Stock market volatility and learning

Introducing bounded rationality in a standard consumption-based asset pricing model with time separable preferences strongly improves empirical performance. Learning causes momentum and mean reversion of returns and thereby excess volatility, persistence of price-dividend ratios, long-horizon return predictability and a risk premium, as in the habit model of Campbell and Cochrane (1999), but for lower risk aversion. This is obtained, even though our learning scheme introduces just one free parameter and we only consider learning schemes that imply small deviations from full rationality. The findings are robust to the learning rule used and other model features. What is key is that agents forecast future stock prices using past information on prices.

Market effects of foreign exchange coordinated intervention

In this article we develop a theoretical microstructure model of coordinated central bank intervention based on asymmetric information. We study the economic implications of coordination on some measures of market quality and show that the model predicts higher volatility and more significant exchange rate changes when central banks coordinate compared to when they intervene unilaterally. Both these predictions are in line with empirical evidence. Keywords: coordinated foreign exchange intervention, market microstructure. JEL Classification: D82, E58, F31, G14

Immunoregulation in human Schistosomiasis by idiotypic interactions and lymphokine-mediated mechanisms

Anti-idiotypic (anti-Id) T cells from schistosomiasis patients or former patients proliferate upon exposure to polyclonal or monoclonal anti-soluble egg antigen (SEA) antibodies. Chloroquine does not inhibit, the response, which is induced by F(ab')2 (but not soluble Fab) fragments of these antibodies. Purified T cells from former patients require macrophages or exogenous IL-1 to respond to anti-SEA Ids and can respond to matrix-bound Fab fragments in the presence of IL-1. These anti-Id T cells recognize the Ids directly. Chronic schistosomiasis patients immunoregulate the production of a non-IL-2 lymphokine that stimulates IL-2 receptor expression on resting T cells. This regulation is reversed upon chemotherapeutic cure.

Prospects for a nonliving vaccine against Schistosomiasis based on cell-mediated immune resistance mechanisms

We have designed a vaccine model based on induction of cell-mediated immunity and shown that it protects mice against Schistosoma mansoni infection. Mice are immunized by intradermal injection with schistosome antigens plus BCG. Resistance is dependent on the route of antigen presentation and the adjuvant chosen. The pattern of resistance correlates with sensitization of T lymphocytes for production of gamma interferon, a macrophage activating lymphokine that stimulates the cellular effector mechanism of protection. Purified schistosome paramyosin, a muscle cell component present in soluble parasite antigenic preparations, is immunogenic for T lymphocytes and induces resistance when given intradermally with BCG. It is likely that this protein, and possibly other soluble molecules that are released by the parasites of a challenge infection, induce a cellular inflammatory response resulting in larval trapping and/or killing by activated macrophages. These results verify the feasibility of a vaccine against schistosomiasis based on induction of cell-mediated immune resistance mechanisms.

Is sociality driven by the costs of dispersal or the benefits of philopatry? A role for kin-discrimination mechanisms.

The role of ecological constraints in promoting sociality is currently much debated. Using a direct-fitness approach, we show this role to depend on the kin-discrimination mechanisms underlying social interactions. Altruism cannot evolve under spatially based discrimination, unless ecological constraints prevent complete dispersal. Increasing constraints enhances both the proportion of philopatric (and thereby altruistic) individuals and the level of altruistic investments conceded in pairwise interactions. Familiarity-based discrimination, by contrast, allows philopatry and altruism to evolve at significant levels even in the absence of ecological constraints. Increasing constraints further enhances the proportion of philopatric (and thereby altruistic) individuals but not the level of altruism conceded. Ecological constraints are thus more likely to affect social evolution in species in which restricted cognitive abilities, large group size, and/or limited period of associative learning force investments to be made on the basis of spatial cues.

Privatization and competition in the delivery of local services: An empirical examination of the dual market hypothesis

This paper empirically analyses the hypothesis of the existence of a dual market for contracts in local services. Large firms that operate on a national basis control the contracts for delivery in the most populated and/or urban municipalities, whereas small firms that operate at a local level have the contracts in the least populated and/or rural municipalities. The dual market implies the high concentration and dominance of major firms in large municipalities, and local monopolies in the smaller ones. This market structure is harmful to competition for the market as the effective number of competitors is low across all municipalities. Thus, it damages the likelihood of obtaining cost savings from privatization.

Mechanisms of inflammation in gout.

An acute attack of gout is a paradigm of acute sterile inflammation, as opposed to pyogenic inflammation. Recent studies suggest that the triggering of IL-1beta release from leucocytes lies at the heart of a cascade of processes that involves multiple cytokines and mediators. The NLRP3 inflammasome appears to have a specific role in this regard, but the biochemical events leading to its activation are still not well understood. We review the known mechanisms that underlie the inflammatory process triggered by urate crystals and suggest areas that require further research.

NEUROPATHOPHYSIOLOGICAL MECHANISMS IN GLUTARIC ACIDURIA TYPE I: 3-HYDROXYGLUTARIC ACID LEADS TO AMMONIA INCREASE AND NON-APOPTOTIC CELL DEATH

A 3D in vitro model of rat organotypic brain cell cultures in aggregates was used to investigate neurotoxicity mechanisms in glutaric aciduria type I (GA-I). 1 mM glutarate (GA) or 3-hydroxyglutarate (3OHGA) were repeatedly added to the culture media at two different time points. In cultures treated with 3OHGA, we observed an increase in lactate in the medium, pointing to a possible inhibition of Krebs cycle and respiratory chain. We further observed that 3OHGA and to a lesser extend GA induced an increase in ammonia production with concomitant decrease of glutamine concentrations, which may suggest an inhibition of the astrocytic enzyme glutamine synthetase. These previously unreported findings may uncover a pathogenic mechanism in this disease which has deleterious effects on early stages of brain development. By immunohistochemistry we showed that 3OHGA increased non-apoptotic cell death. On the cellular level, 3OHGA and to a lesser extend GA led to cell swelling and loss of astrocytic fibers whereas a loss of oligodendrocytes was only observed for 3OHGA. We conclude that 3OHGAwas the most toxic metabolite in our model for GA-I. 3OHGA induced deleterious effects on glial cells, an increase of ammonia production, and resulted in accentuated cell death of non-apoptotic origin.

The Macroeconomics of the labor market: three fundamental views

We distinguish and assess three fundamental views of the labor market regarding the movements in unempoyment: (i) the frictionless equilibrium view; (ii) the chain reaction theory, or prolonged adjustment view; and (iii) the hysteresis view. While the frictionless view implies a clear compartmentalization between the short- and long-run, the hysteresis view implies that all the short-run fluctuations automatically turn into long-run changes in the unemployment rate. We assert the problems faced by these conceptions in explaining the diversity of labor market experiences across the OECD labor markets. We argue that the prolonged adjustment view can overcome these problems since it implies that the short, medium, and long runs are interrelated, merging with one another along an intertemporal continuum.

Stock market integration between new EU member states and the Euro-zone

This paper measures the degree in stock market integration between five Eastern European countries and the Euro-zone. A potentially gradual transition in correlations is accommodated by smooth transition conditional correlation models. We find that the correlation between stock markets has increased from 2001 to 2007. In particular, the Czech and Polish markets show a higher correlation to the Euro-zone. However, this is not a broad-based phenomenon across Eastern Europe. We also find that the increase in correlations is not a reflection of a world-wide phenomenon of financial integration but appears to be specific to the European market. JEL classifications: C32; C51; F36; G15 Keywords: Multivariate GARCH; Smooth Transition Conditional Correlation; Stock Return Comovement; New EU Members.

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