Complete Markets Strikes Back: Revisiting Risk Sharing Tests under Discount Rate Heterogeneity

Recent risk sharing tests strongly reject the hypothesis of complete markets, because in the data: (1) the individual consumption comoves with income and (2) the consumption dispersion increases over the life cycle. In this paper, I revisit the implications of these risk sharing tests in the context of a complete market model with discount rate heterogeneity, which is extended to introduce the individual choices of effort in education. I .nd that a complete market model with discount rate heterogeneity can pass both types of the risk sharing tests. The endogenous positive correlation between income growth rate and patience makes the individual consumption comove with income, even if the markets are complete. I also show that this model is quantitatively admissible to account for both the observed comovement of consumption and income and the increase of consumption dispersion over the life cycle.

Modeling Dependence Structure and Forecasting Portfolio Value-at-Risk with Dynamic Copulas

We study the asymmetric and dynamic dependence between financial assets and demonstrate, from the perspective of risk management, the economic significance of dynamic copula models. First, we construct stock and currency portfolios sorted on different characteristics (ex ante beta, coskewness, cokurtosis and order flows), and find substantial evidence of dynamic evolution between the high beta (respectively, coskewness, cokurtosis and order flow) portfolios and the low beta (coskewness, cokurtosis and order flow) portfolios. Second, using three different dependence measures, we show the presence of asymmetric dependence between these characteristic-sorted portfolios. Third, we use a dynamic copula framework based on Creal et al. (2013) and Patton (2012) to forecast the portfolio Value-at-Risk of long-short (high minus low) equity and FX portfolios. We use several widely used univariate and multivariate VaR models for the purpose of comparison. Backtesting our methodology, we find that the asymmetric dynamic copula models provide more accurate forecasts, in general, and, in particular, perform much better during the recent financial crises, indicating the economic significance of incorporating dynamic and asymmetric dependence in risk management.

Unemployment Risk and Wage Differentials

Workers in less-secure jobs are often paid less than identical-looking workers in more secure jobs. We show that this lack of compensating differentials for unemployment risk can arise in equilibrium when all workers are identical and firms differ only in job security (i.e. the probability that the worker is not sent into unemployment). In a setting where workers search for new positions both on and off the job, the worker’s marginal willingness to pay for job security is endogenous, increasing with the rent received by a worker in his job, and depending on the behavior of all firms in the labor market. We solve for the labor market equilibrium and find that wages increase with job security for at least all firms in the risky tail of the distribution of firm-level unemployment risk. Unemployment becomes persistent for low-wage and unemployed workers, a seeming pattern of ‘unemployment scarring’ created entirely by firm heterogeneity. Higher in the wage distribution, workers can take wage cuts to move to more stable employment.

Dynamic Relational Contracts under Complete Information

This paper considers a long-term relationship between two agents who both undertake a costly action or investment that together produces a joint benefit. Agents have an opportunity to expropriate some of the joint benefit for their own use. Two cases are considered: (i) where agents are risk neutral and are subject to limited liability constraints and (ii) where agents are risk averse, have quasi-linear preferences in consumption and actions but where limited liability constraints do not bind. The question asked is how to structure the investments and division of the surplus over time so as to avoid expropriation. In the risk-neutral case, there may be an initial phase in which one agent overinvests and the other underinvests. However, both actions and surplus converge monotonically to a stationary state in which there is no overinvestment and surplus is at its maximum subject to the constraints. In the risk-averse case, there is no overinvestment. For this case, we establish that dynamics may or may not be monotonic depending on whether or not it is possible to sustain a first-best allocation. If the first-best allocation is not sustainable, then there is a trade-off between risk sharing and surplus maximization. In general, surplus will not be at its constrained maximum even in the long run.

Limited liability and mechanism design in procurement

In the presence of cost uncertainty, limited liability introduces the possibility of default in procurement with its associated bank-ruptcy costs. When financial soundness is not perfectly observable, we show that incentive compatibility implies that financially less sound contractors are selected with higher probability in any feasible mechanism. Informational rents are associated with unsound financial situations. By selecting the financially weakest contractor, stronger price competition (auctions) may not only increase the probability of default but also expected rents. Thus, weak conditions are suffcient for auctions to be suboptimal. In particular, we show that pooling firms with higher assets may reduce the cost of procurement even when default is costless for the sponsor.

