Performance evaluation in competitive REE models

Our basic premise is that fund managers performance is related to superior information about an asset payoff. We investigate the relationship between managerial skills and trading behavior within a two-period rational expectation equilibrium (REE) model where agents trade on private information in the first round, while a public signal arrives at the second date that makes traders revise their beliefs and retrade. The public signal can be related to the asset payoff, or to variables not related to fundamentals (noise), or both. We characterize the unique partially revealing REE and explore the drivers of price dynamics and trading behavior. Our main prediction is that good managers are contrarian traders, while bad managers are momentum traders when public news arrive to the market. Furthermore, the change in holdings of each type of trader is monotonic on the traders' skills. Based on these predictions, we propose new performance evaluation measures that rely on the manager's change in holdings around the arrival of public news rather than his past performance. A byproduct of our analysis is the proposal of a new protocol for performance evaluation and Due Diligence (DD) procedures.REE; performance evaluation; mutual fund; hedge funds; talent; informed traders; due diligence

Evaluating the 2013 Euro CAC Experiment

On January 1, 2013, it became mandatory that every new sovereign bond issued by a member of the European Monetary Union include a new contract clause called a Collective Action Clause or CAC. This, we believe, constituted the biggest one-time change to the terms of sovereign debt contracts in history, impacting a market of many trillions of euros. And it was not just that the change was big in terms of the size of the market it impacted; it was big in terms of its impact on the documentation of each individual Euro area sovereign bond contract. To illustrate, prior to January 1, 2013, all of the terms of a local-law Irish sovereign bond fitted on about a page and a half; the full document was about three pages long. After January 1, 2013, the document was twenty pages long; almost all of that space taken by the new CAC term. In terms of words on the page, it was a big change. But did it do anything meaningful? And, more importantly, did it do what it was intended to do

The Price of Law: The Case of the Eurozone\u27s Collective Action Clauses

Do markets value contract protections? And does the quality of a legal system affect such valuations? To answer these questions we exploit a unique experiment whereby, after January 1, 2013, newly issued sovereign bonds of Eurozone countries under domestic law had to include Collective Action Clauses (CACs) specifying the minimum vote needed to modify payment terms. We find that CAC bonds trade at lower yields than otherwise similar no-CAC bonds; and that the quality of the legal system matters for this differential. Hence, markets appear to see CACs as providing protection against the legal risk embedded in domestic-law sovereign bonds

Environmental policy and speculation on markets for emission permits

Tradable emission permits share many characteristics with financial assets. As on financial markets, speculators are likely to be active on large markets for emission permits such as those developing under the Kyoto Protocol. We show how the presence of speculators on a market for emission permits affects the price of these permits when firms face risk aversion. The agency in charge of the optimal environmental policy should account for the presence of speculators when determining the total amount of permits to issue.

The Price of Cheeky Contracting

An implication of the incompleteness of contracts is that there are going to be gaps and ambiguities that either side can exploit. We ask whether the expectation that a counterparty is likely to act aggressively in its use of contract language impacts the price that market participants attach to that contract. To do our analysis, we look at how markets price contract terms for the perennial “bad boy” of the sovereign debt markets, the Republic of Argentina. The results are consistent with a market penalty for cheeky contracting

Essays on non-fundamental speculation, trading behaviour and strategic information sharing.

This thesis is mainly divided into three chapters. Even though the three chapters have different aims, they all concern investment environment and process. With respect to the former aspect, we consider how stocks and bonds are traded in securities markets. The second and third chapter deal with markets where a single risky asset is sequentially traded in batch auctions. In the fourth chapter we consider bond markets where transaction costs create frictions. As for the investment process, we study how market participants should choose their investment, and when should it be made. We analyze trading strategies for market participants in the second and third chapter, while active bond portfolio management is dynamically characterized in the fourth chapter. Chapter 2 develops a dynamic trading game in which fundamental insiders coexist with non-fundamental speculators. We study inclusions in the S&P 500 as an example in which non-fundamental speculation arises due to preannouncing index replacements. Evidence on volume and liquidity is consistent with our theoretical analysis. Chapter 3 deals with asymmetrically informed traders engaging in information sharing about the asset's fundamental value. In the presence of information sharing, trading activity and price volatility both cluster at the end of the trading period, and price informativeness is reduced. Our model predicts a rich variety of patterns for liquidity, volume and return volatility. Chapter 4 focuses on affine term structure models as portfolio management tools. We use returns implied by different models as inputs for an investor's portfolio optimization problem. Each period we determine the optimal investment, and then characterize the financial properties of trading strategies. We show that evaluating term structure models from a financial perspective may yield conflicting results with those arising from a statistical metric

