What drives stock prices? The Present Value Model revisited in a comparison of developed and emerging markets

Using a dynamic version of the present value model and a range of developed and Asian emerging markets, this paper considers what stock market prices ‘should have been’, given expectations on index cash dividends and on, more broadly defined, index earnings, and compares these fundamental prices with actual prices. Revealed deviations from fundamental value are investigated by considering types of investor behaviour which might drive such departures and whether they are influenced by spillover effects from other markets

Subsampling Cointegration Ranks in Large Systems

In this paper we investigate the possibility of the application of subsampling procedure for testing cointegration relations in large multivariate systems. The subsampling technique is applied to overcome the difficulty of nonstandard distribution and nuisance parameters in testing for cointegration rank without an explicitly formulated structural model. The contribution in this paper is twofold: theoretically this paper shows that the subsampling testing procedure is consistent and has asymptotically power 1;practically this paper demonstrates that the subsampling procedure can be applied to determine the cointegration rank in large scale models, where the standard procedures hits already its limit. For empirical relevant cases our simulation studies show that centered subsampling improves decisively the performance of subsampling test procedure and makes it applicable also for cases when the number of independent stochastic trends are very large.Cointegration, Large Systems, Nonparametric Tests, Subsampling

Testing Cointegration Rank in Large Systems

In this paper we investigate the possibility of the application of subsampling procedure for testing cointegration relations in large multivariate systems. The subsampling technique is applied to overcome the difficulty of nonstandard distribution and nuisance parameters in testing for cointegration rank without an explicitly formulated structural model. The contribution in this paper is twofold: theoretically this paper shows that the subsampling testing procedure is consistent and asymptotically most powerful; practically this paper demonstrates that the subsampling procedure can be applied to determine the cointegration rank in large scale models, where the standard procedures hits already its limit. Especially for the cases of few stochastic trends in a system, the subsampling procedure shows robust and reliable results.Cointegration, Large System, Nonparametric Tests, Subsampling, PPP

What Happens to Japan if China Catches Cold? - A causal analysis of the Chinese growth and the Japanese growth

Many economic professionals like financial analysts, economic journalists and regulatory officers prevailingly regard the fast growth of the Chinese economy as the key factor that leads recently the Japanese economy to recover from the recession that started since beginning of the nineties. This judgement are mostly underpinned by statistical facts that the Chinese economy grew fast in the last two years; the Japanese export to China has experienced a dramatically increase during last two years, China has become now the biggest foreign trade partner of Japan and so on. However, this convincingly sounding arguments are not sufficient to conclude the statement that the Chinese growth leads Japan out of the recession. In fact the statement has essentially a causal character, which means both the interdependence and the directionality of the dependence. While the positive dependence/correlation between the Chinese economy and the Japanese economy is often explicitly documented by statistical facts, arguments about the directionality of the dependence are totally missing. In this paper we conduct an empirical study to investigate the directionality of the dependence in order to justify the statement empirically. Taking a probabilistic causal approach, we infer the causal dependence among the Japanese economy and the Chinese economy based on observed data. We find the evidence that the Chinese growth on average has been a positive cause of the Japanese since the later nineties and the temporary positive casual effect is even more pronounced.Inferred Causality, Recovery of the Japanese economy, China Japan relation

the Transition Process in China: A theoretic and empirical Study

In this paper we analyse the driving forces of the transition from plan to market in China. A two segments and two sectors model is constructed to take into account the particular economic situation in China during the transition process: a large agricultural sector and an industrial sector; a large centrally planned segment and a market segment. The transition from plan to market is described by the increasing share the market segment in the whole economy on the one hand and the forced adjustment of the behaviour of the planned segment to the market situation on the other. Thus this model provides a well structured way to understand the complex phenomenon during the transition process and to analysis the driving forces of the transition process.Transition, Economic reform, Industrialization, Chinese economy

Mining Circumgalactic Baryons in the Low-Redshift Universe

(Abridged) This paper presents an absorption-line study of the multiphase circumgalactic medium (CGM) based on observations of Lya, CII, CIV, SiII, SiIII, and SiIV absorption transitions in the vicinities of 195 galaxies at redshift z<0.176. The galaxy sample is established based on a cross-comparison between public galaxy and QSO survey data and is characterized by a median redshift of =0.041, a median projected distance of =362 kpc to the sightline of the background QSO, and a median stellar mass of log(M_star/M_sun) = 9.7 \pm 1.1. Comparing the absorber features identified in the QSO apectra with known galaxy properties has led to strong constraints for the CGM absorption properties at z<~0.176. First, abundant hydrogen gas is observed out to d~500 kpc, well beyond the dark matter halo radius Rh of individual galaxies, with a mean covering fraction of ~60%. In contrast, no heavy elements are detected at d>~0.7 Rh from either low-mass dwarfs or high-mass galaxies. The lack of detected heavy elements in low- and high-ionization states suggests that either there exists a chemical enrichment edge at d~0.7 Rh or gaseous clumps giving rise to the observed absorption lines cannot survive at these large distances. Considering all galaxies at d>Rh leads to a strict upper limit for the covering fraction of heavy elements of ~3% (at a 95% confidence level) over d=(1-9) Rh. At d<Rh, differential covering fraction between low- and high-ionization gas is observed, suggesting that the CGM becomes progressively more ionized from d<0.3 Rh to larger distances. Comparing CGM absorption observations at low and high redshifts shows that at a fixed-fraction of Rh the CGM exhibits stronger mean absorption at z=2.2 than at z~0. We discuss possible pseudo-evolution of the CGM as a result of misrepresentation of halo radius.Comment: 25 pages, 13 figures; accepted for publication in MNRA

On the Halo Occupation of Dark Baryons

We introduce a new technique that adopts the halo occupation framework for understanding the origin of QSO absorption-line systems. Our initial study focuses specifically on MgII absorbers. We construct a model of the gaseous content in which the absorption equivalent width W_r is determined by the the amount of cold gas, in the form of discrete clouds, along a sightline through a halo. The two quantities that we specify per halo in the model are (1) the mean absorption strength per unit surface mass density A_W(M), and (2) the mean covering factor kappa_g(M) of the gaseous clouds. These parameters determine the conditional probability distribution of W_r as a function of halo mass, P(W_r|M). Two empirical measurements are applied to constrain the model: (i) the absorber frequency distribution function and (ii) the W_r-dependent clustering amplitude. We find that the data demand a rapid transition in the gas content of halos at ~10^11.5 Msol/h, below which halos contain predominantly cold gas and beyond which gas becomes predominantly hot. In order to reproduce the observed overall strong clustering of the absorbers and the anti-correlation between W_r and halo mass M, roughly 5% of gas in halos up to 10^14 Msol/h is required to be cold. The gas covering factor is near unity over a wide range of halo mass, supporting that Mg II systems probe an unbiased sample of typical galaxies. We discuss the implications of our study in the contexts of mass assembly of distant galaxies and the origin of QSO absorption line systems.Comment: 15 emulateapj pages, 7 figures, replaced with revised version incorporating referee's comment