Bayesian estimation of co-integrating thresholds in the term structure of interest rates.

Threshold Error Correction Models are used to analyse the term structure of interest Rates. The paper develops and uses a generalisation of existing models that encompasses both the Band and Equilibrium threshold models of [Balke and Fomby ((1997) Threshold cointegration. Int Econ Rev 38(3):627–645)] and estimates this model using a Bayesian approach. Evidence is found for threshold effects in pairs of longer rates but not in pairs of short rates. The Band threshold model is supported in preference to the Equilibrium model.

Public real estate and the term structure of interest rates: a cross-country study

Using a variation of the Nelson-Siegel term structure model we examine the sensitivity of real estate securities in six key global markets to unexpected changes in the level, slop and curvature of the yield curve. Our results confirm the time-sensitive nature of the exposure and sensitivity to interest rates and highlight the importance of considering the entire term structure of interest rates. One issue that is of particular of interest is that despite the 2007-9 financial crisis the importance of unanticipated interest rate risk weakens post 2003. Although the analysis does examine a range of markets the empirical analysis is unable to provide definitive evidence as to whether REIT and property-company markets display heightened or reduced exposure.

Testing for non-stationarity and cointegration allowing for the possibility of a structural break: an application to EuroSterling interest rates

In this paper we examine the order of integration of EuroSterling interest rates by employing techniques that can allow for a structural break under the null and/or alternative hypothesis of the unit-root tests. In light of these results, we investigate the cointegrating relationship implied by the single, linear expectations hypothesis of the term structure of interest rates employing two techniques, one of which allows for the possibility of a break in the mean of the cointegrating relationship. The aim of the paper is to investigate whether or not the interest rate series can be viewed as I(1) processes and furthermore, to consider whether there has been a structural break in the series. We also determine whether, if we allow for a break in the cointegration analysis, the results are consistent with those obtained when a break is not allowed for. The main results reported in this paper support the conjecture that the ‘short’ Euro-currency rates are characterised as I(1) series that exhibit a structural break on or near Black Wednesday, 16 September 1992, whereas the ‘long’ rates are I(1) series that do not support the presence of a structural break. The evidence from the cointegration analysis suggests that tests of the expectations hypothesis based on data sets that include the ERM crisis period, or a period that includes a structural break, might be problematic if the structural break is not explicitly taken into account in the testing framework.

International evidence on the predictability of returns to securitized real estate assets: econometric models versus neural networks

The performance of various statistical models and commonly used financial indicators for forecasting securitised real estate returns are examined for five European countries: the UK, Belgium, the Netherlands, France and Italy. Within a VAR framework, it is demonstrated that the gilt-equity yield ratio is in most cases a better predictor of securitized returns than the term structure or the dividend yield. In particular, investors should consider in their real estate return models the predictability of the gilt-equity yield ratio in Belgium, the Netherlands and France, and the term structure of interest rates in France. Predictions obtained from the VAR and univariate time-series models are compared with the predictions of an artificial neural network model. It is found that, whilst no single model is universally superior across all series, accuracy measures and horizons considered, the neural network model is generally able to offer the most accurate predictions for 1-month horizons. For quarterly and half-yearly forecasts, the random walk with a drift is the most successful for the UK, Belgian and Dutch returns and the neural network for French and Italian returns. Although this study underscores market context and forecast horizon as parameters relevant to the choice of the forecast model, it strongly indicates that analysts should exploit the potential of neural networks and assess more fully their forecast performance against more traditional models.

A comparison of tests of non-linear cointegration with an application to the predictability of US interest rates using the term structure

We test whether there are nonlinearities in the response of short- and long-term interest rates to the spread in interest rates, and assess the out-of-sample predictability of interest rates using linear and nonlinear models. We find strong evidence of nonlinearities in the response of interest rates to the spread. Nonlinearities are shown to result in more accurate short-horizon forecasts, especially of the spread.

Testing the expectations theory of the term structure in threshold models

We test the expectations theory of the term structure of U.S. interest rates in nonlinear systems. These models allow the response of the change in short rates to past values of the spread to depend upon the level of the spread. The nonlinear system is tested against a linear system, and the results of testing the expectations theory in both models are contrasted. We find that the results of tests of the implications of the expectations theory depend on the size and sign of the spread. The long maturity spread predicts future changes of the short rate only when it is high.

