Forecasting annual inflation with seasonal monthly data: using levels versus logs of the underlying price index

This paper investigates whether using natural logarithms (logs) of price indices for forecasting inflation rates is preferable to employing the original series. Univariate forecasts for annual inflation rates for a number of European countries and the USA based on monthly seasonal consumer price indices are considered. Stochastic seasonality and deterministic seasonality models are used. In many cases, the forecasts based on the original variables result in substantially smaller root mean squared errors than models based on logs. In turn, if forecasts based on logs are superior, the gains are typically small. This outcome sheds doubt on the common practice in the academic literature to forecast inflation rates based on differences of logs.

Designer buildings: an evaluation of the price impacts of signature architects

This study investigates whether commercial offices designed by signature architects in the United States achieve rental premiums compared to commercial offices designed by nonsignature architects. Focusing on buildings designed by winners of the Prizker Prize and the Gold Medal awarded by the American Institute of Architects, we create a sample of commercial office buildings designed by signature architects drawing on CoStar's national database. We use a combination of hedonic regression model and a logit model to estimate the various rent determinants. While the first stage measures the typical rental price differential above the typical building in a particular sub-market over a specific timeframe, the second stage identifies a potential price differential over a set of buildings closely matched on important characteristics (such as age, size, location etc.). We find that in both stages offices design by signature architects exhibit a premium. However these results are preliminary. The premium could be indeed an effect of the name of the architect, but others factors such as micro-market conditions might be the cause. Further tests are needed to confirm the validity of our results.

Green noise or green value? Measuring the price effects of environmental certification in commercial buildings

This paper investigates the price effects of environmental certification on commercial real estate assets. It is argued that there are likely to be three main drivers of price differences between certified and non-certified buildings. First, certified buildings offer a bundle of benefits to occupiers relating to business productivity, image and occupancy costs. Second, due to these occupier benefits, certified buildings can result in higher rents and lower holding costs for investors. Third, certified buildings may require a lower risk premium. Drawing upon the CoStar database of US commercial real estate assets, hedonic regression analysis is used to measure the effect of certification on both rent and price. We first estimate the rental regression for a sample of 110 LEED and 433 Energy Star as well as several thousand benchmark buildings to compare the sample to. The results suggest that, compared to buildings in the same metropolitan region, certified buildings have a rental premium and that the more highly rated that buildings are in terms of their environmental impact, the greater the rental premium. Furthermore, based on a sample of transaction prices for 292 Energy Star and 30 LEED-certified buildings, we find price premia of 10% and 31% respectively compared to non-certified buildings in the same metropolitan area

The price of space: the convergence of value in use and value in exchange

This paper discusses concepts of value from the point of view of the user of the space and the counter view of the provider of the same. Land and property are factors of production. The value of the land flows from the use to which it is put, and that in turn, is dependent upon the demand (and supply) for the product or service that is produced/provided from that space. If there is a high demand for the product (at a fixed level of supply), the price will increase and the economic rent for the land/property will increase accordingly. This is the underlying paradigm of Ricardian rent theory where the supply of land is fixed and a single good is produced. In such a case the rent of land is wholly an economic rent. Economic theory generally distinguishes between two kinds of price, price of production or “value in use” (as determined by the labour theory of value), and market price or “value in exchange” (as determined by supply and demand). It is based on a coherent and consistent theory of value and price. Effectively the distinction is between what space is ‘worth’ to an individual and that space’s price of exchange in the market place. In a perfect market where any individual has access to the same information as all others in the market, price and worth should coincide. However in a market where access to information is not uniform, and where different uses compete for the same space, it is more likely that the two figures will diverge. This paper argues that the traditional reliance of valuers to use methods of comparison to determine “price” has led to an artificial divergence of “value in use” and “value in exchange”, but now such comparison are becoming more difficult due to the diversity of lettings in the market place, there will be a requirement to return to fundamentals and pay heed to the thought process of the user in assessing the worth of the space to be let.

The Farm-Retail Price Spread in an Imperfectly Competitive Food Industry

Gardner's popular model of perfect competition in the marketing sector is extended to a conjectural-variations oligopoly with endogenous entry. Revising Gardner's comparative statics on the "farm-retail price ratio," tests of hypotheses about food industry conduct are derived. Using data from a recent article by Wohlgenant, which employs Gardner's framework, tests are made of the validity of his maintained hypothesis-that the food industries are perfectly competitive. No evidence is found of departures from competition in the output markets of the food industries of eight commodity groups: (a) beef and veal, (b) pork, (c) poultry, (d) eggs, (e) dairy, (f) processed fruits and vegetables, (g) fresh fruit, and (h) fresh vegetables.

