Can we explain the dynamics of the UK FTSE 100 stock and stock index futures markets?

If stock and stock index futures markets are functioning properly price movements in these markets should best be described by a first order vector error correction model with the error correction term being the price differential between the two markets (the basis). Recent evidence suggests that there are more dynamics present than should be in effectively functioning markets. Using self-exciting threshold autoregressive (SETAR) models, this study analyses whether such dynamics can be related to different regimes within which the basis can fluctuate in a predictable manner without triggering arbitrage. These findings reveal that the basis shows strong evidence of autoregressive behaviour when its value is between the two thresholds but that the extra dynamics disappear once the basis moves above the upper threshold and their persistence is reduced, although not eradicated, once the basis moves below the lower threshold. This suggests that once nonlinearity associated with transactions costs is accounted for, stock and stock index futures markets function more effectively than is suggested by linear models of the pricing relationship.

An analysis of commercial real estate returns: an anatomy of smoothing in asset and index returns

In this article, we investigate the commonly used autoregressive filter method of adjusting appraisal-based real estate returns to correct for the perceived biases induced in the appraisal process. Many articles have been written on appraisal smoothing but remarkably few have considered the relationship between smoothing at the individual property level and the amount of persistence in the aggregate appraisal-based index. To investigate this issue we analyze a large sample of appraisal data at the individual property level from the Investment Property Databank. We find that commonly used unsmoothing estimates at the index level overstate the extent of smoothing that takes place at the individual property level. There is also strong support for an ARFIMA representation of appraisal returns at the index level and an ARMA model at the individual property level.

Proceedings of the inaugural construction management and economics ‘Past, Present and Future’ conference CME25, 16-18 July 2007, University of Reading, UK

This conference was an unusual and interesting event. Celebrating 25 years of Construction Management and Economics provides us with an opportunity to reflect on the research that has been reported over the years, to consider where we are now, and to think about the future of academic research in this area. Hence the sub-title of this conference: “past, present and future”. Looking through these papers, some things are clear. First, the range of topics considered interesting has expanded hugely since the journal was first published. Second, the research methods are also more diverse. Third, the involvement of wider groups of stakeholder is evident. There is a danger that this might lead to dilution of the field. But my instinct has always been to argue against the notion that Construction Management and Economics represents a discipline, as such. Granted, there are plenty of university departments around the world that would justify the idea of a discipline. But the vast majority of academic departments who contribute to the life of this journal carry different names to this. Indeed, the range and breadth of methodological approaches to the research reported in Construction Management and Economics indicates that there are several different academic disciplines being brought to bear on the construction sector. Some papers are based on economics, some on psychology and others on operational research, sociology, law, statistics, information technology, and so on. This is why I maintain that construction management is not an academic discipline, but a field of study to which a range of academic disciplines are applied. This may be why it is so interesting to be involved in this journal. The problems to which the papers are applied develop and grow. But the broad topics of the earliest papers in the journal are still relevant today. What has changed a lot is our interpretation of the problems that confront the construction sector all over the world, and the methodological approaches to resolving them. There is a constant difficulty in dealing with topics as inherently practical as these. While the demands of the academic world are driven by the need for the rigorous application of sound methods, the demands of the practical world are quite different. It can be difficult to meet the needs of both sets of stakeholders at the same time. However, increasing numbers of postgraduate courses in our area result in larger numbers of practitioners with a deeper appreciation of what research is all about, and how to interpret and apply the lessons from research. It also seems that there are contributions coming not just from construction-related university departments, but also from departments with identifiable methodological traditions of their own. I like to think that our authors can publish in journals beyond the construction-related areas, to disseminate their theoretical insights into other disciplines, and to contribute to the strength of this journal by citing our articles in more mono-disciplinary journals. This would contribute to the future of the journal in a very strong and developmental way. The greatest danger we face is in excessive self-citation, i.e. referring only to sources within the CM&E literature or, worse, referring only to other articles in the same journal. The only way to ensure a strong and influential position for journals and university departments like ours is to be sure that our work is informing other academic disciplines. This is what I would see as the future, our logical next step. If, as a community of researchers, we are not producing papers that challenge and inform the fundamentals of research methods and analytical processes, then no matter how practically relevant our output is to the industry, it will remain derivative and secondary, based on the methodological insights of others. The balancing act between methodological rigour and practical relevance is a difficult one, but not, of course, a balance that has to be struck in every single paper.

An alternative approach to investigating lead-lag relationships between stock and stock index futures markets

In the absence of market frictions, the cost-of-carry model of stock index futures pricing predicts that returns on the underlying stock index and the associated stock index futures contract will be perfectly contemporaneously correlated. Evidence suggests, however, that this prediction is violated with clear evidence that the stock index futures market leads the stock market. It is argued that traditional tests, which assume that the underlying data generating process is constant, might be prone to overstate the lead-lag relationship. Using a new test for lead-lag relationships based on cross correlations and cross bicorrelations it is found that, contrary to results from using the traditional methodology, periods where the futures market leads the cash market are few and far between and when any lead-lag relationship is detected, it does not last long. Overall, the results are consistent with the prediction of the standard cost-of-carry model and market efficiency.

The role of index trading in price formation in the grains and oilseeds markets

We use both Granger-causality and instrumental variables (IV) methods to examine the impact of index fund positions on price returns for the main US grains and oilseed futures markets. Our analysis supports earlier conclusions that Granger-causal impacts are generally not discernible. However, market microstructure theory suggests trading impacts should be instantaneous. IV-based tests for contemporaneous causality provide stronger evidence of price impact. We find even stronger evidence that changes in index positions can help predict future changes in aggregate commodity price indices. This result suggests that changes in index investment are in part driven by information which predicts commodity price changes over the coming months.