Modeling Dependence Structure and Forecasting Market Risk with Dynamic Asymmetric Copula

We investigate the dynamic and asymmetric dependence structure between equity portfolios from the US and UK. We demonstrate the statistical significance of dynamic asymmetric copula models in modelling and forecasting market risk. First, we construct “high-minus-low" equity portfolios sorted on beta, coskewness, and cokurtosis. We find substantial evidence of dynamic and asymmetric dependence between characteristic-sorted portfolios. Second, we consider a dynamic asymmetric copula model by combining the generalized hyperbolic skewed t copula with the generalized autoregressive score (GAS) model to capture both the multivariate non-normality and the dynamic and asymmetric dependence between equity portfolios. We demonstrate its usefulness by evaluating the forecasting performance of Value-at-Risk and Expected Shortfall for the high-minus-low portfolios. From back-testing, e find consistent and robust evidence that our dynamic asymmetric copula model provides the most accurate forecasts, indicating the importance of incorporating the dynamic and asymmetric dependence structure in risk management.

Serological survey for canine cutaneous and visceral leishmaniasis in areas at risk for transmission in Rio de Janeiro where prophylatic measures had been adopted

A serological survery for canine visceral (VL) and American cutaneous leishmaniasis (ACL) has been carried out during 1984-1989, to assess the effects of the prophylactic measures adopted in areas where there was a risk of transmission of the diseases in Rio de Janeiro. A previous serologival survey (1982/83) had detected serum positive dogas as well as the human disease in these same areas. A total fo 22,828 dogs have been examined in this last survey, 7,807 of which came from Campo Grande (VL and ACL area), 4,110 from Jacarepaguá (ACL area), 4,l46 from Realengo, 3,879 from Bangu and 2,886 from Senador Camará, (three VL areas). The analysis of these results showed a notable reduction in the number of serum positve dogs, compared to those of the first survey was 12.7%, against 0.62% of the second; (b) in Jacarepaguá (ACL) it decreased from 8.6%) to l.8% (c) in Bangu, Realengo and Senador Camará (VL) the rate decreased from 4.3% to 0.38%. The results indicate that this decrease was due to the prophylactic measures adopted in those areas.

Influence of age, risk factors, and cardiovascular and renal disease on arterial stiffness: clinical applications.

Age is the main clinical determinant of large artery stiffness. Central arteries stiffen progressively with age, whereas peripheral muscular arteries change little with age. A number of clinical studies have analyzed the effects of age on aortic stiffness. Increase of central artery stiffness with age is responsible for earlier wave reflections and changes in pressure wave contours. The stiffening of aorta and other central arteries is a potential risk factor for increased cardiovascular morbidity and mortality. Arterial stiffening with aging is accompanied by an elevation in systolic blood pressure (BP) and pulse pressure (PP). Although arterial stiffening with age is a common situation, it has now been confirmed that older subjects with increased arterial stiffness and elevated PP have higher cardiovascular morbidity and mortality. Increase in aortic stiffness with age occurs gradually and continuously, similarly for men and women. Cross-sectional studies have shown that aortic and carotid stiffness (evaluated by the pulse wave velocity) increase with age by approximately 10% to 15% during a period of 10 years. Women always have 5% to 10% lower stiffness than men of the same age. Although large artery stiffness increases with age independently of the presence of cardiovascular risk factors or other associated conditions, the extent of this increase may depend on several environmental or genetic factors. Hypertension may increase arterial stiffness, especially in older subjects. Among other cardiovascular risk factors, diabetes type 1 and 2 accelerates arterial stiffness, whereas the role of dyslipidemia and tobacco smoking is unclear. Arterial stiffness is also present in several cardiovascular and renal diseases. Patients with heart failure, end stage renal disease, and those with atherosclerotic lesions often develop central artery stiffness. Decreased carotid distensibility, increased arterial thickness, and presence of calcifications and plaques often coexist in the same subject. However, relationships between these three alterations of the arterial wall remain to be explored.

