The Market Pricing of Accruals Quality

We investigate whether investors price accruals quality, our proxy for the information risk associated with earnings. Measuring accruals quality (AQ) as the standard deviation of residuals from regressions relating current accruals to cash flows, we find that poorer AQ is associated with larger costs of debt and equity. This result is consistent across several alternative specifications of the AQ metric. We also distinguish between accruals quality driven by economic fundamentals ('innate AQ') versus management choices ('discretionary AQ'). Both components have significant cost of capital effects, but innate AQ effects are significantly larger than discretionary AQ effects.Expected return; Information uncertainty; Accounting quality

Impact of cash flow mapping on VaR calculation of bond portfolios

The exact estimation of Value-at-Risk (VaR) is a constant challenge in risk management. Most authors focus their studies on topics such as volatility estimation models or VaR methods; however, the study of the impact of risk factor mapping on VaR estimation has not received much attention. Thus, this dissertation aims to determine the loss of precision on cash flow mapping on the calculation of the VaR of bond portfolios, comparing different cash flow mapping approaches with an alternative that does not involve cash flow mapping. For this, our study requires yield curve modeling parameters that will allow us to have data for any cash flow maturity. The results highlight the importance of choosing a suitable cash flow mapping, namely, when the cash flows’ maturities are in the short term, to avoid vast errors in all the methods.A estimação exata do Value-at-Risk (VaR) é um desafio constante na gestão de risco. Deste modo, vários autores focam-se no estudo de diferentes modelos de estimação da volatilidade ou métodos do VaR. Contudo, a análise da influência da escolha do mapeamento de cash flows no cálculo do VaR não se mostra expressiva. Assim, esta dissertação visa determinar a perda de precisão no cálculo do VaR associada ao mapeamento dos cash flows em portefólios de obrigações, comparando diferentes abordagens com uma alternativa que não carece desse procedimento. Para isso, o nosso estudo requer os parâmetros de modelização da curva das taxas de juro que nos possibilita a obtenção de dados para qualquer maturidade. Os resultados desta dissertação enfatizam a importância da escolha de um mapeamento adequado, nomeadamente quando as maturidades dos cash flows são predominantemente de curto prazo para se evitar erros muito elevados

Financialisation and physical investment: a global race to the bottom in accumulation?

We estimate the effects of financialisation on physical investment in the developed and developing countries using panel data based on balance-sheets of publicly listed non-financial companies (NFCs) for the period 1995-2015. Among the developed economies, we focus on the cases of the USA, Japan, and a group of Western European countries. In the developing world, we present estimations based on the group of the NFCs in all developing countries as well as BRICS as a group- and country specific estimations for South Africa, South Korea, India, and China. We find robust evidence of an adverse effect of both financial payments (interests and dividends) and financial incomes on investment in fixed assets. The negative impacts of financial incomes are non-linear with respect to the companies’ size; financial income crowds out investment in large companies, and have a positive effect on the investment of only smaller, relatively more credit-constrained companies. Our findings support the ‘financialisation thesis’ that the increasing orientation of the non-financial sector towards financial activities is ultimately leading to lower physical investment, hence to stagnant or fragile growth, as well as long term concerns for productivity in both developed and developing countries

Bond value-at-risk : a comparison of methods

Mestrado em FinançasEste trabalho vai comparar três métodos de calcular Value-at-Risk (VaR) de um portfólio composto por produtos de dívida. O primeiro método sendo o Cash Flow Mapping [Morgan, 1996], o segundo sendo o método do Pull Price [Sousa et al.,2012] e o último método sendo o método da Duration [Jorion et al., 2009]. Para comparar os resultados, este estudo calcula o VaR através dos diferentes métodos para dias passados e usa uma ferramenta de backtesting para medir a consistência de cada método. Este estudo irá mostrar que os resultados do método da Duration são largamente sobreestimados e que o método do Pull Price obteve uma boa taxa de aprovação da ferramenta de backtesting quando aplicado a um portfolio. Os resultados do Cash Flow Mapping por outro lado são analisados em mais detalhe já que o factor de risco considerado é a yield curve do European Central Bank no nosso portfolio de obrigações corporate. Ainda ssim, o método falhou a atingir as expectativas já que existem obrigações cujo rating é elegível para ser usado com este factor de risco.This dissertation will compare three ways of computing the Value-at-Risk of a fixed income portfolio. The first being the Cash Flow Mapping \citep, the second one being the Pull Price method \citep and the last one being the Duration Method \citep. To compare the results this study computes the VaR through the different methods for past days and then uses a backtesting tool to measure each method's consistency. This study will show that the results from the Duration Method were vastly overestimated and that the Pull Price Method got a good approval rate of the backtesting techinique when applied for a portfolio. The results from the Cash Flow Mapping are subjected to a more careful analysis since the underlying risk factor used was the European Central Bank yield curve for our portfolio of corporate bonds. Even so, the method failed to meet expectations since there are numerous bonds whose rating is eligible to be used under this yield curve

