Is consumption risk priced in the stock market?

The paper examines whether the risk in the consumption of stockholders caused by incomplete consumption insurance is priced in the cross-section of average stock returns. Using Taylor series expansion of the average marginal utility of consumption, we show that the risk in the consumption of stock market participants can be decomposed into two components, insurable (hedgeable using financial assets) and uninsurable (caused by incomplete consumption insurance) consumption risks. We argue that the growth rate of average consumption may be viewed as a proxy for the insurable component of consumption risk, while the growth rates of the rescaled higher-order cross-sectional consumption distribution moments may be regarded as a multivariate proxy for uninsurable risk in consumption. Exploiting microlevel household quarterly consumption data from the US Consumer Expenditure Survey, we find that both components of consumption risk are significantly priced when the limited stock market participation is taken into account. Neither the insurable and uninsurable components of consumption risk nor the Fama–French risk factors are rejected as capturing important components of systematic risk when tested against each other in an integrated multifactor asset pricing model.     

The Explanatory Power and the Forecast Performance of Consumer Confidence Indices for Private Consumption Growth in Turkey

In this study, we assess empirically whether consumer confidence indices contain information about future private consumption growth in Turkey. To this end, we estimate models for quarterly total, durable, and nondurable consumption growth with and without sentiment indicators. We evaluate in-sample forecasts and one-step-ahead out-of-sample forecasts from recursive ordinary least squares (OLS) estimates. We also test permanent income and precautionary savings hypotheses with our results. We use overall indices of CNBC-e and Turkstat-CBRT Surveys, and Consumer Expectations Index (CEI) and Propensity to Consume Index (PCI) from the CNBC-e Survey as sentiment measures. We show that the lagged values of consumer sentiment have explanatory power on consumption growth. However, when used in conjunction with other economic variables such as real labor income, real stock price, real interest rate, and exchange rate, only CNBC-e for total consumption, and CBRT and PCI for nondurable consumption provide independent information about future consumption growth. Similarly, the gains in out-of-sample forecasts are observed under the absence of other variables and disappear in almost all cases following their inclusion to the estimations. Finally, we find no clear evidence for either precautionary savings motive or permanent income hypothesis on the link between consumer sentiment and future total consumption changes.     

Money matters: consumption variability across the income distribution

Using the Consumer Expenditure Survey, we document the level and variability of quarterly consumption across the socio-economic distribution. While the measurement of well-being is focused on income, the secular and policy discourse prioritises income-adequacy to meet family needs. This concern over income-adequacy centres on the capacity of families to predictably consume minimally acceptable levels of basic needs, and the social and economic mobility consequences of low consumption. Our results show a clear socio-economic and demographic gradient of lower consumption amid higher consumption variability for disadvantaged groups. Food, entertainment, and personal care goods and services exhibit relatively high levels of consumption variability among low-income households.     

Intraindustry information transfer: An analysis of research methods and additional evidence

This study analyzes estimators used in information transfer research. It concludes that tests which use the announcing firm's abnormal return to proxy for the information signal generally overstate the significance of information transfer due to cross-covariation of regression disturbances. However, some related approaches may actually understate information transfer. Another approach, based on direct estimation of the signal, yields an estimator that is less sensitive to assumptions about regression disturbances. This study also tests hypotheses concerning the influence of industry structure on information transfer, since the econometric analysis suggests that prior results concerning this issue should be interpreted with caution. The evidence indicates that transfers are most pronounced in homogeneous and concentrated industries.     

A present value test of habits and the current account

Forecasts derived from standard intertemporal current account (ICA) models generally fail to match the volatility of actual current accounts. This paper offers a solution to the “excess volatility” problem of standard ICA models by incorporating consumption habits into the standard model. The model, as developed in the paper, shows that significant habit formation implies increased current account volatility, as sluggishness is introduced into the consumption adjustment process that follows income shocks. A theory-consistent measure of the degree of habit formation is estimated using GMM. The estimated habit parameter is found to be statistically significant in six of eight quarterly samples.     

