Progress Towards to Equity Market Integration in Eastern Europe

The advent of the European Union has decreased the diversification benefits available from country based equity market indices in the region. This paper measures the increase in stock integration between the three largest new EU members (Hungary, the Czech Republic and Poland who joined in May 2004) and the Euro-zone. A potentially gradual transition in correlations is accommodated in a single VAR model by embedding smooth transition conditional correlation models with fat tails, spillovers, volatility clustering, and asymmetric volatility effects. At the country market index level all three Eastern European markets show a considerable increase in correlations in 2006. At the industry level the dates and transition periods for the correlations differ, and the correlations are lower although also increasing. The results show that sectoral indices in Eastern European markets may provide larger diversification opportunities than the aggregate market. JEL classifications: C32; C51; F36; G15 Keywords: Multivariate GARCH; Smooth Transition Conditional Correlation; Stock Return Comovement; Sectoral correlations; New EU Members

The Determinants of Personal Income Tax Progressivity Around the Globe

This paper utilizes a novel database collected by the authors to document features of the progressivity of personal income tax systems across 209 countries for the years 1980-2009. We measure progressivity in several ways. First, we associate it with the increase in effective average (marginal) tax rates between a wage of zero and ten times the average wage in a country. Second, we consider the curvature of the tax schedule expressed as the difference between the effective average (marginal) tax schedule from a wage of zero to ten times the average wage and a linear average tax schedule and, alternatively, the diference between the effective average (marginal) tax schedule from the minimum positive taxable income, to ten times the average wage as opposed to a linear average tax schedule. Moreover, the paper assesses patterns regarding the conditional correlation of country-specifc tax progressivity measures with a host of economic and political country-specific characteristics and find the labor supply elasticity and the income replacement rates for the unemployed to be key determinants of progressivity around the globe, in line with economic theory.

Condensados de Bose-Einstein em redes óticas: a transição superfluido-isolante de Mott em redes hexagonais e a classe de universalidade superfluido-vidro de Bose em 3D

Estudamos transições de fases quânticas em gases bosônicos ultrafrios aprisionados em redes óticas. A física desses sistemas é capturada por um modelo do tipo Bose-Hubbard que, no caso de um sistema sem desordem, em que os átomos têm interação de curto alcance e o tunelamento é apenas entre sítios primeiros vizinhos, prevê a transição de fases quântica superfluido-isolante de Mott (SF-MI) quando a profundidade do potencial da rede ótica é variado. Num primeiro estudo, verificamos como o diagrama de fases dessa transição muda quando passamos de uma rede quadrada para uma hexagonal. Num segundo, investigamos como a desordem modifica essa transição. No estudo com rede hexagonal, apresentamos o diagrama de fases da transição SF-MI e uma estimativa para o ponto crítico do primeiro lobo de Mott. Esses resultados foram obtidos usando o algoritmo de Monte Carlo quântico denominado Worm. Comparamos nossos resultados com os obtidos a partir de uma aproximação de campo médio e com os de um sistema com uma rede ótica quadrada. Ao introduzir desordem no sistema, uma nova fase emerge no diagrama de fases do estado fundamental intermediando a fase superfluida e a isolante de Mott. Essa nova fase é conhecida como vidro de Bose (BG) e a transição de fases quântica SF-BG que ocorre nesse sistema gerou muitas controvérsias desde seus primeiros estudos iniciados no fim dos anos 80. Apesar dos avanços em direção ao entendimento completo desta transição, a caracterização básica das suas propriedades críticas ainda é debatida. O que motivou nosso estudo, foi a publicação de resultados experimentais e numéricos em sistemas tridimensionais [Yu et al. Nature 489, 379 (2012), Yu et al. PRB 86, 134421 (2012)] que violam a lei de escala $\\phi= u z$, em que $\\phi$ é o expoente da temperatura crítica, $z$ é o expoente crítico dinâmico e $ u$ é o expoente do comprimento de correlação. Abordamos essa controvérsia numericamente fazendo uma análise de escalonamento finito usando o algoritmo Worm nas suas versões quântica e clássica. Nossos resultados demonstram que trabalhos anteriores sobre a dependência da temperatura de transição superfluido-líquido normal com o potencial químico (ou campo magnético, em sistemas de spin), $T_c \\propto (\\mu-\\mu_c)^\\phi$, estavam equivocados na interpretação de um comportamento transiente na aproximação da região crítica genuína. Quando os parâmetros do modelo são modificados de maneira a ampliar a região crítica quântica, simulações com ambos os modelos clássico e quântico revelam que a lei de escala $\\phi= u z$ [com $\\phi=2.7(2)$, $z=3$ e $ u = 0.88(5)$] é válida. Também estimamos o expoente crítico do parâmetro de ordem, encontrando $\\beta=1.5(2)$.

