Using a Parameterization of a Radiative Transfer Model to Build High-Resolution Maps of Typical Clear-Sky UV Index in Catalonia, Spain

To perform a climatic analysis of the annual UV index (UVI) variations in Catalonia, Spain (northeast of the Iberian Peninsula), a new simple parameterization scheme is presented based on a multilayer radiative transfer model. The parameterization performs fast UVI calculations for a wide range of cloudless and snow-free situations and can be applied anywhere. The following parameters are considered: solar zenith angle, total ozone column, altitude, aerosol optical depth, and single-scattering albedo. A sensitivity analysis is presented to justify this choice with special attention to aerosol information. Comparisons with the base model show good agreement, most of all for the most common cases, giving an absolute error within 0.2 in the UVI for a wide range of cases considered. Two tests are done to show the performance of the parameterization against UVI measurements. One uses data from a high-quality spectroradiometer from Lauder, New Zealand [45.04°S, 169.684°E, 370 m above mean sea level (MSL)], where there is a low presence of aerosols. The other uses data from a Robertson–Berger-type meter from Girona, Spain (41.97°N, 2.82°E, 100 m MSL), where there is more aerosol load and where it has been possible to study the effect of aerosol information on the model versus measurement comparison. The parameterization is applied to a climatic analysis of the annual UVI variation in Catalonia, showing the contributions of solar zenith angle, ozone, and aerosols. High-resolution seasonal maps of typical UV index values in Catalonia are presented

Contagion or Interdependence in the recent Global Financial Crisis? An application to the stock markets using unconditional cross-market correlations

We consider stock market contagion as a significant increase in cross-market linkages after a shock to one country or group of countries. Under this definition we study if contagion occurred from the U.S. Financial Crisis to the rest of the major stock markets in the world by using the adjusted (unconditional) correlation coefficient approach (Forbes and Rigobon, 2002) which consists of testing if average crossmarket correlations increase significantly during the relevant period of turmoil. We would not reject the null hypothesis of interdependence in favour of contagion if the increase in correlation only suggests a continuation of high linkages in all state of the world. Moreover, if contagion occurs, this would justify the intervention of the IMF and the suddenly portfolio restructuring during the period under study.

Passive modernization? the new human development index and its components in Italy’s regions (1871-2007)

The article presents and discusses estimates of social and economic indicators for Italy’s regions in benchmark years roughly from Unification to the present day: life expectancy, education, GDP per capita at purchasing power parity, and the new Human Development Index (HDI). A broad interpretative hypothesis, based on the distinction between passive and active modernization, is proposed to account for the evolution of regional imbalances over the long-run. In the lack of active modernization, Southern Italy converged thanks to passive modernization, i.e., State intervention: however, this was more effective in life expectancy, less successful in education, expensive and as a whole ineffective in GDP. As a consequence, convergence in the HDI occurred from the late XIX century to the 1970s, but came to a sudden halt in the last decades of the XX century.

Is there really a backlash against multiculturalism policies? New evidence from the multiculturalism policy index

In much of the western world, and particularly in Europe, there is a widespread perception that multiculturalism has ‘failed’ and that governments who once embraced a multicultural approach to diversity are turning away, adopting a strong emphasis on civic integration. This reaction, we are told, “reflects a seismic shift not just in the Netherlands, but in other European countries as well” (JOPPKE 2007). This paper challenges this view. Drawing on an updated version of the Multiculturalism Policy Index introduced earlier (BANTING and KYMLICKA 2006), the paper presents an index of the strength of multicultural policies for European countries and several traditional countries of immigration at three points in time (1980, 2000 and 2010). The results paint a different picture of contemporary experience in Europe. While a small number of countries, including most notably the Netherlands, have weakened established multicultural policies during the 2000s, such a shift is the exception. Most countries that adopted multicultural approaches in the later part of the twentieth century have maintained their programs in the first decade of the new century; and a significant number of countries have added new ones. In much of Europe, multicultural policies are not in general retreat. As a result, the turn to civic integration is often being layered on top of existing multicultural programs, leading to a blended approach to diversity. The paper reflects on the compatibility of multiculturalism policies and civic integration, arguing that more liberal forms of civic integration can be combined with multiculturalism but that more illiberal or coercive forms are incompatible with a multicultural approach.

