Pub Date : 2017-05-25DOI: 10.12660/BRE.V37N12017.62104
Laura Leal, Caio Almeida
The main purpose of this paper is to propose a methodology to obtain a hedge fund tail risk measure. Our measure builds on the methodologies proposed by citet*{ag15} and citet*{aagvg15}, which rely in solving dual minimization problems of Cressie Read discrepancy functions in spaces of probability measures. Due to the recently documented robustness of the Hellinger estimator (Kitamura et al., 2013), we adopt within the Cressie Read family, this specific discrepancy as loss function. From this choice, we derive a minimum Hellinger risk-neutral measure that correctly prices an observed panel of hedge fund returns. The estimated risk-neutral measure is used to construct our tail risk measure by pricing synthetic out-of-the-money put options on hedge fund returns of ten specific categories. We provide a detailed description of our methodology, extract a Tail risk hedge fund factor for Brazilian funds, and relate it to a commonly adopted market volatility measure.
{"title":"An SDF approach to hedge funds' tail risk: evidence from Brazilian funds","authors":"Laura Leal, Caio Almeida","doi":"10.12660/BRE.V37N12017.62104","DOIUrl":"https://doi.org/10.12660/BRE.V37N12017.62104","url":null,"abstract":"The main purpose of this paper is to propose a methodology to obtain a hedge fund tail risk measure. Our measure builds on the methodologies proposed by citet*{ag15} and citet*{aagvg15}, which rely in solving dual minimization problems of Cressie Read discrepancy functions in spaces of probability measures. Due to the recently documented robustness of the Hellinger estimator (Kitamura et al., 2013), we adopt within the Cressie Read family, this specific discrepancy as loss function. From this choice, we derive a minimum Hellinger risk-neutral measure that correctly prices an observed panel of hedge fund returns. The estimated risk-neutral measure is used to construct our tail risk measure by pricing synthetic out-of-the-money put options on hedge fund returns of ten specific categories. We provide a detailed description of our methodology, extract a Tail risk hedge fund factor for Brazilian funds, and relate it to a commonly adopted market volatility measure.","PeriodicalId":332423,"journal":{"name":"Brazilian Review of Econometrics","volume":"101 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-05-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134376528","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2017-05-25DOI: 10.12660/BRE.V37N12017.56924
J. A. Divino, J. Orrillo
We investigate whether or not the Ricardian Equivalence Theorem (RET) holds in a naive economy with incomplete financial markets. Even in this artificially favorable environment, where public debt has a perfect substitute, the RET fails if we allow the payoff matrix to vary. For the RET to hold, we need to assume that the risk-free payoff belongs to the asset span of the economy and the law of one price is valid. Given that these are strong assumptions, we show that the failure of the RET is robust, in the sense that there exists an open set of payoff matrices such that the RET fails.
{"title":"Failure of the Ricardian Equivalence Theory in Economies with Incomplete Markets","authors":"J. A. Divino, J. Orrillo","doi":"10.12660/BRE.V37N12017.56924","DOIUrl":"https://doi.org/10.12660/BRE.V37N12017.56924","url":null,"abstract":"We investigate whether or not the Ricardian Equivalence Theorem (RET) holds in a naive economy with incomplete financial markets. Even in this artificially favorable environment, where public debt has a perfect substitute, the RET fails if we allow the payoff matrix to vary. For the RET to hold, we need to assume that the risk-free payoff belongs to the asset span of the economy and the law of one price is valid. Given that these are strong assumptions, we show that the failure of the RET is robust, in the sense that there exists an open set of payoff matrices such that the RET fails.","PeriodicalId":332423,"journal":{"name":"Brazilian Review of Econometrics","volume":"31 2","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-05-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120855413","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2017-05-25DOI: 10.12660/BRE.V99N992016.49666
Klenio Barbosa, É. Silva
The presence of generic drugs in a market is of great importance to the society as it increases competition between suppliers of such products, which can lead to a reduction in price of products already established in the market. In the late 90s there were relevant regulatory changes in the Brazilian pharmaceutical which allowed a gradual increase in the share of generic drugs in the domestic market. This paper aims to identify the entry pattern of suppliers of generic drugs in Brazil after the entry of the first generic manufacturer in the domestic market. Using a sample of 1228 observations with 148 different drugs (active ingredient), we estimate the relationship between the number of periods after the date of the first generic entry in Brazil and the amount generic’s suppliers for the same active ingredient in the market. We find that there was a continuous entry of generic’s suppliers on the market after the first generic entry. However, such an increase of suppliers occurs at decreasing rates.
