The jump component of S&P 500 volatility and the VIX index

Much research has investigated the differences between option implied volatilities and econometric model-based forecasts. Implied volatility is a market determined forecast, in contrast to model-based forecasts that employ some degree of smoothing of past volatility to generate forecasts. Implied volatility has the potential to reflect information that a model-based forecast could not. This paper considers two issues relating to the informational content of the S&P 500 VIX implied volatility index. First, whether it subsumes information on how historical jump activity contributed to the price volatility, followed by whether the VIX reflects any incremental information pertaining to future jump activity relative to model-based forecasts. It is found that the VIX index both subsumes information relating to past jump contributions to total volatility and reflects incremental information pertaining to future jump activity. This issue has not been examined previously and expands our understanding of how option markets form their volatility forecasts.

Modeling multivariate autoregressive conditional heteroskedasticity with the double smooth transition conditional correlation GARCH Model

In this paper, we propose a multivariate GARCH model with a time-varying conditional correlation structure. The new double smooth transition conditional correlation (DSTCC) GARCH model extends the smooth transition conditional correlation (STCC) GARCH model of Silvennoinen and Teräsvirta (2005) by including another variable according to which the correlations change smoothly between states of constant correlations. A Lagrange multiplier test is derived to test the constancy of correlations against the DSTCC-GARCH model, and another one to test for another transition in the STCC-GARCH framework. In addition, other specification tests, with the aim of aiding the model building procedure, are considered. Analytical expressions for the test statistics and the required derivatives are provided. Applying the model to the stock and bond futures data, we discover that the correlation pattern between them has dramatically changed around the turn of the century. The model is also applied to a selection of world stock indices, and we find evidence for an increasing degree of integration in the capital markets.

Estimating short and long-term residential demand for electricity : new evidence from Sri Lanka

This study investigates the short-run dynamics and long-run equilibrium relationship between residential electricity demand and factors influencing demand - per capita income, price of electricity, price of kerosene oil and price of liquefied petroleum gas - using annual data for Sri Lanka for the period, 1960-2007. The study uses unit root, cointegration and error-correction models. The long-run demand elasticities of income, own price and price of kerosene oil (substitute) were estimated to be 0.78, - 0.62, and 0.14 respectively. The short-run elasticities for the same variables were estimated to be 032, - 0.16 and 0.10 respectively. Liquefied petroleum (LP) gas is a substitute for electricity only in the short-run with an elasticity 0.09. The main findings of the paper support the following (1) increasing the price of electricity is not the most effective tool to reduce electricity consumption (2) existing subsidies on electricity consumption can be removed without reducing government revenue (3) the long-run income elasticity of demand shows that any future increase in household incomes is likely to significantly increase the demand for electricity and(4) any power generation plans which consider only current per capita consumption and population growth should be revised taking into account the potential future income increases in order to avoid power shortages ill the country.

Environmental and pro-social norms : evidence on littering

The paper investigates the relationship between pro-social norms and its implications for improved environmentsl outcomes. This is an area, which has been neglected in the environmental economic literature. We provide empirical evidence to demonstrate a small but significant positive impact between perceived environmental cooperation (reduced public littering) and increased voluntary environmental morale. For this purpose we use European Value Survey (EVS) data for 30 European countries. We also demonstrate that Western European countries are more sensitive to perceived environmental cooperation than the public in Eastern Europe. Interestingly, the results also demonstrate that environmental morale is strongly correlated with several socio-economic and environmental variables. Several robustness tests are conducted to check the validity of the results.

Health, endogenous time preference, and inequality : a political economy perspective

We study an overlapping-generations model in which agents' mortality risks, and consequently impatience, are endogenously determined by private and public investment in health care. Revenues allocated for public health care arc determined by a voting process. We find that the degree of substitutability between public and private health expenditures matters for macroeconomic outcomes of the model. Higher substitutability implies a “crowding-out" effect, which in turn impacts adversely on morality risks and impatience leading to lower public expenditures on health care in the political equilibrium. Consequently, higher substitutability is associated with greater polarization in wealth, and long-run distributions that are bimodal.

Political theory and theoretical physics

This paper explains, somewhat along a Simmelian line, that political theory may produce practical and universal theories like those developed in theoretical physics. The reasoning behind this paper is to show that the Element of Democracy Theory may be true by way of comparing it to Einstein’s Special Relativity – specifically concerning the parameters of symmetry, unification, simplicity, and utility. These parameters are what make a theory in physics as meeting them not only fits with current knowledge, but also produces paths towards testing (application). As the Element of Democracy Theory meets these same parameters, it could settle the debate concerning the definition of democracy. This will be shown firstly by discussing why no one has yet achieved a universal definition of democracy; secondly by explaining the parameters chosen (as in why these and not others confirm or scuttle theories); and thirdly by comparing how Special Relativity and the Element of Democracy match the parameters.

