Macro Risk Factors Research Articles

Tradable Macro Risk Factors and the Cross-Section of Stock Returns

We show that value and small stocks have higher expected returns due to their exposure to a factor linked to dividend growth and its risk premium – a tradable dividend growth factor constructed using dividend swap data. Hence, growth risks are the only source of their risk premia. The equity market portfolio can be decomposed into several tradable aggregate risk factors, but only one of these factors is priced in the cross-section of size- and value-sorted portfolios. We propose two alternative approaches to test the post-1963 cross-sectional implications of the model based on either the stability of portfolio betas or ability to form factor mimicking portfolios. In both cases, our results imply that only dividend growth news and/or expected return news associated with dividend growth matter in this cross-section, while other cash flow news (for instance, level of dividends) and other expected returns news (for instance, changes in government bond yields) do not matter. We find that a tradable dividend level factor is also priced in the cross-section of other portfolios (sorted on dividend yield, earnings yield and cash-flow-to-price). Results are robust to the inclusion of other tradable aggregate factors such as bond returns, inflation breakeven returns, implied volatility returns as well as credit risk, banking sector risk, and liquidity risk factors.

Why Gaussian macro-finance term structure models are (nearly) unconstrained factor-VARs

This paper explores the implications of filtering and no-arbitrage for the maximum likelihood estimates of the entire conditional distribution of the risk factors and bond yields in Gaussian macro-finance term structure model (MTSM) when all yields are priced imperfectly. For typical yield curves and macro-variables studied in this literature, the estimated joint distribution within a canonical MTSM is nearly identical to the estimate from an economic-model-free factor vector-autoregression (factor-VAR), even when measurement errors are large. It follows that a canonical MTSM offers no new insights into economic questions regarding the historical distribution of the macro risk factors and yields, over and above what is learned from a factor-VAR. These results are rotation-invariant and, therefore, apply to many of the specifications in the literature.

Predicting Macro- and Microvascular Complications in Type 2 Diabetes

OBJECTIVETo develop and validate a risk engine that calculates the risks of macro- and microvascular complications in type 2 diabetes.RESEARCH DESIGN AND METHODSWe analyzed pooled data from two clinical trials on 1,748 Japanese type 2 diabetic patients without diabetes complications other than mild diabetic retinopathy with a median follow-up of 7.2 years. End points were coronary heart disease (CHD), stroke, noncardiovascular mortality, overt nephropathy defined by persistent proteinuria, and progression of retinopathy. We fit a multistate Cox regression model to derive an algorithm for prediction. The predictive accuracy of the calculated 5-year risks was cross-validated.RESULTSSex, age, HbA1c, years after diagnosis, BMI, systolic blood pressure, non-HDL cholesterol, albumin-to-creatinine ratio, atrial fibrillation, current smoker, and leisure-time physical activity were risk factors for macro- and microvascular complications and were incorporated into the risk engine. The observed-to-predicted (O/P) ratios for each event were between 0.93 and 1.08, and Hosmer-Lemeshow tests showed no significant deviations between observed and predicted events. In contrast, the UK Prospective Diabetes Study (UKPDS) risk engine overestimated CHD risk (O/P ratios: 0.30 for CHD and 0.72 for stroke). C statistics in our Japanese patients were high for CHD, noncardiovascular mortality, and overt nephropathy (0.725, 0.696, and 0.767) but moderate for stroke and progression of retinopathy (0.636 and 0.614). By combining macro- and microvascular risks, the classification of low- and high-risk patients was improved by a net reclassification improvement of 5.7% (P = 0.02).CONCLUSIONSThe risk engine accurately predicts macro- and microvascular complications and would provide helpful information in risk classification and health economic simulations.

Variance risk-premia in CO2 markets

This paper proposes a new methodology to measure the volatility of CO2 assets computed as the difference between model-free implied volatility (from option prices) and model-free realized volatility (from high-frequency intraday data), coined as ‘variance risk-premia’ (Carr and Wu, 2009; Bollerslev et al., 2009; Trolle and Schwartz, 2010), during 2008–2011. We find that variance risk-premia are equal to a daily sample average of 0.79 for European Union Allowances and 0.18 for Certified Emissions Reductions. In the spirit of the CAPM, we show that the beta can only explain a small portion, and that macro risk factors specific to CO2 markets and energy volatilities can improve this result. Hence, there exists a systematic variance risk factor in CO2 markets that asks for a highly risk premium. Further analysis shows that variance risk-premia are time-varying, and can be used as strong predictors for forecasting CO2 returns.

