Clara I. Gonzalez

Immigration and Social Security in Spain

The objective of this paper is to understand the impact of immigration on the Spanish pension system during the next fifty years by building aquantitative-theoretical framework. In order to carry out the exercise of projection of revenues and expenditures in the Spanish pension system, we have developed an Overlapping Generation Model where individuals differ by age, gender, skill and nationality. The Cohort Component Population Projection Method is used for the demographic projections, and for the labor market scenario we have simulated the full labor history of all of our different workers for the period-taking into account the future evolution of the educational levels and five possible situations during their labor history (employed, self-employed, unemployed, disable and inactive). In a first baseline scenario the system will be in deficit around year according to the last official estimations. The arrival of a large number of foreign workers is offering the Social Security System roughly five years of additional time to correct its important underlying unbalances. However after this period, the structural problems will come back and may be even magnified by the presence of an additional number of retired immigrants. Even if immigration reaches its total assimilation in the labor market it will not be sufficient to avoid that the pension system will be in deficit. However, immigration is allowing us to obtain very valuable additional time in order to carry out the necessary reforms.

Retirement behaviour and retirement incentives in Spain

In this paper we analyse the role that Social Security wealth and incentives play in the transition to retirement in Spain. We use the labour records and other relevant information contained in a newly released database [Muestra Continua de Vidas Laborales (2006)] to construct incentive measures stemming from the Social Security provisions in relation to retiring at old age and investigate the role played by such incentives and by other socio-economic variables on the retirement hazard. We compute the effects of the reform that took place in 2002, which made the requirements to access a pension stricter in general. We carry out a dynamic reduced-form analysis of the retirement decision using a duration model. Our results show that both the pension wealth and substitution effects have a significant role on retirement decisions, but that the latter has less relevance since the reform introduced in 2002.

Financial Analysts Impact on Stock Volatility

The arrival of new information helps financial markets to value assets, but it may has the side-effect of increasing their volatilities. A better knowledge of the mechanism that links relevant news and stock prices would help both private and institutional agents to improve the calibration of the risks that implies in a given asset. Financial analysts play a key role in distinguishing which news are relevant for the valuation of an asset, and the changes in their recommendations are signals of new information in the market. This paper studies the impact that changes in financial analyst recommendations have on returns and also on volatility instead of the traditional literature that focuses only in the impact on prices. Twenty stocks from the New York Stock Exchange are daily tracked for five years along with the recommendations given by financial analysts. We have modeled stock returns by a Markov Regime Switching model in a similar way as in Schaller and van Norden (1997) and we have found two states of low and high volatilities. Thus, we can measure the volatility generated by the new information from financial analysts. We have also found strong evidence that the probability of being in the state of high volatility increases when a Financial Analyst issues a new recommendation.

Financial Analysts Impact on Stock Volatility: A Study on the Pharmaceutical Sector

The arrival of new information helps financial markets to value assets, but it may has the side-effect of increasing their volatilities. A better knowledge of the mechanism that links relevant news and stock prices would help both private and institutional agents to improve the calibration of the risks implies in a given asset. Financial analysts play a key role in distinguishing which news are relevant for the valuation of a particular asset, and the changes in their recommendations are signals of new information in the market. This paper studies the impact those buy or sell recommendations have on returns and also on volatility instead of the traditional literature that focuses only on prices. The pharmaceutical companies in the New York Stock Exchange are especially suited for this type of analysis given the frequent discontinuities in their expected profits derived from the success or failure in the development of new drugs. Twenty stocks are daily tracked for five years along with the recommendations given by financial analysts. We have modeled stock returns by a Markov Regime Switching model as in Schaller and van Norden (1997) and found two states of low and high volatilities. We have also found strong evidence that the probability of being in the estate of high volatility increases when a Financial Analyst changes his recommendation.

From Bismarck to Beveridge: the Other Pension Reform in Spain

El envejecimiento de la poblacion es un proceso imparable que continua suponiendo un reto para la sostenibilidad del sistema de reparto de pensiones en la mayoria de los paises desarrollados, incluida Espana. Gran parte de estos paises necesitan llevar a cabo reformas en sus sistemas de pensiones para controlar su gasto y, en algunos casos, ya han empezado. Sin embargo, existen otros mecanismos que suponen cambios en parametros del sistema, que al ser percibidos como secundarios por los ciudadanos no son apreciados como tal reforma. Este es el caso de modificaciones en los topes de las pensiones y de las bases de cotizacion y que en Espana se ha denominado, por parte de los expertos en pensiones, como la «Reforma silenciosa». El objetivo de este documento es analizar las implicaciones que este tipo de reforma tendria en el caso de Espana, siendo el primer trabajo que cuantifica y evalua su potencial impacto en dicho pais. Con este fin se ha empleado un modelo de proyeccion contable, con generaciones solapadas y agentes heterogeneos, de gastos del sistema de pensiones espanol hasta el ano 2070. Los resultados obtenidos muestran que este tipo de reforma no solo tendria potencial para contener el gasto futuro, sino que tambien podria suponer un cambio en la naturaleza del sistema al ser capaz de convertir un sistema contributivo (o Bismarckiano) en otro de tipo asistencial (o Beveridge). Esto ultimo podria tener importantes consecuencias, pues ambos sistemas persiguen objetivos distintos. En el documento tambien se pone de relieve que las caracteristicas institucionales que hacen posible este tipo de reforma en Espana existen al mismo tiempo en la mayoria de los paises desarrollados con sistemas de pensiones tipo Bismarckiano. Y por lo tanto, creemos que las lecciones aprendidas en este documento para el caso espanol podrian ser de utilidad para otros paises.

An automatic procedure for the estimation of the tail index

Extreme Value Theory is increasingly used in the modelling of financial time series. The non-normality of stock returns leads to the search for alternative distributions that allows skewness and leptokurtic behavior. One of the most used distributions is the Pareto Distribution because it allows non-normal behaviour, which requires the estimation of a tail index. This paper provides a new method for estimating the tail index. We propose an automatic procedure based on the computation of successive normality tests over the whole of the distribution in order to estimate a Gaussian Distribution for the central returns and two Pareto distributions for the tails. We find that the method proposed is an automatic procedure that can be computed without need of an external agent to take the decision, so it is clearly objective.

Financial Analysts Impact On Stock Volatility. A Study On The Pharmaceutical Sector.

Financial analysts play a key role in distinguishing which news are relevant for the valuation of a particular asset, and the changes in their recommendations are signals of new information in the market. This paper studies the impact those buy or sell recommendations have on volatility instead of the traditional focus on prices. Twenty stocks from pharmaceutical sector in NYSE are daily tracked for five years along with the recommendations given by financial analysts. We have modeled stock returns by a Markov Regime Switching model as in (Schaller and van Norden, 1997) and found two states of low and high volatilities. We have also found strong evidence that the probability of being in the estate of high volatility increases when a Financial Analyst changes his recommendation.