Optimization Makes Estimation Much More Worse

Mean-variance optimization as a modern portfolio theory is a major model for theoretical purposes, however, in practice portfolio managers don’t have enough interest despite some other ad hoc methods for many reasons such as estimation errors. Recently, the significance of modern portfolio theory has been analyzed that it doesn’t beat the simple naïve 1/N rule not only in many real empirical databases but also in a simulation. By this paper, due to inherent weakness of Sharpe ratio we first express more common use and adjusted measurements such as adjusted expected utility of portfolio under ambiguity aversion to analyze their effects on portfolio optimization after this consideration, because using only sample mean and variance (Sharpe ratio) to evaluate performance value for the portfolio models may be subject to considerable bias. Second, we propose a new model based on the new measurement (adjusting ambiguity Sharpe ratio) to improve portfolio optimization problem. Our result states that by using the new measurement mean- variance optimization beats the naïve rule by applying the adjusted measurement and also the novel model outperforms Markowitz in terms of Sharpe ratio while the interesting is that for adjusting Sharpe ratio inverse result exists. Therefore, our study expresses optimization makes estimation almost worse when we try to use a measurement as an optimization target. Keywords: portfolio selection, optimization, measurement, Sharpe ratio

Consumers’ Insurance Literacy: Literature Review, Conceptual Definition, and Approach for a Measurement Instrument

Improved financial literacy is the key to informed decisions, protected consumers, financial independence, and peace of mind. Foremost literature reveals that while financial literacy required more special education to improve insurance literacy, the literature of consumers’ insurance literacy is quite low. Defining and appropriately measuring insurance literacy is essential to understand the educational impact as well as barriers to better utilization of insurance products. Thus, we conducted a systematic literature review using PRISMA guidelines and analyzed 37 studies focusing on the construct validation criteria. This study developed a conceptual definition with an approach for a measurement instrument to address the current limitations in establishing a standardized measure of consumers’ insurance literacy. We identified six knowledge dimensions and skill dimensions to be incorporated into an instrument developed to measure the insurance literacy construct. The study contributes to both insurance and financial literacy, and provide a foundation for further research into consumers’ insurance literacy. Keywords: Consumers’ Insurance Literacy, Insurance literacy measure, Insurance Knowledge, insurance education, Financial Literacy, Insurance DOI: 10.7176/EJBM/11-26-05 Publication date:September 30th 201

Asymmetric Shocks Patterns in the Central African Economic and Monetary Community

Assessing the economic efficiency of countries’ participation to a currency union has become a relevant topic since the introduction of the Optimum Currency Area (OCA) theory by Mundell (1961). This paper attempts to evaluate the performance of the Central African Economic and Monetary Community (CAEMC) as a currency union in the context of exposure to asymmetric shocks. We first identify structural macroeconomic shocks within the region using the Blanchard and Quah Method. We find that aggregate demand shocks fluctuations display more symmetric patterns than those of aggregate supply shocks. Chad is the apparent outlier, as it is the only economy in the monetary union to experience negative supply shocks. This suggests that the loss of monetary sovereignty might result in significant adjustment costs

Dynamic risk sharing in the Central African Economic and monetary community

Abstract. In contrast to the first Optimum Currency Area (OCA) theory which was mostly about preventing currency areas’ exposure to asymmetric shocks, the second model introduced by Robert A. Mundell (1973) focuses on risk sharing across member states when facing adverse macroeconomic shocks. This paper explores how risk is shared across the six member states of the Central African Economic and Monetary Community (CEMAC). Using dynamic panel VAR, we measure disposable income and consumption smoothing of negative output shocks. We find that more than 72 percent of GDP idiosyncratic shocks remain unsmoothed in the case of the Central African currency area from 1986 to 2018.Keywords. Optimal currency area, International risk-sharing, Dynamic panel VAR, Fiscal consolidation, Currency devaluation, Shock smoothing.JEL. C32, E41, E21, F32, F45

The effect of government expenditure on economic growth: The case of Tanzania using VECM approach

The purpose of this paper is to observe empirically the effect of the government spending annex economic growth in Tanzania for the period covered 1990 to 2015 using VECM approach. The results revealed the existence of long-run cointegration among all our variables. Also, the results showed that government expenditure, foreign direct investment inflows, gross capital formation and inflation have positive and significant associations with Tanzania economic growth in the long-run and short-run as well. However, the government and policy-makers must become stable the variation of the inflation rate of commodities to persuade economic growth of Tanzania. Finally, the study suggests that government expenditure promotes economic growth in Tanzania and the paper recommends that more of government's resources should highly allocate to capital expenditure. Keywords: Government Expenditure, Economic Growth, VECM, and Tanzania