Risk factors for perforations associated with endoscopic submucosal dissection in gastric lesions: emphasis on perforation type

Endoscopic submucosal dissection (ESD) enables en bloc resection of larger gastric neoplasms. However, the procedure is associated with a high incidence of perforation. Perforations during ESD are divided into macro- and microperforations. Although both types of perforations could cause widespread tissue injury and secondary sepsis, very little is known concerning the risk factors for perforations according to the type of perforation. Thus, this study was performed to evaluate the risk factors for macro-, micro-, and all perforations (both) during ESD. 823 gastric lesions (gastric adenoma or early gastric cancer) in 729 patients treated by ESD were enrolled, and their records were reviewed retrospectively. Risk factors were evaluated, focusing on age, sex, gastric neoplasm-related factors (12 locations, resected size, gross type of lesions, presence of ulceration, presence of fibrosis, pathologic diagnosis, and depth of invasion), and ESD procedure-related factors (type of knife, immediate bleeding during ESD, en bloc resection, procedure time, and the number of ESD cases experienced by the endoscopist). Of the 823 gastric lesions, the rates of all perforation, macroperforation, and microperforation were 9.6%, 7.5%, and 2.1%, respectively. Risk factors for all perforations on multivariate analysis were location of tumor in upper portion, presence of fibrosis, and long procedure time (>2 h). Risk factors for macroperforations were the same as all perforations. Risk factors for microperforations on multivariate analysis were old age (≥81 years), depth of invasion (muscularis mucosa), and long procedure time (>2 h). The risk factors for perforations during ESD could differ according to the type of perforation. Therefore, although macroperforation did not develop during ESD, it would be necessary to consider the possibility of microperforation in case of old age, long procedure time, and (deep) depth of invasion.

LONG-RUN RISKS IN THE TERM STRUCTURE OF INTEREST RATES: ESTIMATION

SUMMARY This paper estimates a model in which persistent fluctuations in expected consumption growth, expected inflation, and their time-varying volatility determine asset price variation. The model features Epstein–Zin recursive preferences, which determine the market price of macro risk factors. Analysis of the US nominal term structure data from 1953 to 2006 shows that agents dislike high uncertainty and demand compensation for volatility risks. Also, the time variation of the term premium is driven by the compensation for inflation volatility risk, which is distinct from consumption volatility risk. The central role of inflation volatility risk in explaining the time-varying term premium is consistent with other empirical evidence including survey data. In contrast, the existing long-run risks literature emphasizes consumption volatility risk and ignores inflation-specific time-varying volatility. The estimation results of this paper suggest that inflation-specific volatility risk is essential for fitting the time series of the US nominal term structure data. Copyright © 2012 John Wiley & Sons, Ltd.

Why Gaussian Macro-Finance Term Structure Models are (Nearly) Unconstrained Factor-VARs

This paper explores the impact of simultaneously enforcing the no-arbitrage structure of a Gaussian macro-finance term structure model (MTSM) and accommodating measurement errors on bond yield through filtering on the maximum likelihood estimates of the model-implied conditional distributions of the macro risk factors and bond yields. For the typical yield curves and macro variables studied in this literature, the estimated joint distribution within a canonical MTSM is nearly identical to the estimate from an economic-model-free factor vector-autoregression (factor-VAR), even when measurement errors are large. It follows that a canonical MTSM does not offer any new insights into economic questions regarding the historical distribution of the macro risk factors and yields, over and above what is learned from a factor-VAR. In particular, the discipline of a canonical MTSM is empirically inconsequential for analyses of impulse response functions of bond yields and macro factors or empirical studies of term premiums. These results are rotation-invariant and, therefore, apply to many of the specifications of risk factors in the literature. In deriving these results we develop a new canonical form for MTSMs that is particularly revealing about the nature of the over-identifying restrictions implied by MTSMs relative to yield-based factor models.

Introduction

Introduction

Cambios inducidos por la enfermedad renal crónica en los pacientes con diabetes

Diabetic nephropathy affects about 25-40% of diabetic patients and is a marker of morbimortality. Complications related to kidney failure in these patients become even more relevant with decreasing glomerular filtration rate.Cardiovascular disease is the most relevant complication, which include coronary disease, arterial hypertension, left ventricular hypertrophy, congestive cardiac insufficiency, arrhythmias and pericarditis. Other related renal complications will influence the prognosis and evolution of diabetic patients such as anemia, hemorrhagic complications, thrombotic phenomena, alterations of immune response and susceptibility to infections. All these complications, which are present in the patient with diabetic nephropathy, force towards a multifactor approach, which includes firstly the prevention of the appearance/progression of the complications through a control of the risk factors for macro and microangiopathy as glycemic and blood pressure control, proteinuria reduction, avoiding nicotine abuse, keeping closed to the ideal weight, salt intake reduction, antiaggregant treatment and statins therapy, as well as preventing additional renal toxicity.

