Capital market expectations and the London office market

The analysis of office market dynamics has generally concentrated on the impact of underlying fundamental demand and supply variables. This paper takes a slightly different approach to many previous examinations of rental dynamics. Within a Vector-Error-Correction framework the empirical analysis concentrates upon the impact of economic and financial variables on rents in the City of London and West End of London office markets. The impulse response and variance decomposition reveal that while lagged rental values and key demand drivers play a highly important role in the dynamics of rents, financial variables are also influential. Stock market performance not only influences the City of London market but also the West End, whilst the default spread plays an important role in recent years. It is argued that both series incorporate expectations about future economic performance and that this is the basis of their influence upon rental values.

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.

The impact of liquidity on senior credit index spreads during the subprime crisis

This paper examines the effects of liquidity during the 2007–09 crisis, focussing on the Senior Tranche of the CDX.NA.IG Index and on Moody's AAA Corporate Bond Index. It aims to understand whether the sharp increase in the credit spreads of these AAA-rated credit indices can be explained by worse credit fundamentals alone or whether it also reflects a lack of depth in the relevant markets, the scarcity of risk-capital, and the liquidity preference exhibited by investors. Using cointegration analysis and error correction models, the paper shows that during the crisis lower market and funding liquidity are important drivers of the increase in the credit spread of the AAA-rated structured product, whilst they are less significant in explaining credit spread changes for a portfolio of unstructured credit instruments. Looking at the experience of the subprime crisis, the study shows that when the conditions under which securitisation can work properly (liquidity, transparency and tradability) suddenly disappear, investors are left highly exposed to systemic risk.

Why the hand motion proceeds the target in tracking experiment?

In the present study, to shed light on a role of positional error correction mechanism and prediction mechanism in the proactive control discovered earlier, we carried out a visual tracking experiment, in which the region where target was shown, was regulated in a circular orbit. Main results found in this research were following. Recognition of a time step, obtained from the environmental stimuli, is required for the predictive function. The period of the rhythm in the brain obtained from environmental stimuli is shortened about 10%, when the visual information is cut-off. The shortening of the period of the rhythm in the brain accelerates the motion as soon as the visual information is cut-off, and lets the hand motion precedes the target motion. Although the precedence of the hand in the blind region is reset by the environmental information when the target enters the visible region, the hand precedes in average the target when the predictive mechanism dominates the error-corrective mechanism.

Reading aloud in high schools: students and teachers across the curriculum

Reading aloud is apparently an indispensible part of teaching. Nevertheless, little is known about reading aloud across the curriculum by students and teachers in high schools. Nor do we understand teachers’ attitudes towards issues such as error correction, rehearsal time, and selecting students to read. A survey of 360 teachers in England shows that, although they have little training in reading aloud, they are extremely confident. Reading aloud by students and teachers is strongly related, and serves to further understanding rather than administrative purposes or pupils’ enjoyment. Unexpectedly, Modern Language teachers express views that set them apart from other subjects.

Arbetslöshet som en icke önskvärd konsekvens av socialbidrag : Resultat från en tidsserieanalys på befolkningsnivå i Sverige 1946–1990

Unemployment as an unintended consequence of social assistance recipiency: results from a time-series analysis of aggregated population data Does the frequency of unemployment have a tendency to increase the number of social assistance recipients, or does the relationship work the other way around? This article utilizes Swedish annual data on aggregated unemployment and means-tested social assistance recipiency in the period 1946–1990 and proposes a multiple time-series approach based on vector error-correction modelling to establish the direction of influence. First, we show that rates of unemployment and receipt of social assistance is co-integrated. Second, we demonstrate that adjustments to the long-run equilibrium are made through adjustments of the unemployment. This indicates that the level of unemployment reacts to changes in rates of social assistance recipiency rather than vice versa. It is also shown that lagged changes in the level of unemployment do not predict changes in rates of social assistance recipients in short-term. Together these findings demonstrate that the number of social assistance recipients does increase the number of unemployed in a period characterized by low unemployment and high employment.

Common cycles in macroeconomic aggregates

Reduced form estimation of multivariate data sets currently takes into account long-run co-movement restrictions by using Vector Error Correction Models (VECM' s). However, short-run co-movement restrictions are completely ignored. This paper proposes a way of taking into account short-and long-run co-movement restrictions in multivariate data sets, leading to efficient estimation of VECM' s. It enables a more precise trend-cycle decomposition of the data which imposes no untested restrictions to recover these two components. The proposed methodology is applied to a multivariate data set containing U.S. per-capita output, consumption and investment Based on the results of a post-sample forecasting comparison between restricted and unrestricted VECM' s, we show that a non-trivial loss of efficiency results whenever short-run co-movement restrictions are ignored. While permanent shocks to consumption still play a very important role in explaining consumption’s variation, it seems that the improved estimates of trends and cycles of output, consumption, and investment show evidence of a more important role for transitory shocks than previously suspected. Furthermore, contrary to previous evidence, it seems that permanent shocks to output play a much more important role in explaining unemployment fluctuations.