The Impact of the ECB’s Asset Purchase Programmes on Sovereign Bond Spreads in the Euro Area. Bruges European Economic Research Papers 35/2015

This paper estimates the immediate impact of the European Central Bank’s asset purchase programmes on sovereign bond spreads in the euro area between 2008 and 2015 using a country-by-country GARCH model. The baseline estimates are rigorously diagnosed for misspecification and subjected to a wide range of sensitivity tests. Among others, changes in the dependent variable, the independent variables and the number of (G)ARCH terms are tested. Moreover, the model is applied to subsamples and dynamic conditional correlations are analyzed to estimate the effects of the asset purchases on the contagion of spread movements. Generally, it is found that the asset purchase programmes triggered an reduction of sovereign bond spreads. More specifically, the Securities Markets Programme (SMP) had the most significant immediate effects on sovereign bond spreads across the euro area. The announcements related to the Outright Monetary Transactions (OMT) programme also yielded substantial spread compression in the periphery. In contrast to that, the most recent Public Sector Purchase Programme (PSPP) announced in January 2015 and implemented since March 2015 had no significant immediate effects on sovereign bond spreads, except for Irish spreads. Hence, immediate effects seem to be dependent upon the size of the programme, the extent to which it targets distressed sovereigns and the way in which it is communicated.

Illiquidity shocks and the comovement between stocks:new evidence using smooth transition

This paper extends the smooth transition conditional correlation model by studying for the first time the impact that illiquidity shocks have on stock market return comovement. We show that firms that experience shocks that increase illiquidity are less liquid than firms that experience shocks that decrease illiquidity. Shocks that increase illiquidity have no statistical impact on comovement. However, shocks that reduce illiquidity lead to a fall in comovement, a pattern that becomes stronger as the illiquidity of the firm increases. This discovery is consistent with increased transparency and an improvement in price efficiency. We find that a small number of firms experience a double illiquidity shock. For these firms, at the first shock, a rise in illiquidity reduces comovement while a fall in illiquidity raises comovement. The second shock partly reverses these changes as a rise in illiquidity is associated with a rise in comovement and a fall in illiquidity is associated with a fall in comovement. These results have important implications for portfolio construction and also for the measurement and evolution of market beta and the cost of capital as it suggests that investors can achieve higher returns for the same amount of market risk because of the greater diversification benefits that exist. We also find that illiquidity, friction, firm size and the pre-shock correlation are all associated with the magnitude of the correlation change. © 2013 Elsevier B.V.

Stress correlation function evolution in lattice solid elasto-dynamic models of shear and fracture zones and earthquake prediction

It has been argued that power-law time-to-failure fits for cumulative Benioff strain and an evolution in size-frequency statistics in the lead-up to large earthquakes are evidence that the crust behaves as a Critical Point (CP) system. If so, intermediate-term earthquake prediction is possible. However, this hypothesis has not been proven. If the crust does behave as a CP system, stress correlation lengths should grow in the lead-up to large events through the action of small to moderate ruptures and drop sharply once a large event occurs. However this evolution in stress correlation lengths cannot be observed directly. Here we show, using the lattice solid model to describe discontinuous elasto-dynamic systems subjected to shear and compression, that it is for possible correlation lengths to exhibit CP-type evolution. In the case of a granular system subjected to shear, this evolution occurs in the lead-up to the largest event and is accompanied by an increasing rate of moderate-sized events and power-law acceleration of Benioff strain release. In the case of an intact sample system subjected to compression, the evolution occurs only after a mature fracture system has developed. The results support the existence of a physical mechanism for intermediate-term earthquake forecasting and suggest this mechanism is fault-system dependent. This offers an explanation of why accelerating Benioff strain release is not observed prior to all large earthquakes. The results prove the existence of an underlying evolution in discontinuous elasto-dynamic, systems which is capable of providing a basis for forecasting catastrophic failure and earthquakes.

