9 research outputs found
Constructing optimal sparse portfolios using regularization methods
No full textThe ideas of Markowitz indisputably constitute a milestone in portfolio theory, even though the resulting mean-variance portfolios typically exhibit an unsatisfying out-of-sample performance, especially when the number of securities is large and that of observations is not. The bad performance is caused by estimation errors in the covariance matrix and in the expected return vector that can deposit unhindered in the portfolio weights. Recent studies show that imposing a penalty in form of a l1-norm of the asset weights regularizes the problem, thereby improving the out-of-sample performance of the optimized portfolios. Simultaneously, l1-regularization selects a subset of assets to invest in from a pool of candidates that is often very large. However, l1-regularization might lead to the construction of biased solutions. We propose to tackle this issue by considering several alternative penalties proposed in non-financial contexts. Moreover we propose a simple new type of penalty that explicitly considers financial information. We show empirically that these alternative penalties can lead to the construction of portfolios with superior out-of-sample performance in comparison to the state-of-the-art l1-regularized portfolios and several standard benchmarks, especially in high dimensional problems. The empirical analysis is conducted with various U.S.-stock market datasets
Penalized Least Squares for Optimal Sparse Portfolio Selection
No full textMarkowitz portfolios often result in an unsatisfying out-of-sample performance, due to the presence of estimation errors in inputs parameters, and in extreme and unstable asset weights, especially when the number of securities is large. Recently, it has been shown that imposing a penalty on the 1-norm of the asset weights vector not only regularizes the problem, thereby improving the out-of-sample performance, but also allows to automatically select a subset of assets to invest in. Here, we propose a new, simple type of penalty that explicitly considers financial information and consider several alternative non-convex penalties, that allow to improve on the 1-norm penalization approach. Empirical results on U.S.-stock market data support the validity of the proposed penalized least squares methods in selecting portfolios with superior out-of-sample performance with respect to several state-of-art benchmarks
Cardinality versus q-Norm Constraints for Index Tracking
No full textIndex tracking aims at replicating a given benchmark with a smaller number of its constituents. Different quantitative models can be set up to determine the optimal index replicating portfolio. In this paper, we propose an alternative based on imposing a constraint on the q-norm, 0index tracking, cardinality constraint, q-norm, regularization methods, heuristic algorithms
Dynamic Adverse Selection and the Size of the Informed Side of the Market
No full textIn this paper we examine the problem of dynamic adverse selection in a stylized market where the quality of goods is a seller’s private information. We show that in equilibrium all goods can be traded if a simple piece of information is made publicly available: the size of the informed side of the market. Moreover, we show that if exchanges can take place frequently enough, then agents roughly enjoy the entire potential surplus from exchanges. We illustrate these findings with a dynamic model of trade where buyers and sellers repeatedly interact over time. More precisely we prove that, if the size of the informed side of the market is a public information at each trading stage, then there exists a weak perfect Bayesian equilibrium where all goods are sold in finite time and where the price and quality of traded goods are increasing over time. Moreover, we show that as the time between exchanges becomes arbitrarily small, full trade still obtains in finite time – i.e., all goods are actually traded in equilibrium while total surplus from exchanges converges to the entire potential. These results suggest two policy interventions in markets suffering from dynamic adverse selection: first, the public disclosure of the size of the informed side of the market in each trading stage and, second, the increase of the frequency of trading stagesdynamic adverse selection; full trade; size of the informed side; frequency of exchanges; asymmetric information
The Italian Labour Market and the Crisis
No full textThe aim of this paper is to analyse the effects of the crisis on the Italian labour market. The Italian labour market is characterized by deep gender differences and regional variability. The data show that the crisis lead to an increase in the gap of female employment rates and women?s inactivity rates with respect to Europe. The North of Italy experienced a higher increase in unemployment than the South, where many people withdrew from the labour market because of poor employment prospects. Moreover, in Italy, the increase in unemployment has been mitigated by the increase in the number of workers having access to the wage supplementation fund who are not computed within the unemployed. However, the heterogeneity in the system of unemployment benefits increased inequalities amongst the unemployed. Using a micro simulation techniques, we estimate the effect of the crisis on income distribution and poverty and find that at the national level, the population showed a reduction in equivalised household income by about 1 percent. The limited impact on household?s equivalent income can be connected to the relatively high share of unemployed who are young with relatively low income and sustained by other members of the householdlabour market, poverty, economic crisis
Transnational social capital and FDI.Evidence from Italian associations worldwide
No full textEmigrant associations abroad are structured nodes of social networks; they are manifestations of a transnational social capital. Italian associations are numerous, spread across several countries, in some cases they exist since the end of the nineteenth century, and may count on high numbers of members. Also, they are robustly tied to the home country. This paper assesses the effects of Italian associations abroad on the bilateral FDI between Italy and the countries of settlement of Italian diaspora. The main results are that these effects are positive and strongly significant, especially for the inward FDI and relatively to the countries with the oldest associationsinternational migration, FDI, Italy
