Topics in Spatial Econometrics - With Applications to House Prices

Topics in Spatial Econometrics — With Applications to House Prices Spatial effects in data occur when geographical closeness of observations influences the relation between the observations. When two points on a map are close to each other, the observed values on a variable at those points tend to be similar. The further away the two points are from each other, the less similar the observed values tend to be. Recent technical developments, geographical information systems (GIS) and global positioning systems (GPS) have brought about a renewed interest in spatial matters. For instance, it is possible to observe the exact location of an observation and combine it with other characteristics. Spatial econometrics integrates spatial aspects into econometric models and analysis. The thesis concentrates mainly on methodological issues, but the findings are illustrated by empirical studies on house price data. The thesis consists of an introductory chapter and four essays. The introductory chapter presents an overview of topics and problems in spatial econometrics. It discusses spatial effects, spatial weights matrices, especially k-nearest neighbours weights matrices, and various spatial econometric models, as well as estimation methods and inference. Further, the problem of omitted variables, a few computational and empirical aspects, the bootstrap procedure and the spatial J-test are presented. In addition, a discussion on hedonic house price models is included. In the first essay a comparison is made between spatial econometrics and time series analysis. By restricting the attention to unilateral spatial autoregressive processes, it is shown that a unilateral spatial autoregression, which enjoys similar properties as an autoregression with time series, can be defined. By an empirical study on house price data the second essay shows that it is possible to form coordinate-based, spatially autoregressive variables, which are at least to some extent able to replace the spatial structure in a spatial econometric model. In the third essay a strategy for specifying a k-nearest neighbours weights matrix by applying the spatial J-test is suggested, studied and demonstrated. In the final fourth essay the properties of the asymptotic spatial J-test are further examined. A simulation study shows that the spatial J-test can be used for distinguishing between general spatial models with different k-nearest neighbours weights matrices. A bootstrap spatial J-test is suggested to correct the size of the asymptotic test in small samples.

Tuloverotuksen reaalinen muuttuminen Suomessa : Kuusikymmentä vuotta verojen vuoristorataa

The study seeks to find out whether the real burden of the personal taxation has increased or decreased. In order to determine this, we investigate how the same real income has been taxed in different years. Whenever the taxes for the same real income for a given year are higher than for the base year, the real tax burden has increased. If they are lower, the real tax burden has decreased. The study thus seeks to estimate how changes in the tax regulations affect the real tax burden. It should be kept in mind that the progression in the central government income tax schedule ensures that a real change in income will bring about a change in the tax ration. In case of inflation when the tax schedules are kept nominally the same will also increase the real tax burden. In calculations of the study it is assumed that the real income remains constant, so that we can get an unbiased measure of the effects of governmental actions in real terms. The main factors influencing the amount of income taxes an individual must pay are as follows: - Gross income (income subject to central and local government taxes). - Deductions from gross income and taxes calculated according to tax schedules. - The central government income tax schedule (progressive income taxation). - The rates for the local taxes and for social security payments (proportional taxation). In the study we investigate how much a certain group of taxpayers would have paid in taxes according to the actual tax regulations prevailing indifferent years if the income were kept constant in real terms. Other factors affecting tax liability are kept strictly unchanged (as constants). The resulting taxes, expressed in fixed prices, are then compared to the taxes levied in the base year (hypothetical taxation). The question we are addressing is thus how much taxes a certain group of taxpayers with the same socioeconomic characteristics would have paid on the same real income according to the actual tax regulations prevailing in different years. This has been suggested as the main way to measure real changes in taxation, although there are several alternative measures with essentially the same aim. Next an aggregate indicator of changes in income tax rates is constructed. It is designed to show how much the taxation of income has increased or reduced from one year to next year on average. The main question remains: How aggregation over all income levels should be performed? In order to determine the average real changes in the tax scales the difference functions (difference between actual and hypothetical taxation functions) were aggregated using taxable income as weights. Besides the difference functions, the relative changes in real taxes can be used as indicators of change. In this case the ratio between the taxes computed according to the new and the old situation indicates whether the taxation has become heavier or easier. The relative changes in tax scales can be described in a way similar to that used in describing the cost of living, or by means of price indices. For example, we can use Laspeyres´ price index formula for computing the ratio between taxes determined by the new tax scales and the old tax scales. The formula answers the question: How much more or less will be paid in taxes according to the new tax scales than according to the old ones when the real income situation corresponds to the old situation. In real terms the central government tax burden experienced a steady decline from its high post-war level up until the mid-1950s. The real tax burden then drifted upwards until the mid-1970s. The real level of taxation in 1975 was twice that of 1961. In the 1980s there was a steady phase due to the inflation corrections of tax schedules. In 1989 the tax schedule fell drastically and from the mid-1990s tax schedules have decreased the real tax burden significantly. Local tax rates have risen continuously from 10 percent in 1948 to nearly 19 percent in 2008. Deductions have lowered the real tax burden especially in recent years. Aggregate figures indicate how the tax ratio for the same real income has changed over the years according to the prevailing tax regulations. We call the tax ratio calculated in this manner the real income tax ratio. A change in the real income tax ratio depicts an increase or decrease in the real tax burden. The real income tax ratio declined after the war for some years. In the beginning of the 1960s it nearly doubled to mid-1970. From mid-1990s the real income tax ratio has fallen about 35 %.