{"title":"The Pattern of Entry of Generic Drugs into the Brazilian Pharmaceutical Market","authors":"Klenio Barbosa, É. Silva","doi":"10.12660/BRE.V99N992016.49666","DOIUrl":"https://doi.org/10.12660/BRE.V99N992016.49666","url":null,"abstract":"The presence of generic drugs in a market is of great importance to the society as it increases competition between suppliers of such products, which can lead to a reduction in price of products already established in the market. In the late 90s there were relevant regulatory changes in the Brazilian pharmaceutical which allowed a gradual increase in the share of generic drugs in the domestic market. This paper aims to identify the entry pattern of suppliers of generic drugs in Brazil after the entry of the first generic manufacturer in the domestic market. Using a sample of 1228 observations with 148 different drugs (active ingredient), we estimate the relationship between the number of periods after the date of the first generic entry in Brazil and the amount generic’s suppliers for the same active ingredient in the market. We find that there was a continuous entry of generic’s suppliers on the market after the first generic entry. However, such an increase of suppliers occurs at decreasing rates.","PeriodicalId":332423,"journal":{"name":"Brazilian Review of Econometrics","volume":"72 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-05-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116343706","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2016-11-01DOI: 10.12660/BRE.V99N992016.57454
R. Moreira
This article proposes an extension of Moreira (2013a,b) as a method for measuring monetary policy’s structural credibility under inflation targeting regimes by the main determinants of the expected inflation, and using a Kalman approach with calibration. Such a method does not present some restrictions found in the existing credibility indexes, such as in Cecchetti and Krause (2002). The proposed approach was applied on the Brazilian case as an illustration and obtained robust results demonstrating that there exists a mutual dynamic relationship between expected inflation, observed inflation and the credibility behavior over time.
{"title":"Measuring the Monetary Policy’s Structural Credibility by the Expected Inflation Determinants: a Kalman Filter Approach for Brazil","authors":"R. Moreira","doi":"10.12660/BRE.V99N992016.57454","DOIUrl":"https://doi.org/10.12660/BRE.V99N992016.57454","url":null,"abstract":"This article proposes an extension of Moreira (2013a,b) as a method for measuring monetary policy’s structural credibility under inflation targeting regimes by the main determinants of the expected inflation, and using a Kalman approach with calibration. Such a method does not present some restrictions found in the existing credibility indexes, such as in Cecchetti and Krause (2002). The proposed approach was applied on the Brazilian case as an illustration and obtained robust results demonstrating that there exists a mutual dynamic relationship between expected inflation, observed inflation and the credibility behavior over time.","PeriodicalId":332423,"journal":{"name":"Brazilian Review of Econometrics","volume":"194 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121613174","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2016-05-09DOI: 10.12660/BRE.V35N22015.61662
Braz Carmargo, Bernardo Guimaraes
Dynamic Stochastic General Equilibrium (DSGE) models have become the standard framework for quantitative macroeconomic analysis in the world. Naturally, there is now a growing literature on DSGE models designed to study the Brazilian economy. A conference organized by the Centro Macro Brasil of the Sao Paulo School of Economics – FGV, sponsored by the Instituto de Pesquisa Econˆomica Aplicada (IPEA), on August 22, 2014 featured papers using DSGE models applied to Brazil. This special issue of the Brazilian Review of Econometrics contains five papers presented in the conference. The Brazilian Central Bank (Banco Central do Brasil) has its own DSGE model, the so-called SAMBA. The paper that presents