Semantic Coherence Dataset: Speech transcripts

The Semantic Coherence Dataset has been designed to experiment with semantic coherence metrics. More specifically, the dataset has been built to the ends of testing whether probabilistic measures, such as perplexity, provide stable scores to analyze spoken language. Perplexity, which was originally conceived as an information-theoretic measure to assess the probabilistic inference properties of language models, has recently been proven to be an appropriate tool to categorize speech transcripts based on semantic coherence accounts. More specifically, perplexity has been successfully employed to discriminate subjects suffering from Alzheimer Disease and healthy controls. Collected data include speech transcripts, intended to investigate semantic coherence at different levels: data are thus arranged into two classes, to investigate intra-subject semantic coherence, and inter-subject semantic coherence. In the former case transcripts from a single speaker can be employed to train and test language models and to explore whether the perplexity metric provides stable scores in assessing talks from that speaker, while allowing to distinguish between two different forms of speech, political rallies and interviews. In the latter case, models can be trained by employing transcripts from a given speaker, and then used to measure how stable the perplexity metric is when computed using the model from that user and transcripts from different users. Transcripts were extracted from talks lasting almost 13 hours (overall 12:45:17 and 120,326 tokens) for the former class; and almost 30 hours (29:47:34 and 252,270 tokens) for the latter one. Data herein can be reused to perform analyses on measures built on top of language models, and more in general on measures that are aimed at exploring the linguistic features of text documents

Changes in cholesterol metabolism-related gene expression in peripheral blood mononuclear cells from Alzheimer patients

<p>Abstract</p> <p>Background</p> <p>Cholesterol homeostasis dysfunction has been reported to have role in the pathogenesis of Alzheimer disease (AD). Therefore, changes in cholesterol metabolism in blood components may help to develop new potential AD biomarkers. In this study changes in cholesterol metabolism-related gene expression genes were evaluated in peripheral blood mononuclear cells (PBMCs) from AD subjects, their first degree relatives (FDR) and two groups of age matched controls (C1 > 80 years, C2 < 60 years). The expression of three genes related to APP processing was also determined.</p> <p>Results</p> <p>Results showed significantly different behavior (P = 0.000) in the expression of all analyzed genes among the 4 groups. An inverse correlation emerged between the age of controls and the propensity of their PBMCs to express selected genes. Moreover, when gene expression was evaluated in PBMCs from AD patients and compared with that of PBMCs from healthy subjects of the same age, LDL-R and APP mRNAs were most abundant in AD as compared C1 whereas SREBP-2 and particularly nCEH were present at much lower mRNA levels in AD-PBMCs. This study describes for the first time a differential expression profile of cholesterol and APP related genes in PBMCs from AD patients and their FDR.</p> <p>Conclusions</p> <p>We suggest that the expressions of cholesterol homeostasis and APP processing related genes in PBMC could be proposed as possible biomarkers to evaluate AD risk. In addition, gene expression in PBMC could be also used for diagnosis and development of therapeutic strategies as well as for personalized prediction in clinical outcome of AD.</p

Point Mutation I261M Affects the Dynamics of BVDV and its Interaction with Benzimidazole Antiviral 227G

Bovine viral diarrhea virus (BVDV) is a Pestivirus of the Flaviviridae family and represents a major viral pathogen in cattle and other ruminants. Infection with BVDV can result in a wide assortment of disease manifestations including resorption, mummification, or abortion of the dead fetus. Recently the point mutation I261M on the thumb domain was shown to confer resistance to BDVD against 227G and other benzimidazole compounds. Here we investigated the role of this mutation by using a multidisciplinary protocol, not involving free energy calculations on structures of the mutated complex which are taken a priori similar to those of the wild one. Namely, we firstly performed MD simulations on the wild and mutated BVDV RdRp proteins in aqueous solution. Then, we selected representative equilibrium conformations by performing a cluster analysis, and ran docking calculations of 277G on representative of the 5 most populated clusters of each protein. Finally, we performed MD simulation on selected complexes as to assess structural and dynamical differences between wild and mutated 227G-protein adducts. Interestingly, the mutation affects the structure and the dynamics of the protein, particularly in the region of binding of the ligand, and this results in a different binding site of 227G with respect to the wild protein. Moreover, while 227G closes the entrance to the RNA strand in the case of the wild protein, a gate and a channel leading to the catalytic site are still present in the mutated complex. These results could offer a possible molecular explanation of the resistance mechanism by mutation I261M