Subclinical hypothyroidism and the risk of coronary heart disease and mortality: an individual participant data analysis from nine prospective cohort studies

Texte intégral: http://www.springerlink.com/content/3q68180337551r47/fulltext.pdf

Risk Attitude And Wage Growth: Replication And Reconstruction

We replicate Shaw (1996) who found that individual wage growth is higher for individuals with greater preference for risk taking. Expanding her dataset with more American observations and data for Germany, Spain and Italy, we find mixed support for the earlier results. We present and estimate a new model and find that in particular the wage level is sensitive to attitudes towards risk taking. Comments given at the Labour Economics Conference in honour of Niels Westergaard (Nyborg, August 2008) and EALE 2008 (Amsterdam) and at seminars in Maastricht,Reus and Essen (RWI) are gratefully acknowledged. The authors also acknowledge financial support from the Spanish Ministry of Science and Innovation (grant number SEJ2007-66318) and from the Barcelona Economics Program of CREA. JEL code: J24; J30. Key words: wage growth, risk, post-school investment.

Long term outcome after mitral valve repair : a risk factor analysis

Objectif: La réparation de la valve mitrale constitue le traitement de choix pour restaurer ta fonction de celle-ci. Elle est actuellement reconnue pour garantir une bonne évolution à long terme. Dans le but de faciliter les décisions périopératoires, nous avons analysé nos patients afin de déterminer les facteurs de risque ayant affecté leur évolution. Méthodes: Nous avons étudié rétrospectivement 175 premiers patients consécutifs (âge moyen : 64 +/-10.4 ans ;113 hommes) qui ont subi une réparation primaire de la valve mitrale associée à toute autre intervention cardiaque entre 1986 et 1998. Les facteurs de risque influençant le taux de réopération et la survie à long terme ont été analysés de manière uni et multivariée. Résultats: La mortalité opératoire était de 3.4 % (6 décès, 0 -22 et jours post-opératoires). La mortalité tardive était de 9.1 % (16 décès, 3e-125e mois post-opératoires). Cinq patients ont dû être réopérés. L'analyse actuarielle selon Kaplan-Meier a montré une survie à 1 année de 96 +l-1 %, une survie à 5 ans de 88 +/- 3 % et une survie à 10 ans de 69 +/- 8 %. Après 1 année, la fraction de population sans réopération était de 99 %, elle était de 97 +/-2 % après 5 ans et de 88+/-6 % après 10 ans. L'analyse multivariée a montré qu' un stade NYHA III et IV résiduel ( p=0.001, RR 4.55, 95 % IC :1.85 -14.29), une mauvaise fraction d'éjection préopératoire(p=0.013, RR 1.09, 95 % IC 1.02 -1.18), ,une régurgitation mitrale d'origine fonctionnelle (p=0.018, RR 4.17, 95% IC 1.32-16.67) ainsi qu'une étiologie ischémique (p=0.049, RR 3.13, 95% IC 1.01-10.0) constituaient tous des prédicteurs indépendant de mortalité. Une régurgitation mitrale persistante au 7 e jour post-opératoire (p= 0.005, RR 4.55, 95 % IC :1.56 -20.0), un âge inférieur à 60 ans (p = 0.012, RR 8.7, 95 % IC 2.44 - 37.8) et l'absence d'anneau prothétique (p = 0.034, RR 4.76, 95 % IC 1.79-33.3) se sont tous révélés être des facteurs de risque indépendant de réopération. Conclusion: Les réparations mitrales sont accompagnées d'une excellente survie à long terme même si leur évolution peut être influencée négativement par de nombreux facteurs de risques periopératoires. Les risques de réopération sont plus élevés chez des patients jeunes présentant une régurgitation mitrale résiduelle et n'ayant pas bénéficié de la mise en place d'un anneau prothétique.