Performance of Personal Pension Funds in Portugal

This paper analyses the performance of personal pension funds in Portugal, during the period from 1999 to 2016, providing the first detailed analysis of this matter. Three performance measures are used: the Sharpe ratio, the difference between the returns of the fund and its benchmark, and the M² measure. The findings show that the performance of these funds is very low and that their returns are not significantly different from zero, which might be the result of government-imposed limits concerning asset allocation. Additionally, evidence was found confirming that these funds, on average, underperform their benchmarks. Tax gains seem to be the main reason why people decide to invest a portion of their wealth in these funds, rather than in other investment forms where there are no penalties in the case of early withdrawals.

     

Feasible Estimation of Nonparametric Generalized Random Effect Model: An Application

This paper considers some feasible estimator for nonparametric random effect panel data model when there are more than one cross section component. A brief discussion about the consistency of the estimator is also included. The paper also discusses an interesting application related to capita-labor ratio and its effect on factor share in a neo-classical set up.

     

Optimizing tracking error-constrained portfolios

Active portfolios subject to tracking error (TE) constraints are the typical setup for active managers tasked with outperforming a benchmark. The risk and return relationship of such constrained portfolios is described by an ellipse in traditional mean-variance space and the ellipse’s flat shape suggests an additional constraint which improves the performance of the active portfolio. Although subsequent work isolated and explored different portfolios subject to these constraints, absolute portfolio risk has been consistently ignored. A different restriction – maximization of the traditional Sharpe ratio on the constant TE frontier in absolute risk/return space – is added here to the existing constraint set, and a method to generate this portfolio is explained. The resultant portfolio has a lower volatility and higher return than the benchmark, it satisfies the TE constraint and the ratio of excess absolute return to risk is maximized (i.e. maximum Sharpe ratio in absolute space).     

Evaluation by the Aumann and Serrano performance index and Sharpe ratio: Bitcoin performance

We compare Bitcoin performance based on the Aumann and Serrano performance index and Sharpe ratio assuming that asset returns follow the class of discrete normal mixture distributions. The Aumann and Serrano performance index can take into account higher moments of the underlying distribution of assets and is relevant for risk-averse investors. We evaluate Bitcoin performance based on the Aumann and Serrano index relative to the performance of other assets. Our evaluation shows that Bitcoin is rated highly by the Sharpe ratio but rated very poorly by the Aumann and Serrano index. We also find some stock assets can beat Bitcoin by the Sharpe ratio when an investment horizon is monthly.     

Asset pricing with idiosyncratic risk and overlapping generations

What is the effect of non-tradeable idiosyncratic risk on asset-market risk premiums? Constantinides and Duffie [Constantinides, G.M., Duffie, D., 1996. Asset pricing with heterogeneous consumers. Journal of Political Economy 104, 219–240] and Mankiw [Mankiw, N.G., 1986. The equity premium and the concentration of aggregate shocks. Journal of Financial Economics 17, 211–219] have shown that risk premiums will increase if the idiosyncratic shocks become more volatile during economic contractions. We add two important ingredients to this relationship: (i) the life cycle, and (ii) capital accumulation. We show that in a realistically-calibrated life-cycle economy with production these ingredients mitigate the ability of idiosyncratic risk to account for the observed Sharpe ratio on US equity. While the Constantinides–Duffie model can account for the US value of 41% with a risk-aversion coefficient of 8, our model generates a Sharpe ratio of 33%, which is roughly half-way to the complete-markets value of 25%. Almost all of this reduction is due to capital accumulation. Life-cycle effects are important in our model—we demonstrate that idiosyncratic risk matters for asset pricing because it inhibits the intergenerational sharing of aggregate risk—but their net effect on the Sharpe ratio is small.     

Managed Futures for Long‐Term Investors: A DEA Ranking Analysis

This study proposes an alternative Data Envelopment Analysis ranking model to evaluate the relative performance efficiency of commodity‐trading advisors. I measure the performance efficiency using the decision‐making process quality/trading skills framework and depart from the traditional risk–return framework. The Data Envelopment Analysis rankings produced some interesting results. First, similarly to the previous studies, I successfully isolated two ‘superstar’ commodity‐trading advisors with the highest Sharpe ratios as the Grade A commodity‐trading advisors. However, as an improvement over the similar studies that used the traditional risk–return framework, I also isolated two commodity‐trading advisors with average and below‐average Sharpe ratios as Grade A commodity‐trading advisors.     

