A Nonlinear Panel Unit Root Test under Cross Section Dependence

We propose a nonlinear heterogeneous panel unit root test for testing the null hypothesis of unit-roots processes against the alternative that allows a proportion of units to be generated by globally stationary ESTAR processes and a remaining non-zero proportion to be generated by unit root processes. The proposed test is simple to implement and accommodates cross sectional dependence. We show that the distribution of the test statistic is free of nuisance parameters as (N, T) −! 1. Monte Carlo simulation shows that our test holds correct size and under the hypothesis that data are generated by globally stationary ESTAR processes has a better power than the recent test proposed in Pesaran [2007]. Various applications are provided.

Forecasting US bond default ratings allowing for previous and initial state dependence in an ordered probit model

In this paper we investigate the ability of a number of different ordered probit models to predict ratings based on firm-specific data on business and financial risks. We investigate models based on momentum, drift and ageing and compare them against alternatives that take into account the initial rating of the firm and its previous actual rating. Using data on US bond issuing firms rated by Fitch over the years 2000 to 2007 we compare the performance of these models in predicting the rating in-sample and out-of-sample using root mean squared errors, Diebold-Mariano tests of forecast performance and contingency tables. We conclude that initial and previous states have a substantial influence on rating prediction.

Stock Market Reaction to Fed Funds Rate Surprises: State Dependence and the Financial Crisis

This paper examines the impact of Federal Funds rate (FFR) surprises on stock returns in the United States over the period 1989-2009, focusing on the impact of the recent financial crisis. We find that prior to the crisis, stock prices increased as a response to unexpected FFR cuts. State dependence is also identified with stocks exhibiting larger increases when interest rate easing coincided with recessions, bear stock markets, and tightening credit market conditions. However, an important structural shift took place during the financial crisis, which changed the stock market response to FFR shocks, as well as the nature of state dependence. Specifically, during the crisis period stock market participants did not react positively to unexpected FFR cuts. Our results highlight the severity of the recent financial turmoil episode and the ineffectiveness of conventional monetary policy close to the zero lower bound for nominal interest rates.

Modeling Dependence Structure and Forecasting Portfolio Value-at-Risk with Dynamic Copulas

We study the asymmetric and dynamic dependence between financial assets and demonstrate, from the perspective of risk management, the economic significance of dynamic copula models. First, we construct stock and currency portfolios sorted on different characteristics (ex ante beta, coskewness, cokurtosis and order flows), and find substantial evidence of dynamic evolution between the high beta (respectively, coskewness, cokurtosis and order flow) portfolios and the low beta (coskewness, cokurtosis and order flow) portfolios. Second, using three different dependence measures, we show the presence of asymmetric dependence between these characteristic-sorted portfolios. Third, we use a dynamic copula framework based on Creal et al. (2013) and Patton (2012) to forecast the portfolio Value-at-Risk of long-short (high minus low) equity and FX portfolios. We use several widely used univariate and multivariate VaR models for the purpose of comparison. Backtesting our methodology, we find that the asymmetric dynamic copula models provide more accurate forecasts, in general, and, in particular, perform much better during the recent financial crises, indicating the economic significance of incorporating dynamic and asymmetric dependence in risk management.

Modeling Dependence Structure and Forecasting Market Risk with Dynamic Asymmetric Copula

We investigate the dynamic and asymmetric dependence structure between equity portfolios from the US and UK. We demonstrate the statistical significance of dynamic asymmetric copula models in modelling and forecasting market risk. First, we construct “high-minus-low" equity portfolios sorted on beta, coskewness, and cokurtosis. We find substantial evidence of dynamic and asymmetric dependence between characteristic-sorted portfolios. Second, we consider a dynamic asymmetric copula model by combining the generalized hyperbolic skewed t copula with the generalized autoregressive score (GAS) model to capture both the multivariate non-normality and the dynamic and asymmetric dependence between equity portfolios. We demonstrate its usefulness by evaluating the forecasting performance of Value-at-Risk and Expected Shortfall for the high-minus-low portfolios. From back-testing, e find consistent and robust evidence that our dynamic asymmetric copula model provides the most accurate forecasts, indicating the importance of incorporating the dynamic and asymmetric dependence structure in risk management.

Investigation of field and diffusion time dependence of the diffusion-weighted signal at ultrahigh magnetic fields.

