Séminaires de recherche


Conditional Risk-Based Portfolio

Mercredi | 2017-10-12
Salle B103 – 12h15

Olessia CAILLÉ – Daria ONORI

The risk-based investment strategies, such as Minimum Variance, Maximum Diversification, Equal Risk Contribution, Risk Parity, etc. share the common feature of being based on a risk measure of the asset returns, typically the covariance matrix. When one comes to implement these strategies, the standard approach consists in using an unconditional covariance matrix, simply estimated by the sample covariance matrix of past returns over a rolling window. An alternative consists in using a conditional covariance matrix that depends on information available to date. In this paper, we propose the first unifying and systematic comparison framework for the unconditional and conditional risk-based investment strategies. We compare their out-of-sample performances in terms of risk, returns and turnover (trading volume) with 4 criteria across 4 empirical datasets. Our results show that conditional risk-based strategies do not improve the out-of-sample Sharpe ratios, logically increase the turnover, but they reduce the ex-post risk.

A Flexible State-Space Model with Application to Stochastic Volatility

Mardi | 2017-10-10
Salle des thèses 16h – 17h20

Yang LU – Christian GOURIEROUX

We introduce a general state-space (or latent factor) model for time series and panel data. The state process has a polynomial expansion based dynamics that can approximate any Markov dynamics arbitrarily well, and has a latent, endogenous switching regime interpretation. The resulting state-space model is associated with simulation-free, recursive formulas for prediction and filtering, as well as the maximum composite likelihood estimation method, which has an extremely low computational cost. When applied to the stochastic volatility (SV) of asset returns, the model captures, in a unified framework, stylized facts such as heavy tailed return, and time irreversibility. The methodology is illustrated using Apple stock return data, which confirms the improvement of our model with respect to a benchmark SV model.

Bank competition and risk-taking for loans and securities at the European Union level

Mercredi | 2017-10-05
Salle B103 – 12h00


The present study re-assesses the competition-risk link based on a sample of 3,680 commercial, cooperative and savings banks from EU28 countries during 2005-2015. We determine the banklevel competition for loans and securities using Lerner index, its efficiency-adjusted form and Boone indicator. Marginal costs (MC) are estimated with a translog cost function with two bank products (i.e. loans and securities) and three input prices (i.e. labour, borrowed funds and physical capital). We use OLS regression to estimate MC for Lerner index and SFA for its efficiency-improved form. The risk measures offer a complete perspective since they are accounting- (Z-score) and market-based (Distance to Default). We control for bank (i.e. size, growth of total loans, securities and total assets, share of total loans, customer deposits and securities in total assets, profitability and capital), country (i.e. inflation rate and GDP growth rate) and banking specific factors (i.e. entry and capital requirements, innovation degree, financial development, market power). Overall, the results confirm the U-inverted relationship, between competition and risk for loans and securities.

Does public debt secure social peace? A diversionary theory of public debt management

Mardi | 2017-10-03
Salle des thèses 16h – 17h20

Patrick VILLIEU – Maxime MENUET

This paper develops a new analysis of the strategic use of public debt. Contrary to the usual view that politicians can use public debt to tie the hands of their successors, we show that an incumbent government can take advantage of having tied his own hands before the election by the means of public debt. By so doing, he reduces the base for future social conflicts, beneficiates from social peace during his term and possibly enhances his chances to be re-elected. In addition, in the case with foreign or external public debt, the incumbent can strategically divert future social conflicts toward a common enemy (the foreign creditors). Thus, by increasing public debt before the election, the incumbent can strengthen social cohesion during the mandate, both by reducing the base of internal conflicts and by diverting citizens from internal toward external rent-seeking activities.

The effect of inflation uncertainty on inflation: Stochastic volatility in mean model within a dynamic framework

Mardi | 2017-09-26
Salle des thèses 16h – 17h20


This paper investigates the effect of inflation uncertainty innovations on inflation over time by considering the monthly United States data for the time period 1976-2006. In order to investigate the effect of inflation uncertainty innovation on inflation, a Stochastic Volatility in Mean model (SVM) has been employed. SVM models are generally used to capture the innovation to inflation uncertainty, which cannot be achieved in the framework of popular deterministic ARCH type of models. Empirical evidence provided here suggests that innovations in inflation volatility increases inflation persistently. This evidence is robust across various definitions of inflation and different sub-periods.

