Cover's universal portfolio,stochastic portfolio theory,and the numéraire portfolio

Cover's celebrated theorem states that the long‐run yield of a properly chosen “universal” portfolio is almost as good as that of the best retrospectively chosen constant rebalanced portfolio. The “universality” refers to the fact that this result is model‐free, that is, not dependent on an underlying stochastic process. We extend Cover's theorem to the setting of stochastic portfolio theory: the market portfolio is taken as the numéraire, and the rebalancing rule need not be constant anymore but may depend on the current state of the stock market. By fixing a stochastic model of the stock market this model‐free result is complemented by a comparison with the numéraire portfolio. Roughly speaking, under appropriate assumptions the asymptotic growth rate coincides for the three approaches mentioned in the title of this paper. We present results in both discrete and continuous time.     

Migrants’ Influence on Firm-level Exports

We examine the role of migrants in trade using a firm-level approach. We exploit a new employer–employee panel for Sweden, which encompasses close to 600,000 full-time employees, approximately 12,000 firms and data for 176 countries for the period 1998–2007. The resulting analysis provides novel firm-level evidence on the trade-migration relationship. Foreign-born workers have a positive association with firm exports. However, immigrants do not have an unconditional positive impact on firm trade. Mainly small firms gain from hiring foreign-born workers, and migrants need to be skilled and recently arrived to have a clear positive impact on firm export performance.     

Network embeddedness and new-venture internationalization: Analyzing international linkages in the German biotech industry

This paper examines whether inter-organizational factors influence German biotech firms' propensity to internationalize by forming international research alliances. Inter-organizational factors include dimensions of a firm's embeddedness within its local cluster and within its national research network. We test two sets of hypotheses (local and national network-drivers) on a longitudinal event history dataset of the complete German biotech population for the years 1995–2004. Findings show that location in a local cluster already dense with international linkages, the building of research alliances with local research institutes as well as national partners and central position in the national research network increase the probability of forming international research alliances.     

Zero‐interest Rate Policy and Unintended Consequences in Emerging Markets

Since 2009, central banks in the major advanced economies have held interest rates at very low levels to stabilise financial markets and support the recovery of their economies. This paper outlines the unintended consequences of the prolonged period of very low world funding interest rates in emerging markets. The paper is informed by a Mises–Hayek‐BIS view on credit booms and Mises' law of unintended consequences. Consistent with the presented credit boom view, I provide evidence that the very low world funding interest rates are associated with a rise in volatile capital flows and asset market bubbles in fast‐growing emerging markets. In line with Mises' law, I further show that these unintended consequences give rise to a new wave of interventionism as policymakers in emerging markets increasingly reintroduce financially repressive measures to isolate the economies from foreign capital inflows.     

Money Does Not Grow on Trees: An Argument for Usury

Usury, charging a higher interest rate than thought by some to be “fair,” has had and still has, a bad press. Historically, it was heavily punished. It was then, and all too often is now, thought to be exploitative. Yet, as even the most economically unsophisticated must realize, both sides of these transactions must necessarily gain at least in the ex ante sense, otherwise one or the other would refuse to enter into the deal in the first place. The present paper is an attempt to justify the practice of charging interest on loans, at any rate agreeable to both borrowers and lenders.