Polydispersity-induced macrophase separation in diblock copolymer melts

The effect of A-block polydispersity on the phase behavior of AB diblock copolymer melts is examined using a complete self-consistent field theory treatment that allows for fractionation of the parent molecular-weight distribution. In addition to observing the established shift in phase boundaries, we find the emergence of significant two-phase coexistence regions causing, for instance, the disappearance of the complex phase window. Furthermore, we find evidence that polydispersity relieves packing frustration, which will reduce the tendency for long-range order

Habit Persistence and Welfare Gains from International Asset Trade

We introduce habit formation in a model that studies the link between international trade in financial assets, economic growth, and welfare. As with time separable preferences asset trade increases the mean growth rate, but it also increases growth-volatility. We demonstrate that the welfare gain from asset trade is lower with habit persistence in consumption. This reflects that the habit-forming households perceive the higher growth-volatility as a higher cost to obtain increased average growth. Calibrating the model to data for North America and Western Europe, we find that habit persistence lowers welfare gains of financial integration by about 40-50 %.Habit formation; financial integration; growth; welfare

Portfolio Choice when Managers Control Returns

This paper investigates the allocation decision of an investor with two projects. Separate managers control the mean return from each project, and the investor may or may not observe the managers’ actions. We show that the investor’s risk-return trade-off may be radically different from a standard portfolio choice setting, even if managers’ actions are observable and enforceable. In particular, feedback effects working through optimal contracts and effort levels imply that expected terminal wealth is nonlinear in initial wealth allocation. The optimal portfolio may involve very little diversification, despite projects that are highly symmetric in the underlying model. We also show that moral hazard in one of the projects need not imply lower allocation to that project. Expected returns are generally lower than under the first-best, but the optimal contract shifts more of the idiosyncratic risk in the hidden action project to the manager in charge of it. The minimum-variance position of the investor’s (net) terminal wealth would in most cases involve a portfolio shift towards the hidden action project, and there are plausible cases where this would dominate the overall effect on the second-best optimal portfolio when comparing with the first-best.Portfolio choice; diversification; optimal contracts

International Diversification, Growth, and Welfare with Non-Traded Income Risk and Incomplete Markets

We ask how the potential benefits from cross-border asset trade are affected by the presence of non-traded income risk in incomplete markets. We show that the mean consumption growth may be lower with full integration than in financial autarky. This can occur because: the hedging demand for risky high-return projects may fall as the investment opportunity set increases, and precautionary savings may fall as the unhedgeable non-traded income variance decreases upon financial integration. We also show that international asset trade increases welfare if it increases the risk-adjusted growth rate. This is always the case in our model, but the effect may be close to negligible. The welfare gain is smaller the higher the correlation between the domestic non-traded income process and foreign asset returns.Incomplete markets;financial integration;growth;welfare

On Asymmetric Information across Countries and the Home-Bias Puzzel

This paper investigates the allocation decision of an investor who owns two projects, a domestic and a foreign one. A manager governs the expected return from each project, and the investor has less information on the actions of the foreign manager. The investor’s portfolio will be tilted relative to a situation with full information. With asymmetric information, he generally achieves a better risk-return characteristic of his net terminal wealth with an allocation different from full diversification, because a biased allocation can be beneficial to the managers’ efforts and/or risk properties of the optimal contracts. However, numerical simulations illustrate that, in general, the portfolio bias is small for plausible parameter values, and theoretically it may even be towards the foreign project. This weakens the case for asymmetric information as a prime reason for the observed home-bias in portfolio allocation.Asymmetric information; portfolio selection