Risk Aversion and Optimal Portfolio Policies in Partial and General Equilibrium Economies

In this article, we show how to analyze analytically the equilibrium policies and prices in an economy with a stochastic investment opportunity set and incomplete financial markets, when agents have power utility over both intermediate consumption and terminal wealth, and face portfolio constraints. The exact local comparative statics and approximate but analytical expression for the portfolio policy and asset prices are obtained by developing a method based on perturbation analysis to expand around the solution for an investor with log utility. We then use this method to study a general equilibrium exchange economy with multiple agents who differ in their degree of risk aversion and face borrowing constraints. We characterize explicitly the consumption and portfolio policies and also the properties of asset returns. We find that the volatility of stock returns increases with the cross-sectional dispersion of risk aversion, with the cross-sectional dispersion in portfolio holdings, and with the relaxation of the constraint on borrowing. Moreover, tightening the borrowing constraint lowers the risk-free interest rate and raises the equity premium in equilibrium.

Growth Opportunities, Technology Shocks, and Asset Prices

We explore the impact of investment-specific technology (IST) shocks on the crosssection of stock returns. IST shocks reflect technological advances embodied in new capital goods. Using a structural model, we show that IST shocks have a differential effect on the two fundamental components of firm value, the value of assets in place and the value of growth opportunities. This differential sensitivity to IST shocks has two main implications. First, risk premia on firms with abundant growth opportunities are different from those on firms with limited growth opportunities. Second, firms with similar levels of growth opportunities comove with each other, giving rise to the value factor in stock returns. Our model replicates the failure of the conditional CAPM to capture the value premium. Our empirical tests confirm the model's predictions for asset returns and investment rates.

Catching Up with the Joneses: Heterogeneous Preferences and the Dynamics of Asset Prices

We analyze a general equilibrium exchange economy with a continuum of agents who have 'catching up with the Joneses' preferences and differ only with respect to the curvature of their utility functions. While individual risk aversion does not change over time, dynamic redistribution of wealth among the agents leads to countercyclical time variation in the Sharpe ratio of stock returns. We show that both the conditional risk premium and the return volatility are negatively related to the level of stock prices, as observed empirically. Therefore, our model exhibits many of the empirically observed properties of aggregate stock returns, e.g., patterns of autocorrelation in returns, the 'leverage effect' in return volatility and long-horizon return predictability. For comparison, otherwise similar representative agent economies with the same type of preferences exhibit counter-factual behavior, e.g., a constant Sharpe ratio of returns and procyclical risk premium and return volatility.

La posición genealógica del ugarítico: la dimensión léxica. Isoglosas léxicas entre el ugarítico y otras lenguas semíticas. Conclusiones

This article is the concluding part of a series of publications by the author dealing with the lexical factor in the genealogical subgrouping of Semitic. In the focus of the discussion are the exclusive lexical isoglosses between Ugaritic and Semitic languages other than Canaanite: Arabic, Aramaic and Akkadian. In both former cases, such isoglosses are few in number, which almost certainly excludes any particularly close association between Ugaritic and Arabic or Aramaic. Conversely, Ugaritic- Akkadian isoglosses are comparatively numerous, which can be explained in several possible ways. In the concluding section, the Canaanite affiliation of Ugaritic as reflected in the basic vocabulary is reaffirmed, with a special emphasis on the hypothetic Ugaritic-Phoenician connection.El presente artículo concluye una serie de publicaciones dedicadas al factor léxico en la clasificación genealógica de las lenguas semíticas. En el centro de la discusión están las isoglosas léxicas que reúnen el ugarítico con otras lenguas semíticas no cananeas: el árabe, el arameo y el acadio. En los dos primeros casos, tales isoglosas son poco numerosas, el que prácticamente excluye la posibilidad de una relación genealógica más o menos estrecha entre el ugarítico y el árabe o el arameo. En cambio, las relativamente numerosas coincidencias entre el ugarítico y el acadio parecen remarcables y necesitan una explicación diacrónica. En la sección final del artículo, se reafirma la afiliación cananea de la lengua ugarítica, enfatizando el probable nexo especial entre el ugarítico y el fenicio

La posición genealógica del ugarítico: la dimensión léxica. Isoglosas léxicas entre ugarítico y cananeo

