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.

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.

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.

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.

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.

Can climate models capture the structure of extratropical cyclones?

Composites of wind speeds, equivalent potential temperature, mean sea level pressure, vertical velocity, and relative humidity have been produced for the 100 most intense extratropical cyclones in the Northern Hemisphere winter for the 40-yr ECMWF Re-Analysis (ERA-40) and the high resolution global environment model (HiGEM). Features of conceptual models of cyclone structure—the warm conveyor belt, cold conveyor belt, and dry intrusion—have been identified in the composites from ERA-40 and compared to HiGEM. Such features can be identified in the composite fields despite the smoothing that occurs in the compositing process. The surface features and the three-dimensional structure of the cyclones in HiGEM compare very well with those from ERA-40. The warm conveyor belt is identified in the temperature and wind fields as a mass of warm air undergoing moist isentropic uplift and is very similar in ERA-40 and HiGEM. The rate of ascent is lower in HiGEM, associated with a shallower slope of the moist isentropes in the warm sector. There are also differences in the relative humidity fields in the warm conveyor belt. In ERA-40, the high values of relative humidity are strongly associated with the moist isentropic uplift, whereas in HiGEM these are not so strongly associated. The cold conveyor belt is identified as rearward flowing air that undercuts the warm conveyor belt and produces a low-level jet, and is very similar in HiGEM and ERA-40. The dry intrusion is identified in the 500-hPa vertical velocity and relative humidity. The structure of the dry intrusion compares well between HiGEM and ERA-40 but the descent is weaker in HiGEM because of weaker along-isentrope flow behind the composite cyclone. HiGEM’s ability to represent the key features of extratropical cyclone structure can give confidence in future predictions from this model.

Long-term effectiveness of sowing high and low diversity seed mixtures to enhance plant community development on ex-arable fields

Questions: How is succession on ex-arable land affected by sowing high and low diversity mixtures of grassland species as compared to natural succession? How long do effects persist? Location: Experimental plots installed in the Czech Republic, The Netherlands, Spain, Sweden and the United Kingdom. Methods: The experiment was established on ex-arable land, with five blocks, each containing three 10 m x 10 m experiment tal plots: natural colonization, a low- (four species) and high-diversity (15 species) seed mixture. Species composition and biomass was followed for eight years. Results: The sown plants considerably affected the whole successional pathway and the effects persisted during the whole eight year period. Whilst the proportion of sown species (characterized by their cover) increased during the study period, the number of sown species started to decrease from the third season onwards. Sowing caused suppression of natural colonizing species, and the sown plots had more biomass. These effects were on average larger in the high diversity mixtures. However, the low diversity replicate sown with the mixture that produced the largest biomass or largest suppression of natural colonizers fell within the range recorded at the five replicates of the high diversity plots. The natural colonization plots usually had the highest total species richness and lowest productivity at the end of the observation period. Conclusions: The effect of sowing demonstrated dispersal limitation as a factor controlling the rate of early secondary succession. Diversity was important primarily for its 'insurance effect': the high diversity mixtures were always able to compensate for the failure of some species.

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.

Intra-specific variation affects the structure of the natural enemy assemblage attacking pea aphid colonies

1. Intra-specific variation in plant defence traits has been shown to profoundly affect herbivore community structure. Here we describe two experiments designed to test whether similar effects occur at higher trophic levels, by studying pea aphid–natural enemy interactions in a disused pasture in southern England. 2. In the first experiment, the numbers and identity of natural enemies attacking different monoclonal pea aphid colonies were recorded in a series of assays throughout the period of pea aphid activity. 3. In the summer assay, there was a significant effect of clone on the numbers of aphidophagous hoverfly larvae and the total number of non-hoverfly natural enemies recruited. Clone also appeared to influence the attack rate suffered by the primary predator in the system, the hoverfly Episyrphus balteatus, by Diplazon laetatorius, an ichneumonid parasitoid. Colonies were generally driven to extinction by hoverfly attack, resulting in the recording of low numbers of parasitoids and entomopathogens, suggesting intense intra-guild predation. 4. To further examine the influence of clonal variation on the recruitment of natural enemies, a second experiment was performed to monitor the temporal dynamics of community development. Colonies were destructively sampled every other day and the numbers of natural enemies attacking aphid colonies were recorded. These data demonstrated that clonal variation influenced the timing, abundance, and identity of natural enemies attacking aphid colonies. 5. Taken together, these data suggest that clonal variation may have a significant influence on the patterns of interactions between aphids and their natural enemies, and that such effects are likely to affect our understanding of the ecology and biological control of these insect herbivores.

The long-term effect of active immunization against inhibin in goats

This experiment addresses the long-term effect of active immunization of goats against a recombinant ovine inhibin alpha subunit (roIHN-alpha). In late anestrus 100 mu g of roINH-alpha was administered to 40 pluriparous Boer goat does, followed, 4 weeks later, by a booster injection. Weekly blood samples were drawn to monitor the inhibin binding capacity with the aid of a radio-tracer binding assay. From the onset until 48 h after the end of each estrus, follicular development and ovulation rate were monitored at 24 h intervals by transrectal ultrasonography. Beginning in August and continuing into January, does were mated at every other estrus, and submitted to transcervical embryo collection. Seven months after the first immunization, the does were mated again and permitted to carry to term. All immunized does produced inhibin antibodies, an elevated titre being first detected 2 weeks after primary immunization. Maximum titres were reached after 6 weeks, i.e. 2 weeks after the booster injection. Thereafter, in the course of the following 32 weeks, the titre subsided gradually. The does started cycling by mid-August. At that stage the average number of follicles more than 4 mm in diameter, ovulations and total embryos and ova recovered were 14.7 (+/- 2.3), 5.3 (+/- 0.7) and 4.4 (+/- 1.0), respectively. A steady decline followed and in January the corresponding means were: 5.2 (+/- 0.6) follicles, 3.1 (+/- 0.6) ovulations and 1.2 (+/- 0.4) embryos and ova recovered. When mated toward the end of the breeding season, 85% of the does became pregnant to the first mating and 73% went to term. Healthy kids were born, the average litter size being 2.2 (+/- 0.1). In conclusion, immunization of goats against a recombinant inhibin alpha-subunit proved to be a practicable means of producing embryos for transfer purposes. After about half a year, when the inhibin antibody titre has subsided, it is possible to return the does to the breeding flock without risking complications with normal breeding activity. (c) 2009 Elsevier Inc. All rights reserved.

Controlled trial of the short- and long-term effect of psychological treatment of post-partum depression - 1. Impact on maternal mood!

Background: Psychological interventions for postnatal depression can be beneficial in the short term but their longer-term impact is unknown, Aims To evaluate the long-term effect on maternal mood of three psychological treatments in relation to routine primary care. Method: Women with post-partum depression (n=193)were assigned randomly to one of four conditions: routine primary care, non-directive counselling, cognitive-behavioural therapy or psychodynamic therapy. They were assessed immediately after the treatment phase (at 4.5 months) and at 18 and 60 months post-partum. Results: Compared with the control, ail three treatments had a significant impact at 4.5 months on maternal mood (Edinburgh Postnatal Depression Scale, EPDS). Only psychodynamic therapy produced a rate of reduction in depression (Structured Clinical interview for DSM III-R) significantly superior to that of the control. The benefit of treatment was no longer apparent by 9 months postpartum, treatment did not reduce subsequent episodes of post-partum depression. Conclusions: Psychological intervention for post-partum depression improves maternal mood (EPDS) in the short term. However, this benefit is not superior to spontaneous remission in the long term.