Exports and Italy’s economic development: a long-run perspective (1863-2004)
No full textThis paper investigates the relationship between real export and real GDP in Italy from 1863 to 2004 by using cointegration analysis and causality tests. The outcome suggests that these variables comove in the long run but the direction of causality depends on the level of economic development: in the period prior to WW1 the growth of the Italian economy led that of exports, while in the post-WW2 period the causal relationship was reversed with the expansion of exports that determined the growth of the Italian economyExport led growth hypothesis, unit root tests, cointegration analysis, Granger – causality
China’s New Demographic Challenge: From Unlimited Supply of Labour to Structural Lack of Labour Supply. Labour market and demographic scenarios: 2008-2048
No full textThe paper focuses on the demographic and labour market consequences of the dramatic decline in fertility that has characterized China starting at the beginning of the ‘50s. It is shared opinion that a sustained decline in fertility below replacement level will provoke a decline in Total population, an even more pronounced decline in Working age population and very relevant ageing phenomena. I have recently shown that, on the contrary and coherently with empirical evidence, a decline in fertility provokes a structural lack of labour supply that determines positive migration balances and, finally, positive demographic trends. The paper applies the same approach to China with similar results. The decline in fertility, determined by the process of economic development and its impact on education and urbanization, but promoted also trough the one-child policy, will provoke a relevant and growing structural lack of labour supply, even in the hypothesis that Chinese employment growth should sharply decline. The implication is that in order to continue its road to economic growth and social development, China will have to rely on large and growing migration flows that will determine a demographic expansion. In conclusion, the decline in fertility, actively pursued to set a ceiling to population growth, will end up provoking the opposite result. The uncertainty about the age structure of the Chinese population makes it impossible to determine in which year China will start to be affected by serious labour shortages. Our scenarios do however clearly show that China will reach the Lewis turning point in the next few years and before the middle of the century will become the world largest importer of labour. Our analysis does therefore clearly suggest that any legal restriction to fertility and territorial mobility is totally unwarranted, and that China should start to consider educational and labour policies aimed to mitigate labour shortages. It also indicates the necessity to start an in depth discussion of which immigration and social integration policies could better serve the interests of China, on the light both of the experiences of other countries, and of the role that China wants to play in the international arena.Demography; Labour market; Demographic and labour market scenarios; Migrations; Lewis turning point; China
Translational research in rheumatoid arthritis: Exploiting melanocortin receptors
No full textThe copyright of this thesis rests with the author and no quotation from it or information derived from it may be published without the prior written consent of the authorRheumatoid arthritis (RA) is a chronic inflammatory disease affecting 1% of the population. The aetiology of rheumatoid arthritis is unknown, although there are multiple postulated theories. In 1950, Philip Hench won the Nobel prize for treating patients with rheumatoid arthritis with cortisone. He also treated 6 patients with adrenocorticotropic hormone (ACTH) with good results. ACTH is a melanocortin. The melanocortin system describes the five melanocortin receptors, their ligands, agonists and antagonists and the accessory proteins. The aim of this study was to explore the melanocortin receptors in rheumatoid arthritis synovium.
Methods
HA-tagged stable cell lines were created for MC1R, MC3R and MC5R. Multiple antibodies were tested for their utility using Western Blot, immunohistochemistry and flow cytometry. Samples of synovium from 28 patients with RA were tested using RTPCR for the presence of MC1R and MC3R. Gene expression was correlated with clinical characteristics, cytokine (RTPCR) expression and immunohistochemical score.
Results
The stable cell lines expressed MC1R, MC3R and MC5R respectively. Of the antibodies tested none were found to be of utility in detecting MC1R or MC3R .The MC1R RQ values in rheumatoid synovium appear to split into two groups, high and low. The medians of the two groups are significantly different (p=0.0005). There is almost a 5 cycle, or 64 fold, difference in gene expression between the medians of the two groups (1.59 v 6.23). Of note no MC3R positive samples were CD138 high (i.e. no MC3R positive samples had a significant plasma cell infiltrate) (p=0.006). Categorical analysis using Fishers Exact test revealed an association between MC1R high samples and CD68 lining high scores, (i.e. MC1R high samples also had a high macrophage score in the lining of the sample) (p=0.02). MC1R low samples were associated with not being on combination therapy,
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this did not quite reach significance (p=0.07). Linear regression analysis confirmed these associations for MC1R. PCA analysis did not show any grouping of samples according to any of the variables tested, likely due to sample size.
Conclusion
MC1R and MC3R are found in human synovium. Current commercial antibodies are not of utility in detecting MC1R or MC3R. Synovial samples can be split into high and low MC1R gene expression groups. MC3R was either present or absent. High expression of MC1R was associated with a high macrophage score and MC3R expression was associated with a low plasma cell score. MC1R and MC3R expression in RA synovium could be used as biomarkers of disease state or severity as well as a target for therapy