Adjusting for risk:: An improved Sharpe ratio

This paper proposes a new rule for risk adjustment and performance evaluation. This rule is a generalization of the well-known Sharpe ratio criterion, and under normal conditions enables a manager to correctly assess alternative risky investments. The rule is superior to existing rules such as the standard Sharpe rule and the RAROC, and can make a substantial difference in estimates of required returns.     

Prospect theory and liquidation decisions

We solve a liquidation problem for an agent with preferences consistent with the prospect theory of Kahneman and Tversky [Econometrica 47 (1979) 263-291]. We find that the agent is willing to hold a risky project with a relatively inferior Sharpe ratio if the project is currently making losses, and intends to liquidate it when it breaks even. On the other hand, the agent may liquidate a project with a relatively superior Sharpe ratio if its current profits rise or drop to the break-even point. Our results capture the spirit of the disposition effect and the break-even effect documented in empirical and experimental studies.     

Tests of the CAPM under structural changes

Abstract

In accordance with the empirical regularity of time-varying betas we estimate and test for the Sharpe–Lintner CAPM by allowing for structural change(s) in betas. Empirical applications using BM- and size-sorted decile portfolios suggest the following interesting results. Firstly, there exists at least one break for all the portfolios under consideration. Secondly, the estimated break dates are quite similar for some of the portfolios, indicating the possible existence of a common break using multivariate time series. Finally, we find the CAPM can be consistent with the data in some regimes but may appear to be inconsistent with the data in some other regimes. This particularly appealing feature has been completely ruled out under the conventional single-equation framework.     

Portfolios in the Ibex 35 before and after the Global Financial Crisis

In this article, we present an analysis of the effectiveness of various portfolio optimization strategies applied to the stocks included in the Spanish Ibex 35 index, for a period of 14 years, from 2001 until 2014. The period under study includes episodes of volatility and instability in financial markets, incorporating the Global Financial Crisis and the European Sovereign Debt Crisis. This implies a challenge in portfolio optimization strategies since the methodologies are restricted to the assignment of positive weights. We have taken for asset allocation the daily returns with an estimation window equal to 1 year and we hold portfolio assets for another year. This article attempts to influence the discussion over whether the naive diversification proves to be an effective strategy as opposed to portfolio optimization models. For that, we evaluate the out-of-sample performance of 15 strategies for asset allocation in the Ibex 35, before and after of the Global Financial Crisis. Our results suggest that a large number of strategies outperform to the 1/N rule and to the Ibex 35 index in terms of return, Sharpe ratio and lower VaR and CVaR. The mean-variance portfolio of Markowitz with short-sale constraints is the only strategy that renders a Sharpe ratio statistically different from Ibex 35 index in the 2001–2007 and 2008–2014 time periods.     

The association of pain with labor force participation,absenteeism, and presenteeism in Spain

Abstract

Objectives:

The aims of this paper are to generate estimates of the association between the severity and frequency of pain in Spain and (i) labor force participation and workforce status and (ii) patterns of absenteeism and presenteeism for the employed workforce.

Methods:

Data are from the internet-based 2010 National Health and Wellness Survey (NHWS). This survey covers both those who report experiencing pain in the last month as well as the no-pain population. An estimated 17.25% of adults in Spain report experiencing pain in the past month. A series of regression models are developed with the no-pain group as the reference category. The impact of pain, categorized by severity and frequency, is assessed within a labor supply framework for (i) labor force participation and (ii) absenteeism and presenteeism. Both binomial and multinomial logistic models are estimated.

