Time-varying coefficients in the almost ideal demand system: An empirical appraisal

This paper provides a generalisation of the structural time series version of the Almost Ideal Demand System (AIDS) that allows for time-varying coefficients (TVC/AIDS) in the presence of cross-equation constraints. An empirical appraisal of the TVC/AIDS is made using a dynamic AIDS with trending intercept as the baseline model with a data set from the Italian Household Budget Survey (1986-2001). The assessment is based on four criteria: adherence to theoretical constraints, statistical diagnostics on residuals, forecasting performance and economic meaningfulness. No clear evidence is found for superior performance of the TVC/AIDS, apart from improved short-term forecasts.

The value premium and time-varying volatility

Numerous studies have documented the failure of the static and conditional capital asset pricing models to explain the difference in returns between value and growth stocks. This paper examines the post-1963 value premium by employing a model that captures the time-varying total risk of the value-minus-growth portfolios. Our results show that the time-series of value premia is strongly and positively correlated with its volatility. This conclusion is robust to the criterion used to sort stocks into value and growth portfolios and to the country under review (the US and the UK). Our paper is consistent with evidence on the possible role of idiosyncratic risk in explaining equity returns, and also with a separate strand of literature concerning the relative lack of reversibility of value firms' investment decisions.

Volatility persistence and time-varying betas in the UK real estate market

This paper investigates the degree of return volatility persistence and the time-varying behaviour of systematic risk (beta) for 31 market segments in the UK real estate market. The findings suggest that different property types exhibit differences in volatility persistence and time variability. There is also evidence that the volatility persistence of each market segment and its systematic risk are significantly positively related. Thus, the systematic risks of different property types tend to move in different directions during periods of increased market volatility. Finally, the market segments with systematic risks less than one tend to show negative time variability, while market segments with systematic risk greater than one generally show positive time variability, indicating a positive relationship between the volatility of the market and the systematic risk of individual market segments. Consequently safer and riskier market segments are affected differently by increases in market volatility.

Duality, observability, and controllability for linear time-varying descriptor systems

A characterization of observability for linear time-varying descriptor systemsE(t)x(t)+F(t)x(t)=B(t)u(t), y(t)=C(t)x(t) was recently developed. NeitherE norC were required to have constant rank. This paper defines a dual system, and a type of controllability so that observability of the original system is equivalent to controllability of the dual system. Criteria for observability and controllability are given in terms of arrays of derivatives of the original coefficients. In addition, the duality results of this paper lead to an improvement on a previous fundamental structure result for solvable systems of the formE(t)x(t)+F(t)x(t)=f(tt).

Regularization of time-varying descriptor systems by the asvd

We study linear variable coefficient control problems in descriptor form. Based on a behaviour approach and the general theory for linear differential algebraic systems we give the theoretical analysis and describe numerically stable methods to determine the structural properties of the system.

A numerical model of the ionospheric signatures of time-varying magnetic reconnection: III. Quasi-instantaneous convection responses in the Cowley-Lockwood paradigm

Using a numerical implementation of the Cowley and Lockwood (1992) model of flow excitation in the magnetosphere–ionosphere (MI) system, we show that both an expanding (on a _12-min timescale) and a quasiinstantaneous response in ionospheric convection to the onset of magnetopause reconnection can be accommodated by the Cowley–Lockwood conceptual framework. This model has a key feature of time dependence, necessarily considering the history of the coupled MI system. We show that a residual flow, driven by prior magnetopause reconnection, can produce a quasi-instantaneous global ionospheric convection response; perturbations from an equilibrium state may also be present from tail reconnection, which will superpose constructively to give a similar effect. On the other hand, when the MI system is relatively free of pre-existing flow, we can most clearly see the expanding nature of the response. As the open-closed field line boundary will frequently be in motion from such prior reconnection (both at the dayside magnetopause and in the cross-tail current sheet), it is expected that there will usually be some level of combined response to dayside reconnection.

A numerical model of the ionospheric signatures of time-varying magnetic reconnection: II. Measuring expansions in the ionospheric flow response

A numerical model embodying the concepts of the Cowley-Lockwood (Cowley and Lockwood, 1992, 1997) paradigm has been used to produce a simple Cowley– Lockwood type expanding flow pattern and to calculate the resulting change in ion temperature. Cross-correlation, fixed threshold analysis and threshold relative to peak are used to determine the phase speed of the change in convection pattern, in response to a change in applied reconnection. Each of these methods fails to fully recover the expansion of the onset of the convection response that is inherent in the simulations. The results of this study indicate that any expansion of the convection pattern will be best observed in time-series data using a threshold which is a fixed fraction of the peak response. We show that these methods used to determine the expansion velocity can be used to discriminate between the two main models for the convection response to a change in reconnection.

