Optimal provision of implicit and explicit incentives in asset management contracts

This paper investigates the importance of the fiow of funds as an implicit incetive provided by investors to portfolio managers in a two-period relationship. We show that the fiow of funds is a powerful incentive in an asset management contract. We build a binomial moral hazard model to explain the main trade-ofIs in the relationship between fiow, fees and performance. The main assumption is that efIort depend" on the combination of implicit and explicit incentives while the probability distrioutioll function of returns depends on efIort. In the case of full commitment, the investor's relevant trade-ofI is to give up expected return in the second period vis-à-vis to induce efIort in the first período The more concerned the investor is with today's payoff. the more willing he will be to give up expected return in the following periods. That is. in the second period, the investor penalizes observed low returns by withdrawing resources from non-performing portfolio managers. Besides, he pays performance fee when the observed excess return is positive. When commitment is not a plausible hypothesis, we consider that the investor also learns some symmetríc and imperfect information about the ability of the manager to generate positive excess returno In this case, observed returns reveal ability as well as efIort choices exerted by the portfolio manager. We show that implicit incentives can explain the fiow-performance relationship and, conversely, endogenous expected return determines incentives provision and define their optimal leveIs. We provide a numerical solution in Matlab that characterize these results.

Making decisions in the absence of clear facts: a historical perspective

Recently, a claim has been made that executive decisions makers, far from being fact collectors, are actually fact users and integrators. As such, the claim continues, executive decision makers need help in understanding how to interpret facts, as well as guidance in making decisions in the absence of clear facts. This report justifies this claim against the backdrop of the modern history of decision making, from 1956 to the present. The historical excursion serves to amplify and clarify the claim, as well as to develop a theoretical framework for making decisions in the absence of clear facts. Two essential issues are identified that impact upon decision making in the absence of clear facts, as well criteria for decision making effectiveness under such circumstances. Methodological requirements and practical objectives round off the theoretical framework. The historical analysis enables the identification of one particular established methodology as claiming to meet the methodological requirements of the theoretical framework. Since the methodology has yet to be tried on information-poor situations, a further project is proposed that will test its validity.

Information asymmetry and transaction costs in a cross-cultural business transaction

The intent of this paper is to provide a practitioners insight into the present and foreseeable future of problem of transaction cost economics related to culture and business etiquette that may increase the of complexity of business communication. We will also explore whether it impacts participant's mindsets regarding opportunistic or passive aggressive behavior. We will study the role of culture, ethics, information asymmetry, and legal systems regarding their importance towards the business contracts and lack of knowledge in local environments. We will make connections to contract theory strategies and objectives and recommend business practices. Furthermore, economic theory explores the role of the impossibility of the perfect contract. Historical and present day operational factors are examined for the determination of forward-looking contract law indications worldwide. This paper is intended provide a practitioners view with a global perspective of a multinational, mid-sized and small corporations giving consideration in a non-partisan and non-nationalistic view, yet examines the individual characteristics of the operational necessities and obligations of any corporation. The study will be general, yet cite specific articles to each argument and give adequate consideration to the intricacies of the global asymmetry of information. This paper defends that corporations of any kind and size should be aware of the risk of international business etiquette and cultural barriers that might jeopardize the savings you could obtain from engaging international suppliers.

Making decisions in the absence of clear facts

The effectiveness of a decision maker is not demonstrated through access to better or more information. Effectiveness is demonstrated in an ability to use, more resourcefully, whatever limited information is available, and to portray its implications more usefully. This paper demonstrates how decision makers can make systemic decisions in situations characterized by extremely limited information and, furthermore, what form such decisions take.

Household borrowing constraints and monetary policy in emerging economies

Credit markets in emerging economies can be distinguished from those in advanced economies in many respects, including the collateral required for households to borrow. This work proposes a DSGE framework to analyze one peculiarity that characterizes the credit markets of some emerging markets: payroll-deducted personal loans. We add the possibility for households to contract long-term debt and compare two different types of credit constraints with one another, one based on housing and the other based on future income. We estimate the model for Brazil using a Bayesian technique. The model is able to solve a puzzle of the Brazilian economy: responses to monetary shocks at first appear to be strong but dissipate quickly. This occurs because income – and the amount available for loans – responds more rapidly to monetary shocks than housing prices. To smooth consumption, agents (borrowers) compensate for lower income and for borrowing by working more hours to repay loans and erase debt in a shorter time. Therefore, in addition to the income and substitution effects, workers consider the effects on their credit constraints when deciding how much labor to supply, which becomes an additional channel through which financial frictions affect the economy.

Terms of trade, macroeconomic dynamics and default decisions

A evidência empírica aponta que Termos de Troca é uma variável relevante tanto para dinâmica macroeconômica como para o risco de default em países emergentes. No entanto, a literatura de dívida soberana baseada nos trabalhos de Eaton e Gerzovitz (1981) e Arellano (2008) ainda não explorou de forma adequada as conecções entre a dinâmica de termos de troca e incentivos ao default. Nós contribuímos nessa área, introduzindo volatilidade de Termos de Troca no modelo proposto por Mendoza e Yue (2012), no qual as decisões de dívida soberana são vinculadas à um modelo de equilíbrio geral para a economia doméstica. Nós encontramos que uma economia exposta à volatilidade dos termos de troca consegue produzir uma variabilidade do consumo que supera significativamente a variabilidade do produto, característica que constitui um fato estilizado chave de business cycles de países emergentes. Nossos exercícios também mostram que decisões de default são geradas por mudanças bruscas nos termos de troca, mas não necessariamente estão vinculados à estados ruins da economia.

