Rob Bauer, Inka Eberhardt, and Paul Smeets
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Dilan SriDaran, Michael Sherris, Andrés M. Villegas and Jonathan Ziveyi
Martin Eling, Omid Ghavibazoo and Katja Hanewald
Yu Fu, Michael Sherris and Mengyi Xu
Roshen Fernando and Warwick J. McKibbin
Abstract: This paper updates the analysis of the global macroeconomic consequences of the COVID-19 pandemic in McKibbin and Fernando (2020c) with data as of late October 2020. It also extends the focus to Asian economies and explores four alternative policy interventions coordinated across all economies. The first three policies relate to fiscal policy: an increase in transfers to households of an additional 2% of GDP in 2020; an increase in government spending on goods and services in all economies of 2% of GDP in 2020; an increase in government infrastructure spending in all economies in 2020. The fourth policy is a public health intervention similar to the approach of Australia that successfully manages the virus (flattens the curve) through testing, contact tracing and isolating infected people, coupled with the rapid deployment of an effective vaccine by mid-2021.
The policy that is most supportive of a global economic recovery is the successfully implemented public health policy. Each of the fiscal policies assists in the economic recovery with public sector infrastructure having the most short-term stimulus and longer- term growth benefits.
Keywords: COVID-19, pandemics, infectious diseases, risk, macroeconomics, DSGE, CGE, G- Cubed
Bao Doan, Jonathan J. Reeves and Michael Sherris
Abstract: Insurers and pension funds face the challenges of historically low interest rates and volatility in equity markets, that have been accentuated due to the COVID-19 pandemic. Recent advances in equity portfolio management with a target volatility have been shown to deliver improved on average risk adjusted return, after transaction costs. This paper studies these targeted volatility portfolios in applications to equity, balanced and target-date funds with varying constraints on leverage. Conservative leverage constraints are particularly relevant to pension funds and insurance companies, with more aggressive leverage levels appropriate for alternative investments. We show substantial improvements in fund performance for differing leverage levels and that the return per unit of risk is not significantly impacted by the leverage constraint. Of most interest to insurers and pensions funds, we show that the highest return per unit of risk is in targeted volatility balanced portfolios with equity and bond allocations. Furthermore, we demonstrate the outperformance of targeted volatility portfolios during major stock market crashes, including the crash from the COVID-19 pandemic.
Keywords: COVID-19 pandemic, Equity investment, Portfolio management, Target-date funds, Volatility management JEL classification: C53, G17.