The Risk Tolerance of International Investors

Investor confidence and risk tolerance are important concepts that investors are constantly trying to gauge. Yet these concepts are notoriously hard to measure in practice. Most attempts rely on price or return data, but these run into trouble when trying to disentangle whether an observed price change is attributable to a shift in investor confidence or a change in fundamental value. In this paper, we take an alternative approach by looking at the world-wide holdings and trading of risky assets. We model global capital markets as the interaction between large global institutional investors and smaller domestic investors from each country. This permits separation of global price changes into two components, one that reflects changes in demand and fundamentals perceived by all investors, and a second that reflects changes in the relative risk tolerance of institutional investors over and above that of domestics. The latter component, changes in relative risk tolerance of global institutions, is driven by the willingness of these investors to acquire additional assets in each country in proportion to their current holdings. Using our model, we show how data on asset holdings and flows across countries can be used to identify changes in risk tolerance. We then apply this identification scheme to recent data on the global portfolio holdings of institutional investors. The resulting measure of risk tolerance impressionistically accords well with periods of market turbulence and quiescence. It also accounts for a considerable portion of the variation in portfolio holdings and is informative about future returns.

"The Bigger They Are, The Harder They Fall": How Price Differences Across U.S. Cities Are Arbitraged

Recent empirical work has made headway in exploring the non-linear dynamics of deviations from the law of one price and" purchasing power parity that are apt to arise from transaction costs. However, there are two important facets of this work that need improvement. First, the choice of empirical specification is arbitrary. Second, the data used are typically composite price indices which are subject to potentially serious aggregation biases. This paper examines the evidence for transport-cost-induced nonlinear price behavior within the U.S. We address both of the above shortcomings. First, we use a simple continuous-time model to inform the choice of empirical specification. The model indicates that the behavior of deviations from price parity depends on the relative importance of fixed and variable transport costs. Second, we employ data on disaggregated commodity prices, yielding a pure' measure of the deviations from price parity. We find strong evidence of nonlinear reversion in these deviations. The nature of this reversion suggests that fixed costs of transportation are integral to an understanding of law-of-one-price deviations.

On The Pricing of Intermediated Risks: Theory and Application to Catastrophe Reinsurance

We model the equilibrium price and quantity of risk transfer between firms and financial intermediaries. Value-maximizing firms have downward sloping demands to cede risk, while intermediaries, who assume risk, provide less-than-fully-elastic supply. We show that equilibrium required returns will be high' in the presence of financing imperfections that make intermediary capital costly. Moreover, financing imperfections can give rise to intermediary market power, so that small changes in financial imperfections can give rise to large changes in price. We develop tests of this alternative against the null that the supply of intermediary capital is perfectly elastic. We take the US catastrophe reinsurance market as an example, using detailed data from Guy Carpenter & Co., covering a large fraction of the catastrophe risks exchanged during 1970-94. Our results suggest that the price of reinsurance generally exceeds fair' values, particularly in the aftermath of large events, that market power of reinsurers is not a complete explanation for such pricing, and that reinsurers' high costs of capital appear to play an important role.

Uncovering the Neural Signature of Lapsing Attention: Electrophysiological Signals Predict Errors up to 20 s before They Occur

The extent to which changes in brain activity can foreshadow human error is uncertain yet has important theoretical and practical implications. The present study examined the temporal dynamics of electrocortical signals preceding a lapse of sustained attention. Twenty-one participants performed a continuous temporal expectancy task, which involved continuously monitoring a stream of regularly alternating patterned stimuli to detect a rarely occurring target stimulus whose duration was 40% longer. The stimulus stream flickered at a rate of 25 Hz to elicit a steady-state visual-evoked potential (SSVEP), which served as a continuous measure of basic visual processing. Increasing activity in the band (8 –14 Hz) was found beginning20 s before a missed target. This was followed by decreases in the amplitude of two event-related components over a short pretarget time frame: the frontal P3 (3– 4 s) and contingent-negative variation (during the target interval). In contrast, SSVEP amplitude before hits and misses was closely matched, suggesting that the efficacy of ongoing basic visual processing was unaffected. Our results show that the specific neural signatures of attentional lapses are registered in the EEG up to 20 s before an error

