On the equivalence of the static and dynamic asset allocation problems

A classic dynamic asset allocation problem optimizes the expected final-time utility of wealth, for an individual who can invest in a risky stock and a risk-free bond, trading continuously in time. Recently, several authors considered the corresponding static asset allocation problem in which the individual cannot trade but can invest in options as well as the underlying. The optimal static strategy can never do better than the optimal dynamic one. Surprisingly, however, for some market models the two approaches are equivalent. When this happens the static strategy is clearly preferable, since it avoids any impact of market frictions. This paper examines the question: when, exactly, are the static and dynamic approaches equivalent? We give an easily tested necessary and sufficient condition, and many non-trivial examples. Our analysis assumes that the stock follows a scalar diffusion process, and uses the completeness of the resulting market model. A simple special case is when the drift and volatility depend only on time; then the two approaches are equivalent precisely if (μ (t)? r)/σ²(t) is constant. This is not the Sharpe ratio or the market price of risk, but rather a nondimensional ratio of excess return to squared volatility that arises naturally in portfolio optimization problems.     

Discretion vs. timeless perspective under model-consistent stabilization objectives

Recent literature has reported situations in which discretion dominates timeless perspective in the presence of elements that reduce the slope of the New Keynesian Phillips curve. Considering a model-consistent welfare metric inhibits this mechanism in the standard New Keynesian framework.     

Ownership concentration and firm risk: The moderating role of mid-sized blockholders

This study analyzes the relationship between mid-sized blockholders and firm risk. We show that ownership structure matters for firm risk beyond the first largest blockholder. Firms with multiple blockholders take more risk than firms with just one blockholder, even when controlling for the stake of the largest blockholder. Consistent with the diversification argument, we find that firm risk increases by 22% when the number of blockholders increases from one to two. Our results are robust to controlling for blockholder type and firm characteristics. We carry out various robustness checks to tackle endogeneity issues. More generally, we provide evidence that firms’ decisions are affected by mid-sized blockholders and not merely the largest blockholder. This is in line with theoretical predictions.     

Estimation of slowly decreasing Hawkes kernels: application to high-frequency order book dynamics

We present a modified version of the non parametric Hawkes kernel estimation procedure studied in Bacry and Muzy [arXiv:1401.0903, 2014] that is adapted to slowly decreasing kernels. We show on numerical simulations involving a reasonable number of events that this method allows us to estimate faithfully a power-law decreasing kernel over at least six decades. We then propose a eight-dimensional Hawkes model for all events associated with the first level of some asset order book. Applying our estimation procedure to this model, allows us to uncover the main properties of the coupled dynamics of trade, limit and cancel orders in relationship with the mid-price variations.     

Gender,Honor, and Aggregate Fertility

This article examines the tension between population‐level and individual‐level interests regarding childbearing, from Malthus's concern for overpopulation to the contemporary issue of son preference, and argues for an understanding of individual‐level interests that distinguishes parents from households. In making this distinction, we draw attention to how gender norms can play an important role in shaping reproductive interests. Survey data and previous work show a wealth of differences in the number of children men and women would like to have, and in their behaviors toward the children they have. We argue not that gender norms cause women to want more children than men, but that they cause women to want children more, for reasons that include time spent with children, old‐age support, women's proscribed opportunities for achieving social standing, and the relationship in many contexts between honorable female adulthood and bearing children at the right time and under the right circumstances. We further argue that a just and effective population policy must consider fertility outcomes at multiple scales, including that of the welfare of individual women.     

Food for Kids: How Children Influence their Parents Purchasing Decisions

During the last decades, sociological changes have modified the role of children within families: participatory models have become more widespread, to the detriment of more authoritative ones: this change has had consequences also in reference to families’ purchases. In scientific literature some scholars have shown that this influence is real, and marketers try to take advantage of this through a communication style that attempts to “teach” children how to pester their parents: this is the so-called nag factor. To understand which are the parental attitudes toward kids’ food products, a questionnaire has been administered in schools (nursery and primary) to a random sample of parents, representative of a larger sample of kids (200 in all). Findings showed that pestering is a real attitude, in particular among the littlest children. Moreover, these findings reflect in part the reality described by marketing literature: children influence the purchasing decisions of their parents, but this influence decreases when mothers and fathers are more aware of the importance of a quality-based diet.     

The Concurrent Impact of Cultural,Political, and Spatial Distances on International Mergers and Acquisitions

This paper explores the concurrent effects of cultural, political, and spatial distances on mergers and acquisitions (M&A) flows occurring between any two countries belonging to the whole European Union (27 States) or to the European Neighbours group (16 States) over the period 2000–11. In the econometric analysis, based on zero‐inflated models, we simultaneously estimate the probability of engaging in a cross‐border M&A and the intensity of the deals. This allows us to adequately model the two different mechanisms which may result in the absence of deals in the cross‐border bilateral M&A transactions. The absence of deals may be due to either the lack of any transactions or unsuccessful negotiations. Taking into account the effect of population, gross domestic product, technological capital, financial conditions and quality of the institutions, we find robust evidence that the multi‐dimensional distance between two countries negatively affects both the probability and the intensity of M&A deals.     

Financial effects of an uncertain change in VAT rates in the EU

The paper analyses how close relationships to banks influence a firm’s choice of financing its debt through publicly marketed bonds or bank loans. It is shown that large Japanese firms use less bank debt, if banks own shares in the firm or bank employees are members of the firm’s board. This result supports a theoretical framework, where banks are able to control agency problems associated with debt. Firms use bank loans in order to be monitored, which enables them to access cheaper bond finance. Closer bank–firm relationships facilitate monitoring for the bank and reduce therefore the need for bank finance.