Dissertations / Theses on the topic 'Premium essay'

In the first essay, I examine the impact of the introduction of exchange traded funds (ETFs) options on the information related trading of index options. Two option pairs, NASDAQ 100 index (NDX) and ETF (QQQ, currently QQQQ ) options, and Standard and Poor's 500 index (SPX) options and S & P Depository Receipts (SPY) options, are studied. I test the hypothesis, based on the theory of Chowdhry and Nanda (1991), and Admati and Pleiderer (1988), that the information component of spreads for index options should decline after ETF options were introduced. The method of George, Kaul and Nimalendran (1991) is used to estimate the adverse selection proportion of log quoted spread and revenue from quoted spread. Primary results show that the adverse selection component of index options declines after the introduction of ETF options, and that the adverse selection component of options on index ETFs is greater than that of options on index, suggesting more informed trading for ETF options. The second essay examines whether the liquidity premium decreases as the costs of transactions decline. Nine liquidity measures are estimated to form liquidity deciles portfolios. I use several benchmark asset pricing models in fixed and rolling 36-month samples to estimate time variation liquidity premia. Surprisingly, the results show that the liquidity premium does not monotonically decline over time, and it increases in the period from 2001 to 2006. This is inconsistent with the implication of liquidity-adjusted capital asset pricing models (L-CAPM). It is likely that the liquidity premium is generated by size and book-to-market factors, rather than the liquidity factor.

Submitted by Ricardo Buscariolli Pereira (ribusca@yahoo.com) on 2014-06-18T16:45:36Z No. of bitstreams: 1 tese_final.pdf: 7712126 bytes, checksum: 31167f00e858b4955d0dbdbde639006a (MD5)<br>Approved for entry into archive by Suzinei Teles Garcia Garcia (suzinei.garcia@fgv.br) on 2014-06-18T18:36:04Z (GMT) No. of bitstreams: 1 tese_final.pdf: 7712126 bytes, checksum: 31167f00e858b4955d0dbdbde639006a (MD5)<br>Made available in DSpace on 2014-06-18T20:06:52Z (GMT). No. of bitstreams: 1 tese_final.pdf: 7712126 bytes, checksum: 31167f00e858b4955d0dbdbde639006a (MD5) Previous issue date: 2014-05-23<br>This dissertation is composed of three related essays on the relationship between illiquidity and returns. Chapter 1 describes the time-series properties of the relationship between market illiquidity and market return using both yearly and monthly datasets. We find that stationarized versions of the illiquidity measure have a positive, significant, and puzzling high premium. In Chapter 2, we estimate the response of illiquidity to a shock to returns, assuming that causality runs from returns to illiquidity and find that an increase in firms' returns lowers illiquidity. In Chapter 3 we take both effects into account and account for the endogeneity of returns and illiquidity to estimate the liquidity premium. We find evidence that the illiquidity premium is a smaller than the previous evidence suggests. Finally, Chapter 4 shows topics for future research where we describe a return decomposition with illiquidity costs.

Value premium, which is the return difference between value and growth stocks, is one of the most important asset pricing anomalies. Value stocks tend to have more returns than growth stocks. And though, researchers agree about the existence of value premium, they tend to disagree about the reasons behind it. There are three main explanations of the value premium. Firstly, value premium is a compensation for risk. This risk is captured systematically by asset pricing models, raised by firm characteristics or measured through business cycle phases. Secondly, value premium is a result of misspricing caused by investors’ behaviour. Finally, value premium is not an anomaly at all, it is a result of data bias. The unsettled debate around value premium shows the need for more re- search into this problem. This study is different from previous work in several important areas. Firstly, the period of study is divided into two subperiods, the pre-1992 and the post-1992 period. This division will (i) reduce the effect of the missing data: and (ii) test the efficent market hypothesis, where the value premium becomes more known. Secondly, the risk of value and growth stocks is really tested by comparing their risk at the same level of returns. Thirdly, the reaction to earnings surprises around the quarterly returns in- stead of yearly returns is investigated. Finally, whether optimized value and growth portfolios can produce more returns than equal weighted ones is tested. I find that: (i) value premium is significant for the pre-1992 and post-1992 periods alike. But after controlling for size, value premium exists only for the smallest size quintile; (ii) the January effect causes the value premium for the smallest size quintile in the post-1992 period but not on the pre-1992 period; (iii) Fama and French’s three factor model fails to explain the returns of the small size portfolios in the post-1992 period; (iv) value premium is not an effect of worsening conditions of the business cycle; (v) value stocks are riskier than growth stocks, but this is not the cause of value premium. Growth stocks have more returns than value stocks at the same levels of risk; (vi) analysts are more optimistic about value stocks but this is not the cause of value premium. Growth stocks are more affected by negative earnings surprise than value stocks; finally, (vii) the optimised value and growth portfolios can produce more out of sample returns than the equally weighted ones regardless of the length of the estimation period.

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2016.<br>Cataloged from PDF version of thesis.<br>Includes bibliographical references (pages 185-191).<br>The thesis consists of three essays on how macroeconomic policy can be an important determinant of risk premium and how variations in risk premium may affect macroeconomic policy. Unconventional monetary policy represents a main example of how the transmission of macroeconomic policy is mediated by movements in risk premium. In the first essay, I examine how unconventional monetary policy affects asset prices by reallocating risk in the economy. I consider an environment with heterogeneity in risk tolerance and limited asset market participation. Risk-tolerant investors take leveraged positions, exposing the economy to balance sheet recessions. Limited asset market participation implies the balance sheet of the central bank is non-neutral. Unconventional monetary policy reduces the risk premium and endogenous volatility. During balance sheet recessions, asset purchases boost investment and growth. In contrast, during normal times, the expectation of future interventions reduces growth. Leveraged institutions respond to the policy by reducing risk-taking relatively more than risk-averse investors. As risk concentration falls, the probability of negative tail-events is reduced, enhancing financial stability. An important determinant of entrepreneurial activity in developing countries is the amount of risk the entrepreneur must bear. The second essay, joint with Robert M. Townsend, analyzes the risk-taking behavior of entrepreneurs. Using data from a survey conducted in villages in Thailand, we document substantial heterogeneity in entrepreneurial activity. The fraction of net worth invested by entrepreneurs in risky activities decreases over the life cycle. Consumption-to-wealth ratio is U-shaped, being high for young and old entrepreneurs. We propose a model that captures both the life cycle patterns and limited idiosyncratic insurance observed in the Thai data. An expansion in idiosyncratic insurance will reduce the idiosyncratic risk premium, increasing the proportion of wealth invested in risky activities and aggregate output. However, as the return on the project falls, entrepreneurs accumulate less wealth, reducing their welfare in the long-run. The third essay studies the optimal response of fiscal policy to a risk premium shock when a country is in a currency union. In the context of an open economy New Keynesian model, I show that the government should not deviate from the optimal provision of public goods at an attempt to stabilize the economy. A consumption tax is used to lean against the wind and reduce the real interest rate in the presence of a positive risk premium shock. A VAT tax allows the government to independently influence the terms of trade. Optimal fiscal policy has the property of being revenue-generating. Therefore, there is not necessarily a trade off between stabilization policy and fiscal consolidation.<br>by Dejanir Henrique Silva.<br>Ph. D.

