Modelling economic returns to plant variety protection in the UK

This paper attempts an empirical assessment of the incentive effects of plant variety protection regimes in the generation of crop variety innovations. A duration model of plant variety protection certificates is used to infer the private appropriability of returns from agricultural crop variety innovations in the UK over the period 1965-2000. The results suggest that plant variety protection provides only modest appropriability of returns to innovators of agricultural crop varieties. The value distribution of plant variety protection certificates is highly skewed with a large proportion of innovations providing virtually no returns to innovators. Increasing competition from newer varieties appears to have accelerated the turnover of varieties reducing appropriability further. Plant variety protection emerges as a relatively weak instrument of protection.

Serial persistence in individual real estate returns in the UK

Purpose – The purpose of this paper is to examine individual level property returns to see whether there is evidence of persistence in performance, i.e. a greater than expected probability of well (badly) performing properties continuing to perform well (badly) in subsequent periods. Design/methodology/approach – The same methodology originally used in Young and Graff is applied, making the results directly comparable with those for the US and Australian markets. However, it uses a much larger database covering all UK commercial property data available in the Investment Property Databank (IPD) for the years 1981 to 2002 – as many as 216,758 individual property returns. Findings – While the results of this study mimic the US and Australian results of greater persistence in the extreme first and fourth quartiles, they also evidence persistence in the moderate second and third quartiles, a notable departure from previous studies. Likewise patterns across property type, location, time, and holding period are remarkably similar. Research limitations/implications – The findings suggest that performance persistence is not a feature unique to particular markets, but instead may characterize most advanced real estate investment markets. Originality/value – As well as extending previous research geographically, the paper explores possible reasons for such persistence, consideration of which leads to the conjecture that behaviors in the practice of institutional-grade commercial real estate investment management may themselves be deeply rooted and persistent, and perhaps influenced for good or ill by agency effects. - See more at: http://www.emeraldinsight.com/journals.htm?articleid=1602884&show=abstract#sthash.hc2pCmC6.dpuf

Does consumption-wealth ratio signal stock returns? VECM results for Germany

This paper studies the signalling effect of the consumption−wealth ratio (cay) on German stock returns via vector error correction models (VECMs). The effect of cay on U.S. stock returns has been recently confirmed by Lettau and Ludvigson with a two−stage method. In this paper, performance of the VECMs and the two−stage method are compared in both German and U.S. data. It is found that the VECMs are more suitable to study the effect of cay on stock returns than the two−stage method. Using the Conditional−Subset VECM, cay signals real stock returns and excess returns in both data sets significantly. The estimated coefficient on cay for stock returns turns out to be two times greater in U.S. data than in German data. When the two−stage method is used, cay has no significant effect on German stock returns. Besides, it is also found that cay signals German wealth growth and U.S. income growth significantly.

Quantile forecasts of daily exchange rate returns from forecasts of realized volatility

Quantile forecasts are central to risk management decisions because of the widespread use of Value-at-Risk. A quantile forecast is the product of two factors: the model used to forecast volatility, and the method of computing quantiles from the volatility forecasts. In this paper we calculate and evaluate quantile forecasts of the daily exchange rate returns of five currencies. The forecasting models that have been used in recent analyses of the predictability of daily realized volatility permit a comparison of the predictive power of different measures of intraday variation and intraday returns in forecasting exchange rate variability. The methods of computing quantile forecasts include making distributional assumptions for future daily returns as well as using the empirical distribution of predicted standardized returns with both rolling and recursive samples. Our main findings are that the Heterogenous Autoregressive model provides more accurate volatility and quantile forecasts for currencies which experience shifts in volatility, such as the Canadian dollar, and that the use of the empirical distribution to calculate quantiles can improve forecasts when there are shifts

Forecasting real estate returns using financial spreads

This paper examines the predictability of real estate asset returns using a number of time series techniques. A vector autoregressive model, which incorporates financial spreads, is able to improve upon the out of sample forecasting performance of univariate time series models at a short forecasting horizon. However, as the forecasting horizon increases, the explanatory power of such models is reduced, so that returns on real estate assets are best forecast using the long term mean of the series. In the case of indirect property returns, such short-term forecasts can be turned into a trading rule that can generate excess returns over a buy-and-hold strategy gross of transactions costs, although none of the trading rules developed could cover the associated transactions costs. It is therefore concluded that such forecastability is entirely consistent with stock market efficiency.

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.

