Rational policymaking during a pandemic.

Policymaking during a pandemic can be extremely challenging. As COVID-19 is a new disease and its global impacts are unprecedented, decisions are taken in a highly uncertain, complex, and rapidly changing environment. In such a context, in which human lives and the economy are at stake, we argue that using ideas and constructs from modern decision theory, even informally, will make policymaking a more responsible and transparent process.

Robust identification of investor beliefs.

This paper develops a method informed by data and models to recover information about investor beliefs. Our approach uses information embedded in forward-looking asset prices in conjunction with asset pricing models. We step back from presuming rational expectations and entertain potential belief distortions bounded by a statistical measure of discrepancy. Additionally, our method allows for the direct use of sparse survey evidence to make these bounds more informative. Within our framework, market-implied beliefs may differ from those implied by rational expectations due to behavioral/psychological biases of investors, ambiguity aversion, or omitted permanent components to valuation. Formally, we represent evidence about investor beliefs using a nonlinear expectation function deduced using model-implied moment conditions and bounds on statistical divergence. We illustrate our method with a prototypical example from macrofinance using asset market data to infer belief restrictions for macroeconomic growth rates.

Aversion to ambiguity and model misspecification in dynamic stochastic environments.

Preferences that accommodate aversion to subjective uncertainty and its potential misspecification in dynamic settings are a valuable tool of analysis in many disciplines. By generalizing previous analyses, we propose a tractable approach to incorporating broadly conceived responses to uncertainty. We illustrate our approach on some stylized stochastic environments. By design, these discrete time environments have revealing continuous time limits. Drawing on these illustrations, we construct recursive representations of intertemporal preferences that allow for penalized and smooth ambiguity aversion to subjective uncertainty. These recursive representations imply continuous time limiting Hamilton-Jacobi-Bellman equations for solving control problems in the presence of uncertainty.

Recursive utility in a Markov environment with stochastic growth.

Recursive utility models that feature investor concerns about the intertemporal composition of risk are used extensively in applied research in macroeconomics and asset pricing. These models represent preferences as the solution to a nonlinear forward-looking difference equation with a terminal condition. In this paper we study infinite-horizon specifications of this difference equation in the context of a Markov environment. We establish a connection between the solution to this equation and to an arguably simpler Perron-Frobenius eigenvalue equation of the type that occurs in the study of large deviations for Markov processes. By exploiting this connection, we establish existence and uniqueness results. Moreover, we explore a substantive link between large deviation bounds for tail events for stochastic consumption growth and preferences induced by recursive utility.

[Prevalence of coeliac disease (CD) in children with type 1 diabetes (T1D)]. / Høj praevalens i Region Syd af cøliaki blandt børn med type 1-diabetes. Sygdomsopsporing samt opfølgning på glutenfri diaet--sekundaerpublikation.

This screening study was performed to determine the prevalence of coeliac disease (CD) in children with type 1 diabetes (T1D) and to estimate the clinical effects of a gluten-free diet. In the region of Southern Denmark all patients under 16 years of age with T1D were identified and 269 (89%) were included. CD was diagnosed in 33 (12.3%). Patients with CD had a lower height SDS and weight SDS and were younger at diabetes onset. After 2 years on a gluten-free diet there were significant improvements in clinical and biochemical parameters. We recommend screening of CD in all children with T1D.