This dissertation addresses issues concerning liquidity and its volatility. It consists of two essays. The first essay, "Liquidity, Macro Factors and the U.S. Equity Flows to Emerging Markets", examines the role of liquidity on equity flows from the U.S. to fifteen emerging markets around the world. Since liquidity has many dimensions, an emphasis is placed on utilizing various measures of liquidity. Moreover, both static and dynamic analyses, as well as short and long-horizon regressions, are performed to investigate the research questions. The results suggest that a liquid market attracts flows, after controlling for market size, political openness, exchange rate and other macro factors. Additionally, evidence indicates that the importance of liquidity varies across regions. For instance in the Asian region, the relation between equity flows and volume-related liquidity is weak while that between flows and price impacts of trading is strong. Evidence also supports the relevance of macro factors such as a country's economic freedom. The second essay, "Liquidity Risk Premium Puzzle and Possible Explanations", attempts to resolve the liquidity risk puzzle: a negative relation between returns and liquidity risk, documented by Chordia, Subrahmanyam, and Anshuman (2001b), by employing alternative liquidity measures and by incorporating factors that might potentially affect the relation. The main findings are as follows. The relation between stock returns and volatility of liquidity depends on the measure of liquidity. When liquidity measures are based on trading volume, the results are largely mixed, but when liquidity is measured based on price impact of trading, the relation between returns and volatility of price impacts is positive, as expected. The results are sensitive to time periods examined. Moreover, during extreme down markets, the aversion to liquidity volatility is lower, suggesting behavioral bias might potentially address the puzzle. Empirical findings also suggest that liquidity risk premium tends to be greater for small stocks. Finally, when the VIX index is included as a proxy for investor sentiment, the results indicate that the relation between returns and liquidity risk is significantly positive in four out of five liquidity measures. In sum, the empirical analysis partially but not completely addresses the puzzle.

This thesis is formed of three chapters. The first chapter examines the effect on social mobility and economic growth following the introduction of reprogenetic technology such that parents can choose to invest in the talent or ability of their unborn children. I find that if the economy is initially in a steady state such that social mobility is low, the introduction of such technology can increase social mobility and economic growth. If the economy is initially in a steady state such that social mobility is high, then the introduction of such technology will not increase (and may decrease) social mobility and will not affect economic growth. The second chapter is a review of the literature on how immigration affects wages focusing on studies of the US and UK labour markets. The third chapter analyses how the skill premium depends on the relative supply of high and low skilled workers in the economy, and the size of the economy. Using a two-sector model where one sector is more skill-intensive than the other, and returns to scale are larger in the skill-intensive sector, I find that the skill premium depends positively on the size of the economy. I consider the effect of an exogenous increase in the number of skilled workers (perhaps due to immigration) on the skill premium and find that under certain conditions the skill premium may increase. I then analyse the effect on the skill premium and the relative price of the skill intensive good in the short and long run and compare the models predictions to the data.

This dissertation consists of two chapters. The first chapter shows that the measurement errors in betas for stocks induce corresponding measurement errors in alphas and a spurious negative covariance between the estimated betas and alphas across stocks. This negative covariance between the estimated betas and alphas results in a violation of the independence assumption between the independent variable (betas) and error terms in the Fama-MacBeth regressions of tests of the CAPM, thereby creating a downward bias in the estimated market risk premiums. The procedure of using portfolio returns and betas does not necessarily eliminate this bias. Depending upon the grouping variable used to form portfolios, the negative covariance between estimated betas and alphas can be increased, decreased, and can even be made positive. This paper proposes two methods for correcting the downward bias in the estimated market risk premium. The estimated market risk premiums are consistent with the CAPM after the proposed corrections. The second chapter provides evidence that when the ex-post market risk premium is positive (up markets), the relation between returns and betas is positive, significant, and consistent with the CAPM. However, when the ex-post market risk premium is negative (down markets), the negative relation between betas and returns is significant, but stronger than what is implied by the CAPM. This strong negative relation offsets the positive relation, resulting in an insignificant relation between returns and betas for the overall period. The negative relation between size and returns, after controlling for beta differences, is present only when the ex-post market risk premium is negative, and is responsible for the negative relation for the overall period. This paper decomposes the negative relation between size and returns after controlling for beta differences into the intercept size effect (relation between alphas of stocks and their size) and the residual size effect (relation between residuals of stocks and their size). The asymmetrical size effect between up and down market is being driven by the residual size effect. Long term mean reversion in returns explains, in part, the negative relation between size and returns during down markets.<br>Ph. D.

My dissertation consists of three essays that study the college premium in China and how it has been affected by China’s higher education expansion. In the first essay, I utilize the high education expansion as exogenous source to estimate the college premium. The rapidly changing access to college provides a rare opportunity to estimate a local treatment effect (LATE) of college education on earnings by utilizing the drastic increase in college admission rate in 1999. I also utilize the yearly admission rate as an instrumental variable for the endogenous college education. Using China Household Income Project 2013, the two IV estimates of college premium are 75.7 and 57.5 log points respectively. The second essay examines the trends of the college earnings premium by age groups from 1995 to 2013 in China. Specifically, based on China Household Income Projects, the college premium for the younger group (age 25-34) stagnated, while the college premium for the older group (age 45-54) increased substantially. I attribute the stagnation for the younger group to the fast-growing relative supply of younger college workers due to China’s higher education expansion. Holding the age cohort and survey year constant, a one unit increase in log relative size of college workers leads to 10.3 log points decrease in college premium. The third essay further explores the channel through which the cohort size affects the college premium. Using Blinder-Oaxaca decomposition, I find that, for all survey years and age groups, the differential of the higher-skilled occupations share between college and non-college educated workers only explains a small part of college premium, 10%-30%. The part due to the higher-skilled occupational premium is negligible. Over 70% of the college premium is contributed by the college premium among the workers with lower-skilled occupations.

