A Common-Feature Approach for Testing Present-Value Restrictions with Financial Data

It is well known that cointegration between the level of two variables (labeled Yt and yt inthis paper) is a necessary condition to assess the empirical validity of a present-value model(PV and PVM, respectively, hereafter) linking them. The work on cointegration has been soprevalent that it is often overlooked that another necessary condition for the PVM to hold isthat the forecast error entailed by the model is orthogonal to the past. The basis of this resultis the use of rational expectations in forecasting future values of variables in the PVM. If thiscondition fails, the present-value equation will not be valid, since it will contain an additionalterm capturing the (non-zero) conditional expected value of future error terms. Our article has a few novel contributions, but two stand out. First, in testing for PVMs,we advise to split the restrictions implied by PV relationships into orthogonality conditions(or reduced rank restrictions) before additional tests on the value of parameters. We showthat PV relationships entail a weak-form common feature relationship as in Hecq, Palm, andUrbain (2006) and in Athanasopoulos, Guillén, Issler and Vahid (2011) and also a polynomialserial-correlation common feature relationship as in Cubadda and Hecq (2001), which representrestrictions on dynamic models which allow several tests for the existence of PV relationships tobe used. Because these relationships occur mostly with nancial data, we propose tests based ongeneralized method of moment (GMM) estimates, where it is straightforward to propose robusttests in the presence of heteroskedasticity. We also propose a robust Wald test developed toinvestigate the presence of reduced rank models. Their performance is evaluated in a Monte-Carlo exercise. Second, in the context of asset pricing, we propose applying a permanent-transitory (PT)decomposition based on Beveridge and Nelson (1981), which focus on extracting the long-runcomponent of asset prices, a key concept in modern nancial theory as discussed in Alvarez andJermann (2005), Hansen and Scheinkman (2009), and Nieuwerburgh, Lustig, Verdelhan (2010).Here again we can exploit the results developed in the common cycle literature to easily extractpermament and transitory components under both long and also short-run restrictions.The techniques discussed herein are applied to long span annual data on long- and short-term interest rates and on price and dividend for the U.S. economy. In both applications we donot reject the existence of a common cyclical feature vector linking these two series. Extractingthe long-run component shows the usefulness of our approach and highlights the presence ofasset-pricing bubbles.

Bailouts in a common market: a strategic approach

Governments in the EU grant Rescue and Restructure Subsidies to bail out ailing firms. In an international asymmetric Cournot duopoly we study effects of such subsidies on market structure and welfare. We adopt a common market setting, where consumers from the two countries form one market. We show that the subsidy is positive also when it fails to prevent the exit. The reason is a strategic effect, which forces the more efficient firm to make additional cost-reducing effort. When the exit is prevented, allocative and productive efficiencies are lower and the only gaining player is the rescued firm

COHESION POLICY:METHODOLOGY AND INDICATORS TOWARDS COMMON APPROACH

The territorial cohesion is a focal object of the regional programming period 2007-2013. This paper aims to purpose a critical review of the cohesion conceptualisation and of its measure, starting from an exchange of experiences and from an initial institutional demand inspired to regional projects foreseen in 2013 programme (ESPON Seminar 2008; French Green paper on Cohesion 2008). Starting from a literature review and from the basic question of indicators, the paper aims to enhance territorial cohesion, measuring its different levels at local, national and European level. The author takes a methodological approach to analyse and to detect a set of territorial cohesion indicators and to evaluate effectiveness and efficiency of indicators’ systems, currently used to measure this territorial dimension (STeMA). This kind of approach is relevant to the programming period of new Structural Funds, looking at the French Green Paper 2008, implementing the 2007-13 Programme.territorial cohesion, model, system of indicators, efficiency