A numerical model of the ionospheric signatures of time-varying magneticreconnection: I. ionospheric convection

This paper presents a numerical model for predicting the evolution of the pattern of ionospheric convection in response to general time-dependent magnetic reconnection at the dayside magnetopause and in the cross-tail current sheet of the geomagnetic tail. The model quantifies the concepts of ionospheric flow excitation by Cowley and Lockwood (1992), assuming a uniform spatial distribution of ionospheric conductivity. The model is demonstrated using an example in which travelling reconnection pulses commence near noon and then move across the dayside magnetopause towards both dawn and dusk. Two such pulses, 8 min apart, are used and each causes the reconnection to be active for 1 min at every MLT that they pass over. This example demonstrates how the convection response to a given change in the interplanetary magnetic field (via the reconnection rate) depends on the previous reconnection history. The causes of this effect are explained. The inherent assumptions and the potential applications of the model are discussed.

Modelling the high-latitude ionosphere for time-varying plasma convection

The paper discusses how variations in the pattern of convective plasma flows should beincluded in self-consistent time-dependent models of the coupled ionosphere-thermosphere system. The author shows how these variations depend upon the mechanism by which the solar wind flow excites the convection. The modelling of these effects is not just of relevance to the polar ionosphere. This is because the influence of convection is not confined to high latitudes: the resultant heating and composition changes in the thermosphere are communicated to lower latitudes by the winds which are also greatly modified by the plasma convection. These thermospheric changes alter the global distribution of plasma by modulatingthe rates of the chemical reactions which areresponsible for the loss of plasma. Hence the modelling of these high-latitude processes is of relevanceto the design and operation of HF communication, radar and navigation systems worldwide.

Time-varying price discovery in the eighteenth century: empirical evidence from the London and Amsterdam stock markets

This paper examines the time-varying nature of price discovery in eighteenth century cross-listed stocks. Specifically, we investigate how quickly news is reflected in prices for two of the great moneyed com- panies, the Bank of England and the East India Company, over the period 1723 to 1794. These British companies were cross-listed on the London and Amsterdam stock exchange and news between the capitals flowed mainly via the use of boats that transported mail. We examine in detail the historical context sur- rounding the defining events of the period, and use these as a guide to how the data should be analysed. We show that both trading venues contributed to price discovery, and although the London venue was more important for these stocks, its importance varies over time.

Time varying price discovery

We show how multivariate GARCH models can be used to generate a time-varying “information share” (Hasbrouck, 1995) to represent the changing patterns of price discovery in closely related securities. We find that time-varying information shares can improve credit spread predictions.

Time patterns in UK demand for alcohol and tobacco: an application of the EM algorithm

Capturing the pattern of structural change is a relevant task in applied demand analysis, as consumer preferences may vary significantly over time. Filtering and smoothing techniques have recently played an increasingly relevant role. A dynamic Almost Ideal Demand System with random walk parameters is estimated in order to detect modifications in consumer habits and preferences, as well as changes in the behavioural response to prices and income. Systemwise estimation, consistent with the underlying constraints from economic theory, is achieved through the EM algorithm. The proposed model is applied to UK aggregate consumption of alcohol and tobacco, using quarterly data from 1963 to 2003. Increased alcohol consumption is explained by a preference shift, addictive behaviour and a lower price elasticity. The dynamic and time-varying specification is consistent with the theoretical requirements imposed at each sample point. (c) 2005 Elsevier B.V. All rights reserved.

A structural time series approach to modelling multiple and resurgent meat scares in Italy

This paper exploits a structural time series approach to model the time pattern of multiple and resurgent food scares and their direct and cross-product impacts on consumer response. A structural time series Almost Ideal Demand System (STS-AIDS) is embedded in a vector error correction framework to allow for dynamic effects (VEC-STS-AIDS). Italian aggregate household data on meat demand is used to assess the time-varying impact of a resurgent BSE crisis (1996 and 2000) and the 1999 Dioxin crisis. The VEC-STS-AIDS model monitors the short-run impacts and performs satisfactorily in terms of residuals diagnostics, overcoming the major problems encountered by the customary vector error correction approach.

Modelling the uptake and growth kinetics of Penicillium glabrum in a tannic acid-containing solid-state fermentation for tannase production

A mathematical growth model for the batch solid-state fermentation process for fungal tannase production was developed and tested experimentally. The unstructured model describes the uptake and growth kinetics of Penicillium glabrum in an impregnated polyurethane foam substrate system. In general, good agreement between the experimental data and model simulations was obtained. Biomass, tannase and spore production are described by logistic kinetics with a time delay between biomass production and tannase and spore formation. Possible induction mechanisms for the latter are proposed. Hydrolysis of tannic acid, the main carbon source in the substrate system, is reasonably well described with Michaelis-Menten kinetics with time-varying enzyme concentration but a more complex reaction mechanism is suspected. The metabolism of gallic acid, a tannase-hydrolysis product of tannic acid, was shown to be growth limiting during the main growth phase. (c) 2004 Elsevier Ltd. All rights reserved.