Bank integration and co-movements across housing markets

This paper investigates whether bank integration measured by cross-border bank flows can capture the co-movements across housing markets in developed countries by using a spatial dynamic panel model. The transmission can occur through a global banking channel in which global banks intermediate wholesale funding to local banks. Changes in financial conditions are passed across borders through the banks’ balance-sheet exposure to credit, currency, maturity, and funding risks resulting in house price spillovers. While controlling for country-level and global factors, we find significant co-movement across housing markets of countries with proportionally high bank integration. Bank integration can better capture house price co-movements than other measures of economic integration. Once we account for bank exposure, other spatial linkages traditionally used to account for return co-movements across region – such as trade, foreign direct investment, portfolio investment, geographic proximity, etc. – become insignificant. Moreover, we find that the co-movement across housing markets decreases for countries with less developed mortgage markets characterized by fixed mortgage rate contracts, low limits of loan-to-value ratios and no mortgage equity withdrawal.

When does direct real estate improve portfolio performance?

For over twenty years researchers have been recommending that investors diversify their portfolios by adding direct real estate. Based on the tenets of modern portfolio theory (MPT) investors are told that the primary reason they should include direct real estate is that they will enjoy decreased volatility (risk) through increased diversification. However, the MPT methodology hides where this reduction in risk originates. To over come this deficiency we use a four-quadrant approach to break down the co-movement between direct real estate and equities and bonds into negative and positive periods. Then using data for the last 25-years we show that for about 70% of the time a holding in direct real estate would have hurt portfolio returns, i.e. when the other assets showed positive performance. In other words, for only about 30% of the time would a holding in direct real estate lead to improvements in portfolio returns. However, this increase in performance occurs when the alternative asset showed negative returns. In addition, adding direct real estate always leads to reductions in portfolio risk, especially on the downside. In other words, although adding direct real estate helps the investor to avoid large losses it also reduces the potential for large gains. Thus, if the goal of the investor is offsetting losses, then the results show that direct real estate would have been of some benefit. So in answer to the question when does direct real estate improve portfolio performance the answer is on the downside, i.e. when it is most needed.

Continental shift? An analysis of convergence trends in European real estate equities

European economic and political integration have been recognised as having implications for patterns of performance in national real estate and capital markets and have generated a wide body of research and commentary. In 1999, progress towards monetary integration within the European Union culminated in the introduction of a common currency and monetary policy. This paper investigates the effects of this ‘event’ on the behaviour of stock returns in European real estate companies. A range of statistical tests is applied to the performance of European property companies to test for changes in segmentation, co-movement and causality. The results suggest that, relative to the wider equity markets, the dispersion of performance is higher, correlations are lower, a common contemporaneous factor has much lower explanatory power whilst lead-lag relationships are stronger. Consequently, the evidence of transmission of monetary integration to real estate securities is less noticeable than to general securities. Less and slower integration is attributed to the relatively small size of the real estate securities market and the local and national nature of the majority of the companies’ portfolios.

Speculative bubbles and the cross-sectional variation in stock returns

Evidence suggests that rational, periodically collapsing speculative bubbles may be pervasive in stock markets globally, but there is no research that considers them at the individual stock level. In this study we develop and test an empirical asset pricing model that allows for speculative bubbles to affect stock returns. We show that stocks incorporating larger bubbles yield higher returns. The bubble deviation, at the stock level as opposed to the industry or market level, is a priced source of risk that is separate from the standard market risk, size and value factors. We demonstrate that much of the common variation in stock returns that can be attributable to market risk is due to the co-movement of bubbles rather than being driven by fundamentals.

Attention processes in children with movement difficulties, reading difficulties or both

Reading difficulties (RD) and movement difficulties (MD) co-occur more often in clinical populations than expected for independent disorders. In this study, we investigated the pattern of association between attentional processes, RD and MD in a population of 9 year old school children. Children were screened to identify index groups with RD, MD or both, plus a control group. These groups were then tested on a battery of cognitive attention assessments (TEA-Ch). Results confirmed that the occurrence of RD and MD was greater than would be predicted for independent disorders. Additionally, children with MD, whether or not combined with RD, had poor performance on all attention measures when compared with typically developing children. Children with RD only, were no poorer on measures of attention than typical children. The results are discussed with respect to approaches proposed to account for the co-occurrence of disorders.

Movement of newly assimilated 13C carbon in the grass Lolium perenne and its incorporation into rhizosphere microbial DNA

One of the key processes that drives rhizosphere microbial activity is the exudation of soluble organic carbon (C) by plant roots. We describe an experiment designed to determine the impact of defoliation on the partitioning and movement of C in grass (Lolium perenne L.), soil and grass-sterile sand microcosms, using a (13)CO(2) pulse-labelling method. The pulse-derived (13)C in the shoots declined over time, but that of the roots remained stable throughout the experiment. There were peaks in the atom% (13)C of rhizosphere CO(2) in the first few hours after labelling probably due to root respiration, and again at around 100 h. The second peak was only seen in the soil microcosms and not in those with sterilised sand as the growth medium, indicating possible microbial activity. Incorporation of the (13)C label into the microbial biomass increased at 100 h when incorporation into replicating cells, as indicated by the amounts of the label in the microbial DNA, started to increase. These results indicate that the rhizosphere environment is conducive to bacterial growth and replication. The results also show that defoliation had no impact on the pattern of movement of (13)C from plant roots into the microbial population in the rhizosphere.

Narratives of grassroots innovations: a comparison of voluntary simplicity and the transition movement in Italy

Grassroots innovations (GI) are promising examples of deliberate transformation of socio-technical systems towards resilience and sustainability. However, evidence is needed on the factors that limit or enable their success. This paper set out to study how GI use narratives to empower innovation in the face of incumbent socio-technical regimes. Institutional documents were comparatively analyzed to assess how the narratives influence the structure, form of action and external interactions of two Italian grassroots networks, Bilanci di Giustizia and Transition Network Italy. The paper finds an internal consistency between narratives and strategies for each of the two networks. The paper also highlights core similarities, but also significant differences in the ethical basis of the two narratives, and in the organizations and strategies. Such differences determine different forms of innovation empowerment and expose the niche to different potentials to transform incumbent regimes, or to the risk of being co-opted by them.