Scale economies and input price elasticities in microfinance institutions

We evaluate the efficiency of microfinance institutions (MFIs) using a structural approach which also captures these institutions’ outreach and sustainability objectives. We estimate economies of scale and input price elasticities for lending-only and deposit-mobilizing MFIs using a large sample of high-quality panel data. The results confirm conjectures that improvements in efficiency can come from the growth or consolidations of MFIs, as we find substantial increasing returns to scale for all but profitability-focused deposit-mobilizing MFIs. Our results support the existence of a trade-off between outreach and sustainability. All inputs are inelastic substitutes, but we find differences in own-price elasticities in lending-only and deposit-mobilizing MFIs.     

Analysing the risk premium in the Italian stock market: ARCH-M models versus non-parametric models

This Paper investigates the variability of the risk premium in the Italian stock market, over the period 1978–89. We have modelled voatility using two different approaches: ARCH-M models and non-parametric models. The estimate of the ARCH-M models confirm the existence of both an ARCH process in the variance and a time-varying risk premium. Also the non-parametric specification confirms the existence of a time varying risk premium. Moreover in both models the acceleration in the inflation rate has a negative effect on stock prices.     

Predictive density construction and accuracy testing with multiple possibly misspecified diffusion models

This paper develops tests for comparing the accuracy of predictive densities derived from (possibly misspecified) diffusion models. In particular, we first outline a simple simulation-based framework for constructing predictive densities for one-factor and stochastic volatility models. We then construct tests that are in the spirit of Diebold and Mariano (1995) and White (2000). In order to establish the asymptotic properties of our tests, we also develop a recursive variant of the nonparametric simulated maximum likelihood estimator of Fermanian and Salanié (2004). In an empirical illustration, the predictive densities from several models of the one-month federal funds rates are compared.     

Options and efficiency in spaces of bounded claims

In a seminal contribution, Ross (1976) showed that a static finite state-space market can be completed by supplementing the primitive securities with ordinary call and put options. Galvani (2009) extends this result to norm separable _Lp$L_p$-spaces, with 1≤p<∞$1\le p<\infty$. This study concludes that options maintain the same spanning power in the space of bounded payoffs topologized by the duality with the space of the state price densities. In particular, under mild assumptions on the probability space, options written on a claim that is a.s. equal to an injective function complete the market.