Common Territory? : Comparing the IMP Approach with Economic Geography

The IMP research tradition has always been open to the cross-fertilisation of ideas with other social science disciplines that study similar phenomena. Recent years have seen a growing interest among IMP researchers in phenomena such as regional strategic networks, spatial clusters and innovation and new business development in networks. IMP papers published on these topics are increasingly citing conceptual frameworks and empirical findings from the field of economic geography. This paper discusses the development of IMP thought and the development of thought in economic geography (particularly evolutionary economic geography), and compares their approaches to the analysis of regional phenomena. The goal is to identify key ideas from economic geography that have been under-exploited in IMP research, in order to suggest original new approaches available to IMP researchers interested in these fields. A number of such ideas are explored: proximity as a multi-dimensional and multi-faceted concept; the distinction between, and relative importance of, learning activities arising automatically from being embedded in a community (local or regional buzz) and learning activities arising from positive investment in channels of communication (pipelines); the concept of relational capital developed by economic geographers; and, conceptualisations of externalities commonly used in the study of spatial clustersPeer reviewedFinal Accepted Versio

Common approach to solving SGEMP, DEMP, and ESD survivability

System Generated Electromagnetic Pulse (SGEMP) and Dispersed Electromagnetic Pulse DEMP) are nuclear generated spacecraft environments. Electrostatic discharge (ESD) is a natural spacecraft environment resulting from differential charging in magnetic substorms. All three phenomena, though differing in origin, result in the same problem to the spacecraft and that is Electromagnetic Interference (EMI). A common design approach utilizing a spacecraft structural Faraday Cage is presented which helps solve the EMI problem. Also, other system design techniques are discussed which minimize the magnitude of these environments through control of materials and electrical grounding configuration

'SO STONED' : common sense approach of the dizzy patient

The history taking of a dizzy patient is of utmost importance in order to differentiate the possible etiologies of vertigo. The key factors that allow a first approximation of diagnosis identification are based on the time profile, symptom profile, and trigger profile of the disease. Here, the proposed mnemonic "SO STONED" comprises eight different dimensions that characterize the vertigo-related complaints of the patient and guide the clinician in his or her decision scheme. All the letters "SO STONED" have a specific meaning: Symptoms, Often (Frequency), Since, Trigger, Otology, Neurology, Evolution, and Duration. Since the most common vestibular diseases have different fingerprints when all dimensions are considered, this tool can facilitate the identification of the appropriate vestibular diagnosis

The Secondary-Rights Approach to the ‘Common Intention Constructive Trust’

Unlike ‘primary rights’ constructive trust doctrines, the CICT affords courts a wide discretion in determining the appropriate remedy in a particular case. This paper suggests that the CICT can take a step towards conceptual and analytical coherence if approached as a device for courts to award remedies that give effect to A’s secondary rights. When B breaches his primary duty to ensure A does not suffer harm from the unreliability of his induced assumptions, and when this causes A to suffer detrimental reliance, A obtains an unliquidated secondary right to be compensated for any harm, and a judge has discretion to determine the appropriate content of the remedy to compensate A for harm suffered. Since this approach is highly similar to proprietary estoppel, assimilating the CICT within proprietary estoppel can further benefit our understanding and practice of resolving disputes in the family homes context

Towards a common thread in Complexity: an accuracy-based approach

The complexity of a system, in general, makes it difficult to determine some or almost all matrix elements of its operators. The lack of accuracy acts as a source of randomness for the matrix elements which are also subjected to an external potential due to existing system conditions. The fluctuation of accuracy due to varying system-conditions leads to a diffusion of the matrix elements. We show that, for the single well potentials, the diffusion can be described by a common mathematical formulation where system information enters through a single parameter. This further leads to a characterization of physical properties by an infinite range of single parametric universality classes

Bailouts in a common market: a strategic approach

Governments in the EU grant Rescue and Restructure Subsidies to bail out ailing firms. In an international asymmetric Cournot duopoly we study effects of such subsidies on market structure and welfare. We adopt a common market setting, where consumers from the two countries form one market. We show that the subsidy is positive also when it fails to prevent the exit. The reason is a strategic effect, which forces the more efficient firm to make additional cost-reducing effort. When the exit is prevented, allocative and productive efficiencies are lower and the only gaining player is the rescued firm.subsidies; asymmetric oligopoly; exit; European Union