Abstract This dissertation contributes to the understanding of investor behavior by using personality traits to help explain investor decision-making. The work is novel, as personality traits have not been used much in finance research. The data used in this dissertation is also new to the field, consisting of observations on personality traits and socioeconomic variables combined with official records of investors’ stockholdings. The first essay provides evidence that personality traits significantly affect the stock market participation decision. The essay shows that subscales of traits (i.e., lower-level traits or facets) can provide a better model of behavior, with some subscales of a single higher-level trait having opposite effects on behavior. The novelty seeking subscales exploratory excitability and extravagance have positive and negative effects, respectively, and the reward dependence subscales dependence and sentimentality have positive and negative effects, respectively. The magnitudes of the effects are large, with marginal effects on the probability of being a stock market participant of up to four percentage points. The second essay explores the relationship between personality traits and risk aversion. We estimate risk aversion from equity holdings and from survey measures. The traits display a distinctive pattern of correlations with the estimates of risk aversion. Some traits are significantly related to observed portfolio characteristics such as portfolio volatility, number of stocks held, and trading frequency. The pattern of the traits’ relationships with the various measures of risk aversion indicates that personality traits should not be considered as merely drivers of risk aversion but as preference parameters distinct from risk aversion. The third essay shows that personality traits are related to an investor’s preferences for value versus growth stocks and for small capitalization stocks versus large capitalization stocks. We find more extravagant individuals favor large capitalization growth stocks; more impulsive people favor small capitalization growth stocks; more sentimental investors prefer small capitalization value stocks; and more social investors prefer small capitalization stocks with a tilt towards value<br>Tiivistelmä Tämä tutkimus auttaa ymmärtämään sijoituskäyttäytymistä selittämällä sijoittajien päätöksentekoa heidän luonteenpiirteillään. Tutkimustuloksilla on uutuusarvoa, sillä luonteenpiirteiden merkitystä ei ole juurikaan tutkittu rahoitustutkimuksessa. Tutkimusaineisto on sekin luonteeltaan tavanomaisesta poikkeava, koostuen yksityishenkilöiden luonteenpiirteitä ja sosioekonomista asemaa kuvaavista muuttujista sekä heidän osakeomistustaan koskevista virallisista rekisteritiedoista. Tutkimuksen ensimmäinen essee osoittaa, että luonteenpiirteillä on merkittävä vaikutus yksityishenkilön päätökseen toimia osakemarkkinoilla. Tutkimustulosten mukaan osallistumispäätöstä kyetään ennustamaan paremmin käyttämällä luonteenpiirteiden pääluokkia mittaavien muuttujien sijasta luonteenpiirteiden alaluokkia mittaavia muuttujia. Tämä selittyy sillä, että alaluokkia mittaavilla muuttujilla on eräissä tapauksissa vastakkaismerkkisiä, pääluokkaa mittaavassa muuttujassa toisensa peittäviä, yhteyksiä osallistumispäätökseen. Tämä voidaan havaita muun muassa pääluokkaan ”elämyshakuisuus” kuuluvien ”kokeilunhalun” (+) ja ”tuhlaavaisuuden” (-) kohdalla, samoin kuin pääluokkaan ”palkkioriippuvuus” kuuvilla ”riippuvuudella” (+) ja ”sentimentaalisuudella” (-). Kaiken kaikkiaan luonteenpirteitä mittaavien muuttujien vaikutuksen suurusluokka on korkea, vastaten yksittäisen muuttujan kohdalla jopa neljän prosentin marginaalivaikutusta osakemarkkinoille osallistumisen todennäköisyyteen. Toinen essee tarkastelee luonteenpiirteiden ja riskinkarttamisen asteen välistä yhteyttä. Tutkimuksessa mitataan yksityishenkilön riskinkarttamisen astetta toisaalta hänen osakeomistuksensa rakenteen perusteella ja toisaalta kyselytutkimuksen avulla. Sijoittajien luonteenpiirteiden ja muodostettujen riskinkarttamisen astetta mittaavien muuttujien väliset korrelaatiot muodostavat selkeän rakenteen. Eräät luonteenpiirteet ovat merkitsevässä riippuvuussuhteessa muun muassa sijoittajan osakesalkun volatiliteettiin, salkkuun sisällytettyjen osakesarjojen määrään ja sijoittajan kaupankäyntiaktiivisuuteen. Luonteenpiirteitä kuvaavien muuttujien ja riskinkarttamisastetta kuvaavien muuttujien välisen yhteyden perusteella luonteenpiirteitä tulisi tarkastella enneminkin erillisinä sijoittajien preferenssejä kuvaavina muuttujina kuin riskinkarttamisasteen taustalla olevina perustekijöinä. Kolmas essee osoittaa, että luonteenpiirteet ovat yhteydessä siihen, suosiiko sijoittaja arvo- vs. kasvuosakkeita ja/tai alhaisen markkina-arvon vs. korkean markkina-arvon yhtiöiden osakkeita. Tutkimustulokset osoittavat, että ”tuhlaavammat” sijoittajat suosivat korkean markkina-arvon omaavia kasvuosakkeita, kun taas ”impulsiivisemmat” sijoittajat suosivat alhaisen markkina-arvon omaavia kasvuosakkeita. Vastaavasti ”sentimentaalisemmat” sijoittajat suosivat ylipäätään alhaisen markkina-arvon omaavia arvo-osakkeita, ”sosiaalisten” sijoittajien suosiessa heidänkin alhaista markkina-arvoa, suunnaten kiinnostustaan samalla arvo-osakkeisiin

Thesis advisor: Pierluigi Balduzzi<br>This dissertation consists of two essays in empirical asset pricing. Chapter I, "Skewness and Co-skewness in Bond Returns," explores skewness and co-skewness in discrete-horizon bond returns. Using data for 1976-2005, we find bond skewness is comparable to that in equities, varies with the holding period and varies over time. Speculative-grade bonds and collateralized securities have substantial negative skewness. The sign of the price of co-skewness risk in fixed income market is in general consistent with the theoretical prediction of the three-moment CAPM. Co-skewness against the market portfolio is priced differently in various bond sectors: taking a unit of co-skewness risk is rewarded with 0.43% and 2.47% per month for corporate bonds and collateralized securities, respectively. Co-skewness risk helps explain the cross section of expected bond returns when state variables such as inflation, real activity, or short term interest rates are included, or when conditioning information is exploited. Chapter II, "Modern Portfolio Management with Conditioning Information," studies models in which active portfolio managers optimize performance relative to a benchmark and utilize conditioning information unavailable to their clients. We provide explicit solutions for the optimal strategies with multiple risky assets, with or without a risk free asset, and also consider various constraints on portfolio risk or on portfolio weights. The equilibrium implications of the models are discussed. A currency portfolio example shows that the optimal solutions improve the measured performance by 53% out of sample, compared with portfolios ignoring conditioning information<br>Thesis (PhD) — Boston College, 2009<br>Submitted to: Boston College. Carroll School of Management<br>Discipline: Finance

A consensus exists in the body of academic literature that stocks with high BE/ME characteristics outperform stocks with low BE/ME characteristics. Researchers disagree, however, as to the cause of the phenomenon. Two competing theories have emerged. The value premium originates either from the relative riskiness of high BE/ME value and low BE/ME growth stocks or from the persistent irrational pricing of those stocks. Market participants question whether the long lineage of academic research showing the existence of the value premium can actually be applied to their portfolio decision-making. The lack of a pervasive value premium across stock size strata suggests the return phenomenon may result from information asymmetry or trading noise, and not from the pricing of greater risk. The value premium appears to be exclusively available to market participants who can effectively navigate the smallest, most illiquid segment of the stock market. In other words, the value premium does not appear to be available to large institutional investors.

Using a two-sector model of production with potentially different capital shares in each sector, I show that the evolution of the skill premium from 1970 to 2005 is consistent with skill-neutrality and even a mild unskill-bias of technological change for plausible values of capital shares. The main channel of adjustment to changes in labor supply is instead via the reallocation of capital. New investment occurs predominantly in the skilled sector, to the detriment of the unskilled sector of the economy. This result is shown both theoretically in a simple model and in a quantitative exercise using data on the US economy. Repeating the exercise with industry level data for the US reveals that there has indeed been skill-biased technological change in a number of industries (such as Business Activities and Health), while others have experienced skill neutral and unskill-biased technological change (e.g. Agriculture). This difference in results across industries is largely due to very different capital shares. Finally, I look at the impact of the increasing importance of information and communication technology (ICT) on the production function and the skill premium in each industry. I estimate a translog price function with skilled and unskilled labor, ICT capital and non-ICT capital as factors of production and find that most industries exhibit ICT capital-skill complementarity. For most industries, technological progress has led to an increased use of both types of capital, but the results on skill-biased technological change are as mixed as in chapter two. ICT has affected the skill premium negatively in nearly two thirds of the industries studied.

Made available in DSpace on 2008-05-13T15:51:00Z (GMT). No. of bitstreams: 1 2278.pdf: 1333452 bytes, checksum: 46ee158520f67dd866ce1492b459c0b3 (MD5) Previous issue date: 2006-12-11<br>Our research agenda consists in showing this strong relation between these puzzles based on evidences that both empirical failures are related to the incapacity of the canonical CCAPM to provide a high volatile intertemporal marginal rate of substitution with reasonable values for the preferences parameters.

