Relative efficiency and price discovery in the two-tier Brussels stock exchange.

Until the mid-90s, the more active among the Brussels-listed stocks were traded in parallel segments: "spot" (that is, with t + 3 settlement) and "forward" (with periodic settlement at the end of a two- or three-week period). The forward market was cheaper, deeper, unhampered by price limits, convenient also for shortsales, and played by the pros; so it looks likely to be the more efficient tier. Yet a simple variance comparison, after correcting for settlement effects,finds no such effect; in fact, the forward market may actually have been the more noisy one. Going on to the issue of price discovery, which is a more formal way of testing whether the forward market is less noisy, we extend the Margrabe-Silber price-discovery model to take into account the asynchronism in the opening forward and spot prices. Although the presence of the latent true morning return in our extended model precludes us from estimating explicitly the price adjustment coefficients, we can still identify the sign of the estimated difference of these coefficients and the lower and upper bounds of its t-statistic. This information enables us to conclude on the significance of the test. Also, our results reject the potential price discoverer status of the forward market: spot prices seem more informative than forward prices. This result raises the issue of how far the financial markets perform their central function of price discovery and how far the conventional wisdom can be trusted (e.g. the more trading volume the less noise the observed price contains).

The dynamics of price discovery in the two-tier Brussels stock exchange.

In this paper, we investigate the dynamics of price discovery in the Brussels Stock Exchange for the spot and forward stock markets. Specifically, we quantitatively analyze each market's process in impounding new fundamental information about a stock's value into its market price. Similar to the permanent-transitory decomposition procedure put forward by Gonzalo and Ng (2001), we use a vecm (Vector Error Correction Model) and decompose the vecm residuals into the permanent and transitory innovations. However, we adjust their procedure to accommodate for the asynchronism problem in the Brussels forward and spot stock exchange. From the impulse response functions of the derived structural cointegration model after the decomposition, we apply the price discovery measure proposed by Yan and Zivot (2007), which is the absolute magnitude of cumulative price errors in the process of reflecting a one-unit change in the permanent innovation. In particular, we investigate which market makes less errors while incorporating the full one-unit increase in the permanent innovation into its price. Our finding is that the spot market outperforms the forwards one in the price discovery process. This result contradicts the price discovery role conventionally ascribed to the forward market.price discovery; brussels stock exchange;

Inference on Riemannian Manifolds: Regression and Stochastic Differential Equations

Statistical inference for manifolds attracts much attention because of its power of working with more general forms of data or geometric objects. We study regression and stochastic differential equations on manifolds from the intrinsic point of view. Firstly, we are able to provide alternative parametrizations for data that lie on Lie group in the problem of fitting a regression model, by mapping this space intrinsically onto its Lie algebra, while we explore the behaviour of fitted values when this base point is chosen differently. Due to the nature of our data in the application of soft tissue artefacts, we employ two correlation structures, namely Matern and quasi-periodic correlation functions when using the generalized least squares, and show that some patterns of the residuals are removed. Secondly, we construct a generalization of the Ornstein-Uhlenbeck process on the cone of covariance matrices SP(n) endowed with two popular Riemannian metrics, namely Log-Euclidean (LE) and Affine-Invariant (AI) metrics. We show that the Riemannian Brownian motion on SP(n) has infinite explosion time as on the Euclidean space and establish the calculation for the horizontal lifts of smooth curves. Moreover, we provide Bayesian inference for discretely observed diffusion processes of covariance matrices associated with either the LE or the AI metrics, and present a novel diffusion bridge sampling method using guided proposals when equipping SP(n) with the AI metric. The estimation algorithms are illustrated with an application in finance, together with a goodness-of-fit test comparing models associated with different metrics. Furthermore, we explore the multivariate volatility models via simulation study, in which covariance matrices in the models are assumed to be unobservable

Constitutional Mobilization

People around the world are mobilizing for constitutional change. This global phenomenon has been underexplored in comparative constitutional studies. This Article introduces the concept of constitutional mobilization, theorizes about it, and offers an original, empirical case-study. First, it develops a general theoretical framework defined by the following key concepts. Constitutional mobilization is the process by which social actors employ constitutional norms and discourses to advocate for constitutional change. Constitutional opportunity refers to the general political and constitutional environment in which constitutional mobilization operates, and particular political and constitutional processes that provoke constitutional mobilization. Constitutional framing concerns identifying constitutional problems and proposing constitutional solutions, the process of which involves invocation of constitutional language, ideas, norms, or symbols presented in national constitutions, transnational constitutional law, and international law. Constitutional resources take the form of state actors who play the influential role in constitutional change. And finally, constitutional change is understood as a multiple concept, which includes three types of change, namely revolutionary, reformative, and cultural. Second, this article develops a contextual theory to answer this question: under what conditions, how and why do social actors mobilize for constitutional change in authoritarian regime? The theory holds that, in an authoritarian regime, social actors seize the opportunity presented by constitution-making process to mobilize the public and also political leaders to engage in a popular, national constitutional dialogue, which results in reformative and cultural constitutional changes. Third, on that theoretical ground, this Article offers a case-study of Vietnam. This case-study has implications for China, which, like Vietnam, is also governed by a communist regime. However, as this article will demonstrate, China also presents significant constitutional divergences from Vietnam. More generally, this Article proposes establishing constitutional mobilization as a new area of empirical comparative constitutional inquiry based on case-studies exploration and contextual theorization

Globalization of Constitutional Identity

This Article extends Gary J. Jacobsohn’s theory of constitutional identity to better understand the dynamics of constitutional identity in the era of globalization. The extended theoretical framework features the relation of constitutional globalization to the change of national constitutional identity. Within that framework, this Article offers an original, empirical examination of the case of Vietnam and compares it with other socialist regimes (China, Laos, North Korea, and Cuba). It argues that globalization induces adaption to the socialist constitutional identity. The socialist constitutional identity is adapted by the pragmatic incorporation of fundamental ideas and principles of global constitutionalism. Consequently, the essence of the socialist constitutional identity remains but is modified and extended in the globalizing context. Although there is convergence in the adaption to socialist constitutional identity among the five socialist countries due to the impact of constitutional globalization, there are four divergent models which these countries adopt to react to the global impact on their constitutional identity, namely constitutional globalism (Vietnam and Laos); constitutional exceptionalism (China); constitutional isolationism (North Korea); and constitutional reservationism (Cuba). This Article contributes to the scholarship on constitutional globalization, comparative theory on constitutional identity, and empirical knowledge on constitutional dynamics in the contemporary socialist world