Empirical Analysis of Credit Risk Regime Switching and Temporal Conditional Default Correlation in Credit Default Swap Valuation: The Market liquidity effect

In this paper, we extend the debate concerning Credit Default Swap valuation to include time varying correlation and co-variances. Traditional multi-variate techniques treat the correlations between covariates as constant over time; however, this view is not supported by the data. Secondly, since financial data does not follow a normal distribution because of its heavy tails, modeling the data using a Generalized Linear model (GLM) incorporating copulas emerge as a more robust technique over traditional approaches. This paper also includes an empirical analysis of the regime switching dynamics of credit risk in the presence of liquidity by following the general practice of assuming that credit and market risk follow a Markov process. The study was based on Credit Default Swap data obtained from Bloomberg that spanned the period January 1st 2004 to August 08th 2006. The empirical examination of the regime switching tendencies provided quantitative support to the anecdotal view that liquidity decreases as credit quality deteriorates. The analysis also examined the joint probability distribution of the credit risk determinants across credit quality through the use of a copula function which disaggregates the behavior embedded in the marginal gamma distributions, so as to isolate the level of dependence which is captured in the copula function. The results suggest that the time varying joint correlation matrix performed far superior as compared to the constant correlation matrix; the centerpiece of linear regression models.

Unusual Centrosome Cycle in Dictyostelium: Correlation of Dynamic Behavior and Structural Changes

Centrosome duplication and separation are of central importance for cell division. Here we provide a detailed account of this dynamic process in Dictyostelium. Centrosome behavior was monitored in living cells using a γ-tubulin–green fluorescent protein construct and correlated with morphological changes at the ultrastructural level. All aspects of the duplication and separation process of this centrosome are unusual when compared with, e.g., vertebrate cells. In interphase the Dictyostelium centrosome is a box-shaped structure comprised of three major layers, surrounded by an amorphous corona from which microtubules emerge. Structural duplication takes place during prophase, as opposed to G1/S in vertebrate cells. The three layers of the box-shaped core structure increase in size. The surrounding corona is lost, an event accompanied by a decrease in signal intensity of γ-tubulin–green fluorescent protein at the centrosome and the breakdown of the interphase microtubule system. At the prophase/prometaphase transition the separation into two mitotic centrosomes takes place via an intriguing lengthwise splitting process where the two outer layers of the prophase centrosome peel away from each other and become the mitotic centrosomes. Spindle microtubules are now nucleated from surfaces that previously were buried inside the interphase centrosome. Finally, at the end of telophase, the mitotic centrosomes fold in such a way that the microtubule-nucleating surface remains on the outside of the organelle. Thus in each cell cycle the centrosome undergoes an apparent inside-out/outside-in reversal of its layered structure.

Monitoring of Dynamic Bridge Behaviour Using Digital Image Correlation

Bridges are a critical part of North America’s transportation network that need to be assessed frequently to inform bridge management decision making. Visual inspections are usually implemented for this purpose, during which inspectors must observe and report any excess displacements or vibrations. Unfortunately, these visual inspections are subjective and often highly variable and so a monitoring technology that can provide quantitative measurements to supplement inspections is needed. Digital Image Correlation (DIC) is a novel monitoring technology that uses digital images to measure displacement fields without any contact with the bridge. In this research, DIC and accelerometers were used to investigate the dynamic response of a railway bridge reported to experience large lateral displacements. Displacements were estimated using accelerometer measurements and were compared to DIC measurements. It was shown that accelerometers can provide reasonable estimates of displacement for zero-mean lateral displacements. By comparing measurements in the girder and in the piers, it was shown that for the bridge monitored, the large lateral displacements originated in the steel casting bearings positioned above the piers, and not in the piers themselves. The use of DIC for evaluating the effectiveness of rehabilitation of the LaSalle Causeway lift bridge in Kingston, Ontario was also investigated. Vertical displacements were measured at midspan and at the lifting end of the bridge during a static test and under dynamic live loading. The bridge displacements were well within the operating limits, however a gap at the lifting end of the bridge was identified. Rehabilitation of the bridge was conducted and by comparing measurements before and after rehabilitation, it was shown that the gap was successfully closed. Finally, DIC was used to monitor the midspan vertical and lateral displacements in a monitoring campaign of five steel rail bridges. DIC was also used to evaluate the effectiveness of structural rehabilitation of the lateral bracing of a bridge. Simple finite element models are developed using DIC measurements of displacement. Several lessons learned throughout this monitoring campaign are discussed in the hope of aiding future researchers.

FILTERING TECHNIQUES APPLIED ON RAW CARRIER PHASE FOR GPS DETECTING SMALL DYNAMIC DISPLACEMENTS

This work is part of a research under construction since 2000, in which the main objective is to measure small dynamic displacements by using L1 GPS receivers. A very sensible way to detect millimetric periodic displacements is based on the Phase Residual Method (PRM). This method is based on the frequency domain analysis of the phase residuals resulted from the L1 double difference static data processing of two satellites in almost orthogonal elevation angle. In this article, it is proposed to obtain the phase residuals directly from the raw phase observable collected in a short baseline during a limited time span, in lieu of obtaining the residual data file from regular GPS processing programs which not always allow the choice of the aimed satellites. In order to improve the ability to detect millimetric oscillations, two filtering techniques are introduced. One is auto-correlation which reduces the phase noise with random time behavior. The other is the running mean to separate low frequency from the high frequency phase sources. Two trials have been carried out to verify the proposed method and filtering techniques. One simulates a 2.5 millimeter vertical antenna displacement and the second uses the GPS data collected during a bridge load test. The results have shown a good consistency to detect millimetric oscillations.