Results:

The results demonstrate that severe and moderate pain has a significant, substantive, and negative association with labor force participation and, together with the experience of mild pain, a substantive impact on absenteeism and presenteeism within the employed workforce. Compared to no-pain controls, the strongest association is seen in the case of severe pain, notably severe daily pain and labor force participation (odds ratio 0.363; 95% CI: 0.206–0.637). The association of severe pain with labor force participation is also significant (odds ratio 0.356; 95% CI: 0.217–0.585). There is a clear gradient in the association of pain severity and frequency with labor force participation. The impact of pain is far greater than the potential impact of other health status measures (e.g., chronic comorbidities and BMI). Labor force participation is also adversely associated with pain experience. Persons reporting severe daily pain are far more likely not to be in the labor force (relative probabilities 0.339 vs 0.611). The experience of pain, notably severe and frequent pain, also outstrips the impact of other health status factors in absenteeism and presenteeism. In the former case, the odds ratio associated with severe daily pain is 16.216 (95% CI: 5.127–51.283), which contrasts to the odds ratio for the Charlson comorbidity index of 1.460 (95%CI: 1.279–1.666). Similar results hold for presenteeism. The contribution of moderate and mild pain to absenteeism and presenteeism is more marked than for labor force participation.

Conclusions:

The experience of pain, in particular severe daily pain, has a substantial negative impact both on labor force participation in Spain as well as reported absenteeism and presenteeism. As a measure of health status, it clearly has an impact that outstrips other health status measures. Whether or not pain is considered as a disease in its own right, the experience of chronic pain, as defined here, presents policy-makers with a major challenge. Programs to relieve the burden of pain in the community clearly have the potential for substantial benefits from societal, individual, and employer perspectives.     

Using observational analysis of multiple sclerosis relapse to design outcomes-based contracts for disease-modifying drugs: a feasibility assessment

Abstract

Objective:

To assess predictors and costs of multiple sclerosis (MS) relapse, a potential outcome measure in payer-manufacturer risk-sharing agreements for disease-modifying drugs (DMDs).

Methods:

A retrospective cohort analysis of medical/pharmacy claims was used. Study patients had ≥1 DMD (interferon beta, glatiramer, natalizumab) claim, without DMD claims in a 6-month pre-period before DMD initiation; were aged 18–64 years and continuously enrolled from the pre-period through a 24-month post-period; and had ≥2 MS medical claims during the 30-month study period. Post-period relapse cohorts included: (1) severe (hospitalization with MS diagnosis); (2) moderate (outpatient services including intravenous methylprednisolone); and (3) none. Poisson regression modeled severe relapse frequency, logistic regression modeled ≥1 severe relapse, and generalized linear modeling predicted healthcare costs. Tested predictors included demographics, insurance type, index DMD, pre-period health status, and DMD medication possession ratio (MPR).

Results:

Severe relapse was experienced by 14.5% and moderate relapse by 13.8% of 2291 patients. In logistic regression, severe relapse was predicted by plan type; age (odds ratio [OR]?=?1.018, 95% confidence interval [CI]?=?1.005–1.031); pre-period Charlson Comorbidity Index (OR?=?1.307, 95% CI?=?1.166–1.464); pre-period proxy measure indicating impaired activities of daily living (OR?=?1.470, 95% CI?=?1.134–1.905); pre-period MS hospitalization (OR?=?2.174, 95% CI?=?1.537–3.074); and DMD non-adherence (MPR OR?=?0.101, 95% CI?=?0.068–0.151). Poisson regression results were similar. Predicted mean [standard deviation] all-cause healthcare expenditures were tripled for patients with severe compared with moderate relapse ($48,173 [$8665] and $13,334 [$1929], respectively).

Limitations:

Commercially insured patients from a single payer; use may have been inconsistent with approved indications; proxy relapse measure may have misclassified patients.

Conclusions:

Severe MS relapses requiring hospitalization, although affecting less than 15% of patients initiating DMD treatment, are associated with high medical costs. The only actionable predictor of severe relapse identified in observational analysis was MPR, raising questions about the feasibility of using observational data to guide outcomes-based contracting.     