Alternative constructions of Tobin's q: An empirical comparison

Although Tobin's q is an attractive theoretical firm performance measure, its empirical construction is subject to considerable measurement error. In this paper we compare five estimators of q that range from a simple-to-construct estimator based on book-values to a relatively complex estimator based upon the methodology developed by Lindenberg and Ross (1981). We present comparisons of the means, medians and variances of the q estimates, and examine how robust sorting and regression results are to changes in the construction of q. We find that empirical results are sensitive to the method used to estimate Tobin's q. The simple-to-construct estimator produces empirical results that differ significantly from the alternative estimators. Among the other four estimators, one developed by Hall (1990) produces means that are higher and variances that are larger than the three alternative estimators, but does approximate those estimators in most of the empirical comparisons. Those three alternative q ratio estimators, furthermore, produce empirical results that are robust.     

我国股市财富效应对居民消费影响的实证检验——基于生命周期—持久收入理论扩展模型的新视角

基于生命周期-持久收入(LC-PIH)理论,本文建立居民收入、消费支出、股市市值和购房支出几个变量之间的实证检验模型,以研究我国股市的财富效应。选取季度和月度频率数据,测算我国2003~2018年全口径居民消费和2013~2018年乘用车消费的股市财富效应,实证结果发现全口径居民消费主要受收入的影响,股市的财富效应不显著,检验结果符合持久收入说;乘用车消费除受收入的影响之外,股市的财富效应也显著。基于实证结果,并结合发达国家较为普遍存在的财富效应,提出三点建议:一是稳步提高居民可支配收入,是促进我国消费平稳增长、发挥消费拉动经济增长基础性作用的根本;二是要发挥出股市在消费中的财富效应,需改变我国股市长期存在的牛短熊长困境;三是应进一步提高我国居民通过养老金和企业年金等间接渠道参与股市的比重,使养老金、企业年金等长期资金与资本市场形成良性互动。     

Empirical Bayes credibility

Abstract

A credibility estimator is Bayes in the restricted class of linear estimators and may be viewed as a linear approximation to the (unrestricted) Bayes estimator. When the structural parameters occurring in a credibility formula are replaced by consistent estimators based on data from a collective of similar risks,we obtain an empirical credibility estimator, which is a credibility counterpart of empirical Bayes estimators. Empirical credibility estimators are proposed under various model assumptions, and sufficient conditions for asymptotic optimality are established.     

Estimating daily volatility in financial markets utilizing intraday data

This study proposes a new approach to the estimation of daily realised volatility in financial markets from intraday data. Initially, an examination of intraday returns on S&P 500 Index Futures reveals that returns can be characterised by heteroscedasticity and time-varying autocorrelation. After reviewing a number of daily realised volatility estimators cited in the literature, it is concluded that these estimators are based upon a number of restrictive assumptions in regard to the data generating process for intraday returns. We use a weak set of assumptions about the data generating process for intraday returns, including transaction returns, given in den Haan and Levin [den Haan, W.J., Levin, A., 1996. Inferences from parametric and non-parametric covariance matrix estimation procedures, Working paper, NBER, 195.], which allows for heteroscedasticity and time-varying autocorrelation in intraday returns. These assumptions allow the VARHAC estimator to be employed in the estimation of daily realised volatility. An empirical analysis of the VARHAC daily volatility estimator employing intraday transaction returns concludes that this estimator performs well in comparison to other estimators cited in the literature.     

Law and the Determinants of Property-Casualty Insurance

This article examines the importance of legal rights and enforcement in influencing property‐casualty insurance (PCI) consumption. We extend the existing literature by examining the role of legal factors in determining insurance density across countries. Also, measures of risk aversion, loss probability, and price, which overcome limitations of proxies used in the existing literature on insurance demand, are analyzed. Using a panel data set, we apply a generalized methods of moments dynamic system estimator, which relaxes the assumption of strict exogeneity of the regressors and produces unbiased and efficient estimates. The results show a strong positive relationship between the protection of property rights and insurance consumption, which is robust to various model specifications and estimation techniques. Moreover, the results show the purchase of PCI is significantly and positively related to loss probability and income, as well as providing weaker evidence of a negative relationship with price.     