Lease maturity and initial rent: is there a term structure for UK commercial property leases?

This paper investigates the relationship between lease maturity and rent in commercial property. Over the last decade market-led changes to lease structures, the threat of government intervention and the associated emergence of the Codes of Practice for commercial leases have stimulated growing interest in pricing of commercial property leases. Seminal work by Grenadier (1995) derived a set of hypotheses about the pricing of different lease lengths in different market conditions. Whilst there is a compelling theoretical case for and a strong intuitive expectation of differential pricing of different lease maturities, to date the empirical evidence is inconclusive. Two Swedish studies have found mixed results (Gunnelin and Soderbergh 2003 and Englund et al 2003). In only half the cases is the null hypothesis that lease length has no effect rejected. In the UK, Crosby et al (2003) report counterintuitive results. In some markets, they find that short lease terms are associated with low rents, whilst in others they are associated with high rents. Drawing upon a substantial database of commercial lettings in central London (West End and City of London) over the last decade, we investigate the relationship between rent and lease maturity. In particular, we test whether a building quality variable omitted in previous studies provides empirical results that are more consistent with the theoretical and intuitive a priori expectations. It is found that initial leases rates are upward sloping with the lease term and that this relationship is constant over time.

Linkages between property asset returns and interest rates: evidence for the UK

This paper considers the effect of short- and long-term interest rates, and interest rate spreads upon real estate index returns in the UK. Using Johansen's vector autoregressive framework, it is found that the real estate index cointegrates with the term spread, but not with the short or long rates themselves. Granger causality tests indicate that movements in short term interest rates and the spread cause movements in the returns series. However, decomposition of the forecast error variances from VAR models indicate that changes in these variables can only explain a small proportion of the overall variability of the returns, and that the effect has fully worked through after two months. The results suggest that these financial variables could potentially be used as leading indicators for real estate markets, with corresponding implications for return predictability.

Long-term response of the nematode community to elevated atmospheric CO2 in a temperate dry grassland soil

Long-term effects of the elevated atmospheric CO2 on biosphere have been in focus of research since the last few decades. In this experiment undisturbed soil monoliths of loess grassland were exposed to an elevated CO2 environment (two-times the ambient CO2 level) for a period of six years with the aid of the open top chamber method. Control without a chamber and CO2 elevation was applied as well. Elevated CO2 level had very little impact oil soil food web. It did not influence either root and microbial biomass or microbial and nematode community structure. The only significant response was that density of the bacterial feeder genus Heterocephalobus increased in the chamber with elevated CO2 concentration. Application of the open top chambers initiated more changes on nematodes than the elevated CO2 level. Open top chamber (OTC) method decreased nematode density (total and plant feeder as well) to less than half of the original level. Negative effect was found on the genus level in the case of fungal feeder Aphelenchoides, plant feeder Helicotylenchus and Paratylenchus. It is very likely that the significantly lower belowground root biomass and partly its decreased quality reflected by the increased C/N ratio are the main responsible factors for the lower density of the plant feeder nematodes in the plots of chambers. According to diversity profiles, MI and MI(2-15) parameters, nematode communities in the open top chambers (both on ambient and elevated CO2 level) seem to be more structured than those under normal circumstances six years after start of the experiment.

Suitability of cryopreservation for the long-term storage of rare and endangered plant species: a case history for Cosmos atrosanguineus

The suitability of cryopreservation for the secure, long-term storage of the rare and endangered species Cosmos atrosanguineus was investigated. Using encapsulation/dehydration of shoot tips in alginate strips, survival rates of up to 100 % and shoot regeneration of up to 35 % were achieved. Light and electron microscopy studies indicated that cellular damage to some regions of the shoot tip during the freeze/thaw procedure was high, although cell survival in and around the meristematic region allowed shoot tip regeneration. The genetic fingerprinting technique, amplified fragment length polymorphisms (AFLPs), showed that no detectable genetic variation was present between material of C. atrosanguineus at the time of initiation into tissue culture and that which had been cryopreserved, stored in liquid nitrogen for 12 months and regenerated. Wearied plantlets that were grown under glasshouse conditions exhibited no morphological variation from non-frozen controls. (C) 2003 Annals of Botany Company.