Cointegração e price discovery do risco soberano brasileiro

A lei do preço único afirma que o mesmo ativo negociado em diferentes mercados deve apresentar preços equivalentes. Este trabalho busca verificar se o risco de crédito soberano brasileiro negociado no mercado internacional é precificado de forma semelhante tanto nos tradicionais mercados de títulos quanto no novo e crescente mercado de derivativos de crédito. Adicionalmente, utiliza-se a análise de Price Discovery para examinar qual dos mercados se move mais rapidamente em resposta às mudanças nas condições de crédito da economia brasileira. A análise empírica é feita por meio de modelos de séries de tempo, mais especificamente análise de cointegração e vetor de correção de erros. Os resultados confirmam a predição teórica da lei do preço único de que o risco de crédito brasileiro, tanto nos mercados de títulos quanto no mercado de derivativos de crédito, movem-se juntos no longo prazo. Por fim, a maior parte do Price Discovery ocorre no mercado de derivativos de crédito.

Os preços administrados e a condução de política monetária no Brasil

Esta dissertação trata da questão dos preços administrados no Brasil sob a argumentação de que os mesmos apresentam uma persistência mais acentuada do que os demais preços da economia. Para alcançar este objetivo foram verificados alguns testes de persistência inflacionária. Em seguida, utilizou-se a metodologia dos Vetores de Correção de Erro (VEC) para estudar a relação dos preços administrados com as variáveis mais importantes da economia brasileira, tais como, produto, taxa de câmbio, preços livres e taxa de juros Selic. Por fim, utilizou-se do instrumental de Mankiw e Reis (2003) para verificar qual o índice de preços seria mais adequado para manter a atividade econômica brasileira mais próxima de seu nível potencial. Os resultados encontrados foram os seguintes: 1) observou-se persistência do IPCA representada pelos preços administrados; 2) a autoridade monetária responde a choques dos preços monitorados com maior veemência do que a choques nos preços livres; 3) o exercício de Mankiw e Reis (2003) apontou que a porcentagem dos preços monitorados deve ser menor que a atual do IPCA em um índice de preços estabilizador. Desta forma, mostra-se que a presença dos preços administrados dificulta pronunciadamente a condução de política monetária no Brasil.

Uma nova estratégia de negociação em pares

Uma das principais vantagens das estratégias de negociação em pares está relacionada à baixa correlação com os retornos do mercado. Ao tomar posições compradas e vendidas, estas estratégias são capazes de controlar a magnitude do beta de mercado, mantendo-se praticamente zero ou estatísticamente não significativas. A idéia consiste na realização de arbitragem estatística, aproveitando os desvios de preços de equilíbrio de longo prazo. Como tal, elas envolvem modelos de correção de equilíbrio para os pares de retornos dos ativos. Nós mostramos como construir uma estratégia de negociação de pares que é beneficiada não só pela relação de equilíbrio de longo prazo entre os pares de preços dos ativos da carteira, mas também pela velocidade com que os preços ajustam os desvios para o equilíbrio. Até então, a grande maioria das estratégias envolvendo negociação em pares se baseavam na hipótese de que a obtenção de retornos positivos estaria relacionada à reversão à média caracterizada pela relação de cointegração dos pares, mas ignorava a possibilidade de seleção dos pares testando a velocidade de ajustamento do Vetor de Correção de Erros desta relação. Os resutados deste trabalho indicaram baixos níveis de correlação com o mercado, neutralidade das estratégias, associados a retornos financeiros líquidos e Índice de Sharpe anualizados de 15,05% e 1,96 respectivamente.

Temporal causality between the exchange rate and the trade balance : the case of Brazil

The paper assesses the impact of intemational relative prices and domestic expenditure variables on Brazil' s foreign trade performance in the first half of the 1990s. It has been argued that the appreciation of the Real since 1994 has had a detrimental impact of the country's trade balance. However, using temporal precedence analysis, our results do not indicate that the trade balance is strongly affected by intemational rei ative prices, such as the exchange rate. Instead, domestic expenditure variables appear to be more powerful determinant of the country' s trade performance in recent years. Granger and error correction causality techniques are used to determine temporal precedence between the trade balance and the exchange rate in the period under examination. Our findings shed light on the debate over the sustainability of recent exchange rate-anchored macroeconomic stabilisation programmes, which is a topic that has encouraged a lot of debate among academics and practitioners.

Earnings dynamics and inequality in Venezuela: 1995-1997

In this paper, we decompose the variance of logarithmic monthly earnings of prime age males into its permanent and transitory components, using a five-wave rotating panel from the Venezuelan “Encuesta de Hogares por Muestreo” from 1995 to 1997. As far as we know, this is the first time a variance components model is estimated for a developing country. We test several specifications and find that an error component model with individual random effects and first order serially correlated errors fits the data well. In the simplest model, around 22% of earnings variance is explained by the variance of permanent component, 77% by purely stochastic variation and the remaining 1% by serial correlation. These results contrast with studies from industrial countries where the permanent component is predominant. The permanent component is usually interpreted as the results of productivity characteristics of individuals whereas the transitory component is due to stochastic perturbations such as job and/or price instability, among others. Our findings may be due to the timing of the panel when occurred precisely during macroeconomic turmoil resulting from a severe financial crisis. The findings suggest that earnings instability is an important source of inequality in a region characterized by high inequality and macroeconomic instability.