Free Flows, Limited Diversification: Explaining the Fall and Rise of Stock Market Correlations, 1890-2001

Using a new dataset on capital account openness, we investigate why equity return correlations changed over the last century. Based on a new, long-run dataset on capital account regulations in a group of 16 countries over the period 1890-2001, we show that correlations increase as financial markets are liberalized. These findings are robust to controlling for both the Forbes-Rigobon bias and global averages in equity return correlations. We test the robustness of our conclusions, and show that greater synchronization of fundamentals is not the main cause of increasing correlations. These results imply that the home bias puzzle may be smaller than traditionally claimed.

Panel index VAR models: Specification, Estimation, Testing and Leading Indicators

This paper proposes a method to conduct inference in panel VAR models with cross unit interdependencies and time variations in the coefficients. The approach can be used to obtain multi-unit forecasts and leading indicators and to conduct policy analysis in a multiunit setups. The framework of analysis is Bayesian and MCMC methods are used to estimate the posterior distribution of the features of interest. The model is reparametrized to resemble an observable index model and specification searches are discussed. As an example, we construct leading indicators for inflation and GDP growth in the Euro area using G-7 information.

Beyond Smith's rule: An optimal dynamic index, rule for single machine stochastic scheduling with convex holding costs

Most research on single machine scheduling has assumedthe linearity of job holding costs, which is arguablynot appropriate in some applications. This motivates ourstudy of a model for scheduling $n$ classes of stochasticjobs on a single machine, with the objective of minimizingthe total expected holding cost (discounted or undiscounted). We allow general holding cost rates that are separable,nondecreasing and convex on the number of jobs in eachclass. We formulate the problem as a linear program overa certain greedoid polytope, and establish that it issolved optimally by a dynamic (priority) index rule,whichextends the classical Smith's rule (1956) for the linearcase. Unlike Smith's indices, defined for each class, ournew indices are defined for each extended class, consistingof a class and a number of jobs in that class, and yieldan optimal dynamic index rule: work at each time on a jobwhose current extended class has larger index. We furthershow that the indices possess a decomposition property,as they are computed separately for each class, andinterpret them in economic terms as marginal expected cost rate reductions per unit of expected processing time.We establish the results by deploying a methodology recentlyintroduced by us [J. Niño-Mora (1999). "Restless bandits,partial conservation laws, and indexability. "Forthcomingin Advances in Applied Probability Vol. 33 No. 1, 2001],based on the satisfaction by performance measures of partialconservation laws (PCL) (which extend the generalizedconservation laws of Bertsimas and Niño-Mora (1996)):PCL provide a polyhedral framework for establishing theoptimality of index policies with special structure inscheduling problems under admissible objectives, which weapply to the model of concern.

Earnings management and audit adjustments: An empirical study of IBEX 35 constituents

Doubts about the reliability of a company's qualitative financial disclosure increase market participant expectations from the auditor's report. The auditing process is supposed to serve as a monitoring device that reduces management incentives to manipulate reported earnings. Empirical research confirms that it could be an efficient device under some circumstancesand recognizes that our estimates of the informativeness of audit reports are unavoidably biased (e.g., because of a client's anticipation of the auditing process). This empirical study supports the significant role of auditors in the financial market, in particular in the prevention of earnings management practice. We focus on earnings misstatements, which auditors correct with anadjustment, using a sample of past and current constituents of the benchmark market index in Spain, IBEX 35, and manually collected audit adjustments reported over the 1997-2004 period (42 companies, 336 annual reports, 75 earnings misstatements). Our findings confirm that companies more often overstate than understate their earnings. An investor may foresee earningsmisreporting, as manipulators have a similar profile (e.g., more leveraged and with lower sales). However, he may receive valuable information from the audit adjustment on the size of earnings misstatement, which can be significantly large (i.e., material in almost all cases). We suggest that the magnitude of an audit adjustment depends, other things constant, on annual revenues and free cash levels. We also examine how the audit adjustment relates to the observed market price, trading volume and stock returns. Our findings are that earnings manipulators have a lower price and larger trading volume compared to their rivals. Their returns are positively associated with the magnitude of earnings misreporting, which is not consistent with the possible pricing of audit information.

