A three-regime model of speculative behaviour: modelling the evolution of the S&P 500 composite index

We examine whether a three-regime model that allows for dormant, explosive and collapsing speculative behaviour can explain the dynamics of the S&P 500. We extend existing models of speculative behaviour by including a third regime that allows a bubble to grow at a steady rate, and propose abnormal volume as an indicator of the probable time of bubble collapse. We also examine the financial usefulness of the three-regime model by studying a trading rule formed using inferences from it, whose use leads to higher Sharpe ratios and end of period wealth than from employing existing models or a buy-and-hold strategy.

Rational speculative bubbles: an empirical investigation of the London Stock Exchange

In recent years, a sharp divergence of London Stock Exchange equity prices from dividends has been noted. In this paper, we examine whether this divergence can be explained by reference to the existence of a speculative bubble. Three different empirical methodologies are used: variance bounds tests, bubble specification tests, and cointegration tests based on both ex post and ex ante data. We find that, stock prices diverged significantly from their fundamental values during the late 1990's, and that this divergence has all the characteristics of a bubble.

Intrinsic and rational speculative bubbles in the U.S. housing market 1960-2011

This paper examines the dynamics of the residential property market in the United States between 1960 and 2011. Given the cyclically and apparent overvaluation of the market over this period, we determine whether deviations of real estate prices from their fundamentals were caused by the existence of two genres of bubbles: intrinsic bubbles and rational speculative bubbles. We find evidence of an intrinsic bubble in the market pre-2000, implying that overreaction to changes in rents contributed to the overvaluation of real estate prices. However, using a regime-switching model, we find evidence of periodically collapsing rational bubbles in the post-2000 market

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.

Speculative bubble spillovers across regional housing markets

In this paper we determine whether speculative bubbles in one region in the United States can lead bubbles to form in others. We first apply a regime-switching model to determine whether speculative bubbles existed in the U.S. regional residential real estate markets. Our findings suggest that the housing markets in five of the nine census divisions investigated were characterized by speculative bubbles. We then examine the extent to which bubbles spill over between neighboring and more distant regions, finding that the transmission of speculative bubbles and nonfundamentals between regions is multidirectional and does not depend on contiguity or distance

On the question of proportionality of the count of observed Scrapie cases and the size of holding

Background: The present paper investigates the question of a suitable basic model for the number of scrapie cases in a holding and applications of this knowledge to the estimation of scrapie-ffected holding population sizes and adequacy of control measures within holding. Is the number of scrapie cases proportional to the size of the holding in which case it should be incorporated into the parameter of the error distribution for the scrapie counts? Or, is there a different - potentially more complex - relationship between case count and holding size in which case the information about the size of the holding should be better incorporated as a covariate in the modeling? Methods: We show that this question can be appropriately addressed via a simple zero-truncated Poisson model in which the hypothesis of proportionality enters as a special offset-model. Model comparisons can be achieved by means of likelihood ratio testing. The procedure is illustrated by means of surveillance data on classical scrapie in Great Britain. Furthermore, the model with the best fit is used to estimate the size of the scrapie-affected holding population in Great Britain by means of two capture-recapture estimators: the Poisson estimator and the generalized Zelterman estimator. Results: No evidence could be found for the hypothesis of proportionality. In fact, there is some evidence that this relationship follows a curved line which increases for small holdings up to a maximum after which it declines again. Furthermore, it is pointed out how crucial the correct model choice is when applied to capture-recapture estimation on the basis of zero-truncated Poisson models as well as on the basis of the generalized Zelterman estimator. Estimators based on the proportionality model return very different and unreasonable estimates for the population sizes. Conclusion: Our results stress the importance of an adequate modelling approach to the association between holding size and the number of cases of classical scrapie within holding. Reporting artefacts and speculative biological effects are hypothesized as the underlying causes of the observed curved relationship. The lack of adjustment for these artefacts might well render ineffective the current strategies for the control of the disease.

Juvenile-mature wood transition in pine: correlation between wood properties and candidate gene expression profiles

There is a strong desire to exploit transcriptomics data from model species for the genetic improvement of non-model crops. Here, we use gene expression profiles from the commercial model Pinus taeda to identify candidate genes implicated in juvenile-mature wood transition in the non-model relative, P. sylvestris. Re-analysis of 'public domain' SAGE data from xylem tissues of P. taeda revealed 283 mature-abundant and 396 juvenile-abundant tags (P < 0.01), of which 70 and 137, respectively matched to genes with known function. Based on sequence similarity, we then isolated 16 putative homologues of genes that in P. taeda exhibited widest divergence in expression between juvenile and mature samples. Candidate expression levels in P. sylvestris were almost invariably differential between juvenile and mature woody tissue samples among two cohorts of five trees collected from the same seed source and selected for genetic uniformity by genetic distance analysis. However, the direction of differential expression was not always consistent with that described in the original P. taeda SAGE data. Correlation was observed between gene expression and juvenile-mature wood anatomical characteristics by OPLS analysis. Four candidates (alpha-tubulin, porin MIP1, lipid transfer protein and aquaporin like protein) apparently had greatest influence on the wood traits measured. Speculative function of these genes in relation to juvenile-mature wood transition is briefly explored. Thus, we demonstrate the feasibility of exploiting SAGE data from a model species to identify consistently differentially expressed candidates in a related non-model species.

Future innovations in anti-platelet therapies

Platelets have long been recognized to be of central importance in haemostasis, but their participation in pathological conditions such as thrombosis, atherosclerosis and inflammation is now also well established. The platelet has therefore become a key target in therapies to combat cardiovascular disease. Anti-platelet therapies are used widely, but current approaches lack efficacy in a proportion of patients, and are associated with side effects including problem bleeding. In the last decade, substantial progress has been made in understanding the regulation of platelet function, including the characterization of new ligands, platelet-specific receptors and cell signalling pathways. It is anticipated this progress will impact positively on the future innovations towards more effective and safer anti-platelet agents. In this review, the mechanisms of platelet regulation and current anti-platelet therapies are introduced, and strong, and some more speculative, potential candidate target molecules for future anti-platelet drug development are discussed.

Competition and dispersal in the pea aphid: clonal variation and correlations across traits

1. The presence of an across-species trade-off between dispersal ability and competitive ability has been proposed as a mechanism that facilitates coexistence. It is not clear if a similar trade-off exists within species. Such a trade-off would constrain the evolution of either trait and, given appropriate selection pressures, promote local adaptation in these traits. 2. This study found substantial levels of heritable variation in competitive ability of the pea aphid, Acyrthosiphon pisum Harris (Homoptera: Aphididae), measured in terms of relative survival when reared with a single clone of the vetch aphid, Megoura viciae Buckton (Homoptera: Aphididae). 3. Pea aphids can move to new patches by either flying (longer distance dispersal) or walking (local dispersal) from plant to plant. There was considerable clonal variation in dispersal ability, measured in terms of the proportion of winged offspring produced, and ability to survive away from their host plant. 4. Winged individuals showed longer off-plant survival times than wingless forms of the same pea aphid clone. 5. There was no evidence of a relationship between clonal competitive ability and either measure of dispersal ability, although the power of the test is limited by the number of pea aphid clones used in the trial. 6. However, there was a positive correlation between clonal fecundity and the proportion of winged offspring produced. Although speculative, it is suggested that clones that are more likely to either overwhelm their host plant or attract higher numbers of natural enemies as a result of having higher fecundity are more likely to produce winged morphs.