Practical Proposals for Specifying k-Nearest Neighbours Weights Matrices

In this article we introduce and evaluate testing procedures for specifying the number k of nearest neighbours in the weights matrix of spatial econometric models. The spatial J-test is used for specification search. Two testing procedures are suggested: an increasing neighbours testing procedure and a decreasing neighbours testing procedure. Simulations show that the increasing neighbours testing procedures can be used in large samples to determine k. The decreasing neighbours testing procedure is found to have low power, and is not recommended for use in practice. An empirical example involving house price data is provided to show how to use the testing procedures with real data.

Monetary Policy, Stock Price Misalignments and Macroeconomic Instability

Perhaps the most fundamental prediction of financial theory is that the expected returns on financial assets are determined by the amount of risk contained in their payoffs. Assets with a riskier payoff pattern should provide higher expected returns than assets that are otherwise similar but provide payoffs that contain less risk. Financial theory also predicts that not all types of risks should be compensated with higher expected returns. It is well-known that the asset-specific risk can be diversified away, whereas the systematic component of risk that affects all assets remains even in large portfolios. Thus, the asset-specific risk that the investor can easily get rid of by diversification should not lead to higher expected returns, and only the shared movement of individual asset returns – the sensitivity of these assets to a set of systematic risk factors – should matter for asset pricing. It is within this framework that this thesis is situated. The first essay proposes a new systematic risk factor, hypothesized to be correlated with changes in investor risk aversion, which manages to explain a large fraction of the return variation in the cross-section of stock returns. The second and third essays investigate the pricing of asset-specific risk, uncorrelated with commonly used risk factors, in the cross-section of stock returns. The three essays mentioned above use stock market data from the U.S. The fourth essay presents a new total return stock market index for the Finnish stock market beginning from the opening of the Helsinki Stock Exchange in 1912 and ending in 1969 when other total return indices become available. Because a total return stock market index for the period prior to 1970 has not been available before, academics and stock market participants have not known the historical return that stock market investors in Finland could have achieved on their investments. The new stock market index presented in essay 4 makes it possible, for the first time, to calculate the historical average return on the Finnish stock market and to conduct further studies that require long time-series of data.

“We live in in a house of blo- in a block of flats.” – Self-repair in EFL Spoken Language

