Consumption Correlatedness and Risk Measurement in Economies with Non trade Assets and Heterogeneous Information

The consumption beta theorem of Breeden makes the expected return on any asset a function only of its covariance with changes in aggregate consumption. It is shown that the theorem is more robust than was indicated by Breeden. The theorem obtains even if one deletes Breeden's assumptions that (a) all risky assets are tradable, (b) investors have homogeneous beliefs, (c) other assets can be traded without transactions costs and (d) that all assets have returns which are Ito processes.

Estimating the Continuous Time Consumption Based Asset Pricing Model

The consumption based asset pricing model predicts that excess yields are determined in a fairly simple way by the market's degree of relative risk aversion and by the pattern of covariances between percapita consumption growth and asset returns. Estimation and testingis complicated by the fact that the model's predictions relate to the instantaneous flow of consumption and point-in-time asset values, but only data on the integral or unit average of the consumption flow is available. In our paper, we show how to estimate the parameters of interest consistently from the available data by maximum likelihood. We estimate the market's degree of relative risk aversion and the instantaneous covariances of asset yields and consumption using six different data sets. We also test the model's overidentifying restrictions.

The Determinants of the Variability of Stock Market Prices

The most familiar interpretation for the large and unpredictable swings that characterize common stock price indices is that price changes represent the efficient discounting of "new information" It is remarkable given the popularity of this interpretation that it has never been established what this information is about. Recent work by Shiller, and Stephen LeRoy and Richard Porter, has shown evidence that the variability of stock price indices cannot be accounted for by information regarding future dividends since dividends just do not seem to vary enough to justify the price movement. These studies assume a constant discount factor. In this paper, we consider whether the variability of stock prices can be attributed to information regarding discount factors (i.e., real interest rates), which are in turn related to current and future levels of economic activity. The appropriate discount factor to be applied to dividends which are received k years from today is the marginal rate of substitution between consumption today and consumption k periods from today, We use historical data on per capita consumption from 1890-1979 to estimate the realized value of these marginal rates of substitution. Theoretically, as LeRoy and C. J. La Civita have also noted independently of us, consumption variability may induce stock price variability whose magnitude depends on the degree of risk aversion.

B -> pi pi, New Physics in B -> pi K and Implications for Rare K and B Decays

The measured B -> pi pi, pi K branching ratios exhibit puzzling patterns. We point out that the B -> pi pi hierarchy can be nicely accommodated in the Standard Model (SM) through non-factorizable hadronic interference effects, whereas the B -> pi K system may indicate new physics (NP) in the electroweak (EW) penguin sector. Using the B -> pi pi data and the SU(3) flavour symmetry, we may fix the hadronic B -> pi K parameters, which allows us to show that any currently observed feature of the B -> pi K system can be easily explained through enhanced EW penguins with a large CP-violating NP phase. Restricting ourselves to a specific scenario, where NP enters only through Z^0 penguins, we derive links to rare K and B decays, where an enhancement of the K_L-> pi^0 nu nu_bar rate by one order of magnitude, with BR(K_L -> pi^0 nu nu_bar) > BR(K^+ -> pi^+ nu nu_bar), BR(K_L -> pi^0 e^+ e^-)=O(10^{-10}), (\sin2\beta)_{pi nu nu_bar} K* mu^+ mu^-, are the most spectacular effects. We address also other rare K and B decays, epsilon'/epsilon and B_d -> phi K_S.Comment: 6 pages, LaTeX, reference added and a few typos correced, to appear in Physical Review Letter

Constraining the CKM Parameters using CP Violation in semi-leptonic B Decays

We discuss the usefulness of the CP violating semi-leptonic asymmetry a_{SL} not only as a signal of new physics, but also as a tool in constraining the CKM parameters. We show that this technique could yield useful results in the first years of running at the B factories. We present the analysis graphically in terms of M_{12}, the dispersive part of the B-Bbar mixing amplitude. This is complementary to the usual unitarity triangle representation and often allows a cleaner interpretation of the data.Comment: 15 pages REVTEX, 7 figure

Vibration amplification by repetitive pulsing of rapidly heated cylinders

The fuel elements of a repetitively pulsed fast reactor are subjected to rapid heating in a time short with respect to their mechanical response time. As a result, vibration of the fuel elements occurs and, under certain conditions, these vibrations may be amplified considerably.This work is an experimental investigation of the amplification which occurs when a thin wall, hollow, stainless steel cylinder is repetitively heated internally by Joule heating. The results, which compare well with a theoretical analysis of this problem performed by another author, show that significant amplification of the vibrations can occur.The experimental technique is a variation of the resonance method for measuring natural frequency and internal damping. The apparatus could be adapted for use as a materials testing facility for high cycle, low stress fatigue studies since relatively large stresses could be induced with a rather small energy deposition per pulse.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/34020/1/0000296.pd

Fractal dimensions of the Q-state Potts model for the complete and external hulls

Fortuin-Kastelyn clusters in the critical $Q$-state Potts model are conformally invariant fractals. We obtain simulation results for the fractal dimension of the complete and external (accessible) hulls for Q=1, 2, 3, and 4, on clusters that wrap around a cylindrical system. We find excellent agreement between these results and theoretical predictions. We also obtain the probability distributions of the hull lengths and maximal heights of the clusters in this geometry and provide a conjecture for their form.Comment: 9 pages 4 figure

Penguin Topologies, Rescattering Effects and Penguin Hunting with Bu,d→KKˉB_{u,d}\to K\bar{K} and B±→π±KB^\pm\to\pi^\pm K

In the recent literature, constraints on the CKM angle $\gamma$ arising from the branching ratios for $B^\pm\to\pi^\pm K$ and $B_d\to\pi^\mp K^\pm$ decays received a lot of attention. An important theoretical limitation of the accuracy of these bounds is due to rescattering effects, such as $B^+\to\{\pi^0K^+\}\to\pi^+K^0$. We point out that these processes are related to penguin topologies with internal up quark exchanges and derive SU(2) isospin relations among the $B^+\to\pi^+K^0$ and $B_d^0\to\pi^-K^+$ decay amplitudes by defining ``tree'' and ``penguin'' amplitudes in a proper way, allowing the derivation of generalized bounds on the CKM angle $\gamma$. We propose strategies to obtain insights into the dynamics of penguin processes with the help of the decays $B_{u,d}\to K\bar{K}$ and $B^\pm\to\pi^\pm K$, derive a relation among the direct CP-violating asymmetries arising in these modes, and emphasize that rescattering effects can be included in the generalized bounds on $\gamma$ completely this way. Moreover, we have a brief look at the impact of new physics.Comment: Some mistakes in the equations have been corrected, conclusions have been changed slightly. The complete paper, including figures, is also available via anonymous ftp at ftp://ttpux2.physik.uni-karlsruhe.de/, or via www at http://www-ttp.physik.uni-karlsruhe.de/cgi-bin/preprints