Thesis advisor: Arthur Lewbel<br>In my dissertation I studied the political economy of economic development as well as the the urban wage premium, all using data from Brazil. In the first chapter, which is joint work with Carlos Varjao, we analyze the effect that increased political opposition in the city council has on corruption and public service provision at the local level. In the second chapter I study the sources of the high wage premium observed in cities, including firm sorting, firm and occupational matching, and compensating wage differentials. Finally, in the third chapter I study what happens to the provision of public education when a school teacher is elected to the city council (which actually occurs quite frequently). More detailed summaries of each chapter follow below. Chapter 1: In 'Political Opposition, Legislative Oversight, and the Performance of the Executive Branch', we study the effect that increased political opposition has on corruption and other measures of the mayor's performance in Brazil. The separation of powers between the executive and legislative branches is a cornerstone of democracy. This system of checks and balances, however, can be circumvented by partisan loyalties if legislators strategically avoid exerting oversight when their own party controls the executive branch. It is thus an empirical question whether the separation of powers prevents the abuse of power in practice. We answer this question by measuring the extent to which members of political opposition parties in a city council effectively check the mayor's performance in Brazil. We employ a regression discontinuity design to estimate the causal effect of an additional politically opposed legislator, and we find that political opposition increases oversight action and decreases corruption, with the effect fully concentrated on mayors facing reelection pressure. We trace the impact of oversight, via a reduction in healthcare spending irregularities, all the way to impacts on healthcare service delivery and health outcomes. Chapter 2: In 'Decomposing the Urban Wage Premium in Brazil: Firms, Matching, and Compensating Wage Differentials' I study the sources of the high wage premium observed in cities. In this chapter I used detailed employer-employee matched data from Brazil to understand 3 important elements of the urban wage premium: (1) the role of firms sorting into cities, (2) the role of firm and occupational matching in creating agglomeration economies, and (3) the role of compensating wage differentials. I first exploit identification from multi-city firms to show that positive selection of high-wage firms into larger cities accounts for 44% of what is often considered `agglomeration economies'. Then I show that improved firm and occupational matching together account for 87% of agglomeration effects. I then turn my attention to compensating wage differentials--- a possible explanation for the high-wage firms in cities. I estimate revealed-preference valuation of jobs, and show that jobs in cities in fact have better non-wage characteristics, and so high urban wages cannot be due to compensating wage differentials. This evidence together suggests that in Brazil, cities exist because they provide thick labor markets where high-wage firms and high-wage workers can go to find productive matches. Chapter 3: In 'Teachers in Politics: Teacher-Politicians, Gender, and the Representation of Public Education' I study what happens to public education in a city when a school teacher is elected to the city council, and I find that it depends on the gender of the teacher. Using a regression discontinuity design that exploits close elections, I find that when a female teacher is elected to the city council, the city hires both more teachers and more qualified teachers, and pays them more. Having a female teacher on the city council also increases the likelihood that the city's schools have necessary teaching resources, books, and financing, and possibly increases student test scores. No significant effect is found for male teachers elected to the city council. This difference may be due to different political career concerns for men versus women, a simple amplification of existing gender policy preference differences, or some mixture of the two<br>Thesis (PhD) — Boston College, 2021<br>Submitted to: Boston College. Graduate School of Arts and Sciences<br>Discipline: Economics

Thesis advisor: Jeffrey J.P. Pontiff<br>My dissertation includes three chapters on the value premium. In the first chapter, I study whether seemingly innocuous decisions in the construction of the original HML portfolio (Fama and French, 1993) affect our inference on the value premium. I find that the value premium is dramatically smaller than we thought. In sample, the average estimate of the value premium is 0.09% per month smaller than the original estimate of the value premium. Out of sample, however, the difference is statistically insignificant. The results suggest that the original value premium estimate is upward biased because of a chance result in the original research decisions. In the second chapter, I propose an estimate for intangible assets and growth opportunities and examine if this estimate improves book-to-market equity as a measure of value. I find that portfolios sorted on book equity plus the estimate to market equity have lower returns than portfolios sorted on book-to-market equity. The results suggest that intangible assets and growth opportunities diminish book-to-market equity as a measure of value because investors value intangible assets and growth opportunities in an overly optimistic way. In my third chapter, I simultaneously study nine explanations of the value effect to better understand what the dominant value explanation is. I find that duration accounts for most of the value effect and that the eight other explanations account for a negligible part of it. The results suggest that duration is the dominant explanation of the value effect<br>Thesis (PhD) — Boston College, 2021<br>Submitted to: Boston College. Carroll School of Management<br>Discipline: Finance

In this dissertation, I investigate three related topics on asset pricing: the consumption-based asset pricing under long-run risks and fat tails, the pricing of VIX (CBOE Volatility Index) options and the market price of risk embedded in stock returns and stock options. These three topics are fully explored in Chapter II through IV. Chapter V summarizes the main conclusions. In Chapter II, I explore the effects of fat tails on the equilibrium implications of the long run risks model of asset pricing by introducing innovations with dampened power law to consumption and dividends growth processes. I estimate the structural parameters of the proposed model by maximum likelihood. I find that the stochastic volatility model with fat tails can, without resorting to high risk aversion, generate implied risk premium, expected risk free rate and their volatilities comparable to the magnitudes observed in data. In Chapter III, I examine the pricing performance of VIX option models. The contention that simpler-is-better is supported by the empirical evidence using actual VIX option market data. I find that no model has small pricing errors over the entire range of strike prices and times to expiration. In general, Whaley’s Black-like option model produces the best overall results, supporting the simpler-is-better contention. However, the Whaley model does under/overprice out-of-the-money call/put VIX options, which is contrary to the behavior of stock index option pricing models. In Chapter IV, I explore risk pricing through a model of time-changed Lévy processes based on the joint evidence from individual stock options and underlying stocks. I specify a pricing kernel that prices idiosyncratic and systematic risks. This approach to examining risk premia on stocks deviates from existing studies. The empirical results show that the market pays positive premia for idiosyncratic and market jump-diffusion risk, and idiosyncratic volatility risk. However, there is no consensus on the premium for market volatility risk. It can be positive or negative. The positive premium on idiosyncratic risk runs contrary to the implications of traditional capital asset pricing theory.

This dissertation presents three essays on asset pricing and econometrics. The first chapter identifies rare events and long-run risks simultaneously from a rich data set (the Barro-Ursua macroeconomic data set) and evaluates their contributions to asset pricing in a unified framework. The proposed model of rare events and long-run risks is estimated using a Bayesian Markov-chain Monte-Carlo method, and the estimates for the disaster process are closer to the data than those in the previous studies. Major evaluation results in asset pricing include: (1) for the unleveraged annual equity premium, the predicted values are 4.8%, 4.2%, and 1.0%, respectively; (2) for the Sharpe ratio, the values are 0.72, 0.66, and 0.15, respectively.<br>Economics

<p>The thesis consists of three self-contained essays on public policy in the macroeconomy.</p><p>“Government Policy in the Formal and Informal Sectors” quantitatively investigates the interaction between the firms' choice to operate in the formal or the informal sector and government policy on taxation and enforcement. Taxes, enforcement, and regulation are incorporated in a general equilibrium model of firms differing in their productivities. The model quantitatively accounts for the keys aspects in the data and allows me to back out country-specific enforcement levels. Some policy reforms are analyzed and the welfare gains can be fairly large.</p><p>“Determinants of Capital Intensive and R&D Intensive Foreign Direct Investment” studies the determinants of capital intensity and technology content of FDI. Using industry data on U.S. FDI abroad and data on many different host countries' institutional characteristics, we show that there is a differential response of FDI flows to investment climate according to the capital intensity of the industries receiving the investments. We find that better protection of property rights has a significant positive effect on R&D intensive capital flows. We find evidence that an increase in workers' bargaining power results in a reduction of both kinds of FDI. </p><p>“Ambiguity Aversion, the Equity Premium, and the Welfare Costs of Business Cycles” examines the relevance of consumers’ ambiguity aversion for asset prices and how consumption fluctuations influence consumer welfare. First, in a Mehra-Prescott-style endowment economy, we calibrate ambiguity aversion so that asset prices are consistent with data: a high return on equity and a low return on risk-free bonds. We then use this calibration to investigate how much consumers would be willing to pay to reduce endowment fluctuations to zero, thus delivering a Lucas-style welfare cost of fluctuations. These costs turn out to be very large: consumers are willing to pay over 10% of consumption in permanent terms.</p>