Tämä tutkielma on osa Helsingin yliopiston rahoittamaa HY-talk -tutkimusprojektia, jonka tavoite on vankentaa puheviestinnän, erityisesti vieraiden kielten suullisen taidon opetusta ja arviointia yleissivistävässä koulutuksessa ja korkeakouluasteella. Tämän tutkielman tavoite on selvittää millaisia korjauksia englantia vieraana kielenä puhuvat ihmiset tekevät puheeseensa ja tutkia itsekorjauksen ja sujuvuuden välistä suhdetta. Korjausjäsennystä ja itsekorjausta on aiemmin tutkittu sekä keskustelunanalyysin että psykolingvistiikan aloilla, ja vaikka tämä tutkielma onkin lähempänä aiempaa keskustelunanalyyttistä kuin psykolingvististä tutkimusta, siinä hyödynnetään molempia suuntauksia. Itsekorjausta on yleisesti pidetty merkkinä erityisesti ei-natiivien kielenpuhujien sujuvuuden puutteesta. Tämän tutkielman tarkoitus on selvittää, kuinka läheisesti itsekorjaus todella liittyy sujuvuuteen tai sen puutteeseen. Tutkielman materiaali koostuu HY-talk -projektia varten kerätyistä puhenäytteistä ja niiden pohjalta tehdyistä taitotasoarvioinneista. Puhenäytteet kerättiin vuonna 2007 projektia varten järjestettyjen puhekielen testaustilanteiden yhteydessä kolmessa eteläsuomalaisessa koulussa. Koska projektin tavoitteena on tutkia ja parantaa kielten suullisen taidon arviointia, projektissa mukana olleet kieliammattilaiset arvioivat puhujien taitotasot projektia varten (Eurooppalaisen Viitekehyksen taitotasokuvainten pohjalta) koottujen arviointiasteikoiden perusteella, ja nämä arvioinnit tallennettiin osaksi projektin materiaalia. Tutkielmassa analysoidaan itsekorjauksia aiemman psykolingvistisen tutkimuksen pohjalta kootun korjaustyyppiluokituksen sekä tätä tutkielmaa varten luodun korjausten oikeellisuutta vertailevan luokituksen avulla. Lisäksi siinä vertaillaan kahden korkeamman ja kahden matalamman taitotasoarvioinnin saaneen puhujan itsekorjauksia. Tulokset osoittavat, että ei-natiivien puheessa esiintyy monenlaisia eri korjaustyyppejä, ja että yleisimpiä korjauksia ovat alkuperäisen lausuman toistot. Yleisiä ovat myös korjaukset, joissa puhuja korjaa virheen tai keskeyttää puheensa ja aloittaa kokonaan uuden lausuman. Lisäksi tuloksista käy ilmi, ettei suurin osa korjauksista todennäköisesti johdu puhujien sujuvuuden puutteesta. Yleisimmät korjaustyypit voivat johtua suurimmaksi osaksi yksilön puhetyylistä, siitä, että puhuja hakee jotain tiettyä sanaa tai ilmausta mielessään tai siitä, että puhuja korjaa puheessaan huomaamansa kieliopillisen, sanastollisen tai äänteellisen virheen. Vertailu korkeammalle ja matalammalle taitotasolle arvioitujen puhujien välillä osoittaa selkeimmin, ettei suurin osa itsekorjauksista ole yhteydessä puhujan sujuvuuteen. Vertailusta käy ilmi, ettei pelkkä itsekorjausten määrä kerro kuinka sujuvasti puhuja käyttää kieltä, sillä toinen korkeammalle taitotasolle arvioiduista puhujista korjaa puhettaan lähes yhtä monesti kuin matalammalle tasolle arvioidut puhujat. Lisäksi korjausten oikeellisuutta vertailevan luokituksen tulokset viittaavat siihen, etteivät niin korkeammalle kuin matalammallekaan tasolle arvioidut puhujat useimmiten korjaa puhettaan siksi, etteivät pystyisi ilmaisemaan viestiään oikein ja ymmärrettävästi.

Sijaissotilasjärjestelmä ja väenotot : Taloudellis-sosiaalinen tutkimus sijaissotilaiden käytöstä Ala-Satakunnan väenotoissa vuosina 1631-1648

The dissertation describes the conscription of Finnish soldiers into the Swedish army during the Thirty Years' War. The work concentrates on so-called substitute soldiers, who were hired for conscription by wealthier peasants, who thus avoided the draft. The substitutes were the largest group recruited by the Swedish army in Sweden. The substitutes made up approximately 25-80% of the total number of soldiers. They recieved a significant sum of money from the peasants: about 50-250 Swedish copper dalers, corresponding to the price of a little peasant house. The practice of using substitutes was managed by the local village council. The recruits were normally from the landless population. However, when there was an urgent need of men, even the yeoman had to leave their homes for the distant garrisons across the Baltic. Conscription and its devastating effect on agricultural production also reduced the flow of state revenues. One of the tasks of the dissertation is the correlation between the custom of using substitutes and the abandonment of farmsteds (= in to the first place, to the non-ability to pay taxes). In areas where there were no substitutes available the peasants had to join the army themselves, which normally led to abandonment and financial ruin because agricultural production was based on physical labour. This led to rise of large farms at the cost of smaller ones. Hence, the system of substitutes was a factor that transformed the mode of settlement.

