Cash-flow or return predictability at long horizons? The case of earnings yield

We examine the predictive ability of the aggregate earnings yield for both market returns and earnings growth by estimating variance decompositions at multiple horizons. Based on weighted long-horizon regressions, we find that most of the variation in the earnings yield is due to return predictability, with earnings growth predictability assuming a minor role. However, by using implied estimates from a first-order restricted VAR, we find an opposite predictability mix. The inconsistency in results stems from a misspecification of the restricted VAR. Using an unrestricted first-order VAR estimated by OLS, or alternatively, estimating the restricted VAR by the Projection Minimum Distance method, produces long-run variance decompositions that are substantially more similar to the decomposition obtained under the direct method. Hence, earnings yield is not fundamentally different from the dividend yield. These results suggest that the practice of analyzing long-run return and cash-flow predictability from a restricted VAR can be quite misleading.     

互助保险机制在长期护理保障中的应用:典型案例的政策设计及绩效

自长期护理保险政策试点启动以来,部分地区以互助保险为基础架构的长期护理保险制度,在制度框架、筹资机制、支付范围、服务提供方式等方面均具有一定的创新性。基于北京市海淀区试点政策的评估表明,以自愿参保、同质群体风险分摊和收益分享为前提的互助保险机制不能兼顾保障公平性、可持续性和可负担性等多重目标。应坚持以社会保险为基础构建多层次长期护理保障体系,支持商业健康保险公司提供多层次、补充性的保险产品。同时,要做好医疗、养老服务体系的改革和衔接,充分发挥护理保险基金的保障功能和保障潜力。     

Search for yield and business cycles

In the ultra-low interest rate environment after the financial crisis, it has been often pointed out that the “search for yield” behavior of financial institutions might have been intensifying interest rate decreases. One hypothesis to explain search for yield is that banks try to buy longer-term bonds even when they recognize negative term premiums in long-term rates because they myopically care about current portfolio income, not just expected holding-period returns. I study the potential impacts of this behavior on U.S. business cycles and long-term bond’s ex-post term premiums. I find that in an economy in which banks are exposed to the value-at-risk constraint, the existence of these myopic banks provides realistic moments of ex-post term premiums. In addition, their existence could generate higher output persistence under a productivity shock compared to an economy without them. This is because the difference between a myopic long-term bond pricing and a realized deposit rate path affects banks’ net worth. I study policy implications, too. In response to changes in the strength of banks’ capital regulation, the existence of myopic banks amplifies business cycles. Regarding monetary policy, it is necessary to consider ex-post term premiums, because ex-post term premiums tend to move in the same direction as the short-term interest rate and amplify business cycles in that direction when myopic banks exist.     

Optimal portfolio choices using financial leverage

This paper investigates the role of leverage in determining the investor's optimal asset allocation over multiperiod investment horizons. To do this, we allow investors to lever their financial position by borrowing from credit markets. GMM methods are used to estimate and test the optimal portfolio weights and individual's optimal choice of financial leverage. These optimal choices are assumed to be parametric functions of a set of state variables describing the evolution of the economy. The empirical application of this methodology to a portfolio of cash, bonds and stocks reveals that a) financial leverage limits the reaction of investors to changes in the investment opportunity set; b) individuals increase leverage during recessions and deleverage in expansionary periods; c) optimal portfolio weights and financial leverage are negatively related to the degree of investor's risk aversion and positively related to the investment horizon.     