Optimal linear estimators of location and scale parameters using order statistics and related empirical Bayes estimation

Summary

An estimator which is a linear function of the observations and which minimises the expected square error within the class of linear estimators is called an “optimal linear” estimator. Such an estimator may also be regarded as a “linear Bayes” estimator in the spirit of Hartigan (1969). Optimal linear estimators of the unknown mean of a given data distribution have been described by various authors; corresponding “linear empirical Bayes” estimators have also been developed.

The present paper exploits the results of Lloyd (1952) to obtain optimal linear estimators based on order statistics of location or/and scale parameter (s) of a continuous univariate data distribution. Related “linear empirical Bayes” estimators which can be applied in the absence of the exact knowledge of the optimal estimators are also developed. This approach allows one to extend the results to the case of censored samples.     

Are the Latent Variables in Time-Varying Expected Returns Compensation for Consumption Risk?

Multibeta asset pricing models are examined using proxies for economic state variables in a framework which exploits time-varying expected returns to estimate conditional betas. Examples include multiple consumption-beta models and models where asset returns proxy for the state variables. When the state variables are not specified, the tests indicate two or three time-varying expected risk premiums in the sample of quarterly asset returns. Conditional betas relative to consumption generate less striking evidence against the model than betas relative to asset returns, but both the consumption and the market variables fail to proxy for the state variables.     

The heteroskedasticity-consistent covariance estimator in accounting

The main purpose of this paper is to compare the White (1980) heteroskedasticity-consistent (HC) covariance matrix estimator with alternative estimators. Many regression packages compute the White (1980) heteroskedasticity-consistent (HC) covariance matrix estimator. The common procedure in Accounting and Finance research to deal with the heteroskedasticity problem is based on this estimator, despite its worse finite-samples properties when compared with other consistent estimators. In this paper we compare several HC covariance matrix estimators based on a sample of 3706 European listed companies from Austria, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden and the United Kingdom. We conclude that HC standard errors increase when finite-samples more appropriate estimators are considered and in the most part of countries the Ohlson (1995) model coefficients estimates became statistically insignificant. This can be explained by the high leverage points in the design matrix. To the best of our knowledge it is the first time that these alternative estimators are compared with the one of White (1980) in accounting research.     

Equity fund ownership and the cross-regional diversification of household risk

We explore the link between portfolio home bias and consumption risk sharing among Italian regions using household-level information on consumption, income and portfolio holdings. Since equity funds are typically diversified at the national or international level, we use data on equity fund ownership to proxy for regional home bias. Cross-regional patterns of equity fund ownership are qualitatively consistent with simple portfolio theory: regions with more asymmetric business cycles are more diversified because they have higher fund participation rates (the extensive margin of diversification) and higher average holdings of equity funds (diversification’s intensive margin). Also, fund holdings increase with the exposure of non-tradable income components (such as labor or entrepreneurial income) to regional shocks. Finally, interregional consumption risk sharing increases with fund holdings and this effect seems strongest when participation is widespread. Increased equity market participation could substantially improve interregional risk sharing.     

Permanent income in the consumption and the demand for money functions

This paper examines whether the concept of permanent income relevant for consumption decisions is the same as the one relevant for cash balance decisions. The equivalence has often been assumed in theoretical and empirical work, but it has never been explicitly tested for, although some comparisons have been made. Using Canadian quarterly data, consumption and demand for money functions are estimated jointly. The results indicate that the hypothesis that the elasticity of income expectations is the same in the two functions cannot be rejected. This conclusion holds whether or not the same income variable is used in the two functions.     