Minästä toiseen : Lacanilaisen subjektin syntymä Anaïs Ninin House of Incestissä ja Hélène Cixous'n Dedans'issa

The study approaches two modern novels using the conceptual frame of Lacanian psychoanalysis, especially the Lacanian notion of subject. The novels can be described as subversive “Bildungsromans” (development novels) highly influenced by psychoanalytic thought. Anaïs Nin’s (1903—1977) “poetic novel” House of Incest (1936) is a story of sexual and artistic awakening while Hélène Cixous’s (b. 1937) first novel Dedans (1969) depicts the growth of a little girl whose father dies. Both are first novels and first person narratives. Concentrating in the narrator’s internal life the novels writings break with the realistic conventions of narrative, bringing forth the themes of anguish, alienation from the world and escape into the prison like realm of the self. The study follows roughly the Lacanian process of becoming a subject. Each chapter opens up with a quick introduction to the Lacanian concepts used in the following part that analyses the novels. The study can thus also be used as a brief introduction to Lacanian theory in finnish. The psychoanalytic narrative/story of the birth of the subject and the novels stories can be seen as mirroring each other. The method of the study is thus based on a dialogue between the theoretical concepts and the analyses. Novels are being approached as texts that break with the Cartesian notion of an autonomous subject making room for a dialectics of self and other, for a movement in which the “I” builds an identity mirroring itself with others. While both of the novels recount the birth of a character called I, they also have a first person narrator apart from the character “I”. Having constituted the self’s identity, the narrator finds from inside of the self also an other or “you” – this discovery is the final clue to the coffin of the autonomous self. From the Lacanian perspective man’s great Other is the order of language, Symbolic, which constitutes the individual, the speaking subject. Using this perspective the novels are interpreted as describing the process of becoming a subject of the Symbolic; subjected to Symbolic order. This “birth process” happens in particular in the Imaginary register, where the self’s identity is built. In the Imaginary or Mirror phase the “I” mirrors himself with different others (e.g. with his mirror image and the family members, the surrounding others) learning to see his body and his selfhood both as familiar and strange, other. In the Imaginary phase the novels’ characters are also trying to deal with the opposite realm of the Symcolic, the Real. The Lacanian Real is not the reality “before words” but a reality left over from the Symbolic, aside of it but constituted by the Symbolic, to be deducted only from within it. In the novels the Real is experienced as a womblike state where the self is immersed in the other’s body. The process of coming a subject of the Symbolic is depicted also as a process of renouncing the “dream of the womb”, which, if realized, could only mean the non-existence of the subject, i.e. death. The study concentrates on analysing the novels’ writing, where meanings are constantly changing: “I” becomes you, the father becomes a mother, inside becomes outside. This technique enables also the deconstruction of certain opposing notions in the novels. The Lacanian point of view exposes language as a constantly moving universe where the subject has no more stability than the momentary meanings language creates. The self’s identity depicted in the novels is a Lacanian fixed identity, whose growth is necessary but opposes the flux imminent to the Symbolic. The anguish experienced in the novels, in the “house of incest” or “inside”, is due to clinging on the unchanging “I”. However, the writing of the novels shows how the meaning of the “I” changes constantly and the fixity thus becomes movement. This way House of Incest and Dedans, despite their pessimistic stories, manage to create an image of a new, moving subject.

The Impact of Emissions Trading on the Price of Electricity in Nord Pool : Market Power and Price Determination in the Nordic Electricity Market

The objective of this thesis is to find out how dominant firms in a liberalised electricity market will react when they face an increase in the level of costs due to emissions trading, and how this will effect the price of electricity. The Nordic electricity market is chosen as the setting in which to examine the question, since recent studies on the subject suggest that interaction between electricity markets and emissions trading is very much dependent on conditions specific to each market area. There is reason to believe that imperfect competition prevails in the Nordic market, thus the issue is approached through the theory of oligopolistic competition. The generation capacity available at the market, marginal cost of electricity production and seasonal levels of demand form the data based on which the dominant firms are modelled using the Cournot model of competition. The calculations are made for two levels of demand, high and low, and with several values of demand elasticity. The producers are first modelled under no carbon costs and then by adding the cost of carbon dioxide at 20€/t to those technologies subject to carbon regulation. In all cases the situation under perfect competition is determined as a comparison point for the results of the Cournot game. The results imply that the potential for market power does exist on the Nordic market, but the possibility for exercising market power depends on the demand level. In season of high demand the dominant firms may raise the price significantly above competitive levels, and the situation is aggravated when the cost of carbon dioixide is accounted for. Under low demand leves there is no difference between perfect and imperfect competition. The results are highly dependent on the price elasticity of demand.