The Term Structure of Credit Spreads in Project Finance

This paper analyses the peculiar nature of credit risk in project finance by means of a comparative econometric analysis of ex ante credit spreads for a large cross section of international loans and bonds between 1993 and 2001 in both industrialised and emerging countries. Our main contribution relates to the analysis of the term structure of credit spreads for project finance loans compared to other loans and bonds. For both investment-grade and speculative-grade bonds used for purposes other than project financing, we find that the term structure of credit spreads can reasonably be approximated by a linear positive function of maturity, once other relevant micro and macro risk factors have been controlled for. For project finance loans, instead, we show that the term structure of credit spreads is hump-shaped. This result applies to both industrialised as well as emerging countries and appears robust to a large number of sensitivity tests, controlling also for possible sample selection bias or endogeneity of maturity choice. We emphasise a number of key features of project finance structures that might underlie this finding. In particular, we illustrate the mechanisms by which higher leverage, short-term liquidity concerns due to the exclusive reliance on project cash flows as well as the sequential resolution of risks along various project advancement stages might all alleviate the perceived risk of longer-maturity project finance loans. This paper offers a number of policy implications. It provides a cross-country assessment of the riskmitigating role of explicit or implicit guarantees from multilateral development banks and export credit agencies in project finance. It also makes a number of suggestions for bank regulators on how to effectively align capital requirements with the actual term structure of credit risk in project finance. In particular, our results indicate that a linear maturity adjustment to regulatory capital with slope inversely related to the probability of default might not be applicable to project finance exposures. We acknowledge, however, that introducing different maturity adjustments for different asset classes, while improving the risk sensitivity of capital requirements, would also add to the complexity of their implementation.

Violence against children: a challenge for public health in Pakistan.

World Health Organization has identified violence against children as a growing public-health issue with a global magnitude. This paper explored violence against children as a challenge in the developing world using Pakistan as a case study. A systematic review of existing research and literature on violence against children was followed by assessing the magnitude of this challenge and its impact on policy. Most research done in Pakistan is observational, descriptive, and anecdotal with data collected through survey methods and interviews with small sample sizes. The findings suggest that the confluence of macro risk factors, such as poverty, poor legal protections, illiteracy, large family size, and unemployment, create an enabling environment for violence against children. Lack of empirical data makes it difficult to assess the magnitude of this issue. The health problems reported and the extent of human potential destroyed are unknown. Conclusion calls for focused research to examine the prevalence, potential interventions, and policies in Pakistan.

A multifactor model of Philippine stock returns using latent macro risk factors

This study addresses the measurement problem inherent in using published macroeconomic data to proxy for unobservable macro risk factors. Using a structural equation modelling framework, four latent risk factors are identified in addition to the exchange rate and market timing risk factors. The latter two are proxied one-for-one by fluctuations in the nominal peso-dollar exchange rate and the excess return on the portfolio represented by the Phisix. Using transformations of published macroeconomic data as indicator variables, the measurement part of the model appears to capture the essence of the unobservable risk factors they are supposed to measure. Variables used as such are called manifest exogenous variables (see Maruyama, 1998 or Hair et al., 1998). The betas or factor loadings generated by the structural model indicate that fluctuations in the risk factors have significant effects on the time variation of stock returns. However, the effects are more pronounced after the onset of the Asian financial crisis than before. Tests of model fit do not reject the hypothesis that the returns are consistent with the six-factor model for the entire period covered by the study, although individual factors are priced only during the 1997–2001 sub-period.

Association of Differing Dietary, Metabolic, and Clinical Risk Factors with Microvascular Complications of Diabetes: A Prevalence Study of 503 Mexican Type II Diabetic Subjects. II

The overall prevalences of microvascular complications and their association with dietary, clinical, and metabolic characteristics have been studied in 503 Mexican type II diabetic subjects. Average daily dietary intakes were 1866 kcal, 46.5% as carbohydrate, 13.7 mmol cholesterol, 8.7 g fiber, and a polyunsaturated/saturated fat ratio of 0.98. Prevalence rates of microvascular and metabolic complications were as follows: background retinopathy 12.3%, exudative retinopathy 24.2%, proliferative retinopathy 8.1% (1% blind, 4% able to read large print only), 9.1% of patients had cataract, 15.9% nephropathy, and 40.8% peripheral neuropathy. In addition, 3.6% had experienced transient lower motor neuron facial paralysis and 0.2% oculomotor paralysis. Patients with retinopathy had a longer mean duration of diabetes, were less obese at the time of examination, and had higher initial and mean blood pressures and higher mean fasting blood glucose levels when compared with those without retinopathy. Similar differences were observed between groups with and without nephropathy except that mean blood glucose levels were similar in the two groups. The presence of peripheral neuropathy was associated with longer duration of diabetes, less obesity, higher mean blood pressure and mean blood glucose levels, and lower hemoglobin concentration. Patients treated with diet alone had significantly lower prevalences of all three microvascular complications but they also had significantly shorter duration of diabetes and lower mean blood glucose levels. However, multivariate analyses on the subgroup of 360 patients who had repeated fasting blood glucose measurements for at least 5 yr demonstrated associations between retinopathy and duration of diabetes, mean blood pressure and mean blood glucose, and percent calories from carbohydrate.(ABSTRACT TRUNCATED AT 250 WORDS)