International order flows: Explaining equity and exchange rate returns

Macroeconomic models of equity and exchange rate returns perform poorly at high frequencies. The proportion of daily returns that these models explain is essentially zero. Instead of relying on macroeconomic determinants, we model equity price and exchange rate behavior based on a concept from microstructure – order flow. The international order flows are derived from belief changes of different investor groups in a two-country setting. We obtain a structural relationship between equity returns, exchange rate returns and their relationship to home and foreign equity market order flow. To test the model we construct daily aggregate order flow data from 800 million equity trades in the U.S. and France from 1999 to 2003. Almost 60% of the daily returns in the S&P100 index are explained jointly by exchange rate returns and aggregate order flows in both markets. As predicted by the model, daily exchange rate returns and order flow into the French market have significant incremental explanatory power for the daily S&P returns. The model implications are also validated for intraday returns.

Evolutionary agglomeration theory: increasing returns, diminishing returns, and the industry life cycle

According to Marshall’s agglomeration theory, Krugman’s New Economic Geography models, and Porter’s cluster policies, firms should receive increasing returns from a trinity of agglomeration economies: a local pool of skilled labour, local supplier linkages, and local knowledge spillovers. Recent evolutionary theories suggest that whether agglomeration economies generate increasing returns or diminishing returns depends on time, and especially the evolution of the industry life cycle. At the start of the twenty-first century, we re-examine Marshall’s trinity of agglomeration economies in the city-region where he discovered them. The econometric results from our multivariate regression models are the polar opposite of Marshall’s. During the later stages of the industry life cycle, Marshall’s agglomeration economies decrease the economic performance of firms and create widespread diminishing returns for the economic development of the city-region, which has evolved to become one of the poorest city-regions in Europe.

MMP expression and abnormal lung permeability are important determinants of outcome in IPF

Matrix metalloproteinases (MMPs) degrade all of the extracellular matrix components of the intersititium and may play a role in abnormal alveolar permeability, which is a feature of idiopathic pulmonary fibrosis (IPF). The aims of the present study were to evaluate MMP protein levels in patients with IPF and determine any relationship to treatment and markers of permeability.

Increasing Returns and Competitive Equilibrium--The Content and Development of Marshall's Theory

This paper reviews Alfred Marshall's attempts to reconcile increasing returns and competition from the early economic writings to the later editions of his Principles. It is shown that while Marshall's final solution to the problem involved naming external economies the cause of increasing returns in a regime of competition , both the life cycle of the firm and internal economies remained necessary to his argument. Their function was to give some operation al content to the elusive concept of external economies.

Commonality in Returns, Order Flows, and Liquidity in the Greek Stock Market

Using a unique high-frequency data-set on a comprehensive sample of Greek blue-chip stocks, spanning from September 2003 through March 2006, this note assesses the extent and role of commonality in returns, order flows (OFs), and liquidity. It also formally models aggregate equity returns in terms of aggregate equity OF, in an effort to clarify OF's importance in explaining returns for the Athens Exchange market. Almost a quarter of the daily returns in the FTSE/ATHEX20 index is explained by aggregate own OF. In a second step, using principal components and canonical correlation analyses, we document substantial common movements in returns, OFs, and liquidity, both on a market-wide basis and on an individual security basis. These results emphasize that asset pricing and liquidity cannot be analyzed in isolation from each other.

Dynamic Density Forecasts for Multivariate Asset Returns

We propose a simple and flexible framework for forecasting the joint density of asset returns. The multinormal distribution is augmented with a polynomial in (time-varying) non-central co-moments of assets. We estimate the coefficients of the polynomial via the Method of Moments for a carefully selected set of co-moments. In an extensive empirical study, we compare the proposed model with a range of other models widely used in the literature. Employing a recently proposed as well as standard techniques to evaluate multivariate forecasts, we conclude that the augmented joint density provides highly accurate forecasts of the “negative tail” of the joint distribution.

Abnormal rolls and regular arrays of disclinations in homeotropic electroconvection

We present the first quantitative verification of an amplitude description for systems with (nearly) spontaneously broken isotropy, in particular for the recently discovered abnormal-roll states. We also obtain a conclusive picture of the three-dimensional director configuration in a spatial period doubling phenomenon involving disclination loops. The first observation of two Lifshitz frequencies in electroconvection is reported.

Rule Britannia!: British Stock Market Returns, 1825-1870

This article presents a new series of monthly equity returns for the British stock market for the period 1825-1870. In addition to calculating capital appreciation and dividend yields, the article also estimates the effect of survivorship bias on returns. Three notable findings emerge from this study. First, stock market returns in the 1825-1870 period are broadly similar for Britain and the United States, although the British market is less risky. Second, real returns in the 1825-1870 period are higher than in subsequent epochs of British history. Third, unlike the modern era, dividends are the most important component of returns.

'Diminishing Returns' (diary)

Diary

Thought insertion: Abnormal sense of thought agency or thought endorsement?

The standard approach to the core phenomenology of thought insertion characterizes it in terms of a normal sense of thought ownership coupled with an abnormal sense of thought agency. Recently, Fernández (2010) has argued that there are crucial problems with this approach and has proposed instead that what goes wrong fundamentally in such a phenomenology is a sense of thought commitment, characterized in terms of thought endorsement. In this paper, we argue that even though Fernández raises new issues that enrich the topic, his proposal cannot rival the version of the standard approach we shall defend.