The use of remotely sensed rainfall for managing drought risk: a case study of weather index insurance in Zambia

Remotely sensed rainfall is increasingly being used to manage climate-related risk in gauge sparse regions. Applications based on such data must make maximal use of the skill of the methodology in order to avoid doing harm by providing misleading information. This is especially challenging in regions, such as Africa, which lack gauge data for validation. In this study, we show how calibrated ensembles of equally likely rainfall can be used to infer uncertainty in remotely sensed rainfall estimates, and subsequently in assessment of drought. We illustrate the methodology through a case study of weather index insurance (WII) in Zambia. Unlike traditional insurance, which compensates proven agricultural losses, WII pays out in the event that a weather index is breached. As remotely sensed rainfall is used to extend WII schemes to large numbers of farmers, it is crucial to ensure that the indices being insured are skillful representations of local environmental conditions. In our study we drive a land surface model with rainfall ensembles, in order to demonstrate how aggregation of rainfall estimates in space and time results in a clearer link with soil moisture, and hence a truer representation of agricultural drought. Although our study focuses on agricultural insurance, the methodological principles for application design are widely applicable in Africa and elsewhere.

On comparing two sequences of numbers and its applications to clustering analysis

A conceptual problem that appears in different contexts of clustering analysis is that of measuring the degree of compatibility between two sequences of numbers. This problem is usually addressed by means of numerical indexes referred to as sequence correlation indexes. This paper elaborates on why some specific sequence correlation indexes may not be good choices depending on the application scenario in hand. A variant of the Product-Moment correlation coefficient and a weighted formulation for the Goodman-Kruskal and Kendall`s indexes are derived that may be more appropriate for some particular application scenarios. The proposed and existing indexes are analyzed from different perspectives, such as their sensitivity to the ranks and magnitudes of the sequences under evaluation, among other relevant aspects of the problem. The results help suggesting scenarios within the context of clustering analysis that are possibly more appropriate for the application of each index. (C) 2008 Elsevier Inc. All rights reserved.

On the variations of the Betti numbers of regular levels of Morse flows

We generalize results in Cruz and de Rezende (1999) [7] by completely describing how the Beth numbers of the boundary of an orientable manifold vary after attaching a handle, when the homology coefficients are in Z, Q, R or Z/pZ with p prime. First we apply this result to the Conley index theory of Lyapunov graphs. Next we consider the Ogasa invariant associated with handle decompositions of manifolds. We make use of the above results in order to obtain upper bounds for the Ogasa invariant of product manifolds. (C) 2011 Elsevier B.V. All rights reserved.

NIELSEN COINCIDENCE THEORY OF FIBRE-PRESERVING MAPS AND DOLD`S FIXED POINT INDEX

Let M -> B, N -> B be fibrations and f(1), f(2): M -> N be a pair of fibre-preserving maps. Using normal bordism techniques we define an invariant which is an obstruction to deforming the pair f(1), f(2) over B to a coincidence free pair of maps. In the special case where the two fibrations axe the same and one of the maps is the identity, a weak version of our omega-invariant turns out to equal Dold`s fixed point index of fibre-preserving maps. The concepts of Reidemeister classes and Nielsen coincidence classes over B are developed. As an illustration we compute e.g. the minimal number of coincidence components for all homotopy classes of maps between S(1)-bundles over S(1) as well as their Nielsen and Reidemeister numbers.

Longitudinal study of Consumer Price Index (CPI) trends in core and non-core foods in Australia

Objective: This study examined trends in the price of healthy and less-healthy foods from 1989 to 2007 using the Australian Consumer Price Index (CPI).

Methods: CPI food expenditure classes were classified as 'core' or 'non-core'. Trends in the CPI were analysed to examine the rise in prices of core compared with non-core foods.

Results: On average, the CPI for core foods has risen at a slightly higher, though not statistically significant, rate than non-core foods. Furthermore, selected groupings reveal interesting patterns. 'Bread' has risen in price significantly more than 'cakes and biscuits', and 'milk' has risen in price significantly more than 'soft drinks, waters and juices'.

Conclusions and implications: This investigation of food price trends reveals notable differences between core and non-core foods. This should be investigated further to determine the extent to which this contributes to the higher prevalence of diet-related diseases in low socio-economic groups.

Northward migration of Afro-Siberian Knots Calidris canutus canutus : high variability in Red Knot numbers visiting staging sites on the French Atlantic coast, 1979–2009

The Afro–Siberian Red Knot subspecies, Calidris canutus canutus, winters mainly on Banc d’Arguin, Mauritania, West Africa. An International Wader Study Group project carried out in 1979 suggested that during northward migration Red Knots cover their migration between the wintering grounds and the Siberian breeding grounds in two long-distance non-stop flights, stopping only in the Wadden Sea in Schleswig-Holstein, Germany. Each year Red Knots also visit staging sites along the French Atlantic coast in addition to the German Wadden Sea. Ever since 1979, the French staging sites have been counted on a regular basis and here we present the count data from these 30 years. In some years more than 20% of the population used the French Atlantic coast as a staging site, but numbers are highly variable from one year to the next. We suggest that high numbers in France might occur when birds have to stop short of the Wadden Sea because of head-winds and/or a lack of tail-winds en route from West Africa.

Index of political instability in Brazil, 1889-2009

This article aims to develop an index of political instability (ins) in Brazil between 1889 and 2009, reflecting a wide-ranging set of multiple phenomena that represent conflicts between the different social groups. By presenting different definitions of what is understood by political instability in the economics literature and by using multiple historical events —coups d’état, civil conflicts, constitutional or unconstitutional overthrow and changes in the composition of 50% of the ministerial cabinet— different indicators are obtained which are then synthesized into a single index using the principal component technique, to obtain an ins for Brazil between 1889 and 2009.