This thesis contains two essays. In the first essay, we investigate the impact of time varying volatility of consumption growth on the cross-section and time-series of equity returns. While many papers test consumption-based pricing models using the first moment of consumption growth, less is known about how the time-variation of consumption growth volatility affects asset prices. In a model with recursive preferences and unobservable conditional mean and volatility of consumption growth, the representative agent's estimates of conditional moments of consumption growth affect excess returns. Empirically, we find that estimated consumption volatility is a priced source of risk, and exposure to it predicts future returns in the cross-section. Consumption volatility is also a strong predictor of aggregate quarterly excess returns in the time-series. The estimated negative price of risk together with the evidence on equity premium predictability suggest that the elasticity of intertemporal substitution of the representative agent is greater than unity, a finding that contributes to a long standing debate in the literature. In the second essay, I present a simple model to show that if agents face binding portfolio constraints, stocks with high volatility in states of low market returns demand a premium beyond the one implied by systematic risks. Assets whose volatility positively covaries with market volatility also have high expected returns. Both effects of this idiosyncratic volatility risk premium are strongest for assets that face more binding trading restrictions. Unlike the prior empirical literature that obtains mixed results when focusing on the level of idiosyncratic volatility, I investigate the dynamic behavior of idiosyncratic volatility and find strong support for my predictions. Comovement of innovations of idiosyncratic volatility with market returns negatively predicts returns for trading restricted stocks relative to unrestricted stocks, and comovement of idiosyncratic volatility with market volatility positively predicts returns for restricted assets.

Thesis (Ph. D.)--Ohio State University, 2004.<br>Title from first page of PDF file. Document formatted into pages; contains ix, 97 p.; also includes graphics Includes bibliographical references (p. 96-97). Available online via OhioLINK's ETD Center

Exchange rate economics has achieved substantial development in the past few decades. Despite extensive research, a large number of unresolved problems remain in the exchange rate debate. This dissertation studied three puzzling issues aiming to improve our understanding of exchange rate behavior. Chapter Two used advanced econometric techniques to model and forecast exchange rate dynamics. Chapter Three and Chapter Four studied issues related to exchange rates using the theory of New Open Economy Macroeconomics. Chapter Two empirically examined the short-run forecastability of nominal exchange rates. It analyzed important empirical regularities in daily exchange rates. Through a series of hypothesis tests, a best-fitting fractionally integrated GARCH model with skewed student-t error distribution was identified. The forecasting performance of the model was compared with that of a random walk model. Results supported the contention that nominal exchange rates seem to be unpredictable over the short run in the sense that the best-fitting model cannot beat the random walk model in forecasting exchange rate movements. Chapter Three assessed the ability of dynamic general-equilibrium sticky-price monetary models to generate volatile foreign exchange risk premia. It developed a tractable two-country model where agents face a cash-in-advance constraint and set prices to the local market; the exogenous money supply process exhibits time-varying volatility. The model yielded approximate closed form solutions for risk premia and real exchange rates. Numerical results provided quantitative evidence that volatile risk premia can endogenously arise in a new open economy macroeconomic model. Thus, the model had potential to rationalize the Uncovered Interest Parity Puzzle. Chapter Four sought to resolve the consumption-real exchange rate anomaly, which refers to the inability of most international macro models to generate negative cross-correlations between real exchange rates and relative consumption across two countries as observed in the data. While maintaining the assumption of complete asset markets, this chapter introduced endogenously segmented asset markets into a dynamic sticky-price monetary model. Simulation results showed that such a model could replicate the stylized fact that real exchange rates tend to move in an opposite direction with respect to relative consumption.

This three-essay thesis focuses on how value of the brand, i.e. brand equity is created, with each study investigating different parts of the relationships within the brand value chain. My first essay identifies and tests a new set of brand equity drivers such as brand structure and positioning, brand strategy, and customer characteristics. I use revenue premium as the retail level measure of brand equity and decompose it into price and volume premiums. Then, I explore the effects of different brand equity drivers on these premiums. The study on the universe of grocery industry in the U.S. shows compelling evidences that volume premium prevails over price premium in driving revenue premium. Brand structure and positioning, brand strategy and customer characteristics contribute significantly to the changes of the brand market performance measured with price, volume and revenue premiums. My second essay examines the association between consumer-based brand equity (IBBE) and brand market performance, and the moderators of this association. I explore a comprehensive set of market performance measures (penetration, loyalty, market share, price and revenue) of 216 major brands sold in the grocery channel in the U.S., in conjunction with EquiTrend© brand equity measure. The results show that customer based brand equity provides incremental explanatory power for brand market performance beyond the explanation by a wide array of performance determinants identified in the first essay. Furthermore, the equity-performance association is moderated by a set of product and category features, as well as the firm brand strategy. My third essay studies whether firms benefit from having multiple brands across different areas. I model brand market performance as a function of different elements of the firm brand portfolio, including the size and performance of sibling brands and the inter-brand distance. The dataset includes 1,700 brands from over 350 firms in the grocery channel within the U.S. The results show that the brand portfolio information provides incremental explanatory power for brand market performance. Moreover, the size and the performance of sibling brands have significant impact on a focal brand's market performance, and these impacts are moderated by the inter-brand distance.

A partir de larynx humains autopsiques de foetus à terme non malformés, un modèle numérique a été élaboré. Avec ces mêmes organes placés sur un banc expérimental et placés en condition de débit physiologique, un son a été produit qui a été comparé par une analyse acoustique à des premiers cris recueillis en salle de naissance. Une étude en caméra rapide a également été menée sur ces organes dans des conditions identiques. L'ensemble des données expérimentales, et tout particulièrement celles issues de l'utilisation de la caméra rapide, ainsi que toutes les données numériques tendent à démontrer que le rôle des cordes vocales n'est pas de générer le son par elles-mêmes. Elles induisent en fait une accélération du jet et créent ainsi les conditions aérodynamiques propices à la vibration des stuctures supraglottiques, notamment des bandes ventriculaires<br>From human non malformative fetal larynges a numerical model was built. These organs were then set on an experimental bench with physiological airflow conditions; a sound was then produced and compared through an acoustical analysis to first cries recorded in labour rooms. A study with high-speed imaging was secondarily performed. All the experimental data, especially thoses using high-speed imaging, as well as the numerical model showed that the role of the vocal cords is not to procuce the sound by themselves. They dramatically increase the airflow speed and so create aerodynamical conditions which lead to supraglottal elements vibration, especially the false vocal cords

Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 2003.<br>Includes bibliographical references (p. 140-141).<br>This thesis consists of three chapters that investigate the index premium and its underlying economics both theoretically and empirically. The first chapter presents our empirical findings about the index premium and its properties. First, we find that the index premia for both the S&P 500 and Russell 2000 have been growing over time, reaching levels of about 15% and 10%, respectively, in 2000. The premia arise somewhat gradually between the announcement and effective days and do not reverse at least in the next few weeks. Second, we find that the index premium is related to the idiosyncratic risk and market equity of a firm with economic and statistical significance. Third, we introduce a new concept that we label the index turnover cost, which represents a cost borne by index funds due to the index premium. We illustrate this cost and estimate it as 70-85 bp annually for the S&P 500 and 110-211 bp annually for the Russell 2000. The second chapter develops the first theoretical explanation in the literature for downward-sloping demand curves. In traditional multi-asset models such as the CAPM, demand curves for stocks are almost perfectly horizontal, because a representative investor who is sufficiently risk-tolerant to hold the entire market portfolio has to be almost indifferent to idiosyncratic risk. We start with the basic CAPM setting, but we further assume that there is a fixed cost to actively managing a stock portfolio and that individuals pay the cost through an institution as a proportional fee. In equilibrium, the proportional fee can entirely determine the cross-sectional pricing of stocks, while the risk aversion of individual investors still determines the aggregate market risk premium.<br>(cont.) In contrast to any representative agent models, this allows demand curves for stocks to be sufficiently steep to have economic significance, also implying that stocks will be priced only approximately around their fundamental values. Our explanation can account for several empirically observed puzzles such as the magnitude of the S&P 500 index premium. The third chapter focuses on index investors for whom the index premium creates a recurring cost: as the index is updated, they need to buy stocks with the premium and sell stocks without the premium. Different index rules can produce different index premia due to the different frequency and criteria of updating. We build a model to investigate the behavior of the index turnover cost and the portfolio performance of a mechanical index fund under a market-cap rule, an exogenous random rule, and a deterministic rule. We find that the rational anticipation of future index composition reflected in prices today eliminates any first-order differences in index fund performance across the three index rules. As the index investors become a large part of the market, the non-index investors become less diversified, and this induces hedging motives which hurt the index investors especially under a market-cap rule.<br>by Antti Petäjistö.<br>Ph.D.