Robust and Efficient Estimation of the Tail Index of a Single-Parameter Pareto Distribution

Abstract

Estimation of the tail index parameter of a single-parameter Pareto model has wide application in actuarial and other sciences. Here we examine various estimators from the standpoint of two competing criteria: efficiency and robustness against upper outliers. With the maximum likelihood estimator (MLE) being efficient but nonrobust, we desire alternative estimators that retain a relatively high degree of efficiency while also being adequately robust. A new generalized median type estimator is introduced and compared with the MLE and several well-established estimators associated with the methods of moments, trimming, least squares, quantiles, and percentile matching. The method of moments and least squares estimators are found to be relatively deficient with respect to both criteria and should become disfavored, while the trimmed mean and generalized median estimators tend to dominate the other competitors. The generalized median type performs best overall. These findings provide a basis for revision and updating of prevailing viewpoints. Other topics discussed are applications to robust estimation of upper quantiles, tail probabilities, and actuarial quantities, such as stop-loss and excess-of-loss reinsurance premiums that arise concerning solvency of portfolios. Robust parametric methods are compared with empirical nonparametric methods, which are typically nonrobust.     

文化消费质量：内涵刻画、描述性评价与现状测度

文化消费质量问题正日益受到关注,但梳理相关文献可以发现,关于文化消费质量的已有研究严重欠缺.论文尝试从人均文化消费水平、文化消费占总消费支出的比重、文化消费与收入的匹配度、文化消费的内部结构、文化消费的差异以及文化消费的成本与消费效果等六个维度对文化消费质量的科学内涵进行刻画,藉此构建文化消费质量的描述性评价指标体系,并基于该指标体系对2001～2013年我国居民文化消费质量状况进行了测度,从而得出结论和建议.     

Modelling Accounting Populations for Ratio Estimation in Audit Sampling

The classical ratio estimator is one of the auxiliary information estimators frequently discussed in the audit sampling literature. The major weakness of this estimator is its unreliability when accounting populations have only one-sided errors or when the error rate is low. Efforts have been made to improve the classical estimator by using techniques such as the Jackknifed ratio discussed by Frost and Tamura (1982). This paper proposes a new method to estimate the population total error based on the ratio of error over book value, i.e., taintings.

The special features of the proposed procedure are that (1) it specifically models the special characteristics of the typical accounting populations, and (2) it is the first study we know of in the audit sampling literature that uses simulation to capture the characteristics of the specific distribution of the estimator each time a confidence interval is constructed. This new approach became possible because of the recent publication of several studies on the empirical characteristics of accounting errors. Results of empirical tests indicate that the proposed method can significantly improve the reliability of the classical ratio under circumstances where the classical ratio needs improvements. Empirical comparisons are also made with a third ratio estimator under dollar-unit sampling. Again, the proposed method provides better reliability.     

Is It Inefficient Investment that Causes the Diversification Discount?

Diversified conglomerates are valued less than matched portfolios of pure-play firms. Recent studies find that this diversification discount results from conglomerates' inefficient allocation of capital expenditures across divisions. Much of this work uses Tobin's q as a proxy for investment opportunities, therefore hypothesizing that q is a good proxy. This paper treats measurement error in q . Using a measurement-error consistent estimator on the sorts regressions in the literature, I find no evidence of inefficient allocation of investment. The results in the literature appear to be artifacts of measurement error and of the correlation between investment opportunities and liquidity.     

Skills, Schooling, and Household Income in Ghana

This article examines the impact of cognitive skills on theincome of households in Ghana. It uses scores on mathematicsand English tests to measure cognitive skills and estimatesthe returns to these skills based on farm profit, off-farm income,and total income. The article uses Powell's censored least absolutedeviations and symmetrically trimmed least squares estimatorsto estimate farm and off-farm income. In contrast to Heckman'stwo-step or the Tobit estimator, Powell's estimators are consistentin the presence of heteroscedasticity and are robust to otherviolations of normality. The results show that cognitive skillshave a positive effect on total and off-farm income but do nothave a statistically significant effect on farm income.