28 results found
Gomes F, Michaelides A, Zhang Y, 2020, Tactical target date funds, Management Science, ISSN: 0025-1909
We propose target date funds modified to exploit stock return predictability driven by the variance risk premium. The portfolio rule of these tactical target date funds (TTDFs) is extremely simplified relative to the optimal one, making it easy to implement and to communicate to investors. We show that saving for retirement in TTDFs generates economically large welfare gains, even after we introduce turnover restrictions and transaction costs, and after taking into account parameter uncertainty. This predictability also appears to be un-correlated with individual household risk, suggesting that households are in a prime position to exploit it.
Mankart J, Michaelides A, Pagratis S, 2020, Bank capital buffers in a dynamic model, Financial Management, Vol: 49, Pages: 473-502, ISSN: 0046-3892
We estimate a dynamic structural banking model to examine the interaction between risk-weighted capital adequacy and unweighted leverage requirements, their differential impacton bank lending, and equity buffer accumulation in excess of regulatory minima. Tighterrisk-weighted capital requirements reduce loan supply and lead to an endogenous fall inbank profitability, reducing bank incentives to accumulate equity buffers and, therefore,increasing the incidence of bank failure. Tighter leverage requirements, on the other hand,increase lending, preserve bank charter value and incentives to accumulate equity buffers,therefore leading to lower bank failure rates.
Michaelides A, Milidonis A, Nishiotis G, 2019, Private information in currency markets, Journal of Financial Economics, Vol: 131, Pages: 643-665, ISSN: 0304-405X
Using daily abnormal currency returns for the universe of countries with flexible exchange rates, we show local currency depreciations ahead of unscheduled, public sovereign debt downgrade announcements. Consistent with the private information hypothesis, the effect is stronger in lower institutional quality countries and holds after we control for concurrent public information and for publicly available rumors about the forthcoming downgrades. Our results persist when abnormal currency returns are adjusted for global carry and dollar risk factors, world equity and bond returns, as well as local stock market returns. Finally, the currency depreciations are permanent, providing evidence for a link between fundamentals and currency markets.
Haliassos M, Michaelides A, 2019, Asset and Debt Participation of Households: Opportunities and Challenges in Eliminating Borders, Conference on Capital Market Union and Beyond, Publisher: MIT PRESS, Pages: 113-126
Michaelides A, Zhang Y, 2017, Stock market mean reversion and portfolio choice over the life cycle, Journal of Financial and Quantitative Analysis, Vol: 52, Pages: 1183-1209, ISSN: 0022-1090
We solve for optimal consumption and portfolio choice in a life-cycle model with short-sales and borrowing constraints; undiversifiable labor income risk; and a predictable, time-varying, equity premium and show that the investor pursues aggressive market timing strategies. Importantly, in the presence of stock market predictability, the model suggests that the conventional financial advice of reducing stock market exposure as retirement approaches is correct on average, but ignoring changing market information can lead to substantial welfare losses. Therefore, enhanced target-date funds (ETDFs) that condition on expected equity premia increase welfare relative to target-date funds (TDFs). Out-of-sample analysis supports these conclusions.
Michaelides A, Orphanides A, 2016, The Cyprus Bail-in Policy Lessons from the Cyprus Economic Crisis, ISBN: 9781783268757
Less than a year later, a €10 billion second rescue deal was agreed upon — an unprecedented agreement that bailed in creditors of Cyprus' two largest banks, and triggered an economic crisis that the nation still struggles to recover ...
Calvet L, Haliassos M, Michaelides A, 2015, Introduction to JPEF special issue on household finance, Journal of Pension Economics & Finance, Vol: 14, Pages: 329-331, ISSN: 1474-7472
Michaelides A, Milidonis A, Nishiotis G, et al., 2015, The adverse effects of systematic leakage ahead of official sovereign debt rating announcements, Journal of Financial Economics, Vol: 116, Pages: 526-547, ISSN: 0304-405X
Rating agencies consult with local government officials several days prior to official announcements of sovereign debt rating changes, making information leakage likely. Using cross-country data from 1988 to 2012, we find evidence of information leakage. In particular, we find statistically and economically significant negative daily abnormal stock index returns prior to downgrade announcements. These effects are more pronounced in countries with lower institutional quality, and they persist during times with no downgrade rumors and no concurrent bad news in general. A mild post-announcement reversal consistent with overreaction to pre-event downgrade rumors highlights the adverse effects of such leakage and, thus, should be a policy concern for capital market regulators.
