The Barton Lecture Series on Law and Economics- Economic Perspectives at the SEC

Michael Piwowar, Commissioner of the US Securities and Exchange Commissioner lectures as part of the Center for Humanities in an Urban Environment Lecture Series. Lecture held on October 21, 2014.

A Study of Stock Market Fluctuations and their Relations to Business Conditions

Most research on stock prices is based on the present value model or the more general consumption-based model. When applied to real economic data, both of them are found unable to account for both the stock price level and its volatility. Three essays here attempt to both build a more realistic model, and to check whether there is still room for bubbles in explaining fluctuations in stock prices. In the second chapter, several innovations are simultaneously incorporated into the traditional present value model in order to produce more accurate model-based fundamental prices. These innovations comprise replacing with broad dividends the more narrow traditional dividends that are more commonly used, a nonlinear artificial neural network (ANN) forecasting procedure for these broad dividends instead of the more common linear forecasting models for narrow traditional dividends, and a stochastic discount rate in place of the constant discount rate. Empirical results show that the model described above predicts fundamental prices better, compared with alternative models using linear forecasting process, narrow dividends, or a constant discount factor. Nonetheless, actual prices are still largely detached from fundamental prices. The bubble-like deviations are found to coincide with business cycles. The third chapter examines possible cointegration of stock prices with fundamentals and non-fundamentals. The output gap is introduced to form the non-fundamental part of stock prices. I use a trivariate Vector Autoregression (TVAR) model and a single equation model to run cointegration tests between these three variables. Neither of the cointegration tests shows strong evidence of explosive behavior in the DJIA and S&P 500 data. Then, I applied a sup augmented Dickey-Fuller test to check for the existence of periodically collapsing bubbles in stock prices. Such bubbles are found in S&P data during the late 1990s. Employing econometric tests from the third chapter, I continue in the fourth chapter to examine whether bubbles exist in stock prices of conventional economic sectors on the New York Stock Exchange. The ‘old economy’ as a whole is not found to have bubbles. But, periodically collapsing bubbles are found in Material and Telecommunication Services sectors, and the Real Estate industry group.

Spatially explicit estimates of stock size, structure and biomass of North Atlantic albacore tuna (Thunnus alalunga) in the North Atlantic for the period 1956-2010, compiled from the International Commission for the Conservation of Atlantic Tunas

The development of the ecosystem approach and models for the management of ocean marine resources requires easy access to standard validated datasets of historical catch data for the main exploited species. They are used to measure the impact of biomass removal by fisheries and to evaluate the models skills, while the use of standard dataset facilitates models inter-comparison. North Atlantic albacore tuna is exploited all year round by longline and in summer and autumn by surface fisheries and fishery statistics compiled by the International Commission for the Conservation of Atlantic Tunas (ICCAT). Catch and effort with geographical coordinates at monthly spatial resolution of 1° or 5° squares were extracted for this species with a careful definition of fisheries and data screening. In total, thirteen fisheries were defined for the period 1956-2010, with fishing gears longline, troll, mid-water trawl and bait fishing. However, the spatialized catch effort data available in ICCAT database represent a fraction of the entire total catch. Length frequencies of catch were also extracted according to the definition of fisheries above for the period 1956-2010 with a quarterly temporal resolution and spatial resolutions varying from 1°x 1° to 10°x 20°. The resolution used to measure the fish also varies with size-bins of 1, 2 or 5 cm (Fork Length). The screening of data allowed detecting inconsistencies with a relatively large number of samples larger than 150 cm while all studies on the growth of albacore suggest that fish rarely grow up over 130 cm. Therefore, a threshold value of 130 cm has been arbitrarily fixed and all length frequency data above this value removed from the original data set.

Cascade failure analysis of power grid using new load distribution law and node removal rule

The work is supported in part by NSFC (Grant no. 61172070), IRT of Shaanxi Province (2013KCT-04), EPSRC (Grant no.Ep/1032606/1).

Cascade failure analysis of power grid using new load distribution law and node removal rule

The work is supported in part by NSFC (Grant no. 61172070), IRT of Shaanxi Province (2013KCT-04), EPSRC (Grant no.Ep/1032606/1).

Sustainability through an integrated approach to decision making? A law and regulation Case Study

Peer reviewed

The urban community in fifteenth-century Scotland : language, law and political practice

Peer reviewed

Table 1. Tree growth index and reconstructed precipitation series from 515 BC to AD 1993 based on the archaeological and living tree ring datasets from Dulan and Shenge, China

Annual precipitation for the last 2,500 years was reconstructed for northeastern Qinghai from living and archaeological juniper trees. A dominant feature of the precipitation of this area is a high degree of variability in mean rainfall at annual, decadal, and centennial scales, with many wet and dry periods that are corroborated by other paleoclimatic indicators. Reconstructed values of annual precipitation vary mostly from 100 to 300 mm and thus are no different from the modern instrumental record in Dulan. However, relatively dry years with below-average precipitation occurred more frequently in the past than in the present. Periods of relatively dry years occurred during 74-25 BC, AD 51-375, 426-500, 526-575, 626-700, 1100-1225, 1251-1325, 1451-1525, 1651-1750 and 1801-1825. Periods with a relatively wet climate occurred during AD 376-425, 576-625, 951-1050, 1351-1375, 1551-1600 and the present. This variability is probably related to latitudinal positions of winter frontal storms. Another key feature of precipitation in this area is an apparently direct relationship between interannual variability in rainfall with temperature, whereby increased warming in the future might lead to increased flooding and droughts. Such increased climatic variability might then impact human societies of the area, much as the climate has done for the past 2,500 years.