Sustainable agricultural practices,environmental risk mitigation and livelihood improvements: Empirical evidence from Northern Ethiopia

Using sustainable agriculture practices has various economic, social and environmental benefits. Determining the attitude of farmers toward risk is an important first step in understanding their behaviour and coping strategies to mitigate environmental risks. This paper investigates the dual impacts of some agricultural practices on agricultural yields and farmers’ livelihoods considering sustainable farmland. Cross-sectional data is collected from farmers in six rural villages in Tigray region, Northern Ethiopia using structured questionnaires. Results show that education, labour supply, agricultural extension services, attitudes, social capital, risk mitigation attitudes, farming experience and soil conditions are factors that significantly affect farmers’ decisions to adopt these practices. The practices are adopted either in isolation or jointly of integrated sustainable practices that increase crop production, household income and asset. Therefore, government and other development actors should promote their adoptions especially in drought-prone, degraded and water-stressed areas     

Long-Term Effects of Labour Market Entry Conditions: The Case of Korea

This study investigates the effects of labour market conditions at the time of graduation, proxied by the local unemployment rate, on long-term family and labour market outcomes in Korea. The examination yields four main findings. Labour market entry conditions have strong and persistent effects among high school graduates. Male college graduates have a persistently lower probability of working at large firms if the demand for local labour shrinks at the time of graduation. Self-employment can be persistently hampered by adverse economic conditions at graduation. Family formation and childbearing are temporarily affected by labour market entry conditions, especially for less educated women. The first three findings highlight the notable segmentation of the Korean labour market into protected jobs in large firms – mostly part of business groups (chaebols) – and unprotected jobs.     

期望落差下的组织搜索:长期债务融资及其价值再造

企业在何种状态下采取长期负债经营策略以及这种策略将对企业未来的发展产生何种影响,是一个重要的理论问题。本文将企业的长期债务融资视为组织搜索行为,构建了一个绩效反馈的权变模型,探讨期望落差与长期债务融资之间的理论关系及制约因素。本文基于2007—2018年中国上市企业数据的检验结果表明:期望落差将对企业长期债务融资产生直接影响。在企业管理者搜索动机与搜索成本的共同作用下,企业的长期债务融资与期望落差程度呈非线性关系,即在临近期望值的状态下企业管理者表现出局部搜索动机,倾向于通过增加债务来解决企业的期望落差问题;而在远离期望值的状态下表现出非局部搜索动机,倾向于减少长期债务融资。环境不确定性是制约期望落差下企业长期债务融资策略的重要因素,市场与政策环境的不确定性越高,则越有可能导致处于落差状态下的企业减少长期债务融资。期望落差状态下的长期债务融资与企业价值再造能力之间存在着先升后降的“倒U型”关系,即落差状态下适度的长期债务融资提高了企业的价值能力,但超过临界点后将对价值再造起到遏制作用。本文在一定程度上丰富了期望落差下组织搜索的过程机制,为深入理解企业长期负债经营的前因提供了新的视角。     

Does the Exchange Rate Respond to Monetary Policy in Mexico? Solving an Exchange Rate Puzzle in Emerging Markets

This paper argues that the null or weak response of emerging market currencies to domestic monetary policy documented in the literature is the result of wide event windows. An event study with intraday data for Mexico shows that an unanticipated tightening appreciates the currency and flattens the yield curve, consistent with the evidence for advanced economies. With daily event windows, however, only the yield curve responds to monetary policy. Noise in daily exchange rate returns explains the lack of response of the currency. Such noise gives rise to a bias that declines after controlling for potential omitted variables.     

The 1932 Federal Reserve Open-Market Purchases as a Precedent for Quantitative Easing

The $1 billion open-market operation conducted by the Federal Reserve, at the height of the Great Depression, was a successful precedent to the recent Quantitative Easing (QE) programs. The 1932 program entailed large purchases of medium- and long-term securities over a 4-month period. An event study analysis indicates that the program dramatically lowered medium- and long-term Treasury yields. A segmented markets model is used to analyze the effects of the open-market purchases on the economy. A significant degree of financial market segmentation is estimated, and partly explains the observed upturn in output growth. Had the Federal Reserve continued its operations and used the announcement strategy used in QE1, the Great Contraction could have been attenuated earlier. Our historical analysis suggests that the Federal Reserve in 2008 had a good predecessor to its actions.