and analyses the model, by Marcos de Castro, Solange Gouvea, Andr´e Minella, Rafael Santos and Nelson Souza-Sobrinho, leads this special issue. SAMBA is a large scale DSGE model with a few features designed to bring it closer to the Brazilian economy, namely, the presence of administered prices, an explicit target for the primary surplus, a fraction of households with no access to financial markets, external finance of imports, and imports used as inputs in the production function. SAMBA can be used as a tool for forecasting and for assessing the impact of different shocks. The second paper in this volume, by Fabio Kanczuk, shares the same objectives but employs a medium scale DSGE model of a small open economy. The model is then estimated to understand which shocks can explain the observed fluctuations in output in the last 15 years. The model is also used to assess the economic impacts of a hypothetical currency depreciation and to check the hypothesis that monetary policy has become more powerful over time in Brazil. The next paper in this volume, by Marco Cavalcanti and Luciano Vereda, builds a DSGE framework with a rich modeling of the public sector that explicitly considers public employment as well as other types of public expenditures, public investments and transfers. The model also incorporates a fairly detailed fiscal apparatus comprising several policy instruments both on the taxation and spending sides, and considers different fiscal rules. The model is thus able to quantify the macroeconomic effects of shocks to different types of fiscal policy in the short and medium run. The fourth paper in this volume, by Vladimir Teles, Celso Costa J´unior and Rafael Rosa, presents a DSGE model with two sectors that incorporates technical progress in the investment goods sector. This is motivated by evidence of the importance of this channel that they also document in the paper. They show that incorporating productivity shocks specific to the investment goods sector in the model affects the results in important ways. In particular, optimal monetary policy is more rigorous than in standard models. Most DSGE models applied to the Brazilian economy do not use data from the periods preceding the adoption of the inflati
动态随机一般均衡(DSGE)模型已成为国际上定量宏观经济分析的标准框架。自然，现在有越来越多的研究巴西经济的DSGE模型的文献。2014年8月22日，圣保罗经济学院(FGV)巴西宏观中心组织了一次会议，由巴西应用经济研究所(IPEA)赞助，重点介绍了将DSGE模型应用于巴西的论文。本期《巴西计量经济学评论》特刊收录了本次会议上发表的五篇论文。巴西中央银行(Banco Central do Brasil)有自己的DSGE模型，即所谓的SAMBA。由Marcos de Castro、Solange Gouvea、Andr ' e Minella、Rafael Santos和Nelson Souza-Sobrinho撰写并分析该模型的论文引领了本期特刊。SAMBA是一个大型DSGE模型，其一些特征旨在使其更接近巴西经济，即存在管理价格，明确的基本盈余目标，无法进入金融市场的一小部分家庭，进口的外部融资，以及作为生产函数投入的进口。SAMBA可用作预测和评估不同冲击影响的工具。本卷的第二篇论文由法比奥·坎扎克(Fabio Kanczuk)撰写，其目标相同，但采用了小型开放经济体的中等规模DSGE模型。然后对该模型进行估计，以了解哪些冲击可以解释过去15年观察到的产出波动。该模型还被用于评估假设货币贬值的经济影响，并检验巴西货币政策随着时间的推移变得更有力的假设。本卷的下一篇论文由Marco Cavalcanti和Luciano Vereda撰写，他们构建了一个DSGE框架，其中包含了公共部门的丰富模型，明确考虑了公共就业以及其他类型的公共支出、公共投资和转移。该模型还结合了一个相当详细的财政机构，包括税收和支出方面的若干政策工具，并考虑了不同的财政规则。因此，该模型能够量化短期和中期对不同类型财政政策冲击的宏观经济影响。本卷的第四篇论文由Vladimir Teles、Celso Costa J´unior和Rafael Rosa撰写，提出了一个包含两个部门的DSGE模型，其中包含了投资品部门的技术进步。他们在论文中也记录了这一渠道重要性的证据。他们表明，将投资品部门特有的生产率冲击纳入模型，在重要方面影响了结果。特别是，最优货币政策比标准模型更为严格。大多数适用于巴西经济的DSGE模型都没有使用1999年采用通胀目标制之前的数据。在本卷的最后一篇论文中，Carlos Carvalho和Andr´e Vilela建立了一个DSGE模型来研究1999年发生的不同汇率(和货币政策)制度之间的过渡。他们的研究结果支持1999年向通胀目标制的过渡，但也表明，如果在1998年上半年更早过渡，情况可能会更好。本期特刊中的论文强调了使用DSGE模型进行定量宏观经济分析的主要优势。正如Kanczuk所说，DSGE模型“迫使人们从外生冲击和内生反应的角度来思考，从而提出明智的问题”。Castro等人补充说，DSGE模型“可以在政策制定过程中成功地用作讲故事的工具”。我们希望通过汇集一些应用DSGE方法研究巴西宏观经济的论文，本卷既可以作为有用的指南，也可以为有兴趣在这一领域工作的研究人员提供灵感。
