Does liquidity constraints matter for Ricardian equivalence?

The paper analysis a general equilibrium model with two periods, several households and a government that has to finance some expenditures in the first period. Households may have some private information either about their type (adverse selection) or about some action levei chosen in the first period that affects the probability of certain states of nature in the second period (moral hazard). Trade of financiai assets are intermediated by a finite collection of banks. Banks objective functions are determined in equilibrium by shareholders. Due to private information it may be optimal for the banks to introduce constraints in the set of available portfolios for each household as wellas household specific asset prices. In particular, households may face distinct interest rates for holding the risk-free asset. The government finances its expenditures either by taxing households in the first period or by issuing bonds in the first period and taxing households in the second period. Taxes may be state-dependent. Suppose government policies are neutml: i) government policies do not affect the distribution of wealth across households; and ii) if the government decides to tax a household in the second period there is a portfolio available for the banks that generates the Mme payoff in each state of nature as the household taxes. Tben, Ricardian equivalence holds if and only if an appropriate boundary condition is satisfied. Moreover, at every free-entry equilibrium the boundary condition is satisfied and thus Ricardian equivalence holds. These results do not require any particular assumption on the banks' objective function. In particular, we do not assume banks to be risk neutral.

The firm size wage premium : a quantile analysis

Empirical evidence shows that larger firms pay higher wages than smaller ones. This wage premium is called the firm size wage effect. The firm size effect on wages may be attributed to many factors, as differentials on productivity, efficiency wage, to prevent union formation, or rent sharing. The present study uses quantile regression to investigate the finn size wage effect. By offering insight into who benefits from the wage premi um, quantile regression helps eliminate and refine possible explanations. Estimated results are consistent with the hypothesis that the higher wages paid by large firms can be explained by the difference in monitoring costs that large firms face. Results also suggest that more highly skilled workers are more often found at larger firms .

Banks, liquidity crises and economic growth

How do the liquidity functions of banks affect investment and growth at different stages of economic development? How do financial fragility and the costs of banking crises evolve with the level of wealth of countries? We analyze these issues using an overlapping generations growth model where agents, who experience idiosyncratic liquidity shocks, can invest in a liquid storage technology or in a partially illiquid Cobb Douglas technology. By pooling liquidity risk, banks play a growth enhancing role in reducing inefficient liquidation of long term projects, but they may face liquidity crises associated with severe output losses. We show that middle income economies may find optimal to be exposed to liquidity crises, while poor and rich economies have more incentives to develop a fully covered banking system. Therefore, middle income economies could experience banking crises in the process of their development and, as they get richer, they eventually converge to a financially safe long run steady state. Finally, the model replicates the empirical fact of higher costs of banking crises for middle income economies.

The Brazilian class C women perception regarding premium mass products in the beauty industry

Recentemente, os mercados emergentes se tornaram um alvo potencial para a indústria da beleza e o Brasil está se tornando um mercado lucrativo para os produtos cosméticos Premium (Euromonitor International, 2013). A população de baixa renda no Brasil representa 70% de seus habitantes ao considerar as classes C, D e E (Barki e Parente, 2010), sendo a classe C representada por 56% da população (Neri, 2012). Este é um mercado potencial para as empresas multinacionais (MNCs), que enfrentam desafios de fazer negócios no país, visto que a classe C opta por gastar parte de sua renda com produtos relacionados a beleza (Silva e Parente, 2007) e ainda há um pouco conhecimento sobre o comportamento de consumo na base da pirâmide. Portanto, o objetivo deste estudo é investigar e descrever o comportamento de consumo das mulheres brasileiras da classe C no setor de beleza, em relação aos produtos Mass Premium, melhorando o conhecimento no que diz respeito a essa população e ao tema proposto. Para atingir esse objetivo, o autor utilizou uma metodologia baseada em uma análise descritivas qualitativa em que foram entrevistadas 20 mulheres de todas as faixas etárias, que pertencem à classe C brasileira e citações foram usadas para fornecer a confirmação dos resultados da análise. Os resultados sugerem que, ao longo dos anos, houve de fato um movimento de trade up no consumo de produtos de beleza. Além disso, foram identificados cinco aspectos principais, que conduzem decisão de compra das mulheres de classe C, no setor de beleza: confiabilidade, qualidade, status, autoestima e bem-estar. Apesar das limitações de um estudo exploratório, espera-se que a pesquisa aumente o conhecimento sobre o mercado da base da pirâmide, especialmente no que diz respeito à indústria da beleza.