The purpose of this thesis is to investigate the evidence of return predictability in equity and treasury markets. The first topic investigates the evidence on return predictability from an economic perspective. We use a simple model that incorporates a time varying investment opportunity set into a mean-variance portfolio maximization framework, and derive the optimal capital allocation weights for: (i) a naive strategy based on average realized returns; and (ii) a class of strategies that condition on dividend-price signals. While our data supports in-sample evidence of return predictability, the out-of-sample returns of the naive strategy are higher than those of all conditional portfolio specifications based on a certainty equivalent metric and portfolio turnover. These results suggest that dividendprice predictability offers no economic value to investors. The second topic studies the link between short and long-run risk premia of equity claims. We extract short-term risk premia from contemporaneous information on short-term futures and cash equity markets under the assumption of no arbitrage. Predictability regressions reveal that short-term risk premia capture different information from long-run risk premia. Counter to the intuition that a high price of risk commands high returns, high short-run risk premia on dividend claims predict low returns on the index. While inconsistent with models featuring either habit persistence or long-run risk, the results may be reconciled with some models of uncertainty aversion. The third topic is concerned with monetary policy sources of bond risk premia. Expected monetary policy shocks are extracted from a panel of inflation, GDP growth, and federal funds rates forecasts and using a Taylor rule specification as an identifying assumption. Expected monetary policy shocks are found to be statistically significant predictors of excess returns on bonds, even after controlling for levels and conditional volatilities of macroeconomic activity. The findings are consistent with a long run risk economy where contractionary monetary policy action increases GDP uncertainty.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2004.<br>Includes bibliographical references.<br>This thesis is composed of three chapters, each includes one paper. The first chapter includes a paper that analyses the impact of terror on consumption and investment. This paper provides evidence on how consumers and investors react to terror attacks based on a new database from the Israeli-Palestinian conflict. An increase in terror casualties triggers households to alter their perceived personal security and expected future income. Only ex-post do households distinguish a temporary from a permanent increase in terror casualties. A temporary increase in the number of terror casualties causes a bust-boom cycle of durables consumption and irreversible investment; nondurables are affected less. A permanent increase in the number of terror casualties causes a one-time drop in consumption. This is in line with the theory on irreversible investment and durables consumption: terror generates temporary uncertainty about personal security and future income, which in turn causes a bust-boom cycle of durables due to bunching of purchases in later periods. A permanent increase in terror causes neither bunching nor boom. Similar results are obtained for the effect of terror casualties on fixed capital. The second chapter includes a paper titled: "Arbitrage Tests of Israel's Currency Options Markets." The aims of this study are threefold. First, we test the validity of the Black and Scholes (B-S) model as a naive option-pricing model for the case of an exchange-rate target zone. We find that although we cannot reject the weakly efficient market hypothesis (except for very-near-maturity deep-ITM options), we can reject the strongly efficient market and/or the B-S model validity hypotheses.<br>(cont.) The banking sector could have utilized arbitrage opportunities, notably for out-of-the-money, at-the-money, and far-from-maturity options, especially when employing inter-temporal weighted-average implied standard deviation. Second, we estimate the liquidity premium for currency options by using a unique data set that allows us to comparing tradable and non-tradable options. The liquidity premium, though positive in average, is found to be negative for some options. This is an indication that there could have been arbitrage opportunities, especially for the banking sector. Third, we examine the null hypothesis that the Israeli currency options market is efficient, an issue that has not been investigated. Ex-post tests of arbitrage and dominance conditions do not permit rejection of the null hypothesis, except for very-near maturity, deep-in-the-money (ITM) options. The paper enhances the literature by using a unique database from the Israeli currency options market, which includes currency options traded on the Tel Aviv Stock Exchange and (non-tradable) Bank of Israel currency options. In addition, this paper examines B-S when the exchange rate is confined to a target zone. The third chapter includes a paper that analyses the robustness of exchange rate models, unit roots and cointegration. Three basic models have been proposed to explain the exchange rate: Purchasing Power Parity (PPP), the Balassa-Samuelson model and the random walk model. The robustness of these models is not merely a statistical curiosity but has important implications in many economic and financial models. During the last two decades ...<br>by Samer Haj-Yehia.<br>Ph.D.

This thesis investigates the effect of Limited Asset Market Participation on the financial and macroeconomic implications of DSGE models. In particular, I study the implications of LAMP for the equity premium predicted by these kind of models and the implications concerning optimal public policies.

Submitted by Adriano Faria (afaria@fgvmail.br) on 2017-12-13T19:49:29Z No. of bitstreams: 1 Tese_deFaria.pdf: 3657553 bytes, checksum: 11ec67914c866ca46d83c67c1592e093 (MD5)<br>Approved for entry into archive by GILSON ROCHA MIRANDA (gilson.miranda@fgv.br) on 2017-12-21T11:41:13Z (GMT) No. of bitstreams: 1 Tese_deFaria.pdf: 3657553 bytes, checksum: 11ec67914c866ca46d83c67c1592e093 (MD5)<br>Made available in DSpace on 2017-12-27T12:18:22Z (GMT). No. of bitstreams: 1 Tese_deFaria.pdf: 3657553 bytes, checksum: 11ec67914c866ca46d83c67c1592e093 (MD5) Previous issue date: 2017-03-16<br>This thesis is a collection of essays in empirical finance mainly focused on term structure models. In the first three chapters, we developed methods to extract the yield curve from government and corporate bonds. We measure the performance of such methods in pricing, Value at Risk and forecasting exercises. In its turn, the last chapter brings a discussion about the effects of different metrics of the optimal portfolio on the estimation of a CCAPM model.In the first chapter, we propose a segmented model to deal with the seasonalities appearing in real yield curves. In different markets, the short end of the real yield curve is influenced by seasonalities of the price index that imply a lack of smoothness in this segment. Borrowing from the flexibility of spline models, a B-spline function is used to fit the short end of the yield curve, while the medium and the long end are captured by a parsimonious parametric four-factor exponential model. We illustrate the benefits of the proposed term structure model by estimating real yield curves in one of the biggest government index-linked bond markets in the world. Our model is simultaneously able to fit the yield curve and to provide unbiased Value at Risk estimates for different portfolios of bonds negotiated in this market.Chapter 2 introduces a novel framework for the estimation of corporate bond spreads based on mixture models. The modeling methodology allows us to enhance the informational content used to estimate the firm level term structure by clustering firms together using observable firm characteristics. Our model builds on the previous literature linking firm level characteristics to credit spreads. Specifically, we show that by clustering firms using their observable variables, instead of the traditional matrix pricing (cluster by rating/sector), it is possible to achieve gains of several orders of magnitude in terms of bond pricing. Empirically, we construct a large panel of firm level explanatory variables based on results from a handful of previous research and evaluate their performance in explaining credit spread differences. Relying on panel data regressions we identify the most significant factors driving the credit spreads to include in our term structure model. Using this selected sample, we show that our methodology significantly improves in sample fitting as well as produces reliable out of sample price estimations when compared to the traditional models.Chapter 3 brings the paper “Forecasting the Brazilian Term Structure Using Macroeconomic Factors”, published in Brazilian Review of Econometrics (BRE). This paper studies the forecasting of the Brazilian interest rate term structure using common factors from a wide database of macroeconomic series, from the period of January 2000 to May 2012. Firstly the model proposed by Moench (2008) is implemented, in which the dynamic of the short term interest rate is modeled using a Factor Augmented VAR and the term structure is derived using the restrictions implied by no-arbitrage. Similarly to the original study, this model resulted in better predictive performance when compared to the usual benchmarks, but presented deterioration of the results with increased maturity. To avoid this problem, we proposed that the dynamic of each rate be modeled in conjunction with the macroeconomic factors, thus eliminating the no-arbitrage restrictions. This attempt produced superior forecasting results. Finally, the macro factors were inserted in a parsimonious parametric three-factor exponential model.The last chapter presents the paper “Empirical Selection of Optimal Portfolios and its Influence in the Estimation of Kreps-Porteus Utility Function Parameters”, also published in BRE. This paper investigates the effects on the estimation of parameters related to the elasticity of intertemporal substitution and risk aversion, of the selection of different portfolios to represent the optimal aggregate wealth endogenously derived in equilibrium models with Kreps-Porteus recursive utility. We argue that the usual stock market wide index is not a good portfolio to represent optimal wealth of the representative agent, and we propose as an alternative the portfolio from the Investment Fund Industry. Especially for Brazil, where that industry invests most of its resources in fixed income, the aforementioned substitution of the optimal proxy portfolio caused a significant increase in the risk aversion coefficient and the elasticity of the intertemporal substitution in consumption.