A comparison of stock market mechanisms

This paper studies the relationship between the amount of publicinformation that stock market prices incorporate and the equilibriumbehavior of market participants. The analysis is framed in a static, NREEsetup where traders exchange vectors of assets accessing multidimensionalinformation under two alternative market structures. In the first(the unrestricted system), both informed and uninformed speculators cancondition their demands for each traded asset on all equilibrium prices;in the second (the restricted system), they are restricted to conditiontheir demand on the price of the asset they want to trade. I show thatinformed traders incentives to exploit multidimensional privateinformation depend on the number of prices they can condition upon whensubmitting their demand schedules, and on the specific price formationprocess one considers. Building on this insight, I then give conditionsunder which the restricted system is more efficient than the unrestrictedsystem.

With a bang, not a whimper: Pricking Germany's "stock market bubble" in 1927 and the slide into depression

In May 1927, the German central bank intervenedindirectly to reduce lending to equity investors.The crash that followed ended the only stockmarket boom during Germany s relative stabilization 1924-28. This paper examines thefactors that lead to the intervention as well asits consequences. We argue that genuine concernabout the exuberant level of the stock market,in addition to worries about an inflow offoreign funds, tipped the scales in favour ofintervention. The evidence strongly suggeststhat the German central bank under HjalmarSchacht was wrong to be concerned aboutstockprices-there was no bubble. Also, theReichsbank was mistaken in its belief thata fall in the market would reduce theimportance of short-term foreign borrowing,and help to ease conditions in the money market.The misguided intervention had important realeffects. Investment suffered, helping to tipGermany into depression.

Honey, I shrunk the sample covariance matrix

The central message of this paper is that nobody should be using the samplecovariance matrix for the purpose of portfolio optimization. It containsestimation error of the kind most likely to perturb a mean-varianceoptimizer. In its place, we suggest using the matrix obtained from thesample covariance matrix through a transformation called shrinkage. Thistends to pull the most extreme coefficients towards more central values,thereby systematically reducing estimation error where it matters most.Statistically, the challenge is to know the optimal shrinkage intensity,and we give the formula for that. Without changing any other step in theportfolio optimization process, we show on actual stock market data thatshrinkage reduces tracking error relative to a benchmark index, andsubstantially increases the realized information ratio of the activeportfolio manager.

A house price index defined in the potential outcomes framework

Current methods for constructing house price indices are based on comparisons of sale prices of residential properties sold two or more times and on regression of the sale prices on the attributes of the properties and of their locations. The two methods have well recognised deficiencies, selection bias and model assumptions, respectively. We introduce a new method based on propensity score matching. The average house prices for two periods are compared by selecting pairs of properties, one sold in each period, that are as similar on a set of available attributes (covariates) as is feasible to arrange. The uncertainty associated with such matching is addressed by multiple imputation, framing the problem as involving missing values. The method is applied to aregister of transactions ofresidential properties in New Zealand and compared with the established alternatives.

On the drivers of commodity co-movement: Evidence from biofuels

We use the recent introduction of biofuels to study the effect of industry factors on the relationshipsbetween wholesale commodity prices. Correlations between agricultural products and oilare strongest in the 2005-09 period, coinciding with the boom of biofuels, and remain substantialuntil 2011. We disentangle three possible drivers for the linkage: substitution, energy costs, andfinancialization. The timing and magnitude of the biofuels-to-oil relationships are different to thoseof other commodities, and far higher than can be justified by costs and financialization. Substitutionand costs drive the monthly correlations of long-term futures, and each of the three contributeequally to the daily co-movement of the short-term ones. The findings survive many robustnesschecks and appear in the stock market.

Stock returns, term structure, inflation and real activity: An international perspective

This paper analyses the empirical interdependences among assetreturns, real activity and inflation from a multicountry and internationalpoint of view. We find that nominal stock returns are significantly relatedto inflation only in the US, that the US term structure of interest ratespredicts both domestic and foreign inflation rates while foreign termstructures do not have this predictive power and that innovations in inflationand exchange rates induce insignificant responses of real and financialvariables. An interpretation of the dynamics and some policy implicationsof the results are provided.