Modeling Asymmetries in Financial Data with Multiplicative Error Models

This thesis addresses modeling of financial time series, especially stock market returns and daily price ranges. Modeling data of this kind can be approached with so-called multiplicative error models (MEM). These models nest several well known time series models such as GARCH, ACD and CARR models. They are able to capture many well established features of financial time series including volatility clustering and leptokurtosis. In contrast to these phenomena, different kinds of asymmetries have received relatively little attention in the existing literature. In this thesis asymmetries arise from various sources. They are observed in both conditional and unconditional distributions, for variables with non-negative values and for variables that have values on the real line. In the multivariate context asymmetries can be observed in the marginal distributions as well as in the relationships of the variables modeled. New methods for all these cases are proposed. Chapter 2 considers GARCH models and modeling of returns of two stock market indices. The chapter introduces the so-called generalized hyperbolic (GH) GARCH model to account for asymmetries in both conditional and unconditional distribution. In particular, two special cases of the GARCH-GH model which describe the data most accurately are proposed. They are found to improve the fit of the model when compared to symmetric GARCH models. The advantages of accounting for asymmetries are also observed through Value-at-Risk applications. Both theoretical and empirical contributions are provided in Chapter 3 of the thesis. In this chapter the so-called mixture conditional autoregressive range (MCARR) model is introduced, examined and applied to daily price ranges of the Hang Seng Index. The conditions for the strict and weak stationarity of the model as well as an expression for the autocorrelation function are obtained by writing the MCARR model as a first order autoregressive process with random coefficients. The chapter also introduces inverse gamma (IG) distribution to CARR models. The advantages of CARR-IG and MCARR-IG specifications over conventional CARR models are found in the empirical application both in- and out-of-sample. Chapter 4 discusses the simultaneous modeling of absolute returns and daily price ranges. In this part of the thesis a vector multiplicative error model (VMEM) with asymmetric Gumbel copula is found to provide substantial benefits over the existing VMEM models based on elliptical copulas. The proposed specification is able to capture the highly asymmetric dependence of the modeled variables thereby improving the performance of the model considerably. The economic significance of the results obtained is established when the information content of the volatility forecasts derived is examined.

The TRAM flap for breast reconstruction : Studies on perioperative cutaneous blood flow, vasoconstriction, and indices of obesity

Breast reconstruction is performed for 10-15 % of women operated on for breast cancer. A popular method is the TRAM (transverse rectus abdominis musculocutaneous) flap formed of the patient’s own abdominal tissue, a part of one of the rectus abdominis muscles and a transverse skin-subcutis area over it. The flap can be raised as a pedicled or a free flap. The pedicled TRAM flap, based on its nondominant pedicle superior epigastric artery (SEA), is rotated to the chest so that blood flow through SEA continues. The free TRAM flap, based on its dominant pedicle deep inferior epigastric artery (DIEA), is detached from the abdomen, transferred to the chest, and DIEA and vein are anastomosed to vessels on the chest. Cutaneous necrosis is seen in 5–60 % of pedicled TRAM flaps and in 0–15 % of free TRAM flaps. This study was the first one to show with blood flow measurements that the cutaneous blood flow is more generous in free than in pedicled TRAM flaps. After this study the free TRAM flap has exceeded the pedicled flap in popularity as a breast reconstruction method, although the free flap it is technically a more demanding procedure than the pedicled TRAM flap. In pedicled flaps, a decrease in cutaneous blood flow was observed when DIEA was ligated. It seems that SEA cannot provide sufficient blood flow on the first postoperative days. The postoperative cutaneous blood flow in free TRAM flaps was more stable than in pedicled flaps. Development of cutaneous necrosis of pedicled TRAM flaps could be predicted based on intraoperative laser Doppler flowmetry (LDF) measurements. The LDF value on the contralateral skin of the flap decreased to 43 ± 7 % of the initial value after ligation of the DIEA in flaps developing cutaneous necrosis during the next week. Endothelin-1 (ET-1) is a powerful vasoconstrictory peptide secreted by vascular endothelial cells. A correlation was found between plasma ET-1 concentrations and peripheral vasoconstriction developing during and after breast reconstructions with a pedicled TRAM flap. ET-1 was not associated with the development of cutaneous necrosis. Felodipine, a vasodilating calcium channel antagonist, had no effect on plasma ET-1 concentrations, peripheral vasoconstriction or development of cutaneous necrosis in free TRAM flaps. Body mass index and thickness of abdominal were not associated with cutaneous necrosis in pedicled TRAM flaps.