes gave rise to unusual, zebra-like migmatites, in the contact metamorphic aureoles of two layered gabbro-pyroxenite intrusions, PXl and PX2, in the root zone of an ocean island, Fuerteventura Basal Complex (Canary Islands). This thesis focuses on the understanding of processes attributing to the partial melting and formation of these migmatites, characterised by a dense network of closely spaced, millimetre-wide leucocratic segregations with perfectly preserved igneous textures. The presence of fluids are required to decrease the solidus of basic igneous lithologies, to allow partial melting in such aloes-pressure (1-2 kb) environment. An oxygen isotope study was thus carried out on dykes inside and beyond the PX2 aureole, in order to decipher the nature and origin of such fluids. Low or negative δ18O values were obtained for whole rocks and mineral-separates, decreasing towards the contact, with the intrusion itself retaining fairly high values. This trend has been attributed to the advection of meteoric water during magma emplacement, with increasing fluid/rock ratios (higher dyke intensities towards the intrusion acting as fluid-pathways) and higher temperatures promoting increasing exchange during recrystallisation. A comparison of whole rock and mineral major- and trace- element data allowed the redistribution of elements .between different mineral phases and generations, during contact metamorphism and partial melting to be assessed. Certain trace-elements, e.g. Zr, Hf, Y, and REEs, were internally redistributed during contact metamorphic recrystallisation, causing- the enrichment of neocrystallised diopsides compared to relict phenocrysts. This has been assigned to the liberation of trace elements on the breakdown of primary minerals, kaersutite and sphene, on entering the thermal aureole. Major and trace element compositions of minerals in migmatite melanosomes and leucosomes are almost identical, pointing to a syn- or post- solidus reequilibration on cooling of the migmatite terrain. The mineralogical, textural and geochemical evolution of dykes in a contact metamorphic aureole, is recorded around an apophysis of the PX1 intrusion, where there is evidence of incipient partial melting. Hydrothermal mineral pseudomorphs in the outer parts of the aureole are progressively replaced by dry mineral assemblages, with increasingly recrystallised diopside and evidence of partial melting -the extent of which varies from one lithology to another. The appearance of more mafic lithologies towards the intrusion, with lower whole rock SiO2 and mobile element abundances, e.g. Rb, Cs, K, has been explained by the migration and accumulation of feldspathic material into leucosomes outside the samples. A micro-structural study of leucosomes and leucocratic pods, with the aid of high-resolution X-ray computed micro-tomography (HRXµCT), allowing the visualization and quantification of shapes and orientations, was carried out in order to better understand the processes of melt segregation in the PX1 aureole. Leucocratic pods, representing former amygdales, are considered as natural strain ellipsoids. Their short axes are oriented perpendicular to leucosome planes, which sub-parallel the intrusive contact. Leucosomes thus effectively represent foliation planes. This implies that the direction of maximum shortening, during migmatisation, was perpendicular to the orientation of leucosomes, contradicting earlier models that suggest leucosomes represent tension veins. RESUME DE LA THESE Un phénomène rare de fusion partielle de filons basiques à basse pression a été étudié dans les auréoles de contact de deux intrusions litées de gabbro-pyroxénite, PX1 et PX2, localisées dans le soubassement de l'île volcanique de Fuerteventura aux Canaries. Cette anatexie a engendré des migmatites finement zébrées d'aspect très inhabituel, dont les processus de formation ont été étudiés dans le présent travail. Ces roches sont caractérisées par un réseau dense de veinules leucocrates d'épaisseur millimétrique, dont les textures ignées sont parfaitement préservées. La fusion partielle de roches basiques à basse pression (1-2 kbar) requiert la présence d'eau afin d'abaisser le solidus du système à des températures géologiquement réalistes. Une étude comparative des isotopes de l'oxygène a ainsi été menée sur des filons respectivement affectés et non affectés par le métamorphisme de contact, afin de confirmer la présence de ces fluides, de déterminer