Over the last decade, there has been a significant increase in the number of high-magnetic-field MRI magnets. However, the exact effect of a high magnetic field strength (B0 ) on diffusion-weighted MR signals is not yet fully understood. The goal of this study was to investigate the influence of different high magnetic field strengths (9.4 T and 14.1 T) and diffusion times (9, 11, 13, 15, 17 and 24 ms) on the diffusion-weighted signal in rat brain white matter. At a short diffusion time (9 ms), fractional anisotropy values were found to be lower at 14.1 T than at 9.4 T, but this difference disappeared at longer diffusion times. A simple two-pool model was used to explain these findings. The model describes the white matter as a first hindered compartment (often associated with the extra-axonal space), characterized by a faster orthogonal diffusion and a lower fractional anisotropy, and a second restricted compartment (often associated with the intra-axonal space), characterized by a slower orthogonal diffusion (i.e. orthogonal to the axon direction) and a higher fractional anisotropy. Apparent T2 relaxation time measurements of the hindered and restricted pools were performed. The shortening of the pseudo-T2 value from the restricted compartment with B0 is likely to be more pronounced than the apparent T2 changes in the hindered compartment. This study suggests that the observed differences in diffusion tensor imaging parameters between the two magnetic field strengths at short diffusion time may be related to differences in the apparent T2 values between the pools. Copyright © 2013 John Wiley & Sons, Ltd.

Modelling dependence in a ratemaking procedure with multivariate Poisson regression models

When actuaries face with the problem of pricing an insurance contract that contains different types of coverage, such as a motor insurance or homeowner's insurance policy, they usually assume that types of claim are independent. However, this assumption may not be realistic: several studies have shown that there is a positive correlation between types of claim. Here we introduce different regression models in order to relax the independence assumption, including zero-inflated models to account for excess of zeros and overdispersion. These models have been largely ignored to multivariate Poisson date, mainly because of their computational di±culties. Bayesian inference based on MCMC helps to solve this problem (and also lets us derive, for several quantities of interest, posterior summaries to account for uncertainty). Finally, these models are applied to an automobile insurance claims database with three different types of claims. We analyse the consequences for pure and loaded premiums when the independence assumption is relaxed by using different multivariate Poisson regression models and their zero-inflated versions.

Comment on "Streaming potential dependence on water-content in Fontainebleau sand" by V. Allegre, L. Jouniaux, F. Lehmann and P. Sailhac

Allegre et al. recently presented new experimental data regarding the dependence of the streaming potential coupling coefficient with the saturation of the water phase. Such experiments are important to model the self-potential response associated with the flow of water in the vadose zone and the electroseismic/seismoelectric conversions in unsaturated porous media. However, the approach used to interpret the data is questionable and the conclusions reached by Allegre et al. likely incorrect

Prevalence of and potential influencing factors for alcohol dependence in europe.

Alcohol use disorders (AUDs), and alcohol dependence (AD) in particular, are prevalent and associated with a large burden of disability and mortality. The aim of this study was to estimate prevalence of AD in the European Union (EU), Iceland, Norway, and Switzerland for the year 2010, and to investigate potential influencing factors. The 1-year prevalence of AD in the EU was estimated at 3.4% among people 18-64 years of age in Europe (women 1.7%, men 5.2%), resulting in close to 11 million affected people. Taking into account all people of all ages, AD, abuse and harmful use resulted in an estimate of 23 million affected people. Prevalence of AD varied widely between European countries, and was significantly impacted by drinking cultures and social norms. Correlations with level of drinking and other drinking variables and with major known outcomes of heavy drinking, such as liver cirrhosis or injury, were moderate. These results suggest a need to rethink the definition of AUDs.

Going beyond energy intensity to understand the energy metabolism of nations: the case of Argentina

The link between energy consumption and economic growth has been widely studied in the economic literature. Understanding this relationship is important from both an environmental and a socio-economic point of view, as energy consumption is crucial to economic activity and human environmental impact. This relevance is even higher for developing countries, since energy consumption per unit of output varies through the phases of development, increasing from an agricultural stage to an industrial one and then decreasing for certain service based economies. In the Argentinean case, the relevance of energy consumption to economic development seems to be particularly important. While energy intensity seems to exhibit a U-Shaped curve from 1990 to 2003 decreasing slightly after that year, total energy consumption increases along the period of analysis. Why does this happen? How can we relate this result with the sustainability debate? All these questions are very important due to Argentinean hydrocarbons dependence and due to the recent reduction in oil and natural gas reserves, which can lead to a lack of security of supply. In this paper we study Argentinean energy consumption pattern for the period 1990-2007, to discuss current and future energy and economic sustainability. To this purpose, we developed a conventional analysis, studying energy intensity, and a non conventional analysis, using the Multi-Scale Integrated Analysis of Societal and Ecosystem Metabolism (MuSIASEM) accounting methodology. Both methodologies show that the development process followed by Argentina has not been good enough to assure sustainability in the long term. Instead of improving energy use, energy intensity has increased. The current composition of its energy mix, and the recent economic crisis in Argentina, as well as its development path, are some of the possible explanations.