{"title":"Introduction to the special issue on DSGE models for the Brazilian economy","authors":"Braz Carmargo, Bernardo Guimaraes","doi":"10.12660/BRE.V35N22015.61662","DOIUrl":"https://doi.org/10.12660/BRE.V35N22015.61662","url":null,"abstract":"Dynamic Stochastic General Equilibrium (DSGE) models have become the \u0000standard framework for quantitative macroeconomic analysis in the world. Naturally, \u0000there is now a growing literature on DSGE models designed to study the \u0000Brazilian economy. A conference organized by the Centro Macro Brasil of the \u0000Sao Paulo School of Economics – FGV, sponsored by the Instituto de Pesquisa \u0000Econˆomica Aplicada (IPEA), on August 22, 2014 featured papers using DSGE \u0000models applied to Brazil. This special issue of the Brazilian Review of Econometrics \u0000contains five papers presented in the conference. \u0000The Brazilian Central Bank (Banco Central do Brasil) has its own DSGE \u0000model, the so-called SAMBA. The paper that presents and analyses the model, \u0000by Marcos de Castro, Solange Gouvea, Andr´e Minella, Rafael Santos and Nelson \u0000Souza-Sobrinho, leads this special issue. SAMBA is a large scale DSGE model \u0000with a few features designed to bring it closer to the Brazilian economy, namely, \u0000the presence of administered prices, an explicit target for the primary surplus, \u0000a fraction of households with no access to financial markets, external finance of \u0000imports, and imports used as inputs in the production function. SAMBA can be \u0000used as a tool for forecasting and for assessing the impact of different shocks. \u0000The second paper in this volume, by Fabio Kanczuk, shares the same objectives \u0000but employs a medium scale DSGE model of a small open economy. The model is \u0000then estimated to understand which shocks can explain the observed fluctuations \u0000in output in the last 15 years. The model is also used to assess the economic \u0000impacts of a hypothetical currency depreciation and to check the hypothesis that \u0000monetary policy has become more powerful over time in Brazil. \u0000The next paper in this volume, by Marco Cavalcanti and Luciano Vereda, \u0000builds a DSGE framework with a rich modeling of the public sector that explicitly \u0000considers public employment as well as other types of public expenditures, public \u0000investments and transfers. The model also incorporates a fairly detailed fiscal apparatus \u0000comprising several policy instruments both on the taxation and spending \u0000sides, and considers different fiscal rules. The model is thus able to quantify the \u0000macroeconomic effects of shocks to different types of fiscal policy in the short and \u0000medium run. \u0000The fourth paper in this volume, by Vladimir Teles, Celso Costa J´unior and \u0000Rafael Rosa, presents a DSGE model with two sectors that incorporates technical progress in the investment goods sector. This is motivated by evidence of the \u0000importance of this channel that they also document in the paper. They show \u0000that incorporating productivity shocks specific to the investment goods sector in \u0000the model affects the results in important ways. In particular, optimal monetary \u0000policy is more rigorous than in standard models. \u0000Most DSGE models applied to the Brazilian economy do not use data from the \u0000periods preceding the adoption of the inflati","PeriodicalId":332423,"journal":{"name":"Brazilian Review of Econometrics","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-05-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121640549","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2016-02-07DOI: 10.12660/BRE.V99N992016.56135
Fernando Henrique de Paula e Silva Mendes, J. Caldeira, G. V. Moura
O objetivo deste trabalho e identificar tendencias de alta e de baixa no indice Bovespa. Para tanto, sao estimados modelos com mudancas de regime markovianas que incorporam dependencia de duracao, nos quais a probabilidade de transicao depende tambem do numero de periodos em que o processo se encontra em determinado estado. Os resultados mostraram um regime de retorno positivo e baixa volatilidade, e outro com alta volatilidade e retorno negativo. Ademais, a probabilidade de troca de regime diminui com a persistencia do mercado de alta e de baixa. Uma analise das probabilidades suavizadas evidencia o sucesso da metodologia na identificacao dos principais episodios de instabilidade na bolsa brasileira. Por fim, estrategias de investimento foram construidas com base nas probabilidades previstas do modelo e apresentaram retorno medio e indice de Sharpe superiores aos do indice Ibovespa