Asymmetric response of demand-supply mismatch to investor's sentiment

We look through both the demand and supply side information to understand dynamics of price determination in the real estate market and examine how accurately investors’ attitudes predict the market returns and thereby flagging off extent of any demand-supply mismatch. Our hypothesis is based on the possibility that investors’ call for action in terms of their buy/sell decision and adjustment in reservation/offer prices may indicate impending demand-supply imbalances in the market. In the process, we study several real estate sectors to inform our analysis. The timeframe of our analysis (1995-2010) allows us to observe market dynamics over several economic cycles and in various stages of those cycles. Additionally, we also seek to understand how investors’ attitude or the sentiment affects the market activity over the cycles through asymmetric responses. We test our hypothesis variously using a number of measures of market activity and attitude indicators within several model specifications. The empirical models are estimated using Vector Error Correction framework. Our analysis suggests that investors’ attitude exert strong and statistically significant feedback effects in price determination. Moreover, these effects do reveal heterogeneous responses across the real estate sectors. Interestingly, our results indicate the asymmetric responses during boom, normal and recessionary periods. These results are consistent with the theoretical underpinnings.

Dynamic analysis of house price diffusion across Asian financial centres

The aim of this paper is to explore effects of macroeconomic variables on house prices and also, the lead-lag relationships of real estate markets to examine house price diffusion across Asian financial centres. The analysis is based on the Global Vector Auto-Regression (GVAR) model estimated using quarterly data for six Asian financial centres (Hong Kong, Tokyo, Seoul, Singapore, Taipei and Bangkok) from 1991Q1 to 2011Q2. The empirical results indicate that the global economic conditions play significant roles in shaping house price movements across Asian financial centres. In particular, a small open economy that heavily relies on international trade such as – Singapore and Tokyo - shows positive correlations between economy’s openness and house prices, consistent with the Balassa-Samuelson hypothesis in international trade. However, region-specific conditions do play important roles as determinants of house prices, partly due to restrictive housing policies and demand-supply imbalances, as found in Singapore and Bangkok.

Price-based demand side management: Assessing the impacts of time-of-use tariffs on residential electricity demand and peak shifting in Northern Italy

One of the most common Demand Side Management programs consists of Time-of-Use (TOU) tariffs, where consumers are charged differently depending on the time of the day when they make use of energy services. This paper assesses the impacts of TOU tariffs on a dataset of residential users from the Province of Trento in Northern Italy in terms of changes in electricity demand, price savings, peak load shifting and peak electricity demand at substation level. Findings highlight that TOU tariffs bring about higher average electricity consumption and lower payments by consumers. A significant level of load shifting takes place for morning peaks. However, issues with evening peaks are not resolved. Finally, TOU tariffs lead to increases in electricity demand for substations at peak time.

The impact of price promotions on producer strategies in markets with large product heterogeneity

Although current research indicates that increasing the number of options has negative effects on the cognitive ability of consumers, little understanding has been given to the consequences on producers and their strategic behavior. This article tests whether a large portfolio of products is beneficial to producers by observing UK consumer response to price promotions. The article shows that discounts induce mainly segment switching (74% of the total impact), with a limited effect on stockpiling (26%) and no impact on purchase incidence. Consequently, consumers prefer to “follow the discount” rather than purchase multiple units of the same wine. This result seems to explain the current structure of the market, and suggests that discounts may conflict with segment loyalty, a situation that disfavors producers, particularly in very populated segments. Results also casts doubts on the economic sustainability of competition based on an intense product differentiation in the wine sector.

Futures basis, inventory and commodity price volatility: an empirical analysis

We employ a large dataset of physical inventory data on 21 different commodities for the period 1993–2011 to empirically analyze the behavior of commodity prices and their volatility as predicted by the theory of storage. We examine two main issues. First, we analyze the relationship between inventory and the shape of the forward curve. Low (high) inventory is associated with forward curves in backwardation (contango), as the theory of storage predicts. Second, we show that price volatility is a decreasing function of inventory for the majority of commodities in our sample. This effect is more pronounced in backwardated markets. Our findings are robust with respect to alternative inventory measures and over the recent commodity price boom.