A Dynamic Analysis of Tuberculosis Dissemination to Improve Control and Surveillance

Background: Detailed analysis of the dynamic interactions among biological, environmental, social, and economic factors that favour the spread of certain diseases is extremely useful for designing effective control strategies. Diseases like tuberculosis that kills somebody every 15 seconds in the world, require methods that take into account the disease dynamics to design truly efficient control and surveillance strategies. The usual and well established statistical approaches provide insights into the cause-effect relationships that favour disease transmission but they only estimate risk areas, spatial or temporal trends. Here we introduce a novel approach that allows figuring out the dynamical behaviour of the disease spreading. This information can subsequently be used to validate mathematical models of the dissemination process from which the underlying mechanisms that are responsible for this spreading could be inferred. Methodology/Principal Findings: The method presented here is based on the analysis of the spread of tuberculosis in a Brazilian endemic city during five consecutive years. The detailed analysis of the spatio-temporal correlation of the yearly geo-referenced data, using different characteristic times of the disease evolution, allowed us to trace the temporal path of the aetiological agent, to locate the sources of infection, and to characterize the dynamics of disease spreading. Consequently, the method also allowed for the identification of socio-economic factors that influence the process. Conclusions/Significance: The information obtained can contribute to more effective budget allocation, drug distribution and recruitment of human skilled resources, as well as guiding the design of vaccination programs. We propose that this novel strategy can also be applied to the evaluation of other diseases as well as other social processes.

Correlation of Modified Natural Rubber Properties by Artificial Neural Networks

Natural rubber (NR) is a raw material largely used by the modern industry; however, it is common that chemical modifications must be made to NR in order to improve properties such as hydrophobicity or mechanical resistance. This work deals with the correlation of properties of NR modified with dimethylaminoethylmethacrylate or methylmethacrylate as grafting agents. Dynamic-mechanical behavior and stress/strain relations are very important properties because they furnish essential characteristics of the material such as glass transition temperature and rupture point. These properties are concerned with different physical principles; for this reason, normally they are not related to each other. This work showed that they can be correlated by artificial neural networks (ANN). So, from one type of assay, the properties that as a rule only could be obtained from the other can be extracted by ANN correlation. POLYM. ENG. SCI., 49:499-505, 2009. (c) 2009 Society of Plastics Engineers

Dynamic behavior analysis of drill-threading process when machining AISI Al-Si-Cu(4) alloy

Conventional threading operations involve two distinct machining processes: drilling and threading. Therefore, it is time consuming for the tools must be changed and the workpiece has to be moved to another machine. This paper presents an analysis of the combined process (drilling followed by threading) using a single tool for both operations: the tap-milling tool. Before presenting the methodology used to evaluate this hybrid tool, the ODS (operating deflection shapes) basics is shortly described. ODS and finite element modeling (FEM) were used during this research to optimize the process aiming to achieve higher stable machining conditions and increasing the tool life. Both methods allowed the determination of the natural frequencies and displacements of the machining center and optimize the workpiece fixture system. The results showed that there is an excellent correlation between the dynamic stability of the machining center-tool holder and the tool life, avoiding a tool premature catastrophic failure. Nevertheless, evidence showed that the tool is very sensitive to work conditions. Undoubtedly, the use of ODS and FEM eliminate empiric decisions concerning the optimization of machining conditions and increase drastically the tool life. After the ODS and FEM studies, it was possible to optimize the process and work material fixture system and machine more than 30,000 threaded holes without reaching the tool life limit and catastrophic fail.

Experimental analysis of wheel/workpiece dynamic interactions in grinding

The aim of this work is to study the wheel/workpiece dynamic interactions in high-speed grinding using vitrified CBN wheel and DTG (difficult to grind) work materials. This problem is typical in the grinding of engine valve heads. The influence of tangential force per abrasive grain was investigated as an important control variable for the determination of G ratio. Experiments were carried out to observe the influence of vibrations in the wheel wear. The measurements of acoustic emission (AE) and vibration signals helped in identifying the correlation between the dynamic interactions (produced by forced random excitation) and the wheel wear. The wheel regenerative chatter phenomenon was observed by using the wheel mapping technique. (c) 2008 CIRP.