Cross-country evidence on the relation between stock prices and the current account

This paper explores the relation between stock prices and the current account for 17 OECD countries in 1980-2007. I use a panel vector autoregression (VAR) to compare the effects of stock price shocks to those originating from monetary policy and exchange rates. While monetary policy shocks have little effects, shocks to stock prices and exchange rates have sizeable effects. A 10% contraction in stock prices improves the current account by 0.3% after two years. Hence I find a channel, in addition to the traditional exchange rate channel, through which external balance for an OECD country with a current account imbalance can be restored

Cross-country evidence on the relation between equity prices and the current account

This paper explores the relationship between equity prices and the current account for 17 industrialized countries in the period 1980-2007. Based on a panel vector autoregression, I compare the effects of equity price shocks to those originating from monetary policy and exchange rates. While monetary policy shocks have a limited impact, shocks to equity prices have sizeable effects. The results suggest that equity prices impact on the current account through their effects on real activity and exchange rates. Furthermore, shocks to exchange rates play a key role as well. Keywords: current account fluctuations, equity prices, panel vector autoregressio

Do monetary and technology shocks move euro area stock prices?

I use a Bayesian vector autoregressive (VAR) model to investigate the impact of monetary and technology shocks on the euro area stock market in 1987-2005. I find an important role for technology shocks, but not monetary shocks, in explaining variations in real stock prices. The identification method is flexible enough to study the effects of technology news shocks. The responses are consistent with the idea that news on technology improvements have an immediate impact on stock prices. These findings are robust to several modelling choices, including the productivity measure, omitted variables, and the identifying restrictions.monetary policy, technology shocks, news, stock prices, Bayesian VAR

Precision matrix expansion - efficient use of numerical simulations in estimating errors on cosmological parameters

Computing the inverse covariance matrix (or precision matrix) of large data vectors is crucial in weak lensing (and multi-probe) analyses of the large scale structure of the universe. Analytically computed covariances are noise-free and hence straightforward to invert, however the model approximations might be insufficient for the statistical precision of future cosmological data. Estimating covariances from numerical simulations improves on these approximations, but the sample covariance estimator is inherently noisy, which introduces uncertainties in the error bars on cosmological parameters and also additional scatter in their best fit values. For future surveys, reducing both effects to an acceptable level requires an unfeasibly large number of simulations. In this paper we describe a way to expand the true precision matrix around a covariance model and show how to estimate the leading order terms of this expansion from simulations. This is especially powerful if the covariance matrix is the sum of two contributions, $\smash{\mathbf{C} = \mathbf{A}+\mathbf{B}}$, where $\smash{\mathbf{A}}$ is well understood analytically and can be turned off in simulations (e.g. shape-noise for cosmic shear) to yield a direct estimate of $\smash{\mathbf{B}}$. We test our method in mock experiments resembling tomographic weak lensing data vectors from the Dark Energy Survey (DES) and the Large Synoptic Survey Telecope (LSST). For DES we find that $400$ N-body simulations are sufficient to achive negligible statistical uncertainties on parameter constraints. For LSST this is achieved with $2400$ simulations. The standard covariance estimator would require >$10^5$ simulations to reach a similar precision. We extend our analysis to a DES multi-probe case finding a similar performance.Comment: 14 pages, submitted to mnra

Using a model for telluric absorption in full-spectrum fits

The typical approach for removing telluric absorption lines from a science spectrum is to divide it by the spectrum of a standard star of spectral type A or B observed close in time and airmass. We present a new method, where we use a model for the transmission of the Earth's atmosphere in a full-spectrum fit, which determines the parameters for the stellar and Earth's atmosphere simultaneously. This eliminates the need of a standard star completely.Comment: 4 pages, 3 figures, International Workshop on Stellar Spectral Libraries 201

Guide to Spectral Proper Orthogonal Decomposition

This paper discusses the spectral proper orthogonal decomposition and its use in identifying modes, or structures, in flow data. A specific algorithm based on estimating the cross-spectral density tensor with Welch’s method is presented, and guidance is provided on selecting data sampling parameters and understanding tradeoffs among them in terms of bias, variability, aliasing, and leakage. Practical implementation issues, including dealing with large datasets, are discussed and illustrated with examples involving experimental and computational turbulent flow data

Cross-country evidence on the relation between stock prices and the current account

This paper explores the relation between stock prices and the current account for 17 OECD countries in 1980-2007. I use a panel vector autoregression (VAR) to compare the effects of stock price shocks to those originating from monetary policy and exchange rates. While monetary policy shocks have little effects, shocks to stock prices and exchange rates have sizeable effects. A 10% contraction in stock prices improves the current account by 0.3% after two years. Hence I find a channel, in addition to the traditional exchange rate channel, through which external balance for an OECD country with a current account imbalance can be restored.current account fluctuations, stock prices, panel VAR

Spectral proper orthogonal decomposition and its relationship to dynamic mode decomposition and resolvent analysis

We consider the frequency domain form of proper orthogonal decomposition (POD) called spectral proper orthogonal decomposition (SPOD). Spectral POD is derived from a space-time POD problem for statistically stationary flows and leads to modes that each oscillate at a single frequency. This form of POD goes back to the original work of Lumley (Stochastic tools in turbulence, Academic Press, 1970), but has been overshadowed by a space-only form of POD since the 1990s. We clarify the relationship between these two forms of POD and show that SPOD modes represent structures that evolve coherently in space and time while space-only POD modes in general do not. We also establish a relationship between SPOD and dynamic mode decomposition (DMD); we show that SPOD modes are in fact optimally averaged DMD modes obtained from an ensemble DMD problem for stationary flows. Accordingly, SPOD modes represent structures that are dynamic in the same sense as DMD modes but also optimally account for the statistical variability of turbulent flows. Finally, we establish a connection between SPOD and resolvent analysis. The key observation is that the resolvent-mode expansion coefficients must be regarded as statistical quantities to ensure convergent approximations of the flow statistics. When the expansion coefficients are uncorrelated, we show that SPOD and resolvent modes are identical. Our theoretical results and the overall utility of SPOD are demonstrated using two example problems: the complex Ginzburg-Landau equation and a turbulent jet

The UK government’s review of EU competences offers valuable academic insights into both Britain and the EU

The British government’s ‘Review of the Balance of Competences’ into the European Union’s role in British life is surrounded by political tensions. Tim Oliver argues that beyond the controversy, the review also offers a unique insight into the operation of British government, the politics of the UK’s coalition government, UK-EU relations, and the evolution of the EU. Academics may well look back in future years at the review as a useful opportunity to study both the UK and European integration

Forget independence for London: but the capital now needs its own devolved government more than ever

London has vote to remain in the EU while the rest of the UK – and especially England – voted to leave. This has led to calls for London to declare independence. Independence is not going to happen. But as Tim Oliver argues, a fully devolved government for London is possible. It’s time the UK recognised that London is its undiscovered country, a fifth constituent part that deserves devolved powers of its own