Diverse Beliefs and Time Variability of Risk Premia

Why do risk premia vary over time? We examine this problem theoretically and empirically by studying the effect of market belief on risk premia. Individual belief is taken as a fundamental primitive state variable. Market belief is observable; it is central to the empirical evaluation and we show how to measure it. Our asset pricing model is familiar from the noisy REE literature but we adapt it to an economy with diverse beliefs. We derive equilibrium asset prices and implied risk premium. Our approach permits a closed form solution of prices; hence we trace the exact effect of market belief on the time variability of asset prices and risk premia. We test empirically the theoretical conclusions. Our main result is that, above the effect of business cycles on risk premia, fluctuations in market belief have significant independent effect on the time variability of risk premia. We study the premia on long positions in Federal Funds Futures, 3- and 6-month Treasury Bills (T-Bills). The annual mean risk premium on holding such assets for 1-12 months is about 40-60 basis points and we find that, on average, the component of market belief in the risk premium exceeds 50% of the mean. Since time variability of market belief is large, this component frequently exceeds 50% of the mean premium. This component is larger the shorter is the holding period of an asset and it dominates the premium for very short holding returns of less than 2 months. As to the structure of the premium we show that when the market holds abnormally favorable belief about the future payoff of an asset the market views the long position as less risky hence the risk premium on that asset declines. More generally, periods of market optimism (i.e. "bull" markets) are shown to be periods when the market risk premium is low while in periods of pessimism (i.e. "bear" markets) the market's risk premium is high. Fluctuations in risk premia are thus inversely related to the degree of market optimism about future prospects of asset payoffs. This effect is strong and economically very significant

Kupffer Cells Hasten Resolution of Liver Immunopathology in Mouse Models of Viral Hepatitis

Kupffer cells (KCs) are widely considered important contributors to liver injury during viral hepatitis due to their pro-inflammatory activity. Herein we utilized hepatitis B virus (HBV)-replication competent transgenic mice and wild-type mice infected with a hepatotropic adenovirus to demonstrate that KCs do not directly induce hepatocellular injury nor do they affect the pathogenic potential of virus-specific CD8 T cells. Instead, KCs limit the severity of liver immunopathology. Mechanistically, our results are most compatible with the hypothesis that KCs contain liver immunopathology by removing apoptotic hepatocytes in a manner largely dependent on scavenger receptors. Apoptotic hepatocytes not readily removed by KCs become secondarily necrotic and release high-mobility group box 1 (HMGB-1) protein, promoting organ infiltration by inflammatory cells, particularly neutrophils. Overall, these results indicate that KCs resolve rather than worsen liver immunopathology

Monitoring the quality of laboraties and the prevalence of resistance to antituberculosis drugs: Italy, 1998-2000

In 1998 a network of 20 regional tuberculosis (TB) laboratories (the Italian Multicentre Study on Resistance to Antituberculosis drugs (SMIRA) network) was established in Italy to implement proficiency testing and to monitor the prevalence of drug resistance nationwide. The network managed 30% of all TB cases reported in Italy each year. The aim of the present report is to describe: 1) the accuracy of drug-susceptibility testing in the network; 2) the prevalence of drug resistance for the period 1998-2000. Data were collected from the network laboratories. Sensitivity to streptomycin and ethambutol increased from the first survey (1998-1999) to the second survey (2000) from 87.7 to 91.9%. Specificity, predictive values for resistance and susceptibility, efficiency and reproducibility were consistent in both surveys. In previously untreated cases, the prevalence of multidrug-resistance was the same in both surveys (1.2%), while a slight decrease from the first to the second survey was observed for monoresistance to rifampicin (from 0.8 to 0.4%) and isoniazid (from 2.9 to 2%,). The significant association found between isoniazid resistance and immigration is a useful indicator for both clinicians managing individual tuberculosis cases and public health services planning control strategies