The Equity Premium and the Baby Boom

This paper explores the quantitative impact of the Baby Boom on stock and bond returns. It constructs a neoclassical growth model with overlapping generations, in which agents make a portfolio decision over risky capital and safe bonds in zero net supply. The model has exogenous technology and population shocks that are calibrated to match long run data for the US. With agents allowed to borrow freely by shorting bonds, the model fails to match the historical equity premium by a large margin and generates only small asset market effects over a simulated Baby Boom. When agents are constrained in their ability to borrow, the model comes close to matching the historical equity premium and suggests that there will be a sharp rise in the equity premium when the Baby Boomers retire, driven by a large decline in bond returns as Baby Boomers seek to hold the riskless asset in retirementEquity premium, population aging, portfolio choice

Firm-level evidence on international stock market movement

We explore the link between international stock market comovement and the degree to which firms operate globally. Using stock returns and balance sheet data for companies in twenty countries, we estimate a factor model that decomposes stock returns into global, country- and industry-specific shocks. We find a large and highly significant link: a firm raising its international sales by 10 percent raises the exposure of its stock return to global shocks by 2 percent and reduces its exposure to country-specific shocks by 1.5 percent. This link has grown stronger over time since the mid-1980s.Financial markets ; International finance ; Risk

International stock returns and market integration: A regional perspective

An empirical regularity in the portfolio diversification literature is the importance of country effects in explaining international return variation. We develop a new decomposition that disaggregates these country effects into region effects and within-region country effects. We find that half the return variation typically attributed to country effects is actually due to region effects, a result robust across developed and emerging markets, with the remaining variation explained by within-region country effects. For the average investor, this means that diversifying across countries within Europe, for example, delivers half the risk reduction possible from diversifying across regions globally.Financial markets ; Risk

International diversification strategies

We estimate a model with country- and industry-specific shocks that extends the dummy variable model used in the portfolio diversification literature by relaxing the restriction that all stocks with exposure to a given shock have the same exposure to that shock. We find that: i) This restriction is strongly rejected by the data. ii) Many industry betas are negative, while almost all country betas are positive. This difference in within-group heterogeneity may explain why country shocks have historically outweighed industry shocks in explaining international return variation. iii) We use the betas to construct portfolios whose volatility is substantially below that of the world market, both in and out of sample.Financial markets ; Risk

Firm-level evidence on international stock market comovement

We explore the link between international stock market comovement and the degree to which firms operate globally. Using stock returns and balance sheet data for companies in 20 countries, we estimate a factor model that decomposes stock returns into global, country-specific and industry-specific shocks. We find a large and highly significant link : on average, a firm raising its international sales by 10 percent raises the exposure of its stock return to global shocks by 2 percent and reduces its exposure to countryspecific shocks by 1.5 percent. This link has grown stronger since the mid-1980s. --Diversification,risk,international financial markets,industrial structure

The rise in comovement across national stock markets: market integration or IT bubble?

A stylized fact in the portfolio diversification literature is that diversifying across countries is more effective than diversifying across industries in terms of risk reduction. But with the rise in comovement across national stock markets since the mid-1990s, this no longer appears to be true. We explore whether this change is driven by global integration and therefore likely to be permanent, or if it is a temporary phenomenon associated with the recent stock market bubble. Our results point to the latter hypothesis. In the aftermath of the bubble, diversifying across countries may therefore still be effective in reducing portfolio risk.Financial markets ; Risk ; Markets

The Vital and the Positive: A Genealogy of the Science of Man

The thesis presents a historical study of the Enlightenment project for a Science of Man which takes its perspective from the 20th century philosophical 'death of man'. From the contemporary move against humanistic ideals associated already from the 1930's exemplified contrasting interpretations over an Enlightenment Science of Man and its ambitions. In the 1960's Michel Foucault's pivotal approach gave this dispute the perspective of the 'death of man', which this thesis frames in relation to his reading of Kant. This forms a perspective from which to examine Kant's positive ambitions, as Foucault saw them extending beyond Critique. But a second perspective is taken up through what Gilles Deleuze ascribed to an empiricist tradition subjugated under a vitalism. This is indicated by the 'age of Bichat', the French medical tradition which Deleuze contrasted with Foucault's 'rarefied form of positivism'. A genealogical history of the Science of Man frames these as alternative models to a critique of reason, two perspectives derived of the Enlightenment project. The 'age of Bichat' is understood around the French Enlightenment discourse on vitalism modelled on a post-Cartesian concept of the body. This gave the positive ambitions for early 19th century Positivism explored through Saint Simon's 'concept of labour' and August Comte's epistemological critique, intended as substitute for an older Enlightenment model. However, this becomes further complicated by the new positive paradigm of experimental medicine. The effect, during the early Third Republic, was to re-orientate the philosophical perspective on the older project for a Science of Man. This served Henri Bergson's critique of Positivist historical formations, but also the neo-Positive model of Emile Durkheim and the ambition for an autonomous new science that delimits a collective 'order of things'. The dilemma was legitimating vital norms in a modern society. This genealogy situates these as perspectives seen through the 18th century Science of Man from which the vital and the positive remained elements historically resistant to being the determinable object of study

Firm-level evidence on international stock market movement

We explore the link between international stock market comovement and the degree to which firms operate globally. Using stock returns and balance sheet data for companies in twenty countries, we estimate a factor model that decomposes stock returns into global, country- and industry-specific shocks. We find a large and highly significant link: a firm raising its international sales by 10 percent raises the exposure of its stock return to global shocks by 2 percent and reduces its exposure to country-specific shocks by 1.5 percent. This link has grown stronger over time since the mid-1980s