The structure of interrupted human AC microsatellites

Microsatellite lengths change over evolutionary time through a process of replication slippage. A recently proposed model of this process holds that the expansionary tendencies of slippage mutation are balanced by point mutations breaking longer microsatellites into smaller units and that this process gives rise to the observed frequency distributions of uninterrupted microsatellite lengths. We refer to this as the slippage/point-mutation theory. Here we derive the theory's predictions for interrupted microsatellites comprising regions of perfect repeats, labeled segments, separated by dinucleotide interruptions containing point mutations. These predictions are tested by reference to the frequency distributions of segments of AC microsatellite in the human genome, and several predictions are shown not to be supported by the data, as follows. The estimated slippage rates are relatively low for the first four repeats, and then rise initially linearly with length, in accordance with previous work. However, contrary to expectation and the experimental evidence, the inferred slippage rates decline in segments above 10 repeats. Point mutation rates are also found to be higher within microsatellites than elsewhere. The theory provides an excellent fit to the frequency distribution of peripheral segment lengths but fails to explain why internal segments are shorter. Furthermore, there are fewer microsatellites with many segments than predicted. The frequencies of interrupted microsatellites decline geometrically with microsatellite size measured in number of segments, so that for each additional segment, the number of microsatellites is 33.6% less. Overall we conclude that the detailed structure of interrupted microsatellites cannot be reconciled with the existing slippage/point-mutation theory of microsatellite evolution, and we suggest that microsatellites are stabilized by processes acting on interior rather than on peripheral segments.

Suitability of cryopreservation for the long-term storage of rare and endangered plant species: a case history for cosmos atrosanguineus

The suitability of cryopreservation for the secure, long-term storage of the rare and endangered species Cosmos atrosanguineus was investigated. Using encapsulation/dehydration of shoot tips in alginate strips, survival rates of up to 100 % and shoot regeneration of up to 35 % were achieved. Light and electron microscopy studies indicated that cellular damage to some regions of the shoot tip during the freeze/thaw procedure was high, although cell survival in and around the meristematic region allowed shoot tip regeneration. The genetic fingerprinting technique, amplified fragment length polymorphisms (AFLPs), showed that no detectable genetic variation was present between material of C. atrosanguineus at the time of initiation into tissue culture and that which had been cryopreserved, stored in liquid nitrogen for 12 months and regenerated. Weaned plantlets that were grown under glasshouse conditions exhibited no morphological variation from non-frozen controls.

The effects of landscape modifications on the long-term persistence of animal populations

Background: The effects of landscape modifications on the long-term persistence of wild animal populations is of crucial importance to wildlife managers and conservation biologists, but obtaining experimental evidence using real landscapes is usually impossible. To circumvent this problem we used individual-based models (IBMs) of interacting animals in experimental modifications of a real Danish landscape. The models incorporate as much as possible of the behaviour and ecology of four species with contrasting life-history characteristics: skylark (Alauda arvensis), vole (Microtus agrestis), a ground beetle (Bembidion lampros) and a linyphiid spider (Erigone atra). This allows us to quantify the population implications of experimental modifications of landscape configuration and composition. Methodology/Principal Findings: Starting with a real agricultural landscape, we progressively reduced landscape complexity by (i) homogenizing habitat patch shapes, (ii) randomizing the locations of the patches, and (iii) randomizing the size of the patches. The first two steps increased landscape fragmentation. We assessed the effects of these manipulations on the long-term persistence of animal populations by measuring equilibrium population sizes and time to recovery after disturbance. Patch rearrangement and the presence of corridors had a large effect on the population dynamics of species whose local success depends on the surrounding terrain. Landscape modifications that reduced population sizes increased recovery times in the short-dispersing species, making small populations vulnerable to increasing disturbance. The species that were most strongly affected by large disturbances fluctuated little in population sizes in years when no perturbations took place. Significance: Traditional approaches to the management and conservation of populations use either classical methods of population analysis, which fail to adequately account for the spatial configurations of landscapes, or landscape ecology, which accounts for landscape structure but has difficulty predicting the dynamics of populations living in them. Here we show how realistic and replicable individual-based models can bridge the gap between non-spatial population theory and non-dynamic landscape ecology. A major strength of the approach is its ability to identify population vulnerabilities not detected by standard population viability analyses.