Fatty acid composition of cooked chicken meat and chicken meat products as influenced by price range at retail

The primary objective was to determine fatty acid composition of skinless chicken breast and leg meat portions and chicken burgers and nuggets from the economy price range, standard price range (both conventional intensive rearing) and the organic range from four leading supermarkets. Few significant differences in the SFA, MUFA and PUFA composition of breast and leg meat portions were found among price ranges, and supermarket had no effect. No significant differences in fatty acid concentrations of economy and standard chicken burgers were found, whereas economy chicken nuggets had higher C16:1, C18:1 cis, C18:1 trans and C18:3 n-3 concentrations than had standard ones. Overall, processed chicken products had much higher fat contents and SFA than had whole meat. Long chain n-3 fatty acids had considerably lower concentrations in processed products than in whole meat. Overall there was no evidence that organic chicken breast or leg meat had a more favourable fatty acid composition than had meat from conventionally reared birds.

To eat or not to eat? Kinematics and muscle activity of reach-to-grasp movements are influenced by the action goal, but observers do not detect these differences

Recent evidence suggests that the mirror neuron system responds to the goals of actions, even when the end of the movement is hidden from view. To investigate whether this predictive ability might be based on the detection of early differences between actions with different outcomes, we used electromyography (EMG) and motion tracking to assess whether two actions with different goals (grasp to eat and grasp to place) differed from each other in their initial reaching phases. In a second experiment, we then tested whether observers could detect early differences and predict the outcome of these movements, based on seeing only part of the actions. Experiment 1 revealed early kinematic differences between the two movements, with grasp-to-eat movements characterised by an earlier peak acceleration, and different grasp position, compared to grasp-to-place movements. There were also significant differences in forearm muscle activity in the reaching phase of the two actions. The behavioural data arising from Experiments 2a and 2b indicated that observers are not able to predict whether an object is going to be brought to the mouth or placed until after the grasp has been completed. This suggests that the early kinematic differences are either not visible to observers, or that they are not used to predict the end-goals of actions. These data are discussed in the context of the mirror neuron system

The impact of buy to let residential investment on local housing markets: evidence from Glasgow, Scotland

The advent of the 'buy to let' (BTL) phenomenon in the UK. apart from producing a new wave of individualized rental market investment, has been widely judged to be a speculative and destabilizing force in the housing market. This paper provides a detailed empirical investigation of new residential investment in one city (Glasgow) where BTL has made a relatively large impact. In seeking to overcome data problems, the study employed qualitative (expert interviews and a landlord survey) and quantitative methods (census, the Register of Sasines, standardized house price information and modelling thereof) in order to assess the nature and scale of BTL, the motivations of investors and its impact on the private housing market. The evidence suggests that white Glasgow is in many re.spects different to rental markets elsewhere in the UK and although the investment has thus far largely occurred in a benign environment, the context for future investment, on balance, looks sustainable (i.e.favourable changes to pension planning law and the maturing market for BTL}. Long-term market impact is an empirical question that depends on the specific interactions of market niches or segments (i.e. the first-time buyer market for apartments} with potential buy to let investment. Our conclusion, to borrow a Scottish legal term, is that BTL induced volatility is 'not proven'.

Revenue-neutral tax policy under price uncertainty

The firm's response to revenue-neutral taxation is investigated under price uncertainty. Revenue-neutral policies adjust simultaneously the marginal tax rate and the level of exemptions while keeping expected tax receipts constant. Nonincreasing absolute risk aversion is sufficient to sign the firm's response: a reduction in the marginal rate causes the firm to contract output. Implications are established for the equilibrium level of treasury receipts.

Revenue-neutral tax policies under price uncertainty: reply

In their comment on my 1990 article, Yeh, Suwanakul, and Mai extend my analysis-which focused attention exclusively on firm output-to allow for simultaneous endogeneity of price, aggregate output, and numbers of firms. They show that, with downward- sloping demand, industry output adjusts positively to revenue-neutral changes in the marginal rate of taxation. This result is significant for two reasons. First, we are more often interested in predictions about aggregate phenomena than we are in predictions about individual firms. Indeed, firm-level predictions are frequently irrefutable since firm data are often unavailable. Second, the authors derive their result under a set of conditions that appear to be more general than those invoked in my 1990 article. In particular, they circumvent the need to invoke specific assumptions about the nature of firms' aversions toward risk. I consider this a useful extension and I appreciate the careful scrutiny of my paper.