Distribution of benefits of irrigation induced technological changes and commodity markets : new evidence

A plethora of literature exists on irrigation development. However, only a few studies analyse the distributional issues associated with irrigation induced technological changes (IITC) in the context of commodity markets. Furthermore, these studies deal with only the theoretical arguments and to date no proper investigation has been conducted to examine the long-term benefits of adopting modern irrigation technology. This study investigates the long-term benefit changes of irrigation induced technological changes using data from Sri Lanka with reference to rice farming. The results show that (1) adopting modern technology on irrigation increases the overall social welfare through consumption of a larger quantity at a lower cost (2) the magnitude, sensitivity and distributional gains depend on the price elasticity of demand and supply as well as the size of the marketable surplus (3) non-farm sector gains are larger than farm sector gains (4) the distribution of the benefits among different types of producers depend on the magnitude of the expansion of the irrigated areas as well as the competition faced by traditional farmers (5) selective technological adoption and subsidies have a detrimental effect on the welfare of other producers who do not enjoy the same benefits (6) the short-term distributional effects are more severe than the long-term effects among different groups of farmers.

Political theory and theoretical physics [Revised]

This paper explains, somewhat along a Simmelian line, that political theory may produce practical and universal theories like those developed in theoretical physics. The reasoning behind this paper is to show that the Element of Democracy Theory may be true by way of comparing it to Einstein’s Special Relativity – specifically concerning the parameters of symmetry, unification, simplicity, and utility. These parameters are what make a theory in physics as meeting them not only fits with current knowledge, but also produces paths towards testing (application). As the Element of Democracy Theory meets these same parameters, it could settle the debate concerning the definition of democracy. This will be shown firstly by discussing why no one has yet achieved a universal definition of democracy; secondly by explaining the parameters chosen (as in why these and not others confirm or scuttle theories); and thirdly by comparing how Special Relativity and the Element of Democracy match the parameters.

Political theory and theoretical physics

This paper argues, somewhat along a Simmelian line, that political theory may produce practical and universal theories like those developed in theoretical physics. The reasoning behind this paper is to show that the theory of ‘basic democracy’ may be true by way of comparing it to Einstein’s Special Relativity – specifically concerning the parameters of symmetry, unification, simplicity, and utility. These parameters are what make a theory in physics as meeting them not only fits with current knowledge, but also produces paths towards testing (application). As the theory of ‘basic democracy’ may meet these same parameters, it could settle the debate concerning the definition of democracy. This will be argued firstly by discussing what the theory of ‘basic democracy’ is and why it differs from previous work; secondly by explaining the parameters chosen (as in why these and not others confirm or scuttle theories); and thirdly by comparing how Special Relativity and the theory of ‘basic democracy’ may match the parameters.

Technology strategy for re-engineering design and construction

Automation technology can provide construction firms with a number of competitive advantages. Technology strategy guides a firm's approach to all technology, including automation. Engineering management educators, researchers, and construction industry professionals need improved understanding of how technology affects results, and how to better target investments to improve competitive performance. A more formal approach to the concept of technology strategy can benefit the construction manager in his efforts to remain competitive in increasingly hostile markets. This paper recommends consideration of five specific dimensions of technology strategy within the overall parameters of market conditions, firm capabilities and goals, and stage of technology evolution. Examples of the application of this framework in the formulation of technology strategy are provided for CAD applications, co-ordinated positioning technology and advanced falsework and formwork mechanisation to support construction field operations. Results from this continuing line of research can assist managers in making complex and difficult decisions regarding reengineering construction processes in using new construction technology and benefit future researchers by providing new tools for analysis. Through managing technology to best suit the existing capabilities of their firm, and addressing the market forces, engineering managers can better face the increasingly competitive environment in which they operate.

Preliminary development of a sewerage infrastructure buffer assessment tool for engineering risk and strategic land use planning

Urban expansion continues to encroach on once isolated sewerage infrastructure. In this context,legislation and guidelines provide limited direction to the amenity allocation of appropriate buffer distances for land use planners and infrastructure providers. Topography, wind speed and direction,temperature, humidity, existing land uses and vegetation profiles are some of the factors that require investigation in analytically determining a basis for buffer separations. This paper discusses the compilation and analysis of six years of Logan sewerage odour complaint data. Graphically,relationships between the complaints, topographical features and meteorological data are presented. Application of a buffer sizing process could assist planners and infrastructure designers alike, whilst automatically providing extra green spaces. Establishing a justifiable criterion for buffer zone allocations can only assist in promoting manageable growth for healthier and more sustainable communities.