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We provide an assessment of the Basel Committee on Banking Supervision (BCBS) proposal to restrict the internal ratings-based approach on bank risk and to introduce risk-weighted asset floors. If well enforced, risk-sensitive capital regulation results in a more efficient credit allocation compared to the standard approach. Thus, the internal ratings-based approach should be maintained. Further, the use of internal ratings-based output floors potentially results in unintended negative side effects. Input floors are likely a valuable tool to achieve risk-weighted assets comparability. Finally, the proposed measures have a potential detrimental impact for European banks as compared to others.
The Capital Markets Union-project of the European Commission aims for an increase of marketbased debt financing of small and medium-sized enterprises (SMEs), complementing bank lending. In this essay we argue that rather than focussing on pure non-bank lending, a reasonable mix of bankand market-based financing should be considered. Banks are said to have a comparative advantage in critical lending functions such as credit screening, debtor monitoring and debt renegotiation. All forms of lending require a persistent skin-in-the-game of critical players in order to be effective. The regulator should insist on full disclosure of skin-in-the-game, thereby improving capital allocation and reducing systemic risks.
The impact of network connectivity on factor exposures, asset pricing and portfolio diversification
(2017)
This paper extends the classic factor-based asset pricing model by including network linkages in linear factor models. We assume that the network linkages are exogenously provided. This extension of the model allows a better understanding of the causes of systematic risk and shows that (i) network exposures act as an inflating factor for systematic exposure to common factors and (ii) the power of diversification is reduced by the presence of network connections. Moreover, we show that in the presence of network links a misspecified traditional linear factor model presents residuals that are correlated and heteroskedastic. We support our claims with an extensive simulation experiment.
Causality is a widely-used concept in theoretical and empirical economics. The recent financial economics literature has used Granger causality to detect the presence of contemporaneous links between financial institutions and, in turn, to obtain a network structure. Subsequent studies combined the estimated networks with traditional pricing or risk measurement models to improve their fit to empirical data. In this paper, we provide two contributions: we show how to use a linear factor model as a device for estimating a combination of several networks that monitor the links across variables from different viewpoints; and we demonstrate that Granger causality should be combined with quantile-based causality when the focus is on risk propagation. The empirical evidence supports the latter claim.
Mobilizations in defence of ‘companion animals’ have become major sites of contestation in Chinese society in recent years. They often reject the existing ambiguity between the use of these animals as pets and as meat, demanding unambiguous respect for and protection of dogs. However, in a society where inequalities are as significant as in China, where the level of poverty, sickness, and environmental and industrial tragedies appears overwhelming, one may ask how pets’ destinies have become such a symbolic focus and source of occasional fury – for both Chinese and foreign audiences. Taking this question seriously, this article aims to examine such mobilizations in China – demanding the protection of dogs – as a starting point to theoretically unwrap the more general problem of how the perception of certain beings as ‘weak’ and as deserving the protection of society is socially constructed, and what the related choices imply. I argue that to better understand these mobilizations to protect dogs, we should not separate the focus of the calls for protection from the social web of relationships and oppositions in which they are entrenched.
In my paper I take issue with proponents of ‘intersectionality’ which believe that a theoretical concept cannot/should not be detached from its original context of invention. Instead, I argue that the traveling of theory in a global context automatically involves appropriations, amendment and changes in response to the original meaning. However, I reject the idea that ‘intersectionality’ can be used as a freefloating signifier; on the contrary, it has to be embedded in the respective (historical, social, cultural) context in which it is used. I will start by mapping some of the current debates engaging with the pros and cons of the global implementation of the concept (the controversy about master categories, the dispute about the centrality of ‘race’, and the argument about the amendment of categories). I will then turn to my own use of ‘intersectionality’ as a methodological tool (elaborated in Lutz and Davis 2005). Here, we shifted attention from how structures of racism, class discrimination and sexism determine individuals’ identities and practices to how individuals ongoingly and flexibly negotiate their multiple and converging identities in the context of everyday life. Introducing the term doing intersectionality we explored how individuals creatively and often in surprising ways draw upon various aspects of their multiple identities as a resource to gain control over their lives.
