Forecasting the performance of hedge fund styles

This article predicts the relative performance of hedge fund investment styles using time-varying conditional stochastic dominance tests. These tests allow for the construction of dynamic trading strategies based on nonparametric density forecasts of hedge fund returns. During the recent financial turmoil, our tests predict a superior performance for the Global Macro investment style compared with the other strategies of ‘Directional Traders’. The Dedicated Short Bias investment style is stochastically dominated by the other directional styles. These results are confirmed by simple nonparametric tests constructed from realized excess returns. Further, by utilizing a cross-validation method for optimal bandwidth parameter selection, we discover the factors that have predictive power regarding the density of hedge fund returns. We observe that different factors have forecasting power for different regions of the returns distribution and, more importantly, that the Fung and Hsieh factors have power not only for describing the risk premium but also, if appropriately exploited, for density forecasting.     

Structural estimation of a principal-agent model: moral hazard in medical insurance

Despite the importance of principal-agent models in the development of modern economic theory, there are few estimations of these models. I recover the estimates of a principal-agent model and obtain an approximation to the optimal contract. The results show that out-of-pocket payments follow a concave profile with respect to costs of treatment. I estimate the welfare loss due to moral hazard, taking into account income effects. I also propose a new measure of moral hazard based on the conditional correlation between contractible and noncontractible variables.     

Pricing growth-indexed bonds

Growth-indexed bonds have been suggested as a way of reducing the procyclicality of emerging-market countries’ fiscal policies and the likelihood of costly debt crises. Investor attitude surveys suggest that pricing difficulties are seen as a considerable obstacle. In an effort to reduce such concerns, this article presents a simple way of pricing growth-indexed bonds. As a pleasant by-product, the analysis tracks the quantitative implications of an increase in the share of growth-indexed bonds in total debt, measuring the ensuing decline in the probability of default and the reduction in the spreads at which standard bonds can be issued.     

Accumulation pattern of the Brazilian economy in the 1990s and 2000s

This paper investigates the dynamic relationships among income distribution, debt ratio and capital accumulation in the Brazilian economy in the 1990s and 2000s. One explanation for the relatively slow growth of the Brazilian economy is the relatively low rate of investment. The paper presents an econometric model, based on Nishi, to investigate the causes of instability in investment in the period. It concludes that the Brazilian economy since the economic opening presents a debt-burdened pattern of capital accumulation.     

Economic transformation, population growth and the long-run world income distribution

We present and calibrate a model where trade with advanced economies spurs development, and trade opportunities depend on the relative population in advanced and developing countries. As developing countries become advanced, prospects improve for the remaining developing countries. If population growth differentials between developing and advanced economies are small, economic development accelerates over time. Otherwise, long-run global prosperity requires a sufficiently large initial population in advanced countries. More open countries develop faster, but more openness by all developing countries may only modestly increase their aggregate growth. China's development may hurt developing countries in the short-run, but improves their long-run prospects.     

Single and Double Black–Cox: Two approaches for modelling debt restructuring

In this paper we propose two first-passage-time approaches for pricing debt and equity when the firm is able to restructure its debt as an alternative to liquidation. In contrast to other first passage models that account for reorganization, our approaches allow the firm to restructure its debt by changing its maturity and/or its face value. The first approach developed consists of a first-passage model for reorganization together with a Merton approach for default, while the second approach uses first-passage models for both reorganization and default. We also provide a comparison of the proposed approaches with the Merton (Merton, R.C., 1974. On the pricing of corporate debt: The risk structure of interest rates. Journal of Finance, 29, 449–470.) and Black and Cox (Black, F. and Cox, J.C., 1976, Valuing corporate securities: Some effects of bond indenture provisions. Journal of Finance, 31, 351–367.) models.     

Building,coding and programming 3D models via a visual programming environment

This paper presents the findings of a study conducted in the state-funded Infant, Primary and Secondary School Santísima Trinidad in Salamanca. The main objectives of the research were, to evaluate the use of the visual programming environment, Lego Education WeDo, in natural science and to know the benefits of the use of this tool to teach abstract concepts, solve problems and motivate students. In order to achieve these objectives, we used the case study method since we focused on individuals who represented the phenomenon of our interest, and explored and investigated in depth the phenomenon in its natural context bounded by time and space. In the research were involved a teacher and fifty-two students of 4th grade of primary education. The study found that the project developed was effective to help students to achieve the learning objectives of the unit, and also to begin building, coding and programming 3D models. The research showed the teacher’ fundamental role as a guide and students’ active role as builders, programmers, or presenters. There were evidences of the possibilities offered to acquire the skills of critical thinking, creative thinking, problem solving, reflection, collaboration, communication, and time management. Due to the positive results obtained in this study, it is recommended to incorporate computational thinking in primary education and in core content areas since it is fundamental in the current society.     

Towards a New Flashmob Unionism: The Case of the Fight for 15 Movement

Unionism renewal has been described as a hybridization process between ‘old’ and ‘new’ logics. Understanding how these two potentially conflicting logics might be combined, however, has so far received little attention. Through the study of the Fight for 15 (FF15) movement, we investigate how the old ‘collectivist’ logic of action-oriented unions and the new ‘connectivist’ logic are being hybridized. To do so, we develop a mixed-methods approach that combines interviews with Twitter data. We evidence three mechanisms through which the collectivist and connectivist logics are being hybridized, namely, imbrication, camouflage and cumulation. We suggest to name ‘flashmob unionism’ the hybrid logic of FF15, characterized by apparently spontaneous mobilizations, a loosely co-ordinated organization, a personalized communication and online virality.     

Behavioral portfolio insurance strategies

Financial Markets and Portfolio Management - Portfolio insurance strategies that ensure a certain minimum portfolio value or floor such as the Constant Proportion Portfolio Insurance (CPPI) and the...     

Valuing ecosystem services of urban forests and open spaces: application of the SEEA framework in Australia*

Around two‐thirds of the global population will live in cities by 2050 requiring large urban infrastructure development. Decision‐makers and planners usually rely on standard economic accounting methods for urban planning and investments on infrastructure assets. However, standard methods fail to account for the ecosystem services benefits that living infrastructure (e.g. urban forests, open spaces) provides to city dwellers. This could generate socially inefficient configurations of urban spaces and compromise the achievement of long‐term urban sustainability targets. In this analysis, we applied a stochastic whole‐of‐life benefit–cost analysis following the System of Environmental‐Economic Accounting (SEEA) framework to compare alternative long‐term management strategies for living infrastructure in Canberra, Australia. Spatially explicit data, i‐Tree Eco and benefit transfer methods were used to estimate the stocks and flows ecosystem services benefits of urban forests and irrigated open spaces from 2018 to 2070. Our analysis suggests that a ’30 per cent canopy cover expansion’ scenario has the highest benefit–cost ratio, while the business as usual scenario, where a net loss of 400 trees is expected per year, offers the lowest benefit–cost ratio. Scenarios of expanding versus not expanding irrigated open spaces in the future both result in a benefit–cost ratio of approximately two.