{"title":"Evidence of Bull and Bear Markets in the Bovespa index: An application of Markovian regime-switching Models with Duration Dependence","authors":"Fernando Henrique de Paula e Silva Mendes, J. Caldeira, G. V. Moura","doi":"10.12660/BRE.V99N992016.56135","DOIUrl":"https://doi.org/10.12660/BRE.V99N992016.56135","url":null,"abstract":"O objetivo deste trabalho e identificar tendencias de alta e de baixa no indice Bovespa. Para tanto, sao estimados modelos com mudancas de regime markovianas que incorporam dependencia de duracao, nos quais a probabilidade de transicao depende tambem do numero de periodos em que o processo se encontra em determinado estado. Os resultados mostraram um regime de retorno positivo e baixa volatilidade, e outro com alta volatilidade e retorno negativo. Ademais, a probabilidade de troca de regime diminui com a persistencia do mercado de alta e de baixa. Uma analise das probabilidades suavizadas evidencia o sucesso da metodologia na identificacao dos principais episodios de instabilidade na bolsa brasileira. Por fim, estrategias de investimento foram construidas com base nas probabilidades previstas do modelo e apresentaram retorno medio e indice de Sharpe superiores aos do indice Ibovespa","PeriodicalId":332423,"journal":{"name":"Brazilian Review of Econometrics","volume":"65 1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-02-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123458072","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-12-20DOI: 10.12660/BRE.V36N12016.47745
C. Costa, Érica Diniz Oliveira
Giving couples the option to either file individually or jointly is equivalent to offering the envelope budget set if household choices may be rationalized by a utility maximization problem. This need not be the case if instead a collective model best describes household behavior. We study tax filing choices under the assumption that households’ decisions are outcomes of Nash bargains. Threat points for the bargain are minimum utilities that spouses perceived as being available in case of disagreement, modeled as the utilities attained by each spouse as a follower in counter-factual Stackelberg games. If individual filing is an option the utility thus attained establishes a lower bound for the threat points. We assess the allocative impact of allowing couples to file individually. Our numeric exercises show that redistribution across spouses due to this effect may be substantial even when this option is never chosen. This places filing options as a non-trivial aspect of tax policies for the household.
{"title":"Tax Filing Choices for the Household","authors":"C. Costa, Érica Diniz Oliveira","doi":"10.12660/BRE.V36N12016.47745","DOIUrl":"https://doi.org/10.12660/BRE.V36N12016.47745","url":null,"abstract":"Giving couples the option to either file individually or jointly is equivalent to offering the envelope budget set if household choices may be rationalized by a utility maximization problem. This need not be the case if instead a collective model best describes household behavior. We study tax filing choices under the assumption that households’ decisions are outcomes of Nash bargains. Threat points for the bargain are minimum utilities that spouses perceived as being available in case of disagreement, modeled as the utilities attained by each spouse as a follower in counter-factual Stackelberg games. If individual filing is an option the utility thus attained establishes a lower bound for the threat points. We assess the allocative impact of allowing couples to file individually. Our numeric exercises show that redistribution across spouses due to this effect may be substantial even when this option is never chosen. This places filing options as a non-trivial aspect of tax policies for the household.","PeriodicalId":332423,"journal":{"name":"Brazilian Review of Econometrics","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114898999","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-12-07DOI: 10.12660/BRE.V36N12016.51595
Adriano Faria, R. Ornelas, Caio Almeida
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.