The Effect of Current Expected Variance of Return on Future Trading Optimal Strategy

Due to the presence of transaction cost, most investors do not keep changing their portfolio to an optimal portfolio over time. This paper adopts a new approach to investigate the linkages between current optimal portfolio variance and the expected future portfolios variances. It is given a closed-form solution for optimal dynamic portfolio selection with trading cost; considering the minimum variance of the utility function as an optimal or selected portfolio by an investor for any period of time based on Gârleanu & Pedersen (2013) framework. Finally, we introduce the multi-period portfolio model based on CRRA preference utility function. Keywords: multiperiod portfolio selection, higher-order moments, CRRA utility function, optimal wealth change

A Novel Approach to Construct Portfolio that Addresses Variance of Utility Function

Many studies in the area of portfolio selection have done based on trade-off among various moments especially between mean and risk of sample returns. Merton (1980) argued that the instability of portfolio weights and sampling errors are due more to estimate the amount of mean. Indeed, it is difficult to estimate the expected return from time series of realized expected return. By this paper, we first answer to this question how to eliminate the wrong effect of mean sample returns instead of ignoring it from calculating portfolio weights and how would be the relation of other moments after this consideration. Second, the substantial evidence from experiments shows that hide information exposes ambiguity aversion to investor’s behavior, and hence decision making under ambiguity for portfolio choice has led to improving tractability of the main features of asset returns. By considering the volatility of utility preferences as ambiguity then individuals prefer to stabilize their utility preferences to maximize their expected utility. Keywords: utility function, portfolio selection, risk aversion, ambiguity aversio

Determinants of Rice Productivity: An Analysis of Jaffarabad District –Balochistan (Pakistan)

This study examines the determinants of rice production in the district of Jaffarabad in Balochistan using primary data. The data is collected with the help of well-developed questionnaire based on random sampling from the different tehsils of Jaffarabad district. In this study, we estimated the parameters of the Neo-classical and Cobb-Douglas production function with the help of ordinary least square (OLS) method. The results of this empirical work show that with the exception of experience of farmers and high cost of the inputs, all explanatory variables i.e. capital, labor, education of the farmers, availability of credit and farm size have a positive effect on rice output. Therefore, government is recommended to encourage farmers to use fertilizers and new methods in agricultural production and watering, and provide them with convenient loans at low interest rate

Exploring the Policy Reforms and Productivity Nexus: Evidence from Indian Banking Sector

The study investigates the effect of deregulation of the Indian financial system in 1991 followed by various financial sector reforms on productivity growth of Indian scheduled commercial banks, with exclusion of Regional Rural Banks, over the period of time, from 2002 to 2010.The results of our study show that the performance of the Indian banking industry remained satisfactory for the said period despite of the financial turmoil that literally hampered the financial institutions all over the world. This was because Indian financial system remained sheltered from such external shocks as a result of having flexible exchange rate regime, the foreign reserves were high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure. Therefore, we recommend that the policy makers should carry on with their current economic policy as it has been successful in sheltering them from external shocks. Furthermore, the study found that the deposits and credits are negatively related with financial system reforms of deregulation, which is surprising. As increase in deposits results in increase in credits. So, we would recommend the policy makers to emphasize on increasing the deposit base of the banks by increasing the interest rates on deposits. Keywords: Financial Sector Reforms, Indian Banking industry, Productivity, Financial turmoil, Deregulatio

TSC1/2 Signaling Complex Is Essential for Peripheral Naïve CD8+ T Cell Survival and Homeostasis in Mice

The PI3K-Akt-mTOR pathway plays crucial roles in regulating both innate and adaptive immunity. However, the role of TSC1, a critical negative regulator of mTOR, in peripheral T cell homeostasis remains elusive. With T cell-specific Tsc1 conditional knockout (Tsc1 KO) mice, we found that peripheral naïve CD8+ T cells but not CD4+ T cells were severely reduced. Tsc1 KO naïve CD8+ T cells showed profound survival defect in an adoptive transfer model and in culture with either stimulation of IL-7 or IL-15, despite comparable CD122 and CD127 expression between control and KO CD8+ T cells. IL-7 stimulated phosphorylation of Akt(S473) was diminished in Tsc1 KO naïve CD8+T cells due to hyperactive mTOR-mediated feedback suppression on PI3K-AKT signaling. Furthermore, impaired Foxo1/Foxo3a phosphorylation and increased pro-apoptotic Bim expression in Tsc1 KO naïve CD8+T cells were observed upon stimulation of IL-7. Collectively, our study suggests that TSC1 plays an essential role in regulating peripheral naïve CD8+ T cell homeostasis, possible via an mTOR-Akt-FoxO-Bim signaling pathway