Exchange rate and inflation risk premia in the EMU

This paper tests the effects of exchange rate and inflation risk factors on asset pricing in the European Union (EU) stock markets. This investigation was motivated by the results of Vassalou [J. Int. Money Finance, 2000, 19, 433–470] showing that both exchange rate and foreign inflation are generally priced in equity returns, and it studies the opportunity of evaluating the causality between these sources of risk after the elimination of the EU currency risks because of the adoption of the single currency. Our results show that both exchange rate and inflation risks are significantly priced in the pre- and post-euro periods. Moreover, the sizes of exchange rate and inflation risk premiums are economically significant in the pre- and post-euro periods. Futhermore, the UK and excluding-UK inflation risk premiums explain, in part, our evidence concerning a large EUR/GBP exchange rate risk premium and the existence of an economically significant domestic non-diversifiable risk after euro adoption. Hence overlooking inflation risk factors can produce an under/overestimation of the currency premiums and a miscalculation of the degree of integration of stock markets.     

Cost-effectiveness of fingolimod versus interferon beta-1a for relapsing remitting multiple sclerosis in the United States

Abstract

Objective:

Fingolimod has been shown to be more efficacious than interferon (IFN) beta-1a, but at a higher drug acquisition cost. The aim of this study was to assess the cost-effectiveness of fingolimod compared to IFN beta-1a in patients diagnosed with relapsing-remitting multiple sclerosis (RRMS) in the US.

Methods:

A Markov model comparing fingolimod to intramuscular IFN beta-1a using a US societal perspective and a 10-year time horizon was developed. A cohort of 37-year-old patients with RRMS and a Kurtzke Expanded Disability Status Scale score of 0–2.5 were assumed. Data sources included the Trial Assessing Injectable Interferon vs FTY720 Oral in Relapsing–Remitting Multiple Sclerosis (TRANSFORMS) and other published studies of MS. Outcomes included costs in 2011 US dollars, quality-adjusted life years (QALYs), number of relapses avoided, and incremental cost-effectiveness ratios (ICERs).

Results:

Compared to IFN beta-1a, fingolimod was associated with fewer relapses (0.41 vs 0.73 per patient per year) and more QALYs gained (6.7663 vs 5.9503), but at a higher cost ($565,598 vs $505,234). This resulted in an ICER of $73,975 per QALY. Results were most sensitive to changes in drug costs and the disutility of receiving IFN beta-1a. Monte Carlo simulation demonstrated fingolimod was cost-effective in 35% and 70% of 10,000 iterations, assuming willingness-to-pay thresholds of $50,000 and $100,000 per QALY, respectively.

Limitations:

Event rates were primarily derived from a single randomized clinical trial with 1-year duration of follow-up and extrapolated to a 10-year time horizon. Comparison was made to only one disease-modifying drug—intramuscular IFN beta-1a.

Conclusion:

Fingolimod use is not likely to be cost-effective compared to IFN beta-1a unless fingolimod cost falls below $3476 per month or a higher than normal willingness-to-pay threshold is accepted by decision-makers.     

Decomposing the bias in time-series estimates of CAPM betas

We identify two sources of bias arising from time-series regression used to compute beta. This bias arises due to the classical error in variables problem and a ‘mechanical interaction’ which exists when the index comprises the asset of interest. Assuming that the market is proxied by a fixed-weight index, we demonstrate that the relative weighting of an asset within the index, and/or the magnitude of its idiosyncratic risk, directly biases the beta estimate for the individual stock and also for all stocks within the index. Via simulations, we show that the problem is most pronounced for markets with a small number of highly concentrated assets. Finally, we propose a procedure to reduce this bias and apply the methods to equity data.     

Effects of uncertainty and risk aversion on the exposure of investment-style factor returns to real activity

How do uncertainty and risk aversion affect the behavior of investment-style factors? We argue that a significant channel through which both uncertainty and risk aversion impact aggregate risk factors is the exposure of factor returns to real activity. We analyze this issue using mixed data sampling decomposition of the sensitivity of factor returns to real activity into high- and low-frequency components. We find a positive and significant relation between uncertainty and risk aversion for the low-frequency component of the sensitivity of factor returns to economic activity. More importantly, risk aversion significantly amplifies the effects of uncertainty on real activity exposure. The quality-based factor is an important exception to these findings.     

对我国货币供给有效性的实证分析

近年来 ,中国为刺激经济复苏 ,连续多次下调存款利率及法定存款准备金率 ,进行大规模的货币扩张 ,但效果不显著。通过建立货币及其相关因素的经济模型 ,使中国的货币供给更为有效 ,但存在时滞。最后强调中国经济在未来几年有通货膨胀的可能性。     

The Value Relevance of Oil and Gas Disclosures: An Assessment of the Market's Perception of Firms' Effort and Ability to Discover Reserves

The purpose of this study is to determine whether supplemental reserve disclosures contain value-relevant information by examining the extent to which they convey information regarding firms' effort and ability to discover reserves. Using Ohlson's (1995) model as a framework, two hypotheses were developed and tested. The empirical results indicate that both effort and ability to discover reserves are significant in explaining the market value of full cost firms. However, only effort is significant (marginally) in explaining the market value of successful efforts firms.     

我国权证上市对标的股票影响的实证分析

本文通过检验在沪市上市的5只股票在以其为标的的权证上市日前后60个交易日的收益率、β值以及波动性的变化情况,分析权证上市事件对标的股票收益和风险水平的影响。结果显示,我国内地权证上市对标的股票收益率无显著影响,而对标的股票系统风险及波动性影响不尽相同,并未形成一致的统计结论。造成这一结果的原因在于,我国内地权证市场刚刚起步,与国外成熟市场相比还有较大的差距。     

Estimation of conditional asset pricing models with integrated variables in the beta specification

We introduce a methodology which deals with possibly integrated variables in the specification of the betas of conditional asset pricing models. In such a case, any model which is directly derived by a polynomial approximation of the functional form of the conditional beta will inherit a nonstationary right hand side. Our approach uses the cointegrating relationships between the integrated variables in order to maintain the stationarity of the right hand side of the estimated model, thus, avoiding the issues that arise in the case of an unbalanced regression. We present an example where our methodology is applied to the returns of funds-of-funds which are based on the Morningstar mutual fund ranking system. The results provide evidence that the residuals of possible cointegrating relationships between integrated variables in the specification of the conditional betas may reveal significant information concerning the dynamics of the betas.     

Intra-industry transfer effects of credit risk news: Rated versus unrated rivals

We examine the information transfer effect of bond-rating adjustments on industry rivals. Our research is based on the premise that the transfer effect is influenced by the rated status of rivals, i.e., whether the rival’s debt is rated by any credit rating agency. The results reveal that credit rating adjustments induce different/stronger effects. First, the intra-industry transfer effects (on returns and risk) are stronger on rated rivals than on unrated rivals. Second, the credit risk news produces lower co-movements between the returns of the two types of rivals. Third, the differential effect is stronger in the manufacturing industry, in the riskiest industries and in the industries with the lowest competition levels. Interestingly, our results suggest that credit rating news is more relevant for rivals with access to the public debt market (such as re-rated firms) than for rivals that focus on other sources of funding.