Inflation expectations of Brazilian consumers: an analysis based on the FGV survey

ABSTRACT

An accurate assessment of inflation expectations is crucial for the management of monetary policies. However, expectations are not directly observed and are hence normally inferred either from the interest rate structure or from surveys of professional forecasters. Alternatively, a direct measure may be obtained from consumer surveys. The aim of this paper is to study the formation of inflation expectations in Brazil, using a novel dataset based on the FGV/IBRE consumer survey. Basing our model on the rational inattention hypothesis, we find that individual heterogeneity plays a very significant role in shaping individual expectations; also, Brazilians adjust expectations to current inflation and to a fixed reference value, while professional forecasts do not play a very relevant role.     

消费习惯、异质偏好与动态资产定价:纯交换经济情形

本文用Chan和Kogan、Bask和Cuoco等的方法考虑纯交换经济下的定价问题,我们引进了两个投资者:一个具有外在性消费习惯;一个不具有消费习惯。我们重点考察消费习惯对投资者的最优消费规则的影响以及对资产价格的确定。此外,我们还考虑了对数效用函数下,消费习惯以差的形式出现的情形下的消费规则和定价问题。我们发现当两个投资者中一个具有消费习惯而另一个不具有该习惯时,消费习惯同时改变两个投资者的最优消费规则、消费动态和财富动态。此时的动态资产定价受外在性消费习惯的影响,即时Sharpe比为常数,并等于同质量经济下的即时Sharpe比。同时,如果考虑对数效用函数下消费习惯以差的形式出现,则即时Sharpe比是时变的,反周期的。     

Influence of firm performance and gender on CEO compensation

In this article we continue the examination of top executive pay by comparing performance, total pay and the influence of CEO gender. We analyse compensation differences between male and female CEOs using nonparametric analysis. We calculate the potential compensation for each executive using two benchmarks. First, each executive's performance and compensation are evaluated relative to members of the same gender to produce a same-gender measure of under-compensation. Each executive's compensation is also benchmarked against the other gender's potential compensation, producing an other-gender measure of under-compensation. Together, both measures allow an analysis of the gender-specific potential salaries of each executive while controlling for performance. The approach is applied to a sample of male and female executives. The results indicate that women are under-compensated.     

Comparison of Some Static Hedging Models of Agricultural Commodities Price Uncertainty

In static framework, many hedging strategies can be settled following the various hedge ratios that have been developed in the literature. However, it is difficult to choose among them the best the appropriate strategy according the to preference or economic behavior of the decision-maker such as prudence and temperance. This is so even with the hedging effectiveness measure. After introducing a hedging ratio that take into account the prudence and temperance of the decision maker, we propose a ranking based approach to measure the effectiveness using L-moment to classify hedge portfolios, hence hedge ratios, with regard to their performance. Moreover, we deal with the hedging issue in presence of quantity and rollover risks and derive an optimal strategy that depends upon the basis and insurance contract. Such hedging issue includes the relevant risks encountered in practice and we relate how insurance contract, specially designed for production risk could affect the futures hedge. The application on some agricultural futures prices data at hands shows that taking into account quantity and rollover risks leads to better hedging strategy based on the L-performance effectiveness measure.

     

Psychometric evaluation of Global Evaluation of Treatment Effectiveness: a tool to assess patients with moderate-to-severe allergic asthma

Summary

Recent trials of treatment for patients with moderate to severe allergic (immunoglobulin E-mediated) asthma have included a Global Evaluation of Treatment Effectiveness (GETE), which is completed by both the patient and the physician. The current analyses were designed to explore some psychometric properties of this measure using secondary analysis of trial data.

The results found some evidence to support the psychometric properties of the measure, and some evidence that was more equivocal. The GETE had low to moderate rates of missing data. There was also a high level of agreement between the two measures. The five levels of the GETE were significantly differentiated in terms of symptom scores, use of rescue medication and forced expiratory volume (physician version only), and health-related quality of life (Asthma Quality of Life Questionnaire).

The GETE is a simple measure of perceived treatment effectiveness that reflects clinical outcomes and health-related quality of life, and is not burdensome for patients or physicians.     