In my paper I will show how ‘gender’ or ‘ethnicity’ are invariably linked to structures of domination, but can also mobilize or deconstruct disempowering discourses, even undermine and transform oppressive practices.
Obstetrical care as a matter of time: ultrasound screening in anticipatory regimes of pregnancy
(2014)
This article explores the ways in which ultrasound screening influences the temporal dimensions of prevention in the obstetrical management of pregnancy. Drawing on praxeographic perspectives and empirically based on participant observation of ultrasound examinations in obstetricians’ offices, it asks how ultrasound scanning facilitates anticipatory modes of pregnancy management, and investigates the entanglement of different notions of time and temporality in the highly risk-oriented modes of prenatal care in Germany. Arguing that the paradoxical temporality of prevention – acting now in the name of the future – is intensified by ultrasound screening, I show how the attribution of risk regarding foetal growth in prenatal check-ups is based on the fragmentation of procreative time and ask how time standards come into play, how pregnancy is located in calendrical time, and how notions of foetal time and the everyday life times of pregnant women clash during negotiations between obstetricians and pregnant women about the determination of the due date. By analysing temporality as a practical accomplishment via technological devices such as ultrasound, the paper contributes to debates in feminist STS studies on the role of time in reproduction technologies and the management of pregnancy and birth in contemporary societies.
This contribution1 is framed within the field of cultural studies and migration and ethnic relations, trying to examine how the Italian American experience has been imaginatively (re)created and received. It will entail an interdisciplinary approach about the cultural and literary analysis of the Italian diaspora in the United States, from a gender perspective that recovers the voice and historical presence of women as has been transmitted in the arts and critical methods. Focusing on the media and literary representations that deal with Italian migration to the United States since the last decades of the 19th century, their welcome or later development until our days, I make particular reference to a community mainly conceived in the masculine, as major receptions and persistent stereotypes about family relations and ethnicity attest. I will analyse, at the same time, the existence of other works that either contest or balance that cultural and gender stereotyping of the Italian American experience or community.
This paper1 investigates changes in the domestic work sector when passing from the informal to the formal labor market. The issue is explored within the context of the housework voucher policy (titres-services), which allows households to officially purchase weekly housework services from an authorized agency, through vouchers. This contribution has therefore a twofold focus: observing changes in labor market dynamics and investigating workers’ perception of this change. In order to discuss these issues, I will firstly look at the step from informal to formal labor market through two aspects: ethnic niches and individual labor dynamics – two bedrocks of Brussels domestic work market. Then, I will analyze workers’ personal experiences when acquiring a declared job in the voucher system.
Analyzing objective and subjective changes, a entral question of this article is to which extent the switch to the housework voucher system can bring empowerment to domestic workers. The sector work quality, in objective and subjective terms, has improved mainly by the setting of rules and by allowing workers to enjoy labor rights and a work status. The formal market dynamics of the housework voucher system remain, however, profoundly ethicized and marked by women’s presence, as was/is the shadow market.
The article shows that workers’ understanding of the transition from an informal to a formal sector is largely a result of their previous experiences and social position, mainly regarding migration status. This change will be thus much more assertive for workers who had their migrant status regularization and work formalization processes concomitantly, demonstrating that the most empowering shift is the one of acquiring papers, and not of entering declared work.
