CUBE - Working Papers / Preprints
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- Learning in bank runsPublication . Schliephake, Eva; Shapiro, JoelWe examine a model in which depositor learning exacerbates bank runs. Informed depositors can quickly withdraw when the bank has low-quality assets. Uninformed depositors may decide to wait, which allows them to learn by observing informed depositors' actions. However, learning that the bank has low-quality assets will spark a run ex-post, which increases the incentives of uninformed depositors to run ex-ante. Moreover, when there are more informed depositors, uninformed depositors have a fear of missing out, which also makes preemptive runs more likely. Learning may, thus, increase the likelihood of panic runs and decrease surplus.
- The risk-return tradeoff among equity factorsPublication . Barroso, Pedro; Maio, PauloWe examine the time-series risk-return trade-off among equity factors. We obtain a positive tradeoff for profitability and investment factors. Such relationship subsists conditional on the covariance with the market factor, which represents consistency with Merton’s ICAPM. Critically, we obtain an insignificant risk-return relationship for the market factor. The factor risk-return trade-off tends to be weaker among international equity markets. The out-of-sample forecasting power (of factor variances for future own returns) tends to be economically significant for the investment and profitability factors. Our results suggest that the risk-return trade-off is stronger within segments of the stock market than for the whole.
- Human capital spillovers and returns to educationPublication . Portugal, Pedro; Reis, Hugo; Guimarães, Paulo; Cardoso, Ana RuteIn this paper, we quantify the impact of co-workers’ human capital on a worker’s productivity and, more specifically, the spillovers of co-workers’ education within the workplace. We identify the impact of peer quality and provide an unambiguous decomposition of the impact of unobserved heterogeneity on the estimated returns to education. We find that peer effects are quite sizeable. A one standard deviation increase in the measure of peer quality leads to a wage increase of 2.1 percent. We also unveil that an additional year of average education of co-workers yields a 0.5 percent increase in the individual own wage.
- Risk and heterogeneity in benefits from vocational versus general secondary education: estimates for early and mature career stages in PortugalPublication . Hartog, Joop; Raposo, Pedro; Reis, HugoWe estimate a dynamic model of individual labour market careers (turnover and search, wage development) on Portuguese panel data of graduates from vocational and general secondary education. We find that vocational graduates benefit more from the internal labour market than from the external market. This holds even more for mature than for young individuals. This hurts as among the mature, vocational has higher lay-off probability. To the common result that vocational education trades early employment advantage for later disadvantage we add a decomposition of employment status in its dynamic components. To the literature on wage effects we add a breakdown of variances in heterogeneity and risk.
- Learning through repetition? A dynamic evaluation of grade retention in PortugalPublication . Boghesan, Emilio; Reis, Hugo; Todd, Petra E.High rates of grade retention are a matter of much controversy and debate worldwide. Although some students may learn more with extended classroom time, other students get discouraged and drop out of school. This paper develops and implements a dynamic value-added modeling approach for estimating grade retention effects in Portuguese high schools where over 40% of students were retained. The statistical model is derived from an education production function that describes how knowledge cumulates with sequential years of school attendance, including repeated grades. Model parameters are obtained using simulated method of moments applied to nationwide administrative test score data. The estimated model is used to simulate achievement in math and Portuguese under the existing grade retention and compulsory schooling policies and under alternative policies. Results show that the average impact of the current policy on 12th grade test scores of retained students is positive, 0.2 standard deviations in math and 0.5 s.d. in Portuguese. However, we find that the test score impacts are heterogeneous and roughly one third of students experience learning loss. Retention also significantly increases school dropout, especially for male youth and older students. We compute policy-relevant treatment effects for retention’s effects on lifetime earnings, taking into account retention’s simultaneous effects on educational attainment, knowledge, and age of labor market entry, and we solve for the optimal retention policy that maximizes average lifetime earnings in the population.
- Is macroprudential policy driving savings?Publication . Teixeira, André; Venter, ZoëThis paper assesses the impact of macroprudential policy (MaPP) on aggregate demand in the EU between 2000-2019. Using a difference-in-differences approach, we find that MaPP reduces household consumption and increases firm investment. These effects are relatively mild in the short run but become more pronounced in the long run. Our findings point to a weaker macroeconomic impact than suggested in previous studies.
- Nowcasting the Portuguese GDP with monthly dataPublication . Assunção, João B.; Fernandes, Pedro AfonsoIn this article, we present a method to forecast the Portuguese gross domestic product (GDP) in each current quarter (nowcasting). It combines bridge equations of the real GDP on readily available monthly data like the Economic Sentiment Indicator (ESI), industrial production index, cement sales or exports and imports, with forecasts for the jagged missing values computed with the well-known Hodrick and Prescott (HP) filter. As shown, this simple multivariate approach can perform as well as a Targeted Diffusion Index (TDI) model and slightly better thanthe univariate Theta method in terms of out-of-sample mean errors.
- Expressions of gratitude applied to business: a lesson for managing online reviewsPublication . Simão, Claudia; Farias, Ana Rita; Reis, JoanaOnline reviews are critical for business thriving, but their management is not often effective. Using data from one Social Media platform, with more than 600 observations of public online interactions between business owners and customers, we showed that a strategic management of online reviews predicts a positive increment of online reputation. Publicly expressing gratitude (Study 1), and specifically, directing these expressions towards beneficial online reviews (Study 2), are effective strategies supporting a general increase of the business online score. These findings identify public expressions of gratitude as a responsive, attentive gesture that signals care and consideration towards customers. Such gesture promotes the online reputation through satisfaction between business-community relationships.
- Robust filtering with quantile regressionPublication . Assunção, João Borges; Fernandes, Pedro AfonsoThis working paper proposes a new, practical method to compute the non-linear Mosheiov-Raveh (MR) filter using least absolute deviations (LAD) instead of the linear programming approach proposed by these two authors. This paper is embodied with an implementation in the R programming language of the proposed method which facilitates the computation of the MR filter in current applications to produce a robust estimate, namely, of the GDP trend growth. This technique may be appropriate to deal with non linear time series or structural changes.
- On-site inspecting zombie lendingPublication . Bonfim, Diana; Cerqueiro, Geraldo; Degryse, Hans; Ongena, Steven R. G.In spite of growing regulatory pressure in most developed economies, “zombie lending” remains a widespread practice by banks. In this paper we exploit a series of large-scale on-site inspections made on the credit portfolios of several Portuguese banks to investigate how these inspections affect banks’ future lending decisions. We find that an inspected bank becomes 20% less likely to refinance zombie firms, immediately spurring their default. Overall, banks seemingly reduce zombie lending because the incentives to hold these loans disappear once they are forced to recognize losses.