Clinically relevant enhancement of human sperm motility using compounds with reported phosphodiesterase inhibitor activity

STUDY QUESTION: Can we identify compound(s) with reported phosphodiesterase inhibitor (PDEI) activity that could be added to human spermatozoa in vitro to enhance their motility without compromising other sperm functions? SUMMARY ANSWER: We have identified several compounds that produce robust and effective stimulation of sperm motility and, importantly, have a positive response on patient samples. WHAT IS KNOWN ALREADY: For >20 years, the use of non-selective PDEIs, such as pentoxifylline, has been known to influence the motility of human spermatozoa; however, conflicting results have been obtained. It is now clear that human sperm express several different phosphodiesterases and these are compartmentalized at different regions of the cells. By using type-specific PDEIs, differential modulation of sperm motility may be achieved without adversely affecting other functions such as the acrosome reaction (AR). STUDY DESIGN, SIZE, DURATION: This was a basic medical research study examining sperm samples from normozoospermic donors and subfertile patients attending the Assisted Conception Unit (ACU), Ninewells Hospital Dundee for diagnostic semen analysis, IVF and ICSI. Phase 1 screened 43 commercially available compounds with reported PDEI activity to identify lead compounds that stimulate sperm motility. Samples were exposed (20 min) to three concentrations (1, 10 and 100 µM) of compound, and selected candidates (n = 6) progressed to Phase 2, which provided a more comprehensive assessment using a battery of in vitro sperm function tests.  PARTICIPANTS/MATERIALS, SETTING, METHODS: All healthy donors and subfertile patients were recruited at the Medical Research Institute, University of Dundee and ACU, Ninewells Hospital Dundee (ethical approval 08/S1402/6). In Phase 1, poor motility cells recovered from the 40% interface of the discontinuous density gradient were used as surrogates for patient samples. Pooled samples from three to four different donors were utilized in order to reduce variability and increase the number of cells available for simultaneous examination of multiple compounds. During Phase 2 testing, semen samples from 23 patients attending for either routine diagnostic andrology assessment or IVF/ICSI were prepared and exposed to selected compounds. Additionally, 48 aliquots of prepared samples, surplus to clinical use, were examined from IVF (n = 32) and ICSI (n = 16) patients to further determine the effects of selected compounds under clinical conditions of treatment. Effects of compounds on sperm motility were assessed by computer-assisted sperm analysis. A modified Kremer test using methyl cellulose was used to assess sperm functional ability to penetrate into viscous media. Sperm acrosome integrity and induction of apoptosis were assessed using the acrosomal content marker PSA-FITC and annexin V kit, respectively. MAIN RESULTS AND THE ROLE OF CHANCE: In Phase 1, six compounds were found to have a strong effect on poor motility samples with a magnitude of response of ≥60% increase in percentage total motility. Under capacitating and non-capacitating conditions, these compounds significantly (P ≤ 0.05) increased the percentage of total and progressive motility. Furthermore, these compounds enhanced penetration into a cervical mucus substitute (P ≤ 0.05). Finally, the AR was not significantly induced and these compounds did not significantly increase the externalization of phosphatidylserine (P = 0.6, respectively). In general, the six compounds maintained the stimulation of motility over long periods of time (180 min) and their effects were still observed after their removal. In examinations of clinical samples, there was a general observation of a more significant stimulation of sperm motility in samples with lower baseline motility. In ICSI samples, compounds #26, #37 and #38 were the most effective at significantly increasing total motility (88, 81 and 79% of samples, respectively) and progressive motility (94, 93 and 81% of samples, respectively). In conclusion, using a two-phased drug discovery screening approach including the examination of clinical samples, 3/43 compounds were identified as promising candidates for further study. LIMITATIONS, REASONS FOR CAUTION: This is an in vitro study and caution must be taken when extrapolating the results. Data for patients were from one assessment and thus the robustness of responses needs to be established. The n values for ICSI samples were relatively small. WIDER IMPLICATIONS OF THE FINDINGS: We have systematically screened and identified several compounds that have robust and effective stimulation (i.e. functional significance with longevity and no toxicity) of total and progressive motility under clinical conditions of treatment. These compounds could be clinical candidates with possibilities in terms of assisted reproductive technology options for current or future patients affected by asthenozoospermia or oligoasthenozoospermia