In the ‘age of transnationalization’, spatial mobility is highly valued as a resource and accordingly ‘sedentariness’ is often symbolically devalued. Migration between Poland and Germany (mainly from Poland to Germany) has a century-long tradition. Not only has it yielded the emergence of a dense transnational social space, but is also considered as a re-enactor of cultural traits and symbolic meanings. Spatial mobility is tied to notions of social mobility and to projects of life-making. Since legal restrictions for Polish migrants seeking to work and settle in Germany have vanished, the quest for ‘normalcy’ has enhanced and pressures towards even more migration have increased. I argue that symbolic meanings of mobility are decisive for hierarchies in transnational social spaces. I have put main emphasize on families’ practices of caring for and caring about each other: the first being more a physical or material activity, while the latter is a more symbolic and emotional one. The interviews reveal that people draw multiple differentiations between migrant populations in terms of their migration reasons as well as between the mobile and the immobile. Those differentiations are embedded in the distinct feature of the transnational social space between Poland and Germany with assumed differences in terms of ‘modernity’. At the end the symbolic meanings of mobility also help explain the puzzle of why the emigration rates from Poland are constantly high, although Poland is a comparatively wealthy country.
Often adopting a feminist perspective, the sociological literature on migrant domestic services (MDS) does not make explicit which feminist paradigm it speaks from. This article situates this literature within ongoing debates in feminist theory, in particular the tension between materialist and poststructuralist approaches. Then, it discusses the empirical relevance of each of those two paradigms on the example of the results of original research into the personalization of employment relationships in MDS.
The contribution proposes a new way of making sense of the diversity of feminist theories, distinguishing between modern and postmodern approaches. Indeed, since the 1980s, feminist theory in the US and Western Europe has undergone a ‘postmodern turn’, which renders previous typologies much less up-to-speed with recent developments in the field. Then, the article examines which paradigms are implicit in the sociological literature on MDS. Initially, personalization in MDS was mainly seen in materialist terms, as a way to maximize the quantity and quality of labour (including emotional labour) extracted from domestic workers. The emergence of postmodern approaches in feminist theory set off a progressive shift in MDS literature. First, this literature showed that personalization also fulfils identity functions for employers and
workers, then it widened its focus to include the affective dimensions of domestic labour (not to be confused with emotional labour). The final section shows how modern and postmodern feminist approaches can be combined within a single research, on the example of original research on personalization in MDS in Belgium and Poland. In particular, the contribution shows that the distinction between material functions of personalization on the one hand, and its emotional/identity functions on the other is not empirically operative. Indeed, migrant domestic workers generally use emotional/identity categories to frame material questions, and vice versa. This final part shows that, rather than representing incompatible approaches, modern and postmodern feminisms complete each other, in this case showing a fuller image of personalization processes in MDS.
This working paper is based on a lecture given at the Summer School “Multiple Inequalities in the Age of Transnationalization”, June 23-27 2014 at Goethe University Frankfurt. In it, I explore the linkages between sexuality and migration and aim to show that instead of deeming them a narrow subfield of migration studies, thinking through these linkages has much wider implications for different fields, including post- and decolonial queer studies, the study of race and sexuality, the study of citizenship and state projects of inclusion/exclusion, and for work that attempts to ce-center the predominant knowledge production focused on the Global North.
Highly-skilled labour migration in Switzerland: household strategies and professional careers
(2016)
The article investigates household strategies in the context of highly-skilled labour migration. It focuses on the ways highly-skilled migrants are taking up residence in Switzerland. The analysis shows different household strategies based on the perception of a further professional move. The perceived likeliness of a further move implies household strategies characterized by a high motility: the household remains ready to move and mobilises dedicated organisations (like outplacement agencies or international schools). When a further move is neither perceived nor wanted, the household develops more anchored strategies which are often cheaper. In order to cope with frequent mobilities, the analysis shows that household strategies are deeply gendered.
This paper studies the linkage between international male migration and changes on land inheritance patterns in rural Oaxaca (Mexico). Land inheritance is a long-term exchange between parents and male adult children in Oaxaca: sons are bequeathed with land as long as they provide for their parents (and their wives care for their in-laws) while daughters are excluded from the family patrimony. Drawing on theoretical sample and 37 in depth interviews, this paper argues that intergenerational solidarity based on the parent-son alliance through inheritance is breaking down due to the uncertainty of men´s migration project along with the increase in the fallback position of wives, who may refuse to take care of elderly in-laws. Other alliances emerge instead: parents try to build new alliances with their daughters, bequeathing them agricultural and building plots. However, these new alliances and inheritance shifts are neither a heterogeneous process nor an automatic change and several family and social dimensions must be included to understand the different outcomes.