l'importance de leur interaction avec les roches et leur origine. Des valeurs de δ180 basses ou négatives ont été mesurées sur roche totale et minéraux séparés, décroissantes en direction du contact, alors que l'intrusion elle-même a conservé des valeurs élevées. Ce gradient a été attribué à l'advection d'eau météorique durant la mise en place du magma, les températures les plus élevées favorisant d'autant plus la circulation des fluides et les échanges isotopiques durant la recristallisation des roches. Cette recristallisation engendré une redistribution chimique complète des éléments entre les différentes générations de minéraux résultant du métamorphisme de contact et de l'anatexie, mise en évidence par microanalyse. Certains éléments traces comme Zr, Hf, Y et les REE ont été concentrés dans le diopside néoformé consécutivement à la déstabilisation de minéraux primaires riches en ces éléments comme la kaersutite ou le sphène. Les compositions en éléments majeurs et traces des minéraux des mélanosomes et leucosomes des migmatites sont pratiquement identiques, indiquant une rééquilibration syn- à postsolidus lors du refroidissement de l'auréole de contact. La transformation progressive des filons basiques au niveau de leur minéralogie, textures et composition chimique a pu être observée en détail à l'approche du contact d'une apophyse de l'intrusion PX1. La paragenèse magmatique initiale n'est jamais préservée, les faciès les plus distants du contact étant constitués d'un assemblage pseudomorphique hydrothermal. Ce dernier est progressivement remplacé par des assemblages anhydres incluant du diopside néoformé, puis apparaissent les premiers signes de fusion partielle, dont l'importance varie fortement d'une lithologie à l'autre. L'apparition de faciès plus basiques en direction du contact, avec des teneurs réduites en SiO2 et en éléments incompatibles tels Rb, Cs, K, a été attribuée à l'échappement de leucosomes feldspathiques hors du système. Une étude microstructurale de la distribution spatiale du matériel leucocrate au sein des migmatites par microtomographie X de haute résolution (HRXµCT) a été menée pour mieux comprendre les processus de ségrégation des liquides dans l'auréole de PX1. De petites entités ovoïdes, représentant d'anciennes structures amygdalaires au sein des filons, ont été considérées comme des ellipsoïdes marqueurs de la déformation finie. Leur petit axe est orienté perpendiculairement aux plans définis par les leucosomes, eux-mêmes subparallèles au contact intrusif. Les leucosomes matérialisent donc des plans de clivage. Ainsi, la direction de raccourcissement maximum durant la fusion partielle était perpendiculaire à l'orientation des leucosomes, contrairement à ce qui a été dit dans de précédentes publications, qui suggéraient que les leucosomes représentaient des veines de tension. RESUME DE LA THESE (POUR LE GRAND PUBLIC) L'observation directe du soubassement d'une île volcanique est une occasion rare, accessible dans le «complexe de base » de l'île canarienne de Fuerteventura. Ce dernier a enregistré divers phénomènes magmatiques, métamorphiques et de fusion partielle induits par l'intrusion répétée de magmas alimentant des appareils volcaniques sus jacents, sous forme de petits plutons, essaims de filons et complexes annulaires de gabbros alcalins, pyroxénites, syénites et carbonatites. Dans ce contexte de flux de chaleur élevé, des filons basiques ont subi une fusion partielle au contact de deux intrusions de gabbro-pyroxénite, un phénomène extrêmement rare à une profondeur aussi réduite, estimée à quelque 3-6 km. Les produits de cette fusion partielle sont des liquides très riches en feldspath, concentrés en un réseau dense de veinules blanches (leucosomes) au sein du matériau résiduel sombre non fondu (mélanosome) pour former ce qu'on appelle des migmatites. Outre les aspects pétrologiques liés à la formation de ces migmatites, l'intérêt majeur du phénomène réside dans le fait qu'il puisse représenter la source des magmas évolués parfois observés sur les îles océaniques. A des pressions aussi faibles que dans le soubassement de Fuerteventura (1-2 Kbar), la présence de fluides abondants est nécessaire pour abaisser la température de début de fusion des roches (solidus) à des valeurs géologiquement réalistes. Des expériences ont montré que même en présence de plusieurs %-poids d'eau, une température de 1000°C était encore nécessaire pour obtenir une proportion de liquide équivalente