Michaelides A, 2014, Cyprus: from boom to bail-in, Economic Policy, Vol: 29, Pages: 639-689, ISSN: 0266-4658
Gomes F, Michaelides A, Polkovnichenko V, 2013, Fiscal Policy and Asset Prices with Incomplete Markets, REVIEW OF FINANCIAL STUDIES, Vol: 26, Pages: 531-566, ISSN: 0893-9454
Inkmann J, Michaelides A, 2012, Can the Life Insurance Market Provide Evidence for a Bequest Motive?, JOURNAL OF RISK AND INSURANCE, Vol: 79, Pages: 671-695, ISSN: 0022-4367
Kiyotaki N, Michaelides A, Nikolov K, 2011, Winners and Losers in Housing Markets, JOURNAL OF MONEY CREDIT AND BANKING, Vol: 43, Pages: 255-296, ISSN: 0022-2879
Inkmann J, Lopes P, Michaelides A, 2011, How Deep Is the Annuity Market Participation Puzzle?, REVIEW OF FINANCIAL STUDIES, Vol: 24, Pages: 279-319, ISSN: 0893-9454
Grant C, Koulovatianos C, Michaelides A, et al., 2010, EVIDENCE ON THE INSURANCE EFFECT OF REDISTRIBUTIVE TAXATION, REVIEW OF ECONOMICS AND STATISTICS, Vol: 92, Pages: 965-973, ISSN: 0034-6535
Sambanis N, Michaelides A, 2009, A Comment on Diagnostic Tools for Counterfactual Inference, POLITICAL ANALYSIS, Vol: 17, Pages: 89-106, ISSN: 1047-1987
Gomes F, Michaelides A, Polkovnichenko V, 2009, Optimal savings with taxable and tax-deferred accounts, REVIEW OF ECONOMIC DYNAMICS, Vol: 12, Pages: 718-735, ISSN: 1094-2025
Gomes F, Michaelides A, 2008, Asset Pricing with Limited Risk Sharing and Heterogeneous Agents, Review of Financial Studies, Vol: 21, Pages: 415-448, ISSN: 0893-9454
Lopes P, Michaelides A, 2007, Rare events and annuity market participation, Finance Research Letters, Vol: 4, Pages: 82-91, ISSN: 1544-6123
We investigate whether a rare event (like the default of the annuity provider) can explain the annuity market participation puzzle. High risk aversion is needed to change behavior in the presence of such a disastrous shock but higher risk aversion also makes annuities more valuable. Therefore, these rare events are unlikely candidates to explain the low take-up of voluntary annuities: the conclusion is robust to disentangling risk aversion from intertemporal substitution and to allowing portfolio investment in a stock market index. © 2007 Elsevier Inc. All rights reserved.
Gomes F, Michaelides A, 2005, Optimal life-cycle asset allocation: Understanding the empirical evidence, JOURNAL OF FINANCE, Vol: 60, Pages: 869-904, ISSN: 0022-1082
Michaelides A, 2003, International portfolio choice, liquidity constraints and the home equity bias puzzle, JOURNAL OF ECONOMIC DYNAMICS & CONTROL, Vol: 28, Pages: 555-594, ISSN: 0165-1889
Gomes F, Michaelides A, 2003, Portfolio choice with internal habit formation: a life-cycle model with uninsurable labor income risk, REVIEW OF ECONOMIC DYNAMICS, Vol: 6, Pages: 729-766, ISSN: 1094-2025
Michaelides A, 2003, A reconciliation of two alternative approaches towards buffer stock saving, ECONOMICS LETTERS, Vol: 79, Pages: 137-143, ISSN: 0165-1765
Haliassos M, Michaelides A, 2003, Portfolio choice and liquidity constraints, INTERNATIONAL ECONOMIC REVIEW, Vol: 44, Pages: 143-177, ISSN: 0020-6598
Haliassos M, Michaelides A, 2002, Calibration and computation of household portfolio models, Conference on Household Portfolios, Publisher: MIT PRESS, Pages: 55-101
Ludvigson SC, Michaelides A, 2001, Does buffer-stock saving explain the smoothness and excess sensitivity of consumption?, AMERICAN ECONOMIC REVIEW, Vol: 91, Pages: 631-647, ISSN: 0002-8282
Kalyvitis S, Michaelides A, 2001, New evidence on the effects of US monetary policy on exchange rates, ECONOMICS LETTERS, Vol: 71, Pages: 255-263, ISSN: 0165-1765
Abdelkhalek A, Bilas A, Michaelides A, 2001, Parallelization, optimization, and performance analysis of portfolio choice models, Pages: 277-286, ISSN: 0190-3918
In this paper we show how applications in computational economics can take advantage of modern parallel architectures to reduce the computation time in a wide array of models that have been, to date, computationally intractable. The specific application we use computes the optimal consumption and portfolio choice policy rules over the life-cycle of the individual. Our goal is two-fold: (i) To understand the behavior of a class of emerging applications and provide an efficient parallel implementation and (ii) to introduce a new benchmark for parallel computer architectures from an emerging and important class of applications. We start from an existing sequential algorithm for solving a portfolio choice model. We present a number of optimizations that result in highly optimized sequential code. We then present a parallel version of the application. We find that: (i) Emerging applications in this area of computational economics exhibit adequate parallelism to achieve, after a number of optimization steps, almost linear speedup for system sizes up to 64 processors. (ii) The main challenges in dealing with applications in this area are computational imbalances introduced by algorithmic dependencies and the parallelization method and granularity. (iii) We present preliminary results for a problem that has not been, to the best of our knowledge, solved in the financial economics literature to date.
Michaelides A, Ng S, 2000, Estimating the rational expectations model of speculative storage: A Monte Carlo comparison of three simulation estimators, JOURNAL OF ECONOMETRICS, Vol: 96, Pages: 231-266, ISSN: 0304-4076
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