infonet-economy

The univariate collapsing method (UCM) for portfolio optimization is based on obtaining the predictive mean and a risk measure such as variance or expected shortfall of the univariate pseudo-return series generated from a given set of portfolio weights and multivariate set of assets under interest and, via simulation or optimization, repeating this process until the desired portfolio weight vector is obtained. The UCM is well-known conceptually, straightforward to implement, and possesses several advantages over use of multivariate models, but, among other things, has been criticized for being too slow. As such, it does not play prominently in asset allocation and receives little attention in the academic literature. This paper proposes use of fast model estimation methods combined with new heuristics for sampling, based on easily-determined characteristics of the data, to accelerate and optimize the simulation search. An extensive empirical analysis confirms the viability of the method.

What is the added value of a security which qualifies as a “high-quality liquid asset” (HQLA) under the Basel III “Liquidity Coverage Ratio” (LCR)? In this paper, we quantify the added value in terms of yield changes and, as suggested by Stein (2013), call it “HQLA premium”. To do so, we exploit the introduction of the LCR in Switzerland as a unique quasi-natural experiment and we find evidence for the existence of an HQLA premium in the order of 4 basis points. Guided by theoretical considerations, we claim that the HQLA premium is state dependent and argue that our estimate is a lower bound measure. Furthermore, we discuss the implications of an economically significant HQLA premium. Thereby, we contribute to a better understanding of the LCR and its implications for financial markets.

Assuming the classic contingent claim setting, a number of financial asset demand tests of Expected Utility have been developed and implemented in experimental settings. However the domain of preferences of these asset demand tests differ from the mixture space of distributions assumed in the traditional binary lottery laboratory tests of von Neumann-Morgenstern Expected Utility preferences. We derive new sets axioms that are necessary and sufficient for preferences over contingent claims to be representable by an Expected Utility function. We also indicate the additional axioms required to extend the representation to the more general case of preferences over risky prospects.

We show that in a consumption-based asset-pricing model with hyperbolic discounting leading to dynamically inconsistent time preferences value premium increases nonlinearly with the degree of discounting and thus affects cross section of returns. To test our model empirically, we relate the size of the value premium in 41 countries to the degree of hyperbolic discounting across those countries. The latter was found in an International Test of Risk Attitudes (INTRA). Our result is robust to the inclusion of other variables from INTRA, such as risk aversion, as well as micro- and macro-economic variables from the 41 countries.

We assess the quantitative implications of the re-use of collateral on financial market leverage, volatility, and welfare within an infinite-horizon asset-pricing model with heterogeneous agents. In our model, the ability of agents to re-use frees up collateral that can be used to back more transactions. Re-use thus contributes to the build-up of leverage and significantly increases volatility in financial markets. When introducing limits on re-use, we find that volatility is strictly decreasing as these limits become tighter, yet the impact on welfare is non-monotone. In the model, allowing for some re-use can improve welfare as it enables agents to share risk more effectively. Allowing reuse beyond intermediate levels, however, can lead to excessive leverage and lower welfare. So the analysis in this paper provides a rationale for limiting, yet not banning, re-use in financial markets.

Ce travail est basé sur un avant-projet nommé « AVENUE » (Autonomous Vehicles to Evolve to a New Urban Experience) proposé à la Commission européenne des transports et de mobilité. Il s’agit d’un projet qui a pour but de démonter l’utilité que pourraient avoir les véhicules autonomes dans le cadre des transports publics et de mettre en lumière les divers avantages pratiques, économiques, environnementaux et sociaux qu’ils pourraient procurer. Le travail suivant tente avant tout d’explorer l’étendue du potentiel d’une nouvelle technologie appelé « Navette autonome » qui s’inscrit dans le cadre des véhicules autonomes. Cette technologie est, pour le moment, peu connue du grand public, alors qu’elle pourrait pourtant être la solution de demain en termes de mobilité. Ce travail aborde ce sujet de manière qualitative, le but étant de pousser la réflexion et de se poser de nouvelles questions sur les modalités, ainsi que sur l’emploi d’une technologie en développement ; ce travail ne vise donc pas à créer un business plan. Par conséquent, les coûts ne seront que très peu discutés. Par ailleurs, de manière volontaire, cette recherche ne s’intéressera pas aux véhicules autonomes en soit, car de nombreux articles traitent d’ores et déjà de ce sujet. Ce travail se concentre sur un thème précis sur lequel très peu d’articles ont été écrits. De plus, ce travail permet de mettre sous loupe la population des zones périphériques, ainsi que leurs besoins liés à la mobilité. En effet, cette population a tendance à être mise à l’écart par les transports publics et est ainsi poussée vers l’utilisation de véhicules privés. Ce travail essaie de se plonger dans le quotidien des habitants de la périphérie dans le but de découvrir les problèmes auxquels ils font face en matière de mobilité.