CONSTITUTIONAL JUSTICE IN AFRICA: An Examination of Constitutional Positivism, Fundamental Law and Rights in Ghana and Nigeria

This work explores the idea of constitutional justice in Africa with a focus on constitutional interpretation in Ghana and Nigeria. The objective is to develop a theory of constitutional interpretation based upon a conception of law that allows the existing constitutions of Ghana and Nigeria to be construed by the courts as law in a manner that best serves the collective wellbeing of the people. The project involves an examination of both legal theory and substantive constitutional law. The theoretical argument will be applied to show how a proper understanding of the ideals of the rule of law and constitutionalism in Ghana and Nigeria necessitate the conclusion that socio-economic rights in those countries are constitutionally protected and judicially enforceable. The thesis argues that this conclusion follows from a general claim that constitutions should represent a ‘fundamental law’ and must be construed as an aspirational moral ideal for the common good of the people. The argument is essentially about the inherent character of ‘legality’ or the ‘rule of law.’ It weaves together ideas developed by Lon Fuller, Ronald Dworkin, T.R.S. Allan and David Dyzenhaus, as well as the strand of common law constitutionalism associated with Sir Edward Coke, to develop a moral sense of ‘law’ that transcends the confines of positive or explicit law while remaining inherently ‘legal’ as opposed to purely moral or political. What emerges is an unwritten fundamental law of reason located between pure morality or natural law on the one hand and strict, explicit, or positive law on the other. It is argued that this fundamental law is, or should be, the basis of constitutional interpretation, especially in transitional democracies like Ghana and Nigeria, and that it grounds constitutional protection for socio-economic rights. Equipped with this theory of law, courts in developing African countries like Ghana and Nigeria will be in a better position to contribute towards developing a real sense of constitutional justice for Africa.

See you in Geneva? Democracy, the Rule of Law and the WTO (Working Paper 16)

This paper is a constructivist attempt to understand a global political space where states as actors (the traditional domain of international relations theory and international law) are joined by international organizations, firms, NGOs, and others. Today we know that many supposedly private or international orders (meaning sources of order other than the central institutions of the territorial state) are engaged in the regulation of large domains of collective life in a world where the sources of power are multiple, sovereignties are overlapping, and anarchy is meaningless. The paper begins with an attempt, discussed in the first section, to sort out what the rule of law might mean in the context of the WTO, where we soon see that it can only be understood by also considering the meaning of Administrative Law. Much of the debate about rule of law depends on positivist and centralist theories of “law,” whose inadequacy for my purposes leads, in the second section, to a discussion of legal pluralism and implicit law in legal theory. These approaches offer an alternative theoretical framework that respects the role of the state while not seeing it as the only source of normativity. The third section looks directly at WTO law and dispute settlement. I tr y to show that the sources and interpretations of law in the WTO and the trading system cannot be reduced to the Dispute Settlement Body. I conclude in the fourth section with some suggestions on how a WTO rule of law could be understood as democratic.

Speaking with different voices: the problems with English law and psychiatric injury

Private law courts in the UK have maintained the de minimis threshold as a condition precedent for a successful claim for the infliction of mental harm. This de minimis threshold necessitates the presence of a ‘recognised psychiatric illness’ as opposed to ‘mere emotion’. This standard has also been adopted by the criminal law courts when reading the Offences Against the Person Act 1861 to include non-physical injury. In determining the cut-off point between psychiatric injury and mere emotion, the courts have adopted a generally passive acceptance of expert testimony and the guidelines used by mental health professionals to make diagnoses. Yet these guidelines were developed for use in a clinical setting, not a legal one. This article examines the difficulty inherent in utilising the ‘dimensional’ diagnostic criteria used by mental health professionals to answer ‘categorical’ legal questions. This is of particular concern following publication of the new diagnostic manual, DSM-V in 2013, which will further exacerbate concerns about compatibility. It is argued that a new set of diagnostic guidelines, tailored specifically for use in a legal context, is now a necessity.

Default Invariance: Naïve Category of Law and Finance

Default invariance is the idea that default does not change at any scale of law and finance. Default is a conserved quantity in a universe where fundamental principles of law and finance operate. It exists at the micro-level as part of the fundamental structure of every financial transaction, and at the macro- level, as a fixed critical point within the relatively stable phases of the law and finance cycle. A key point is that default is equivalent to maximizing uncertainty at the micro-level and at the macro-level, is equivalent to the phase transition where unbearable fluctuations occur in all forms of risk transformation, including maturity, liquidity and credit. As such, default invariance is the glue that links the micro and macro structures of law and finance. In this essay, we apply naïve category theory (NCT), a type of mapping logic, to these types of phenomena. The purpose of using NCT is to introduce a rigorous (but simple) mathematical methodology to law and finance discourse and to show that these types of structural considerations are of prime practical importance and significance to law and finance practitioners. These mappings imply a number of novel areas of investigation. From the micro- structure, three macro-approximations are implied. These approximations form the core analytical framework which we will use to examine the phenomena and hypothesize rules governing law and finance. Our observations from these approximations are grouped into five findings. While the entirety of the five findings can be encapsulated by the three approximations, since the intended audience of this paper is the non-specialist in law, finance and category theory, for ease of access we will illustrate the use of the mappings with relatively common concepts drawn from law and finance, focusing especially on financial contracts, derivatives, Shadow Banking, credit rating agencies and credit crises.