People who delay claiming Social Security receive higher lifelong benefits upon retirement. We survey individuals on their willingness to delay claiming later, if they could receive a lump sum in lieu of a higher annuity payment. Using a moment-matching approach, we calibrate a lifecycle model tracking observed claiming patterns under current rules and predict optimal claiming outcomes under the lump sum approach. Our model correctly predicts that early claimers under current rules would delay claiming most when offered actuarially fair lump sums, and for lump sums worth 87% as much, claiming ages would still be higher than at present.
The international diffusion of technology plays a key role in stimulating global growth and explaining co-movements of international equity returns. Existing empirical evidence suggests that countries are heterogeneous in their attitude toward innovation: Some countries rely more on technology adoption while other countries rely more on internal technology production. European countries that rely more on adoption are also typically characterized by lower fiscal policy exibility and higher labor market rigidity. We develop a two-country model – where both countries rely on R&D and adoption – to study the short-run and long-run effects of aggregate technology and adoption probability shocks on economic growth in the presence of the aforementioned asymmetries. Our framework suggests that an increase in the ability to adopt technology from abroad stimulates economic growth in the country that benefits from higher adoption rates but the beneficial effects also spread to the foreign country. Moreover, it helps explaining the differences in macro quantities and equity returns observed in the international data.
Asymmetric social norms
(2017)
Studies of cooperation in infinitely repeated matching games focus on homogeneous economies, where full cooperation is efficient and any defection is collectively sanctioned. Here we study heterogeneous economies where occasional defections are part of efficient play, and show how to support those outcomes through contagious punishments.
This paper sets the background for the Special Issue of the Journal of Empirical Finance on the European Sovereign Debt Crisis. It identifies the channel through which risks in the financial industry leaked into the public sector. It discusses the role of the bank rescues in igniting the sovereign debt crisis and reviews approaches to detect early warning signals to anticipate the buildup of crises. It concludes with a discussion of potential implications of sovereign distress for financial markets.
This paper investigates whether the overpricing of out-of-the money single stock calls can be explained by Tversky and Kahneman’s (1992) cumulative prospect theory (CPT). We argue that these options are overpriced because investors overweight small probability events and overpay for such positively skewed securities, i.e., characteristics of lottery tickets. We match a set of subjective density functions derived from risk-neutral densities, including CPT with the empirical probability distribution of U.S. equity returns. We find that overweighting of small probabilities embedded in CPT explains on average the richness of out-of-the money single stock calls better than other utility functions. The degree that agents overweight small probability events is, however, strongly timevarying and has a horizon effect, which implies that it is less pronounced in options of longer maturity. We also find that time-variation in overweighting of small probabilities is strongly explained by market sentiment, as in Baker and Wurgler (2006).
Low probability events are overweighted in the pricing of out-of the-money index puts and single stock calls. We find that this behavioral bias is strongly time-varying, linked to equity market sentiment, and higher moments of the risk-neutral density. An implied volatility (IV) sentiment measure that is jointly derived from index and single stock options explains investors' overweight of tail events the best. Our findings also suggest that IV-sentiment predicts equity markets reversals better than overweight of small probabilities itself. When employed in a trading strategy, IV-sentiment delivers economically significant results, which are more consistent than the ones produced by the market sentiment factor. The joint use of information from the single stock and index option markets seems to explain the forecasting power of IV-sentiment. Out-of-sample tests on reversal prediction show that our IV-sentiment measure adds value over and above traditional factors in the equity risk premium literature, especially as an equity-buying signal. This reversals prediction seems to improve time-series and cross-sectional momentum strategies.