A systematic component of the jump-risk premium in an AJD model

We develop an affine jump diffusion (AJD) model with the jump-risk premium being determined by both idiosyncratic and systematic sources of risk. While we maintain the classical affine setting of the model, we add a finite set of new state variables that affect the paths of the primitive, under both the actual and the risk-neutral measure, by being related to the primitive's jump process. Those new variables are assumed to be commom to all the primitives. We present simulations to ensure that the model generates the volatility smile and compute the "discounted conditional characteristic function'' transform that permits the pricing of a wide range of derivatives.

Liquidity proxies in the Brazilian debenture market

Este estudo analisa as variáveis de liquidez no mercado corporativo brasileiro de debêntures e testa a variável Eurobond para compreender quais características ajudam a prever a liquidez de debêntures. Embora os mercados de capitais brasileiros tenham melhorado drasticamente nos últimos anos, as grandes empresas brasileiras têm muitas opções na hora de tomar a decisão de aumentar capital (emissão de Eurobônus é um deles). Este estudo busca preencher uma lacuna na literatura acadêmica vendo se existe uma relação de liquidez entre os dois mercados. O proxy Eurobond foi encontrado significativo ao nível de 5% e o nível de 1%. Os outras proxies que foram significativos (valor de emissão, data de vencimento inicial, Avaliação) coincidem com os resultados de estudos anteriores.

Ecommerce as internationalization strategy: an exploratory study based on premium fashion brazilian brands: case study of farfetch

As stated by Hoffmann and Coste-Manière (2012) “The web is a mass medium that contrast completely with the traditional codes of exclusivity associated with the luxury industry, and has long been simply rejected by the luxury industry for being an illegitimate distribution channel.” Meanwhile this market presents an incomparable pace of growth and is gradually changing the existing retailing business model and companies must be aware of this change and capable to adapt to it. The internet and cross-border sales already changed the competition throughout retailing and it will increase even more, so companies must be ready to face it. Internet has shown its great opportunity for all markets, although luxury/premium market is not yet taking the proper advantage of its potential, but the necessity to be an omnichannel business strategy is growing. This paper presents an exploratory research based on a case study of how premium fashion Brazilian brands are using Farfetch, e-commerce, as an entry market strategy and how this affects them. The research question of this study is: How is Farfetch helping on the internationalization of Brazilian premium fashion brands?, and in order to answer it was conducted an in-depth interview with the Brazilian head of business development of Farfetch, apart an extensive secondary data research. As expected the study found a list of trade-offs of using an e-commerce, luxury specialized, with a marketplace approach to the brands willing to internationalize. As stated by Altagamma and McKinsey (2015) study “[...] luxury brands have no choice but to embrace the digital era and become truly omnichannel. This will require them a radical rethinking of both their customer experience of their consumer engagement strategy.” Looking either from the Farfetch point of view, trying to understand why they offer this opportunity to the brands, or also from the brand side if this is a manageable approach. This study presents a contribution for both sides, trying to give tools to the brands on understanding the internationalization reasons and approach, as well as explaining Farfetch business model, and the advantages it can bring to them, at the same time of a general market trend analysis for Farfecth.

The equity premium puzzle: um estudo de viés de seleção dos ativos

As empresas de capital aberto, listadas em bolsa de valores, são naturalmente aquelas que vieram apresentando retornos superiores perante às demais empresas do seu setor. Assim, será que o viés de seleção desses ativos in uencia sigini cativamente no resultado do Equity Premium Puzzle, primordialmente lançado por Mehra and Prescott (1985)? É essa pergunta que este trabalho investiga e conclui que, sim, de fato pode haver uma in uência desse viés em explicar o Puzzle . Para isso, iremos gerar uma economia cujos ativos, por hipótese, sejam preci cados de acordo com o fator estocástico de desconto (SDF) baseado em consumo, ou seja, os modelos conhecidos como CCAPM (Consumption Capital Asset Pricing Model). Assim, essa economia será gerada via simulação de Monte Carlo, de forma que iremos construir um índice benchmark dessa economia, nos quais participariam apenas os ativos que foram historicamente mais rentáveis. Adota-se tal metodologia em paralelo à forma como os reais benchmarks são construidos (S&P 500, Nasdaq, Ibovespa), em que neles participam, basicamente, as empresas de capital aberta mais negociadas em Bolsa de Valores, que são, comumente, as empresas historicamente mais rentáveis da economia. Em sequência, iremos realizar a estimação via GMM (Generalized Method of Moments) de um dos parâmetros de interesse de uma economia CCAPM: o coe ciente de aversão relativa ao risco (CRRA). Finalmente, os resultados obtidos são comparados e analisados quanto ao viés de estimação.