This dissertation seeks to contribute to the policy discussion on how to design efficient and sustainable energy policies. In three self-contained chapters, it applies microeconomic theory and empirical analysis to identify three market failures in European energy markets and to evaluate specific policy measures that strive to overcome these failures in order to increase market efficiency and to enhance environmental or societal sustainability. Chapter 1 and 2 study European electricity markets, which play an important role in the transition towards a carbon-neutral energy future. Overcoming barriers to efficient electricity markets is a crucial step to keep the costs of this transition as low as possible to society. Both chapters focus on obstacles to electricity market efficiency that have recently been highlighted by the European Commission. On the supply side, subsidies for renewable electricity may distort production incentives and competition in wholesale electricity markets. Chapter 1 applies a theoretical model to study the effect of different subsidies on producer strategies and competition in wholesale electricity markets. On the demand side, the European Commission seeks to overcome the reluctance of residential electricity consumers to switch electricity supplier in order to ensure effective competition in the retail electricity market. Chapter 2 empirically quantifies different reasons for switching inertia using a structural discrete choice model and performs counterfactual analysis to study the effect of different policy measures that seek to overcome switching inertia. Chapter 3 looks at the building sector, which accounts for 40% of final energy consumption in Europe and is a major emitter of carbon emissions. In the residential housing market information asymmetries hamper incentives to invest in energy efficiency improvements of rental property. This chapter empirically analyzes the effect of a European policy that mandates the use of energy performance certificates aiming at establishing an efficient market for energy efficient dwellings.<br>Doctorat en Sciences économiques et de gestion<br>info:eu-repo/semantics/nonPublished

Estimating risk premia has been at the forefront of the financial economics' literature due to their informational content. Risk premia are of particular interest to academics, policymakers and practitioners given the information they disclose on expected asset returns for a given level of risk, their contribution in asset pricing and their ability to disentangle the different sources of risk. However, risk premia are unobserved and their estimates strongly differ from one study to another, as they are highly sensitive to the specification of the underlying model, sparking hence a strong interest in their analysis. The aim of the thesis is to estimate risk premia in a dynamic term structure model setting. The first part of the thesis comprises of an overview of a particular class of dynamic term structure models, namely affine term structure models. The overview will include important concepts and definitions. The second part of the thesis uses a risk-averse formulation of the uncovered interest rate parity to determine exchange rates through interest rate differentials, and ultimately extract currency risk premia. The method proposed consists of developing an affine Arbitrage-Free class of dynamic Nelson-Siegel term structure models (AFNS) with stochastic volatility to obtain the domestic and foreign discount rate variations, which in turn are used to derive a representation of exchange rate depreciations and risk premia. The third part of the thesis studies both the nominal and real UK term structure of interest rates using a Gaussian dynamic term structure model, which imposes the non-negativity of nominal short maturity rates. Estimates of the term premia, inflation risk premia and market-implied inflation expectations are provided.

