The surplus prior to ruin and the deficit at ruin for a correlated risk process

This paper presents an explicit characterization for the joint probability density function of the surplus immediately prior to ruin and the deficit at ruin for a general risk process, which includes the Sparre-Andersen risk model with phase-type inter-claim times and claim sizes. The model can also accommodate a Markovian arrival process which enables claim sizes to be correlated with the inter-claim times. The marginal density function of the surplus immediately prior to ruin is specifically considered. Several numerical examples are presented to illustrate the application of this result.     

Trading networks and liquidity provision

We study the profitability of traders in two fully electronic and highly liquid markets: the Dow and Standard & Poor?s 500 e-mini futures markets. Using unique information that identify counterparties to a transaction, we show and seek to explain the fact that the network pattern of trades captures the relations between behavior in the market and returns. Our approach includes a simple representation of how much a shock is amplified by the network and how widely it is transmitted. This representation provides a possible shorthand for understanding the consequences of a fat-finger trade, a withdrawing of liquidity, or other market shock.     

Global industry portfolios and short-term predictability of returns: Is it there?

This paper explores the degree of success of a large set of active trading rules that have been popularized in the literature on the short-term predictability of returns in equity and foreign exchange markets by extending the scope of research in three dimensions: global portfolios, industry portfolios, and exclusive versus inclusive portfolios. Our results show that after adjusting for (1) the impact of nonsynchronous prices in the reported closing index levels which causes spurious autocorrelations in returns, (2) data snooping bias caused by searching through a large number of possible trading strategies in order to find a few that yield superior in-sample performance, and (3) transaction costs that reduce any profits from active trading, the risk-adjusted profits generated by short-term trend chasing trading rules are generally not statistically significant and the hypothesis of no outperformance of trading rules over either buy-and-hold or risk-free benchmark return cannot be rejected in most industries. Such findings favor short-term market efficiency and are hardly comforting for active traders.     

Immigration,remittances and business cycles

Using data on border enforcement and macroeconomic indicators from the U.S. and Mexico, we estimate a two-country business cycle model of labor migration and remittances. The model matches the cyclical dynamics of unskilled migration, and documents the insurance role of remittances in consumption smoothing. Over the cycle, immigration increases with the expected stream of future wage gains, but it is dampened by a sunk emigration cost. Migration barriers slow the adjustment of the stock of immigrant labor, enhancing the volatility of unskilled wages and remittances. Changes in border enforcement have asymmetric welfare implications for the skilled and unskilled households.     

The value relevance of earnings in a transition economy: The case of Romania

We investigate the value relevance of earnings on the Bucharest Stock Exchange. We find that the association between accounting earnings and stock returns is comparable to the levels reported by studies conducted on more mature markets, and that it is higher for securities issued by small companies. Excluding losses from the analysis increases the value relevance of earnings, which confirms the transitory nature of negative earnings, already documented by prior studies. We also find that the regression coefficient of earnings changes is negative and we provide evidence consistent with the hypothesis that it is a consequence of the relative inefficiency of the market. Finally, the “prices lead earnings” hypothesis formulated for more mature markets is not supported by our results.     

Cost-effectiveness of hydrophilic-coated intermittent catheters compared with uncoated catheters in Canada: a public payer perspective

Study design: A Markov model was used to analyze cost-effectiveness over a lifetime horizon.

Objective: To investigate the cost-effectiveness of hydrophilic-coated intermittent catheters (HCICs) compared with uncoated catheters (UCs) among individuals with neurogenic bladder dysfunction (NB) due to spinal cord injury (SCI).

Setting: A Canadian public payer perspective based on data from Ontario; including a scenario analysis from the societal perspective.

Methods: A previously published Markov decision model was modified to compare the lifetime costs and quality-adjusted life years (QALYs) for the two interventions. Three renal function and three urinary tract infection (UTI) health states as well as other catheter-related events were included. Scenario analyses, including utility gain from compact catheter and phthalate free catheter use, were performed. Deterministic and probabilistic sensitivity analyses were conducted to evaluate the robustness of the model.

Results: The model predicted that a 50-year-old patient with SCI would gain an additional 0.72 QALYs if HCICs were used instead of UCs at an incremental cost of $48,016, leading to an incremental cost-effectiveness ratio (ICER) of $66,634/QALY. Moreover, using HCICs could reduce the lifetime number of UTI events by 11%. From the societal perspective, HCICs cost less than UCs, while providing superior outcomes in terms of QALYs, life years gained (LYG), and UTIs. The cost per QALY further decreased when health-related quality-of-life (HRQoL) gains associated with compact HCICs or catheters not containing phthalates were included.

Conclusion: In general, ICERs in the range of CAD$50–100,000 could be considered cost-effective. The ICERs for the base case and sensitivity analyses suggest that HCICs could be cost-effective. From the societal perspective, HCICs were associated with potential cost savings in our model. The results suggest that reimbursement of HCICs should be considered in these settings.     

The impact of different scenarios for intermittent bladder catheterization on health state utilities: results from an internet-based time trade-off survey

Aims: Intermittent catheterization (IC) is the gold standard for bladder management in patients with chronic urinary retention. Despite its medical benefits, IC users experience a negative impact on their quality of life (QoL). For health economics based decision making, this impact is normally measured using generic QoL measures (such as EQ-5D) that estimate a single utility score which can be used to calculate quality-adjusted life years (QALYs). But these generic measures may not be sensitive to all relevant aspects of QoL affected by intermittent catheters. This study used alternative methods to estimate the health state utilities associated with different scenarios: using a multiple-use catheter, one-time-use catheter, pre-lubricated one-time-use catheter and pre-lubricated one-time-use catheter with one less urinary tract infection (UTI) per year.

Methods: Health state utilities were elicited through an internet-based time trade-off (TTO) survey in adult volunteers representing the general population in Canada and the UK. Health states were developed to represent the catheters based on the following four attributes: steps and time needed for IC process, pain and the frequency of UTIs.

Results: The survey was completed by 956 respondents. One-time-use catheters, pre-lubricated one-time-use catheters and ready-to-use catheters were preferred to multiple-use catheters. The utility gains were associated with the following features: one time use (Canada: +0.013, UK: +0.021), ready to use (all: +0.017) and one less UTI/year (all: +0.011).

Limitations: Internet-based survey responders may have valued health states differently from the rest of the population: this might be a source of bias.

Conclusion: Steps and time needed for the IC process, pain related to IC and the frequency of UTIs have a significant impact on IC related utilities. These values could be incorporated into a cost utility analysis.     

Predictability of equity returns during a financial crisis

An occurrence of a market crash or a financial crisis has long been considered a cause of market inefficiency. An inefficient market commonly implies return predictability and the existence of profitable opportunities for traders and speculators. Technical analysis has been a popular tool to identify predictable patterns in asset prices. The usefulness of a large universe of technical trading rules popularized in the existing literature on technical analysis is tested when they are applied to a set of equity markets that are generally considered developed and efficient during the two most recent periods of major financial turmoil: the 1997 Asian financial crisis and the 2008 global financial crisis. Three major statistical deficiencies that existing studies on return predictability are commonly criticized for – data snooping bias, nonsynchronicity bias and transaction costs – have been incorporated in the analysis. Technical trading rules are largely unable to yield abnormal excess returns over the passive benchmark after data snooping bias, nonsynchronous pricing and transaction costs are accounted for. Chaotic price movements typical for a volatile market during a financial crisis are likely to have an adverse effect on the performance of active trend chasing trading strategies.