{"title":"Empirical Selection of Optimal Portfolios and its Influence in the Estimation of Kreps-Porteus Utility Function Parameters","authors":"Adriano Faria, R. Ornelas, Caio Almeida","doi":"10.12660/BRE.V36N12016.51595","DOIUrl":"https://doi.org/10.12660/BRE.V36N12016.51595","url":null,"abstract":"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.","PeriodicalId":332423,"journal":{"name":"Brazilian Review of Econometrics","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-12-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116816437","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-11-09DOI: 10.12660/BRE.V99N992016.18544
Caio Almeida, Bernard P. Ricca, Cristina Tessari
This online appendix reports additional robustness checks for our main results. Wepresent a set of tables with summary statistics for portfolios sorted on higher idiosyncraticmoments (expected skewness, realized skewness, and realized volatility) using two alternativetime horizons to estimate the measures of idiosyncratic skewness and idiosyncratic volatility:T = 24 months and T = 60 months. For both time horizons, consistent with the empiricalevidence presented in our paper for equally-weighted portfolios, the results indicate theexistence of a negative and statistically significant relation between expected idiosyncraticskewness and the cross-section of expected returns, as well as between idiosyncratic volatilityand the cross-section of future returns. Although we observe a negative relation betweenrealized idiosyncratic skewness and the cross-section of future returns, the results are notstatistically significant. To illustrate the time-varying nature of the idiosyncratic higher moments,we also present additional figures with the cross-sectional distribution of idiosyncraticskewness and idiosyncratic volatility for the alternative time horizons.
{"title":"Idiosyncratic Moments and the Cross-Section of Stock Returns in Brazil","authors":"Caio Almeida, Bernard P. Ricca, Cristina Tessari","doi":"10.12660/BRE.V99N992016.18544","DOIUrl":"https://doi.org/10.12660/BRE.V99N992016.18544","url":null,"abstract":"This online appendix reports additional robustness checks for our main results. Wepresent a set of tables with summary statistics for portfolios sorted on higher idiosyncraticmoments (expected skewness, realized skewness, and realized volatility) using two alternativetime horizons to estimate the measures of idiosyncratic skewness and idiosyncratic volatility:T = 24 months and T = 60 months. For both time horizons, consistent with the empiricalevidence presented in our paper for equally-weighted portfolios, the results indicate theexistence of a negative and statistically significant relation between expected idiosyncraticskewness and the cross-section of expected returns, as well as between idiosyncratic volatilityand the cross-section of future returns. Although we observe a negative relation betweenrealized idiosyncratic skewness and the cross-section of future returns, the results are notstatistically significant. To illustrate the time-varying nature of the idiosyncratic higher moments,we also present additional figures with the cross-sectional distribution of idiosyncraticskewness and idiosyncratic volatility for the alternative time horizons.","PeriodicalId":332423,"journal":{"name":"Brazilian Review of Econometrics","volume":"697 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-11-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121990364","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-10-05DOI: 10.12660/BRE.V35N12015.46423
Francisco Santos, M. Garcia, M. C. Medeiros
We study price discovery in the Brazilian Foreign Exchange (FX) markets and indicate which market (spot or futures) adjusts more quickly to the arrival of new information. We find that futures market dominates price discovery since it responds for 66.2% of the variation in the fundamental price shock and for 97.4% of the fundamental price composition, corroborating the result provided in previous studies that, in a unique world example, the exchange rate is formed in the futures market. In a dynamic perspective, the futures market is also more efficient since, when markets are subjected to a shock in the fundamental price, it is faster to recover to equilibrium. By computing price discovery according to calendar semesters, we find evidence of the correlation between price discovery metrics and market factors, such as spot market supply-demand disequilibrium, central bank interventions and institutional investors’ pressure.
{"title":"Price Discovery in Brazilian FX Markets","authors":"Francisco Santos, M. Garcia, M. C. Medeiros","doi":"10.12660/BRE.V35N12015.46423","DOIUrl":"https://doi.org/10.12660/BRE.V35N12015.46423","url":null,"abstract":"We study price discovery in the Brazilian Foreign Exchange (FX) markets and indicate which market (spot or futures) adjusts more quickly to the arrival of new information. We find that futures market dominates price discovery since it responds for 66.2% of the variation in the fundamental price shock and for 97.4% of the fundamental price composition, corroborating the result provided in previous studies that, in a unique world example, the exchange rate is formed in the futures market. In a dynamic perspective, the futures market is also more efficient since, when markets are subjected to a shock in the fundamental price, it is faster to recover to equilibrium. By computing price discovery according to calendar semesters, we find evidence of the correlation between price discovery metrics and market factors, such as spot market supply-demand disequilibrium, central bank interventions and institutional investors’ pressure.","PeriodicalId":332423,"journal":{"name":"Brazilian Review of Econometrics","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-10-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123003542","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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