A model of brain morphological changes related to aging and Alzheimer's disease from cross-sectional assessments

In this study we propose a deformation-based framework to jointly model the influence of aging and Alzheimer's disease (AD) on the brain morphological evolution. Our approach combines a spatio-temporal description of both processes into a generative model. A reference morphology is deformed along specific trajectories to match subject specific morphologies. It is used to define two imaging progression markers: 1) a morphological age and 2) a disease score. These markers can be computed locally in any brain region. The approach is evaluated on brain structural magnetic resonance images (MRI) from the ADNI database. The generative model is first estimated on a control population, then, for each subject, the markers are computed for each acquisition. The longitudinal evolution of these markers is then studied in relation with the clinical diagnosis of the subjects and used to generate possible morphological evolution. In the model, the morphological changes associated with normal aging are mainly found around the ventricles, while the Alzheimer's disease specific changes are more located in the temporal lobe and the hippocampal area. The statistical analysis of these markers highlights differences between clinical conditions even though the inter-subject variability is quiet high. In this context, the model can be used to generate plausible morphological trajectories associated with the disease. Our method gives two interpretable scalar imaging biomarkers assessing the effects of aging and disease on brain morphology at the individual and population level. These markers confirm an acceleration of apparent aging for Alzheimer's subjects and can help discriminate clinical conditions even in prodromal stages. More generally, the joint modeling of normal and pathological evolutions shows promising results to describe age-related brain diseases over long time scales.Comment: NeuroImage, Elsevier, In pres

Credit Risk, Systemic Uncertainties and Economic Capital Requirements for an Artificial Bank Loan Portfolio

This paper analyses the impact of different credit risk-based capital requirement implementations on banks' need for capital. The capital requirements for an artificially constructed risky loan portfolio are calculated by applying the BIS approach, the two widespread commercial risk-measurement models, CreditMetrics and CreditRisk+, and, finally, an original synthetic model similar to KMV. In the first three cases we closely follow the methodologies proposed by the regulatory or credit risk models. Economic capital requirements for the latter are obtained by means of Monte Carlo simulations. In the context of CreditMetrics, we additionally perform a Monte Carlo-based stress testing of the monetary policy changes reflected in the term structure of interest rates. Our model of KMV type combines the elements of the structural and the reduced-form methods of risky debt pricing, and the possibilities of its numerical solution are outlined.credit risk, economic capital, market risk, New Basel Capital Accord, systemic uncertainty.

The Business Cycle Implications of Reciprocity in Labor Relations

We develop a reciprocity-based model of wage determination and incorporate it into a modern dynamic general equilibrium framework. We estimate the model and find that, among potential determinants of wages, rent-sharing (between workers and firms) and wage entitlement (based on wages earned in the past) are important to fit the dynamic responses of output, wages and inflation to various exogenous shocks. Aggregate employment conditions (measuring workers' outside option), on the other hand, are found to play only a negligible role for wage setting. These results are broadly consistent with micro-studies on reciprocity in labor relations but contrast with traditional efficiency wage models which emphasize aggregate labor market variables as the main determinant of wage setting.Efficiency Wages, Reciprocity, Estimated DSGE Models

Farm Risk Management Between Normal Business Risk and Climatic/Market Shocks

Farm risk management for income stabilization is on-going issue. An applied work has been performed to measure farm risk using a stochastic model. Risk management tools, with symmetric as well as asymmetric impacts, are then tested and compared through ad hoc statistics. Normal farm business risk can be efficiently managed using a precautionary saving provision. Farm revenue insurance is found as the most efficient asymmetric tool for dealing with climatic and market shocks. The linkage between these complementary tools can be adjusted upon market environment.Comparative, performance, risk, management, tools,

Asset versus consumption poverty and poverty dynamics in the presence of multiple equilibria in rural Ethiopia

Effective poverty reduction programs require careful measurement of poverty status. Several studies have shown conceptually that assets reflecting productive capacity form a more robust basis for identifying the poor than do flow variables such as expenditures or income. Nonetheless, little work has empirically compared poverty measurements based on assets and expenditures. This paper uses panel data from Ethiopia to generate an asset-based poverty classification scheme. Regression results are used to estimate an asset index and classify households into categories of structural poverty. Asset index dynamics are also explored to test for the existence of multiple asset index equilibria; evidence of potential poverty traps. Results provide evidence of multiple equilibria in the study sample as a whole as well as convergence at different levels over space, depending on commercialization opportunities and agroecological factors. The asset-based poverty classifications consistently predict future poverty status more accurately than do income-based measures, confirming that the asset-based measure could be used to more carefully target poverty interventions in rural areas and to more accurately assess the impact of those interventions.asset index, asset poverty, Commercialization, expenditures, income-based measures, index equilibria, Poverty dynamics, Poverty reduction, regression,