The present contribution continues a series of publications by the author dealing with the lexical evidence for some of the much-discussed problems of the genealogical subgrouping of Semitic. In the present article, specific isoglosses between Ugaritic and the Canaanite languages (notably, Hebrew and Phoenician) are accumulated and discussed, their total number amounting to ca. 80 lexical items. In the second, concluding article (scheduled for publication in the forthcoming issue of Sefarad), this evidence will be compared with specific lexical isoglosses shared by Ugaritic with Semitic languages other than Canaanite.El presente artículo forma parte de una serie de publicaciones del autor dedicadas al factor léxico en la clasificación genealógica de las lenguas semíticas. Poco menos de 80 isoglosas exclusivas entre ugarítico y las lenguas cananeas (en particular, hebreo y fenicio), presentadas en el orden alfabético y acompañadas de una discusión general tanto lingüística como filológica, constituyen el núcleo del artículo, que va a ser complementado próximamente por un análisis detallado de posibles isoglosas léxicas entre la lengua ugarítica y las lenguas semíticas no pertenecientes al grupo cananeo

Futures Prices in a Production Economy with Investment Constraints

We document a new stylized fact regarding the term-structure of futures volatility. We show that the relation between the volatility of futures prices and the slope of the term structure of prices is non-monotone and has a %u201CV-shape%u201D'. This aspect of the data cannot be generated by basic models that emphasize storage while this fact is consistent with models that emphasize investment constraints or, more generally, time-varying supply-elasticity. We develop an equilibrium model in which futures prices are determined endogenously in a production economy in which investment is both irreversible and is capacity constrained. Investment constraints affect firms' investment decisions, which in turn determine the dynamic properties of their output and consequently imply that the supply-elasticity of the commodity changes over time. Since demand shocks must be absorbed either by changes in prices, or by changes in supply, time-varying supply-elasticity results in time-varying volatility of futures prices. Calibrating this model, we show it is quantitatively consistent with the aforementioned %u201CV-shape%u201D relation between the volatility of futures prices and the slope of the term-structure.

Writing on Islamic Apologetics in an Unwritten Tongue. An Unusual Sample of Transitional Prose from the Island of Soqotra

Soqotri is a Modern South Arabian language spoken by 100 000 inhabitants of the Island of Soqotra. The island is famous for its narrative art, first revealed to the Western world by the Austrian South Arabian Expedition around 1900. Until recently, Soqotri functioned as an unwritten language, and Soqotra’s traditional lore has mainly been transmitted orally. From 2014 on, an Arabic-based writing system for Soqotri has been implemented by a Russian-Yemeni research team. Originally intended as a means of preservation of the traditional oral lore, the writing system proves to be capable of meeting other intellectual demands – notably, to create original, non-traditional compositions. Apologetic and propagandistic works pertaining to the Muslim faith are among the first genres of the nascent Soqotri prose. The article analyzes one such composition in an attempt to trace the thorny path from orality to literacy on Soqotri soil: the adaptation of traditional narrative techniques; the difficult balance between purism and innovation; and interaction with Arabic. It shows that the concept of transitional text, mostly applied to poetry in modern literary research, can also be used about prose, including religiously motivated writing.El socotrí es una lengua actual del sur de Arabia hablada por 100 000 habitantes de la isla de Socotra. La isla es famosa por su arte narrativo, revelado al mundo occidental por la expedición austríaca al sur de Arabia alrededor de 1900. Hasta tiempos recientes, el socotrí ha funcionado como una lengua no escrita, y la cultura tradicional de Socotra se ha transmitido principalmente de forma oral. Desde 2014, un sistema de escritura basado en el árabe se ha puesto en marcha gracias a un equipo de investigación ruso-yemení. Concebido originalmente como un medio para la conservación de la cultura oral tradicional, el sistema de escritura resulta capaz de afrontar otras exigencias intelectuales; particularmente, de realizar composiciones originales, no tradicionales. Obras apologéticas y propagandísticas de la fe musulmana constituyen los primeros géneros de la naciente prosa socotrí. El artículo analiza una de estas composiciones con el objetivo de trazar el espinoso camino de la oralidad a la escritura en el suelo de Socotra: la adaptación de técnicas narrativas tradicionales; el difícil equilibrio entre purismo e innovación; y la interacción con el árabe. Se muestra así que el concepto de texto transicional, aplicado especialmente a la poesía en la investigación literaria actual, también puede usarse en relación con la prosa, incluyendo escritos de motivación religiosa

Durability of Output and Expected Stock Returns

The demand for durable goods is more cyclical than that for nondurable goods and services. Consequently, the cash flows and stock returns of durable-good producers are exposed to higher systematic risk. Using the benchmark input-output accounts of the National Income and Product Accounts, we construct portfolios of durable-good, nondurable-good, and service producers. In the cross-section, an investment strategy that is long on the durable-good portfolio and short on the service portfolio earns a risk premium exceeding 4 percent annually. In the time series, an investment strategy that is long on the durable-good portfolio and short on the market portfolio earns a countercyclical risk premium. We explain these findings in a general equilibrium asset-pricing model with endogenous production.