Cost-utility analyses of targeted immunomodulators in rheumatoid arthritis: systematic review

Abstract

Aims: Cost-utility (CU) modeling is a common technique used to determine whether new treatments represent good value for money. As with any modeling exercise, findings are a direct result of methodology choices, which may vary widely. Several targeted immuno-modulators have been launched in recent years to treat moderate-to-severe rheumatoid arthritis (RA) which have been evaluated using CU methods. Our objectives were to identify common and innovative modeling choices in moderate-to-severe RA and to highlight their implications for future models in RA.

Materials and methods: A systematic literature search was conducted to identify CU models in moderate-to-severe RA published from January 2013 to June 2019. Studies must have included an active comparator and used quality-adjusted life-years (QALYs) as the common measure of effectiveness. Modeling methods were characterized by stakeholder perspective, simulation type, mapping between parameters, and data sources.

Results: Thirty-one published modeling studies were reviewed spanning 13 countries and 9 drugs, with common methodological choices and innovations observed among them. Over the evaluated time period, we observed common methods and assumptions that are becoming more prominent in the RA CU modeling landscape, including patient-level simulations, two-stage models combining trial results and real-world evidence, real-world treatment durations, long-term health consequences, and Health Assessment Questionnaire (HAQ)-related hospitalization costs. Models that consider the societal perspective are increasingly being developed as well.

Limitations: This review did not consider studies that did not report QALYs as a utility measure, models published only as conference abstracts, or cost-consequence models that did not report an incremental CU ratio.

Conclusions: CU modeling for RA increasingly reflects real-world conditions and patient experiences which are anticipated to provide better information in the assessment of health technologies. Future CU models in RA should consider applying the observed advances in modeling choices to optimize their CU predictions and simulation of real-world outcomes.     

Cost-effectiveness of insulin degludec compared with insulin glargine in a basal-bolus regimen in patients with type 1 diabetes mellitus in the UK

Abstract

Objective:

The aim of this study was to evaluate the cost-effectiveness of insulin degludec (IDeg) vs insulin glargine (IGlar) as part of a basal-bolus treatment regimen in adults with T1DM, using a short-term economic model.

Methods:

Data from two phase III clinical studies were used to populate a simple and transparent short-term model. The costs and effects of treatment with IDeg vs IGlar were calculated over a 12-month period. The analysis was conducted from the perspective of the UK National Health Service. Sensitivity analyses were conducted to assess the degree of uncertainty surrounding the results. The main outcome measure, the incremental cost-effectiveness ratio (ICER), was the cost per quality-adjusted life-year (QALY).

Results:

IDeg is a cost-effective treatment option vs IGlar in patients with T1DM on a basal-bolus regimen. The base case ICER was estimated at £16,895/QALY, which is below commonly accepted thresholds for cost-effectiveness in the UK. Sensitivity analyses demonstrated that the ICER was stable to variations in the majority of input parameters. The parameters that exerted the most influence on the ICER were hypoglycemia event rates, daily insulin dose, and disutility associated with non-severe nocturnal hypoglycemic events. However, even under extreme assumptions in the majority of analyses the ICERs remained below the commonly accepted threshold of £20,000–£30,000 per QALY gained.

Conclusions:

This short-term modeling approach accommodates the treat-to-target trial design required by regulatory bodies, and focuses on the impact of important aspects of insulin therapy such as hypoglycemia and dosing. For patients with T1DM who are treated with a basal-bolus insulin regimen, IDeg is a cost-effective treatment option compared with IGlar. IDeg may be particularly cost-effective for sub-groups of patients, such as those suffering from recurrent nocturnal hypoglycemia and those with impaired awareness of hypoglycemia.     

Investment performance of shorted leveraged ETF pairs

We analyze investment strategies involving triple-leveraged and inverse triple-leveraged ETF pairs by simulating daily returns over a 48-year period. Our results show that many such strategies significantly outperform the S&P 500 on a risk-adjusted basis. For example, when shorting the bear triple-leveraged ETF and the bull triple-leveraged ETF in a 2:1 proportion (while going long Treasuries), we find that the average annual Sharpe ratio is more than four times higher than for the S&P 500 and that the strategy outperforms the S&P 500 in 43 of the 48 years. Our results are robust to variations in bear/bull proportions, rebalance thresholds, and underlying parameters.