Dynamic Panels with MIDAS Covariates: Nonlinearity, Estimation and Fit

Mardi | 2017-09-19
Salle des thèses 16h – 17h20

This paper introduces Mixed Data Sampling (MIDAS) to panel regressions suitable for analysis with GMM of the Arellano-Bond form. As MIDAS specification tests are lacking, even in univariate contexts, our proposed methods statistically embed specification checks. We proceed via confidence set estimation for the MIDAS parameter for which empty outcomes signal lack of fit. Conformably, simultaneous and partialled-out confidence sets for the regression coefficient are proposed that address the unidentified boundary parameter (Davies’ problem). Inverted statistics are asymptotically pivotal. A simulation study illustrates good size and power and, more broadly, sets a promising template for dealing with shrinkage parameters.

Foreign currency denominated indebtedness and the fiscal multiplier

Mercredi | 2017-09-06
B103 12h

Marie-Pierre HORY – Grégory LEVIEUGE – Daria ONORI

After presenting an empirical evidence of the negative impact of foreign denominated debt on the fiscal multiplier, this paper develops a two-country DSGE model with sticky prices, imperfect and incomplete international financial markets and a financial accelerator à la Bernanke et al. 1999. Following an increase in public spending, the real exchange rate depreciates. In the case where firms are indebted in foreign currency, the depreciation leads to an increase in the value of firms’ debt ratios. The financing costs therefore increase, generating a decrease in the investment level. The positive impact of fiscal policy becomes thus weaker. In contrast, if firms are indebted in local currency, the depreciation amplifies the positive impact of fiscal policy. This result supports the increasing number of measures taken in EMEs to limit their level of indebtedness in foreign currency.

Money demand stability, monetary overhang and inflation forecasting in CEE countries

Mardi | 2017-07-11
16h00-17h20 en salle des thèses

Claudiu ALBULESCU – Dominique PÉPIN

This paper tests the money demand stability in Central and Eastern European (CEE) countries, comparing two competing models, namely the Cagan’s (1956) closed-economy money demand model, and the Albulescu et al.’s (2017) open-economy model adapted for the CEE countries. The purpose is to see if the money demand is more stable in a generalized, open-economy model, which considers a currency substitution effect. Further, we check to what extent the monetary overhang represents a good predictor of inflation in the Czech Republic, Hungary and Poland. We discover that in the long run, the open-economy specification of the money demand model gives more consistent results than the closed-economy version, except for the Czech Republic, where no significant differences appear. Finally, we discover that money may improve the forecasts of inflation vis-à-vis a benchmark model only in the long run and only if we consider the currency substitution between the domestic currency and the euro. This result is however consistent only for Poland.

Location Choices of Undocumented Migrants: Does Access to Higher Public Education Matter?

Mardi | 2017-07-04
15h30-16h50 en SULLY5


Many states in the US have experienced a large influx of undocumented immigrants over the past two decades. This phenomenon has created new demands on the educational systems dealing with higher education at the state level, resulting in several state-level educational policy reforms. In several cases, these state-level policy reforms promote access to higher education for undocumented immigrants who have completed high school; however, in other cases, the state policy changes have sought either to not promote or limit this access for undocumented immigrants. Our research examines the impact of differences in state-level policies regarding higher public education (post-secondary) on the location choices of undocumented immigrants in the United States. Our results indicate that the effect of educational access on the percentage of undocumented workers in a state is mixed and very small in most specifications, indicating perhaps a trade-off between competing priorities in their choice of location. Interestingly, the interaction terms between the favorable educational access variables and the networks variable is negative, suggesting that even among states that have a favorable education policy, undocumented migrants prefer states where there is likely to be a smaller number of undocumented migrants competing for admission. Undocumented migrants are also reluctant to locate in states that have both large networks and unfavorable educational policies towards undocumented migrants – the negative restrictive effect of attracting even more stringent regulation dominates the positive cost saving effect of large networks.