La integració de les energies renovables en un model energètic sostenible

La sostenibilitat del model energètic de Catalunya es veu condicionada per aspectes com la dependència energètica, la seguretat de subministrament, l’eficiència energètica, els impactes ambientals i la demanda creixent. D’altra banda, la incorporació d’energia renovable en el mix energètic implica una major autonomia energètica, seguretat de subministrament a llarg termini, i eficiència energètica, així com un menor impacte ambiental. Tanmateix, la contribució en el sistema elèctric d’un volum ja important i creixent d’energia renovable requereix una complexa tasca d’integració a nivell tècnic i econòmic. Per aconseguir-ho, és necessari desenvolupar una regulació estable que complementi el procés de liberalització del sector amb l’objectiu d’acomodar la generació renovable en un model energètic sostenible. La (in)formació i participació de la demanda es presenta com una condició clau per engegar el camí cap a una nova cultura energètica.

Dependence of brain intravoxel incoherent motion perfusion parameters on the cardiac cycle.

Measurement of microvascular perfusion with Intravoxel Incoherent Motion (IVIM) MRI is gaining interest. Yet, the physiological influences on the IVIM perfusion parameters ("pseudo-diffusion" coefficient D*, perfusion fraction f, and flow related parameter fD*) remain insufficiently characterized. In this article, we hypothesize that D* and fD*, which depend on blood speed, should vary during the cardiac cycle. We extended the IVIM model to include time dependence of D* = D*(t), and demonstrate in the healthy human brain that both parameters D* and fD* are significantly larger during systole than diastole, while the diffusion coefficient D and f do not vary significantly. The results non-invasively demonstrate the pulsatility of the brain's microvasculature.

Appropriateness of methadone maintenance treatment for opiate addiction: evaluation by an expert panel.

With some 30,000 dependent persons, opiate addiction constitutes a major public health problem in Switzerland. The Swiss Federal Office of Public Health (FOPH) has long played a leading role in the prevention and treatment of opiate addiction and in research on effective means of containing the epidemic of opiate addiction and its consequences. Major milestones on that path have been the successive "Methadone reports" published by that Office and providing guidance on the care of opiate addiction with substitution treatment. In view of updating the recommendations for the appropriateness of substitution treatment for opiate addiction, in particular for the prescription of methadone, the FOPH commissioned a multi-component project involving the following elements. A survey of current attitudes and practices in Switzerland related to opiate substitution treatment Review of Swiss literature on methadone substitution treatment Review of international literature on methadone substitution treatment National Methadone Substitution Conference Multidisciplinary expert panel to evaluate the appropriateness of substitution treatment. The present report documents the process and summarises the results of the latter element above. The RAND appropriateness method (RAM) was used to distil from literature-based evidence and systematically formulated expert opinion, areas where consensus exist on the appropriateness (or inappropriateness) of methadone maintenance treatment (MMT) and areas where disagreement or uncertainty persist and which should be further pursued. The major areas which were addressed by this report are Initial assessment of candidates for MMT Appropriate settings for initiation of MMT (general and special cases) Appropriateness of methadone supportive therapy Co-treatments and accompanying measures Dosage schedules and pharmacokinetic testing Withdrawal from MMT Miscellaneous questions Appropriateness of other (non-methadone) substitution treatment Summary statements for each of the above categories are derived from the panel meeting and presented in the report. In the "first round", agreement was observed for 31% of the 553 theoretical scenarios evaluated. The "second round" rating, following discussion of divergent ratings, resulted in a much higher agreement among panellists, reaching 53% of the 537 scenarios. Frank disagreement was encountered for 7% of all scenarios. Overall 49% of the clinical situations (scenarios) presented were considered appropriate. The areas where at least 50% of the situations were considered appropriate were "initial assessment of candidates for MMT", the "appropriate settings for initiation of MMT", the "appropriate settings for methadone supportive treatment" and "Appropriateness of other (non-methadone) substitution treatment". The area where there was the least consensus on appropriateness concerned "appropriateness of withdrawal from MMT" (6%). The report discusses the implications and limitations of the panel results and provides recommendations for the dissemination, application, and future use of the criteria for the appropriateness of MMT. The RAND Appropriateness Method proved to be an accepted and appreciated method to assess the appropriateness of methadone maintenance treatment for opiate addicts. In the next step, the results of the expert panel process must now be combined with those of the Swiss and international literature reviews and the survey of current attitudes and practices in Switzerland, to be synthesized into formal practice guidelines. Such guidelines should be disseminated to all concerned, promoted, used and rigorously evaluated for compliance and outcome.

Is real GDP stationary? Evidence from a panel unit root test with cross-sectional dependence and historical data

We use historical data that cover more than one century on real GDP for industrial countries and employ the Pesaran panel unit root test that allows for cross-sectional dependence to test for a unit root on real GDP. We find strong evidence against the unit root null. Our results are robust to the chosen group of countries and the sample period. Key words: real GDP stationarity, cross-sectional dependence, CIPS test. JEL Classification: C23, E32