Liquidity black holes: why modern financial regulation in developed countries is making short-term capital flows to developing countries even more volatile

Includes bibliography

Análisis de viabilidad para la puesta en marcha de la empresa "Canarias Premium Class"

Estructura de Teleformación

The Pricing Discount for Limited Liquidity: Evidence from SWX Swiss Exchange and the Nasdaq

We investigate the pricing discount for limited liquidity. Unlike previous studies that have examined the relation between histroical returns and liquidity, ours looks directly at current stock prices. This approach requires less data and yields up-to-date information about limited liquidity discounts. We analyze data from the Swiss exchange and the Nasdaq during 1995-2001, and find a statistically and economically significant price-liquidity relation in both markets. We test the robustness of that relation with a procedure that does not rely on specific distributional assumptions. Our findings are unaffected. Accordingly, the discount suffered by the least liquid securities is about 30%.

Trade Costs, Quality, and The Skill Premium

We develop a monopolistic competition model with nonhomothetic factor input bundles where increasing quality requires increasing use of skilled workers. As a result more skill abundant countries export higher quality, higher priced goods. Using a multicountry dataset we test and confirm the findings in Schott (2004) of a positive effect of skill abundance on unit values identified with US data. We extend the core model with per unit trade costs leading to the Washington-apples effect that goods shipped over larger distance are of higher quality. The combination of high-quality goods being relatively skill intensive with the Washington-apples effect implies that countries at a larger distance from their trading partners display a higher skill premium. Simulating our model we find that a doubling of distance of a country relative to all its trading partners raises the skill premium in a country by about 2.3 percent.

Empirical Analysis of Credit Risk Regime Switching and Temporal Conditional Default Correlation in Credit Default Swap Valuation: The Market liquidity effect

In this paper, we extend the debate concerning Credit Default Swap valuation to include time varying correlation and co-variances. Traditional multi-variate techniques treat the correlations between covariates as constant over time; however, this view is not supported by the data. Secondly, since financial data does not follow a normal distribution because of its heavy tails, modeling the data using a Generalized Linear model (GLM) incorporating copulas emerge as a more robust technique over traditional approaches. This paper also includes an empirical analysis of the regime switching dynamics of credit risk in the presence of liquidity by following the general practice of assuming that credit and market risk follow a Markov process. The study was based on Credit Default Swap data obtained from Bloomberg that spanned the period January 1st 2004 to August 08th 2006. The empirical examination of the regime switching tendencies provided quantitative support to the anecdotal view that liquidity decreases as credit quality deteriorates. The analysis also examined the joint probability distribution of the credit risk determinants across credit quality through the use of a copula function which disaggregates the behavior embedded in the marginal gamma distributions, so as to isolate the level of dependence which is captured in the copula function. The results suggest that the time varying joint correlation matrix performed far superior as compared to the constant correlation matrix; the centerpiece of linear regression models.

Liquidity Constraint and Child Labor In India: Is Market Really Incapable Of Eradicating It From Wage-Labor Households?

One way to measure the lower steady state equilibrium outcome in human capital development is the incidence of child labor in most of the developing countries. With the help of Indian household level data in an overlapping generation framework, we show that production loans under credit rationing are not optimally extended towards firms because of issues with adverse selection. More stringent rationing in the credit market creates a distortion in the labor market by increasing adult wage rate and the demand for child labor. Lower availability of funds under stringent rationing coupled with increased demand for loans induces the high risk firms to replace adult labor by child labor. A switch of regime from credit rationing to revelation regime can clear such imperfections in the labor market. The equilibrium higher wage rate elevates the household consumption to a significantly higher level than the subsistence under credit rationing and therefore higher level of human capital development is assured leading to no supply of child labor.