International Diversification in Debt vs Equity

Can a standard open economy macro model generate realistic international diversification in debt AND equity? We address this question by solving for steady-state portfolios in a two-country, two-good DSGE endowment model with consumption home bias. We compare two different asset trading regimes. In the first, households in each country trade equity claims on their underlying stochastic endowments; in the second, households trade locally-denominated bonds. We derive locally accurate closed-form solutions for steady-state portfolios under each regime. The model can predict realistic home equity bias and bond diversification if the intratemporal elasticity of substitution between home and foreign goods is sufficiently low. However, for commonly used parameter values, the standard two-good model understates bond diversification and overstates equity diversification.Home bias, international diversification puzzle, portfolio choice, open economy macroeconomics, DSGE models

"Capital Structure Over The Business Cycle"

Why are aggregate equity payouts and debt issued positively correlated over the business cycle in U.S. data? Standard real business cycle (RBC) models have few predictions about capital structure, because they assume that financial markets are frictionless. On the other hand, the tradeoff theory of capital structure argues that financial frictions determine firms' optimal mix of debt and equity financing. We develop an RBC model with financial frictions and use it to explain some stylized facts about aggregate U.S. debt and equity flows. We document that debt issued and equity payouts are (i) positively correlated with output, (ii) positively correlated with investment, and (iii) positively correlated with each other. Our model can account for these stylized facts. We also calibrate the model to the periods 1952 - 1983 and 1984 - 2007 in order to explain the finding that real variables have become less volatile in the later subperiod, while financial variables have become more volatile. By varying both the scale of technology shocks and the degree of financial frictions, we are able to account for both results.Debt-equity finance, RBC models, business cycle moderation, corporate finance, capital structure, tradeoff theory, payout policy

Comparing Public and Private Real Estate Through Repeat-Sales Indexes and Unlevered REIT Returns

This paper constructs repeat-sales indexes using Real Capital Analytics (RCA) transaction data from central business districts (CBD) in Chicago, New York City (Manhattan), Philadelphia, Washington D.C., Los Angeles, San Francisco, and Boston. The indexes can be used to measure the historical returns of offices in these markets. This paper brings insight on whether public and private real estate should be treated as the same asset class. It was found that exposure to private real estate has a positive liquidity premium compared to public REITs. This was found by comparing RCA’s Manhattan Office Repeat-Sales Index to SL Green’s unlevered returns

Toward an Understanding of the Later Philosophy of Ludwig Wittgenstein

Perhaps the biggest obstacle to understanding the later philosophy (1930-1951) of Ludwig Wittgenstein is that, unlike his earlier work, the later work has no explicit organization. I have attempted to show a way around this obstacle by showing the legitimacy of imposing upon the later work the following order: First, I have taken his later work to stand opposed to the position of traditional epistemology. I have attempted to show how from traditional epistemology the empiricist theory of meaning stems, and how from that theory of meaning stem certain familiar problems of academic philosophy. Second, I have attempted to show that the bulk of Wittgenstein\u27s later work may be considered as presenting a theory of meaning, and have attempted to show the role of five concepts in that theory: \u27meaning-as-use,\u27 \u27family resemblance,\u27 \u27language-games,\u27 • forms of life,• and \u27criteria.\u2