The effect of phase-correlated returns and spatial smoothing on the accuracy of radar refractivity retrievals

Radar refractivity retrievals have the potential to accurately capture near-surface humidity fields from the phase change of ground clutter returns. In practice, phase changes are very noisy and the required smoothing will diminish large radial phase change gradients, leading to severe underestimates of large refractivity changes (ΔN). To mitigate this, the mean refractivity change over the field (ΔNfield) must be subtracted prior to smoothing. However, both observations and simulations indicate that highly correlated returns (e.g., when single targets straddle neighboring gates) result in underestimates of ΔNfield when pulse-pair processing is used. This may contribute to reported differences of up to 30 N units between surface observations and retrievals. This effect can be avoided if ΔNfield is estimated using a linear least squares fit to azimuthally averaged phase changes. Nevertheless, subsequent smoothing of the phase changes will still tend to diminish the all-important spatial perturbations in retrieved refractivity relative to ΔNfield; an iterative estimation approach may be required. The uncertainty in the target location within the range gate leads to additional phase noise proportional to ΔN, pulse length, and radar frequency. The use of short pulse lengths is recommended, not only to reduce this noise but to increase both the maximum detectable refractivity change and the number of suitable targets. Retrievals of refractivity fields must allow for large ΔN relative to an earlier reference field. This should be achievable for short pulses at S band, but phase noise due to target motion may prevent this at C band, while at X band even the retrieval of ΔN over shorter periods may at times be impossible.

Quantifying errors due to frequency changes and target location uncertainty for radar refractivity retrievals

Radar refractivity retrievals can capture near-surface humidity changes, but noisy phase changes of the ground clutter returns limit the accuracy for both klystron- and magnetron-based systems. Observations with a C-band (5.6 cm) magnetron weather radar indicate that the correction for phase changes introduced by local oscillator frequency changes leads to refractivity errors no larger than 0.25 N units: equivalent to a relative humidity change of only 0.25% at 20°C. Requested stable local oscillator (STALO) frequency changes were accurate to 0.002 ppm based on laboratory measurements. More serious are the random phase change errors introduced when targets are not at the range-gate center and there are changes in the transmitter frequency (ΔfTx) or the refractivity (ΔN). Observations at C band with a 2-μs pulse show an additional 66° of phase change noise for a ΔfTx of 190 kHz (34 ppm); this allows the effect due to ΔN to be predicted. Even at S band with klystron transmitters, significant phase change noise should occur when a large ΔN develops relative to the reference period [e.g., ~55° when ΔN = 60 for the Next Generation Weather Radar (NEXRAD) radars]. At shorter wavelengths (e.g., C and X band) and with magnetron transmitters in particular, refractivity retrievals relative to an earlier reference period are even more difficult, and operational retrievals may be restricted to changes over shorter (e.g., hourly) periods of time. Target location errors can be reduced by using a shorter pulse or identified by a new technique making alternate measurements at two closely spaced frequencies, which could even be achieved with a dual–pulse repetition frequency (PRF) operation of a magnetron transmitter.

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.

Liquidity effects and FFA returns in the international shipping derivatives market

The study examines the impact of liquidity risk on freight derivatives returns. The Amihud liquidity ratio and bid–ask spreads are utilized to assess the existence of liquidity risk in the freight derivatives market. Other macroeconomic variables are used to control for market risk. Results indicate that liquidity risk is priced and both liquidity measures have a significant role in determining freight derivatives returns. Consistent with expectations, both liquidity measures are found to have positive and significant effects on the returns of freight derivatives. The results have important implications for modeling freight derivatives, and consequently, for trading and risk management purposes.

Collusion in a Bertrand duopoly model with decreasing returns and product differentiation

We study cartel stability in a differentiated price-setting duopoly with returns to scale. We show that a cartel may be equally stable in the presence of lower differentiation, provided that the decreasing returns parameter is high. In addition we demonstrate that for a given factor of discount, there are technologies that can have decreasing returns to scale where the cartel always is stable independent of the differentiation degree.

The Golden Age returns: Virgil's fourth Eclogue in the political panegyric of the Italian courts

E. H. Gombrich and others have analysed the uses made of language and imagery from Virgil's famous fourth Eclogue in panegyrical writing by partisans of the Medici dynasty in Florence. This study examines the appropriation of the theme of the returning Golden Age and related motifs from the fourth Eclogue in other Italian courts during the same period, by supporters of the Visconti and Sforza of Milan, the Gonzaga of Mantua, Leonello d'Este and his successors in Ferrara, and the Bentivoglio of Bologna, among others. The deployment of this Virgilian material in political panegyric is seen to be a central element in the self-definition and self-promotion of dynastic rulers throughout the peninsula.

Commodity risks and the cross-section of equity returns

The article examines whether commodity risk is priced in the cross-section of global equity returns. We employ a long-only equally-weighted portfolio of commodity futures and a term structure portfolio that captures phases of backwardation and contango as mimicking portfolios for commodity risk. We find that equity-sorted portfolios with greater sensitivities to the excess returns of the backwardation and contango portfolio command higher average excess returns, suggesting that when measured appropriately, commodity risk is pervasive in stocks. Our conclusions are robust to the addition to the pricing model of financial, macroeconomic and business cycle-based risk factors.