International trade and financial integration: a weighted network analysis

The authors analyse patterns of international trade and financial integration using complex network analysis. The combination of both binary and weighted approaches delivers more precise and thorough insights into the topological structure and properties of international trade and financial networks (ITN and IFN). It is found that the ITN is more densely connected than the IFN, while both types of network display a core–periphery structure. This hierarchical organization is more pronounced in financial markets, suggesting that the bulk of trade in financial assets occurs through a handful of countries acting as hubs. High-income countries are better linked and form groups of tightly interconnected nodes. This kind of structure can explain why the recent financial crisis has spread rapidly among advanced countries while reaching emerging markets only in a second phase.     

HUMAN CAPITAL MEASUREMENT: A SURVEY

Abstract After a short history of the concept of human capital (henceforth HC) in economic thought ( Section 1 ), this study presents the two main methods for estimating the value of the stock of HC – the retrospective and prospective one – with a review of the models proposed ( Section 2 ). These methods are linked both to the theory of HC investment as a rational choice ( Section 3 ), the literature analysing the contribution of HC investment to economic growth and the HC estimating method through educational attainment ( Section 4 ). The more recent literature on HC as a latent variable is also assessed ( Section 5 ) and a new method of estimation where HC is seen both as an unknown function of formative indicators and as a ‘latent effect’ underlying earned income is proposed ( Section 6 ). Section 7 concludes.     

Income distribution dynamics among Italian provinces. The role of Bank Foundations

This paper investigates the convergence process and the distribution dynamics of income among Italian NUTS-3 provinces between 2003 and 2011. Findings show the existence of multiple steady-state equilibria which is consistent with the well-documented persistence in income disparities among Italian provinces. The role of grant-making activities by Bank Foundations is assessed on a conditioning scheme. Results suggest that Bank Foundations can affect the shape of the distribution of income and, in the long run, reduce polarization with a tendency for income to collapse towards a unimodal distribution.     

Corporate codes of ethics and cash holdings: International evidence

In the presence of agency costs, managers retain cash for their own benefit at the expense of shareholder wealth. Extending prior literature on the role of corporate governance in mitigating the effects of agency conflicts on corporate cash holdings, we study a governance mechanism that has largely been overlooked, namely, corporate codes of ethics. We find a negative association between code of ethics quality and cash holdings, which suggests that managers hold less cash when the firm has a strong code of ethics in place. The effect is greater when agency costs are elevated due to weaker country-level investor protections. We also find that payouts and the marginal value of cash holdings to investors are increasing in code quality. Overall, our results are consistent with codes of ethics helping to limit opportunistic behaviour from managers when determining the firm's level of cash holdings.     

Risk parity portfolio optimization under a Markov regime-switching framework

We formulate and solve a risk parity optimization problem under a Markov regime-switching framework to improve parameter estimation and to systematically mitigate the sensitivity of optimal portfolios to estimation error. A regime-switching factor model of returns is introduced to account for the abrupt changes in the behaviour of economic time series associated with financial cycles. This model incorporates market dynamics in an effort to improve parameter estimation. We proceed to use this model for risk parity optimization and also consider the construction of a robust version of the risk parity optimization by introducing uncertainty structures to the estimated market parameters. We test our model by constructing a regime-switching risk parity portfolio based on the Fama–French three-factor model. The out-of-sample computational results show that a regime-switching risk parity portfolio can consistently outperform its nominal counterpart, maintaining a similar ex post level of risk while delivering higher-than-nominal returns over a long-term investment horizon. Moreover, we present a dynamic portfolio rebalancing policy that further magnifies the benefits of a regime-switching portfolio.     

Nutrition and national development: Establishing the connection

The three major strands of the nutrition planning literature — the socio-economic consequences of malnutrition, its determinants and characteristics, and the solutions offered to the problem — are examined by the authors and found wanting. There are serious limitations both in analysis of the problems and proposals for action in most work on nutrition policies because macro-level social, institutional, economic and political factors are neglected.     

Indirect estimation of large conditionally heteroskedastic factor models,with an application to the Dow 30 stocks

We derive indirect estimators of conditionally heteroskedastic factor models in which the volatilities of common and idiosyncratic factors depend on their past unobserved values by calibrating the score of a Kalman-filter approximation with inequality constraints on the auxiliary model parameters. We also propose alternative indirect estimators for large-scale models, and explain how to apply our procedures to many other dynamic latent variable models. We analyse the small sample behaviour of our indirect estimators and several likelihood-based procedures through an extensive Monte Carlo experiment with empirically realistic designs. Finally, we apply our procedures to weekly returns on the Dow 30 stocks.