Risk in Dynamic Arbitrage: The Price Effects of Convergence Trading

I develop an equilibrium model of convergence trading and its impact on asset prices. Arbitrageurs optimally decide how to allocate their limited capital over time. Their activity reduces price discrepancies, but their activity also generates losses with positive probability, even if the trading opportunity is fundamentally riskless. Moreover, prices of identical assets can diverge even if the constraints faced by arbitrageurs are not binding. Occasionally, total losses are large, making arbitrageurs' returns negatively skewed, consistent with the empirical evidence. The model also predicts comovement of arbitrageurs' expected returns and market liquidity.     

The Dynamics of Capital Flow Episodes

We first propose a novel methodology for identifying episodes of strong equity and bond flows using estimates from a regime-switching model that keeps context- and sample-specific assumptions to a minimum. We then assess the impacts of U.S. stock market volatility (VIX) and U.S. monetary policy shocks on equity and bond flow episodes. Our results indicate that the impacts of both shocks differ across in- and outflow episodes and, based on an assessment of equity flows, vary considerably over time. While VIX shocks are mostly associated with asymmetric impacts across episodes, U.S. monetary policy shocks generate such asymmetries primarily over time.     

Rolling Regression Analysis of the Pástor-Stambaugh Model: Evidence from Robust Instrumental Variables

The capital asset pricing model (CAPM), Fama-French (FF), and Pástor-Stambaugh (PS) factor models are examined using a new dynamic rolling regression version of the generalized method of moments (GMM) method. This rolling regression framework not only allows us to investigate phases of the business cycle, but also permits regression estimates to vary through time due to changes in the development and efficiency of the sectors. The principal reasons for using the dynamic GMM with robust instruments is that some of these factors are measured with errors and the disturbances may be non-spherical. The CAPM appears as the most parsimonious model to explain the FF sector returns. Furthermore, the rolling GMM approach is clearly more sensitive to dynamic financial episodes than the ordinary least squares approach. In particular, liquidity has some anticipatory power, as it is able to forecast the 2007–2009 crises with heightened volatility starting in late 2005.     

The size structure of manufacturing establishments and enterprises: An international comparison

The development of the size structure of manufacturing establishments in 18 countries is analyzed by use of employment data. The data base for investigation of changes from the beginning of this century up to World War II is not extensive, but after that a unified statistical system of data is available. The paper reviews to what extent pre-World Wor II trends survived and what new characteristics emerged after World War II in countries under different social systems. Some hypotheses concerning causes and effects of the examined phenomena are offered.     

Constant supervision of bathing in French public swimming pools: an unrealistic regulatory requirement?

In France, to prevent drowning accidents in public swimming pools (PSPs), bathing must be constantly supervised by qualified staff. However, fatal drowning regularly occurs in supervised aquatic facilities. A review of the literature shows that human supervision is a complex task. The aim of this research is to fully assess the periods during which supervision is not carried out, or carried out in an inadequate manner. The observations made in 108 French PSPs show that supervision is not carried out 18% of the time and that it is carried out inadequately 33% of the time. The medical literature shows that, in order to expect to survive without after-effects, an immersed victim requires intervention within a time limit of not more than three minutes; however, we noted, over a total observation time of 54 hours, 147 periods (29.8%) during which the supervision system was degraded for three minutes or more. This quantification research on the periods of degraded supervision is complemented by an identification of the causes leading to these degradations, from which we can draw interesting areas for improvement, particularly from an organizational point of view, in order to improve safety management in French PSPs.