1,721,086 research outputs found
Efficient Portfolios when Housing Needs Change over the Life-Cycle
Full text linkWe address the issue of the efficiency of household portfolios in the presence of housing risk. We treat housing stock as an asset and rents as a stochastic liability stream: over the life cycle, households can be short or long in their net-housing position. Efficient financial portfolios are the sum of a standard Markowitz portfolio and a housing risk hedge term that multiplies net housing wealth. Our empirical results show that net housing plays a key role in determining which household portfolios are inefficient. The largest proportion of inefficient portfolios obtains among those with positive net housing, who should invest more in stocks
Diversification and ownership concentration
No full textWe use a Tobin-Markowitz mean-variance model where the expected returns for the insiders and outsiders are different to analyze the interactions between portfolio choices and investment financing in an economy with benefits of control for entrepreneurs. The need to diversify the portfolio of the entrepreneur conflicts with the small amount of external finance that can be raised when the possibility to expropriate other providers of funds is ample. This implies that a large fraction of investment must be funded with internal sources, thus limiting both diversification and growth opportunities. Entrepreneurs choose to expropriate outside shareholders even if they compete to attract the savings of the outsiders. Nonetheless, when the diversification opportunities are small it is better to let the entrepreneurs choose independently the level of investor protection than let the entrepreneurs choose the common rules of investor protection
Are Household Portfolios Efficient? an Analysis Conditional on Housing.
No full textStandard tests of portfolio efficiency neglect the existence of illiquid wealth. The most important illiquid asset in household portfolios is housing: if housing stock adjustments are infrequent, optimal portfolios in periods of no adjustment are affected by housing price risk through a hedge term and tests for portfolio efficiency of financial assets must be run conditionally upon housing wealth. We use Italian household portfolio data and time series on financial assets and housing stock returns to assess whether actual portfolios are efficient. We find that housing wealth plays a key role in determining whether portfolios chosen by home-owners are efficient
A meta-measure of performance related to both investors and investments characteristics
No full textWe introduce hereafter a new flexible meta-measurement of portfolio performance, called the Generalized Utility-based N-moment measure, relying both on a characterization of the whole return distribution and on the set of preferences of the investor, which is adapted to analyze the performance of hedge funds. It could also serve as the basis of a Fraudulent Behavior Index aiming to detect fraudulent funds
Contagion and interdependence measures: some words of caution
No full textWorking paper 0302 GRETA, Venezi
Risk pooling, intermediation efficiency, and the business cycle
No full textWe develop a tractable macro-finance model in which entrepreneurs cannot pool idiosyncratic risks across firms due to restricted market participation. Costly risk pooling is provided by financial intermediaries who also issue safe assets via balance sheet leverage. We characterize the general equilibrium effects that associate intermediation costs to the dynamics of output and show that higher (lower) cost efficiency fosters (weakens) growth but also amplifies (dampens) its fluctuations. The model predicts negative relationships between the financial sector’s costs-to-assets and leverage ratios and the business cycle, which we find to hold for the US economy
Loss Sharing in Central Clearinghouses: Winners and Losers
No full textCentral clearing counterparties (CCPs) were established to mitigate default losses resulting from counterparty risk in derivatives markets. In a parsimonious model, we show that clearing benefits are unevenly distributed across market participants. Loss sharing rules determine who wins or loses from clearing. Current rules disproportionately benefit market participants with flat portfolios. Instead, those with directional portfolios are relatively worse off, consistent with their reluctance to voluntarily use central clearing. Alternative loss sharing rules can address cross-sectional disparities in clearing benefits. However, we show that CCPs may favor current rules to maximize fee income, with externalities on clearing participation. (JEL G18, G23, G28, G12
Health status and portfolio choice: is their relationship economically relevant?
Full text linkRecent empirical work on individual portfolio choice focuses on the role of the individual's health in making financial decisions. The key idea is that, through precautionary saving or reducing investors' time horizon, health issues make people choose safer financial portfolios. This paper questions the empirical relevance of the link between health and portfolio choice, measured as stockownership and overall fraction of risky securities held. We handle with caution the findings from previous papers and ask whether data from the first wave of the Survey of Health, Aging and Retirement in Europe (SHARE) are able to clarify some of our doubts. We find that only poor self-reported health negatively impacts the portfolio choice, while other health measures (chronic conditions, limitations in daily activities of life, mental health) are irrelevant for investment decisions
- …
