Estimation of growth in fund models

Fund models are statistical descriptions of markets where all asset returns are spanned by the returns of a lower-dimensional collection of funds, modulo orthogonal noise. Equivalently, they may be characterised as models where the global growth-optimal portfolio only involves investment in the aforementioned funds. The loss of growth due to estimation error in fund models under local frequentist estimation is determined entirely by the number of funds. Furthermore, under a general filtering framework for Bayesian estimation, the loss of growth increases as the investment universe does. A shrinkage method that targets maximal growth with the least amount of deviation is proposed. Empirical evidence suggests that shrinkage gives a stable estimate that more closely follows growth potential than an unrestricted Bayesian estimate.Comment: 40 pages, 5 figure

Restructuring R & D: The case of Korea

In this paper we study the changing pattern of Korean Research and Development (R&D) after the IMF crisis. We contend that the focus has changed from government and chaebol-initiated R&D to small business and university-initiated R&D. This transition resulted from various reasons: (1) financial difficulty caused upon big chaebols by the IMF crisis, (2) the government\u27s emphasis on nurturing hightechnology venture businesses, (3) the government\u27s initiative to start Brain Korea 21 (BK21) projects. We evaluate this transition from the real options view of R&D

Asia\u27s contagious financial crisis and its impact on Korea

Asian countries have, from 1965 to the early 1990s, shown remarkable growth performance. The recent financial crisis, however, has brought disastrous effects on these growing economies. The region has been suffering from high inflation, massive unemployment, and large drops in growth rates. The major cause of the crisis can be attributed to the international financial markets. International financial institutions lent without serious examination of the borrowers\u27 ability to repay. In this regard, the ratings agencies were also responsible for the worsening of the crisis. Their ratings did not give correct signals to the lenders. The borrowers\u27 speculative activities and their subsequent failures were a direct cause that led to the crisis. A second cause lies in the structural problems in these economies. There are still covert dealings between government officials and businesses, and these economies lack transparency. These deficiencies greatly distort allocation of resources in the economies. There should be a global risk-management system to prevent such a crisis from happening again. This risk-management system would give an early warning signal. Creditors should coordinate their efforts to resolve the liquidity crisis in the Asian countries. Coordinated loans and partial forgiving of debts will be helpful to both debtors and creditors. © 1999 Elsevier Science Inc. All rights reserved

Asia-Pacific region in changing global economy

The Asia-Pacific economies have undergone the most striking economic growth and ever-increasing interdependence, and the region has been a major contributor to global prosperity and stability. The Asia-Pacific has rapidly grown in the last two decades, and the region leads trade liberalization through its open regionalism. Unlike any other regional integrations, the APEC presents an alternative way which is fully compatible with multilateralism of the WTO, and it is an open regional organization which has launched its implementation to liberalize trade and investment by strengthening economic and technical cooperation through business sectors which continue to prosper and to provide the engine of growth in the region. The environments for trade, investment and technology have been improved for the business dynamism and linkages of Asian-Pacific economies

Does It Pay to Go Outside Your Comfort Zone?

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Asset Demands and Consumption with Longevity Risk

We study asset demands and consumption of an individual with longevity risk. We investigate a complete market with vehicles hedging against longevity risk and compare this case with a no insurance case and a partial insurance case to illustrate comprehensive economic implications. Particularly, we show that the stock-to-savings ratio in the partial insurance case is smaller than that in the other two cases, and that the time-old proposition, such that an increased mortality rate is equivalent to an increased subjective discount rate, does not necessarily follow without the assumption of a time-separable utility function.110ssciscopu