Aquesta tesi pretén descobrir, de manera empírica, nous aspectes de la secció transversal dels rendiments del capital i oferir explicacions teòriques i empíriques de les seves conclusions principals. La tesi documenta nous predictors de preus i altres factors relacionats amb els nivells d’incertesa i d’imprecisió de la informació continguda en diferents mesures del risc. Al primer capítol, s’estudia si la volatilitat de la sèrie temporal del book-to-market (BM), anomenada incertesa de valor (value uncertainty, UNC) és valorada en la secció transversal dels rendiments del capital. Un factor ponderat per valor i ajustat per mida amb una posició llarga (curta) en accions d’alta (baixa) incertesa genera un alfa anualitzat del 6-8%. Aquesta prima d’incertesa de valor es veu impulsada pels resultats extraordinaris de les empreses d’UNC alta i no s’explica pels factors de risc establerts o per les característiques de l’empresa, com la dinàmica dels beneficis i dels preus, la inversió, la rendibilitat o el propi BM. A nivell agregat, la UNC està correlacionada amb els fonaments macroeconòmics i prediu els rendiments futurs del mercat, així com la seva volatilitat. En aquest capítol, també es dona una explicació racional per a la fixació del preu dels actius de la prima d’UNC no coberta. El segon capítol és una ampliació del primer i examina el poder predictiu de la incertesa de la rendibilitat (uncertainty of profitability, UP) en la secció transversal dels rendiments del capital. Una estratègia de cartera amb una posició llarga en accions d’alta volatilitat i curta en accions baixa volatilitat genera una taxa de rendiment brut anual (ajustada al risc) del 8% (10%). Les accions d’UP alta tindrien rendiments més alts en temps de més rendibilitat i menys volatilitat de mercat, i més inflació esperada, cosa que justificaria la prima documentada. Les empreses amb més incertesa sobre el creixement dels seus actius (uncertainty of asset growth, UAG) superarien aquelles amb menys incertesa sobre aquest creixement en un 7% (12%) en rendiment brut (ajustat al risc) de risc excessiu. Aquests resultats mostren la importància de la volatilitat dels factors de risc en les decisions d’inversió. Al tercer capítol, s’estudia l’impacte que té la imprecisió en l’expectativa de guanys de la direcció (management earnings guidance, IMP) sobre els rendiments del capital. L’evidència empírica revela que una IMP alta (un interval més gran en els ingressos previstos) s’associa a uns rendiments subsegüents més baixos de les accions. S’ofereixen dues explicacions complementàries per explicar aquests baixos rendiments. Primera, en un mercat que presenta limitacions a la venda en descobert i disparitat d’opinions sobre les estimacions de beneficis, una IMP alta desanima els inversors pessimistes, mentre que els optimistes creuen en el gran salt de rang i prenen posicions llargues basant-se en aquestes creences, cosa que provoca sobrevaloracions de les accions i, en darrera instància, rendibilitats més baixes. Segona, una IMP alta pot reflectir una genuïna incertesa pel que fa als guanys futurs, i això pot atreure els inversors en valor o de loteria. Les conclusions són sòlides, a nivell d’anàlisi de la cartera i de les accions, per al mesurament de la imprecisió i per a diferents models de fixació de preus dels actius.<br>Esta tesis pretende descubrir, de forma empírica, nuevos aspectos de la sección transversal de los rendimientos del capital y proporcionar explicaciones teóricas y empíricas de sus principales conclusiones. La tesis documenta nuevos indicadores de precios y otros factores relacionados con los niveles de incertidumbre y de imprecisión de la información contenida en distintas medidas del riesgo. En el primer capítulo, se investiga si la volatilidad de la serie temporal del book-to-market (BM), denominada incertidumbre de valor (value uncertainty, UNC) es estimada en la sección transversal de los rendimientos del capital. Un factor ponderado por valor y ajustado por tamaño con una posición larga (corta) en acciones de alta (baja) incertidumbre genera un alfa anualizado del 6-8%. Esta prima de incertidumbre de valor es impulsada por los resultados extraordinarios de las empresas de alta UNC y no se explica por los factores de riesgo establecidos o por las características de la empresa, como la tendencia de los beneficios y los precios, la inversión, la rentabilidad o el propio BM. A nivel agregado, la UNC está correlacionada con los fundamentos macroeconómicos y predice los rendimientos futuros del mercado, así como la volatilidad del mercado. En este capítulo, también se proporciona una explicación racional para la fijación del precio de los activos de la prima de UNC no cubierta. El segundo capítulo es una ampliación del primero y examina el poder predictivo de la incertidumbre de rentabilidad (uncertainty of profitability, UP) en la sección transversal de los rendimientos del capital. Una estrategia de cartera con una posición larga en acciones de alta volatilidad y corta en acciones baja volatilidad genera una tasa de rendimiento bruto anual (ajustada al riesgo) del 8% (10%). Las acciones de alta UP tendrían mayores rendimientos en tiempos de mayor rentabilidad de mercado, menor volatilidad de mercado y mayor inflación esperada que justifica la prima documentada. Las empresas con mayor incertidumbre sobre el crecimiento de sus activos (uncertainty of asset growth, UAG) superarían a aquellas con menor incertidumbre sobre el crecimiento de sus activos en un 7% (12%) en rendimiento bruto (ajustado al riesgo) de riesgo excesivo. Estos resultados muestran la importancia de la volatilidad de los factores de riesgo en las decisiones de inversión. En el tercer capítulo, se estudia el impacto que tiene la imprecisión en las expectativas de ganancias de la dirección (management earnings guidance, IMP) sobre los rendimientos del capital. La evidencia empírica revela que unas altas IMP (un mayor intervalo en los ingresos previstos) se asocian a unos rendimientos más bajos de las acciones. Se proporcionan dos explicaciones complementarias para explicar estos bajos rendimientos. Primero, en un mercado que presenta limitaciones a la venta a corto y disparidad de opiniones sobre las estimaciones de beneficios, unas altas IMP desaniman a los inversores pesimistas, mientras que los más optimistas creen en el gran salto de rango y toman posiciones largas en base a estas creencias, lo cual ocasiona sobrevaloraciones de las acciones y, en consecuencia, rentabilidades más bajas. Segundo, unas altas IMP pueden reflejar una verdadera incertidumbre con respecto a las ganancias futuras, y ello puede atraer a los inversores en valor o de lotería. Las conclusiones son sólidas, a nivel de análisis de la cartera y de los valores, para la medición de la imprecisión y para diferentes modelos de fijación de precios de los activos.<br>This dissertation aims at empirically uncovering new aspects of the cross-section of equity returns and providing theoretical-backed and empirical explanations of the main findings. The dissertation documents novel pricing predictors and factors related to the uncertainty and imprecision levels of the information content embedded in different risk measures. The first chapter investigates whether the time-series volatility of book-to-market (BM), called value uncertainty (UNC), is priced in the cross-section of equity returns. A size-adjusted value-weighted factor with a long (short) position in high-UNC (low-UNC) stocks generates an annualized alpha of 6-8%. This value uncertainty premium is driven by outperformance of high-UNC firms and is not explained by established risk factors or firm characteristics, such as price and earnings momentum, investment, profitability, or BM itself. At the aggregate level, UNC is correlated with macroeconomic fundamentals and predicts future market returns and market volatility. The chapter also provides a rational asset-pricing explanation of the uncovered UNC premium. The second chapter extends the first chapter and examines the predictive power of the uncertainty of profitability (UP) on the cross-section of equity returns. A portfolio strategy that goes long in the high-UP decile portfolio and short in the low-UP decile portfolio generates an annual excess raw (risk-adjusted) return of 8% (10%). High-UP stocks would have higher returns during times of higher market-wide profitability, lower market volatility, and higher expected inflation justifying the documented premium. Moreover, firms with high uncertainty surrounding their asset growth (UAG) would outperform those with low asset growth uncertainty by 7% (12%) in terms of excess raw (risk-adjusted) return. Results shed light on the importance of the volatility of risk factors in investment decisions. The third chapter examines the impact that imprecision in management earnings guidance (IMP) has on equity returns. Empirical evidence reveals that high IMP (wider interval in the forecasted earnings) is associated with lower subsequent stock returns. Two complementary explanations are provided to explain the low returns. First, in a market that exhibits short-selling constraints and diversion of opinion regarding earnings estimates, high IMP discourages pessimistic investors while optimists believe in the high bound of the range and take long positions based on these beliefs, leading to stocks' overpricing and hence to lower subsequent returns. Second, high IMP may reflect genuine uncertainty regarding future earnings appealing to growth and lottery investors. Findings are robust at the portfolio and stock level of analysis, to the measurement of imprecision, and to different asset pricing models.

This dissertation consists of three chapters, which focus jointly on the effects of education policy on the functioning of labor markets.De-industrialization and technological progress have changed job markets fundamentally. The most fundamental change is that the concept of a worker as a unit of production relatively insensitive to inherent characteristics has been overthrown. Service sectors that have taken over from manufacturing as the engines of economic activity rely primarily on human capital for autonomous production. This is especially true for internationally tradable services. Their stark development was rendered possible by the informationcommunication revolution. Skills and talent, as well as their allocation to suitable tasks matter for production, now more than ever. We argue in this dissertation that the ability of education policy to facilitate optimal task allocation plays a role in maximizing aggregate production and in influencing education earnings premia, as well as employment volumes in various sectors of activity.<br>Doctorat en Sciences économiques et de gestion<br>info:eu-repo/semantics/nonPublished

Submitted by Pedro Guimarães (pedroengel@hotmail.com) on 2017-12-28T19:42:52Z No. of bitstreams: 1 Tese.pdf: 917520 bytes, checksum: cfa05ebb1d37a4a617f387942ee05a15 (MD5)<br>Approved for entry into archive by GILSON ROCHA MIRANDA (gilson.miranda@fgv.br) on 2018-01-15T18:46:52Z (GMT) No. of bitstreams: 1 Tese.pdf: 917520 bytes, checksum: cfa05ebb1d37a4a617f387942ee05a15 (MD5)<br>Made available in DSpace on 2018-01-16T19:08:33Z (GMT). No. of bitstreams: 1 Tese.pdf: 917520 bytes, checksum: cfa05ebb1d37a4a617f387942ee05a15 (MD5) Previous issue date: 2017-07-28<br>This doctoral thesis is composed of three chapters related to portfolio theory and model uncertainty. The first paper investigates how ambiguity averse agents explain the equity premium puzzle for a large group of countries including both Advanced Economies (AE) and Emerging Markets (EM). In the second article, we develop a general robust allocation framework that is capable of dealing with parametric and non parametric asset allocation models. In the final paper, I investigate portfolio selection criteria and analyze a set of portfolios out of sample performance in terms of Sharpe ratio (SR) and Certainty Equivalent (CEQ)