Investors’ perspective on portfolio insurance

Portuguese Economic Journal - This study supports the use of behavioural finance to explain the popularity of portfolio insurance. Portfolio insurance strategies are important financial solutions...     

Can Leaders of Public Companies Make Them Innovative?

Public companies have limitations to innovate because they are usually concentrated on short‐term results and are subjected to scrutiny and accountability in their innovation projects. Therefore, leaders of public companies face a greater challenge if they want their companies to be innovative. Leaders must make use of all their creativity and leadership skills to accomplish short‐term goals and at the same time foster the innovation that companies need to remain successful.     

Dynamic Efficiency Measurement: Theory and Application

Nonparametric dynamic measures of production efficiency are developed in the context of an adjustment-cost technology and intertemporal cost minimization. Bounds on each efficiency measure are derived for each firm using a nonparametric revealed preference approach. Long-run efficiency measures indicate the relative efficiency of both variable and dynamic factors while short-run measures of efficiency indicate whether variable inputs are employed efficiently in the production process. The efficiency measures are temporal in nature by describing the degree of efficiency of the firm at a particular point along its adjustment path. The empirical implementation is illustrated for a balanced panel of Pennsylvania dairy operators during 1986–1992.     

Can broker-dealer client surveys provide signals for debt investing?

We use a novel data set to study return predictability in debt markets. The data are collected from J.P. Morgan’s periodic surveys on its clients’ outlook for changes in US Treasury yields and corporate credit spreads. We document that simple signals constructed from such surveys predict excess returns on debt portfolios formed on the basis of duration (2-years minus zero) or credit quality (BBB minus AAA). A linear trading strategy placing equal weight on Treasury and Credit signals has an annualized Information Ratio equal to 1.18, before transaction costs. We also show that predictability is likely to stem from private information possessed by survey respondents rather than from risk premia.     

The fertility of the Irish in the United States in 1910

The relatively high marital fertility of the Irish in the United States in the 19th century has long been interpreted as evidence for the persistence of a distinctive Irish culture in the United States. This claim echoes a similar view of Irish-American marriage patterns. Recent work has shown that the marriage patterns of the Irish in the United States were similar to native-born whites with similar occupational and other characteristics. This paper studies the reasons for the high fertility of Irish-Americans in 1910. Irish-born women in that year had much larger families than the typical native-born woman, and little of the difference can be attributed to other characteristics. Second-generation Irishwomen were less distinctive in this regard, although even they differed from the natives primarily because of a different proclivity to have a large family. Our results signal the complexity of immigrant adjustment to a new environment; the Irish largely abandoned one aspect of Irish demographic behavior while clinging to another.     

A continuous time approach to the pricing of bonds

This paper develops an arbitrage model of the term structure of interest rates based on the assumptions that the whole term structure at any point in time may be expressed as a function of the yields on the longest and shortest maturity default free instruments and that these two yields follow a Gauss-Wiener process. Arbitrage arguments are used to derive a partial differential equation which must be satisfied by the values of all default free bonds. The joint stochastic process for the two yields is estimated using Canadian data and the model is used to price a sample of Government of Canada bonds.     

Hedonic prices indexes for new passenger cars in Portugal (1997–2001)

This paper evaluates the effects of quality change on the price index for new passenger cars in Portugal for the years 1997–2001. Hedonic regression models are studied, giving particular emphasis to the relation between the form of the price index and the econometric techniques used for inference. The results of the empirical part of the paper indicate that during this period the changes in the quality of new cars sold in Portugal are responsible for price increases averaging 4.8% per year. Because this quality change was not entirely taken into account, in recent years the CPI component corresponding to the sales of new passenger cars may have been overestimated by as much as 2.2 percentage points per year. This corresponds to an overestimation of the overall CPI by about 0.15 percentage points per year.     

Identifying unsound firms in Italy: An attempt to use trend variables

The aims of the present study are (i) to develop a predictive model, using discriminant analysis to forecast the solvency of Italian firms and (ii) to compare the ability of this model with that of a second one in which static ratios have been replaced by values that take account of their own trends. The results obtained by considering the trends of ratios over three years are encouraging and indicate that the second model not only performed better than the first, but also better than any other model using the balance sheet data of Italian firms.