à celle observée sur le terrain, soit 25%. Or les magmas alcalins des îles océaniques, bien qu'hydratés, n'en contiennent de loin pas autant, ce qui implique une source d'eau externe. Une étude isotopique de l'oxygène a été entreprise afin de tester cette hypothèse. Les valeurs obtenues en 5180 sont basses ou négatives et indiquent l'influence d'eau d'origine météorique. Cette eau de pluie se serait infiltrée le long des filons depuis la surface du volcan et les aurait complètement hydrothermalisés en profondeur (situation encore visible à l'extérieur de l'auréole de contact), leur permettant ainsi de stocker l'eau nécessaire à leur fusion partielle ultérieure. L'interaction entre eau de pluie et filons a été d'autant plus importante que ces derniers étaient proches du contact avec l'intrusion, ce qui suggère que la circulation de ces eaux et leur interaction avec les roches a été favorisée par la chaleur fournie par l'intrusion elle-même. Un autre aspect de ce travail s'est focalisé sur la redistribution des éléments traces au sein des minéraux des filons basiques durant le métamorphisme de contact et la fusion partielle. Ainsi, le pyroxène de seconde génération est-il sensiblement enrichi en traces telles Zr, Hf, Y et les terres rares, par rapport au pyroxène magmatique originel, en relation avec la déstabilisation de minéraux primaires riches en ces éléments tels le sphène et la kaersutite. Cependant, les compositions en éléments majeurs et traces des minéraux recristallisés des migmatites sont pratiquement les mêmes dans les leucosomes et les mélanosomes, suggérant une rééquilibration chimique complète durant le refroidissement de ces lithologies. Si certaines migmatites se sont comportées en système chimiquement fermé (hormis l'eau météorique), d'autres filons ont manifestement perdu une partie de leurs leucosomes, ainsi qu'en témoigne leur composition progressivement appauvrie en silice et autres éléments incompatibles mobiles, tels K et Rb à l'approche du contact de l'intrusion. Parallèlement à cette évolution chimique, les paragenèses hydrothermales distantes du contact sont progressivement remplacées par des paragenèses anhydres, puis par l'apparition des premiers leucosomes, tandis que les textures magmatiques initiales sont complètement effacées au profit d'une combinaison de textures magmatique dans les leucosomes et en mosaïque dans les mélanosomes. Enfin, la distribution spatiale des liquides de fusion partielle a été étudiée par microtomographie X de haute résolution, dans des filons contenant des entités ovoïdes leucocrates, sans doute d'anciennes amygdales à zéolites. Ces dernières ont été considérées comme des ellipsoïdes de la déformation finie. L'orientation de leur petit axe, perpendiculaire au plan défini par les veinules de leucosomes, indique que ces derniers représentent des plans de clivage perpendiculaires à la direction de raccourcissement maximum. Ainsi, la ségrégation des liquides de fusion partielle se serait faite dans les plans de compression et non dans des plans de dilatation, contrairement à ce que laisserait penser le sens commun.

Reverse logistics in the editorial sector: An exploratory study

Nowadays, the Reverse Logistics field is becoming very important. On one hand, laws areimposing companies to be responsible for the contamination made by their products. On theother hand, companies have discovered the profits derived from a good Reverse Logisticsprocess. This paper is the result of the work done by a group of companies from the SpanishEditorial sector to understand and improve their Reverse Logistics process. The paperdescribes the characteristics of the Reverse Logistics process in this sector and theimprovements identified by the work group .

Pension plan funding and stock market efficiency

The paper argues that the market signifficantly overvalues firms with severely underfunded pension plans. These companies earn lower stock returns than firms with healthier pension plans for at least five years after the first emergence of the underfunding. The low returns are not explained by risk, price momentum, earnings momentum, or accruals. Further, the evidence suggests that investors do not anticipate the impact of the pension liability on future earnings, and they are surprised when the negative implications of underfunding ultimately materialize. Finally, underfunded firms have poor operating performance, and they earn low returns, although they are value companies.