Asymmetric preferences in investment decisions in the Brazilian financial market

The main objective of this article is to test the hypothesis that utility preferences that incorporate asymmetric reactions between gains and losses generate better results than the classic Von Neumann-Morgenstern utility functions in the Brazilian market. The asymmetric behavior can be computed through the introduction of a disappointment (or loss) aversion coefficient in the classical expected utility function, which increases the impact of losses against gains. The results generated by both traditional and loss aversion utility functions are compared with real data from the Brazilian market regarding stock market participation in the investment portfolio of pension funds and individual investors.

Limited liability and non-responsiveness in moral hazard and adverse selection problems

This work analyses the optimal menu of contracts offered by a risk neutral principal to a risk averse agent under moral hazard, adverse selection and limited liability. There are two output levels, whose probability of occurrence are given by agent’s private information choice of effort. The agent’s cost of effort is also private information. First, we show that without assumptions on the cost function, it is not possible to guarantee that the optimal contract menu is simple, when the agent is strictly risk averse. Then, we provide sufficient conditions over the cost function under which it is optimal to offer a single contract, independently of agent’s risk aversion. Our full-pooling cases are caused by non-responsiveness, which is induced by the high cost of enforcing higher effort levels. Also, we show that limited liability generates non-responsiveness.

Electrophysiological effects of guanosine and MK-801 in a quinolinic acid-induced seizure model

TORRES, F ; FILHO, M.S. ; ANTUNES, C. ; KALININE, E. ; ANTONIOLLI, E. ; PORTELA, Luis Valmor ; SOUZA, Diogo Onofre ; TORT, A. B. L. . Electrophysiological effects of guanosine and MK-801 in a quinolinic acid-induced seizure model. Experimental Neurology , v. 221, p. 296-306, 2010

Within plant distribution of Anthonomus grandis (Coleoptera: Curculionidae) feeding and oviposition damages in cotton cultivars

Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (CAPES)

Hemocyte types and total and differential counts in unparasitized and parasitized Anastrepha obliqua (Diptera, Tephritidae) larvae

Os tipos de hemócitos e as contagens total e diferencial foram estudados em larvas parasitadas e não parasitadas de Anastrepha obliqua pertencentes ao início e ao final da terceira fase. em ambas as fases do desenvolvimento, tanto em larvas parasitadas quanto nas não parasitadas, foram observados pró-hemócitos, plasmatócitos, granulócitos, adipo-hemócitos, esferulócitos e oenocitóides. A presença de divisões mitóticas indica os pró-hemócitos como células-tronco. Pró-hemócitos, plasmatócitos e granulócitos são as células mais numerosas na hemolinfa de A. obliqua. Foi observada diferença no número total de hemócitos entre larvas parasitadas e não parasitadas apenas no final da terceira fase.

Cafeteria diet intake for fourteen weeks can cause obesity and insulin resistance in Wistar rats

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

Influence of Th1/Th2 cytokines and nitric oxide in murine systemic infection induced by Sporothrix schenckii

In an attempt to elucidate the effects of Sporothrix schenckii infection on the immune response, our laboratory has developed a murine model of disseminated sporotrichosis. Helper T cells can be further subdivided into Th1 and Th2 phenotypes. The differentiation of two subsets of T lymphocytes is driven by IL-12 and IL-4 cytokines, respectively. Th1 cells produce IFN-gamma that activate macrophages and promote cell-mediated immunity. In addition, we found low levels of iNOS and NO production in the initial (1st and 2nd weeks) and final (9th and 10th weeks) periods of the infection, in contrast with the period of week 4 to 7 of elevated values. The determination of IFN-gamma and IL-12 are in agreement with NO/iNOS detection, showing the presence of cellular immune response throughout the infectious process. However, the production of IL-4 shows an increase in levels after the 5th and 6th weeks suggesting a participation of Th2 response in this period as well. Regarding these results, the study demonstrated that in experimental sporotrichosis infection the cellular immune response participated throughout the period analyzed as a nitric oxide dependent mechanism. In contrast, the presence of Th2 response began in the 5th week, suggesting the participation of humoral immune response in advanced stages of sporotrichosis.

Context-specific modulation of cocaine-induced locomotor sensitization and ERK and CREB phosphorylation in the rat nucleus accumbens

Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (CAPES)

Electromyographical, ultrasonographical and morphological modifications in semitendinous muscle after transposition as ventral perineal muscle flap

The aim of this study was to evaluate modifications occurring in semitendinous muscle after transposition as a ventral perineal muscle flap using electromyography, ultrasonography, and morphological studies. Ten male crossbreed dogs of 3-4 year old were used. The left semitendinous muscle was cut close to the popliteus lymph node, rotated and sutured at the perineal region. The contralateral muscle was considered as control. Motor nerve conduction studies of both sciatic-tibial nerves, and electromyographic and ultrasonographic examinations of both semitendinous muscles were performed before surgery and 15, 30, 60, and 90 days postoperatively. Semitendinous muscle samples were collected for morphological analysis 90 days after surgery. No alterations were observed in clinical gait examinations, or in goniometrical and electroneuromyographical studies in pelvic limbs after surgery. Electromyography demonstrated that the transposed muscle was able to contract, but atrophy was detected by ultrasonography and morphological analysis.