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.

Phlebotomines (Diptera, Psychodidae) in the Ribeira Valley Speleological Province - 1. Parque Estadual Intervales, state of São Paulo, Brazil

The identification of the sandfly fauna and investigation of some ecological aspects of its populations in areas frequented by tourists of the PEI, an Atlantic forest reserve with many caves, were the objective of this study. Captures were undertaken monthly from January 2001 to December 2002, with automatic light traps installed in 13 ecotopes, including caves, forests, domiciliary and peridomiciliary environments, and by aspiration in armadillo burrows. Additionally, although not at regular intervals, Shannon traps were installed in forests and anthropic environments, aspirations were made on cave walls, among roots and fallen leaves, and some insects were captured while biting researchers. A total of 891 sandflies belonging to 21 species were captured. Six hundred specimens representing 19 species were captured with light traps, 215 in anthropic (2.24 insects/trap) and 385 in extra-domiciliary (1.46 insects/trap) environments. Brumptomyia troglodytes was the most abundant species (the Standardised Index of Species Abundance = 0.705). Pintomyia monticola predominated in the Shannon traps and showed anthropophilic and diurnal activity. Psathyromyia pascalei predominated in the aspirations; the largest number being in armadillo burrows. Eleven species were captured in caves; although some might be troglophiles, the majority used these ecotopes as resting places. Nyssomyia intermedia, Nyssomyia neivai and Migonemyia migonei, implicated in the transmission of cutaneous leishmaniasis in the Southeastern Brazilian region, were all found, though in such low densities as to suggest minimal risk of the disease in the PEI.

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.

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.

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.

New findings regarding return autocorrelation anomalies and the importance of non-trading periods

In this paper, differences in return autocorrelation across weekdays havebeen investigated. Our research provides strong evidence of the importanceon non-trading periods, not only weekends and holidays but also overnightclosings, to explain return autocorrelation anomalies. While stock returnsare highly autocorrelated, specially on Mondays, when daily returns arecomputed on a open-to-close basis, they do not exhibit any significantlevel of autocorrelation. Our results are compatible with theinformation processing hypotheses as an explanation of the weekendeffect.

Portable alphas from pension mispricing

We introduce a new dynamic trading strategy based on the systematic misspricing of U.S. companies sponsoring Defined Benefit pension plans. This portfolio produces an average return of 1.51% monthly between 1989 and 2004, with a Sharpe Ratio of 0.26. The returns of the strategy are not explained by those of primary assets. These returns are not related to those of benchmarks in the alternative investments industry either. Hence, we are in the presence of a "pure alpha" strategy that can be ported into a large variety of portfolios to significantly enhance their performance.

A recoverable production planning model

Aware of the importance of developing new alternatives to improve the performance of the companies, our purpose in this paper is to develop a medium term production planning model that deals with the concepts of Partnership and Reverse Logistics. Our model takes advantage of the synergies of integration, developing a model for global production planning that generates the optimal production and purchasing schedule for all the companies integrating a logistic chain. In a second part of the paper we incorporate products returns to the first model proposed, and analyze the implications they have over this model. We use some examples with different configurations of supply chains varying the number of production plants, distribution centers and recovery plants. To solve the model we have combined optimization and simulation procedures.

In-vitro testing of biofilm formation on infected bone grafts and bone substitutes

Background: Bacteria form biofilms on the surface of orthopaedic devices, causing persistent infections. Monitoring biofilm formation on bone grafts and bone substitutes is challenging due to heterogeneous surface characteristics. We analyzed various bone grafts and bone substitutes regarding their propensity for in-vitro biofilm formation caused by S. aureus and S. epidermidis. Methods: Beta-tricalciumphosphate (b-TCP, ChronOsTM), processed human spongiosa (TutoplastTM) and PMMA (PalacosTM) were investigated. PE was added as a growth control. As test strains S. aureus (ATCC 29213) and S. epidermidis RP62A (ATCC 35984) were used. Test materials were incubated with 105 cfu/ml. After 24 h, test materials were removed and washed, followed by a standardised sonication protocol. The resulting sonication fluid was plated and bacterial counts were enumerated and expressed as cfu/sample. Sonicated samples were transferred to a microcalorimeter (TA Instrument) and heat flow monitored over a 24 h period with a precision of 0.0001°C and a sensitiviy of 200 μW. Experiments were performed in triplicates to calculate the mean ± SD. One-way ANOVA analysis was used for statistical analysis. Results: Bacterial counts (log10 cfu/sample) were highest on b-TCP (S. aureus 7.67 ± 0.17; S. epidermidis 8.14 ± 0.05) while bacterial density (log10 cfu/surface) was highest on PMMA (S. aureus 6.12 ± 0.2, S. epidermidis 7.65 ± 0.13). Detection time for S. aureus biofilms was shorter for the porous materials (b-TCP and Tutoplast, p <0.001) compared to the smooth materials (PMMA and PE) with no differences between b-TCP and TutoplastTM (p >0.05) or PMMA and PE (p >0.05). In contrast, for S. epidermidis biofilms the detection time was different (p <0.001) between all materials except between Tutoplast and PE (p >0.05). Conclusion: Our results demonstrate biofilm formation with both strains on all tested materials. Microcalorimetry was able to detect quantitatively the amount of biofilm. Further studies are needed to see whether calorimetry is a suitable tool also to monitor approaches to prevent and treat infections associated with bone grafts and bone substitutes.