Multifactor consumption based asset pricing model of the UK stock market: The US stock market as a wealth reference

Copyright @ 2011 University of BirminghamHere a multifactor model of UK stock returns is developed, replac- ingHere a multifactor model of UK stock returns is developed, replacing the conventional consumption habit reference by a relation that depends on US wealth. Two step Instrumental Variables and Generalized Method of Moments estimators are applied to reduce the impact of weak instruments. The standard errors are corrected for the generated regressor problem and the model is found to explain UK excess returns by UK consumption growth and expected US excess returns. Hence, controlling for nominal effects by subtracting a risk free rate and conditioning on real US excess returns provides an appealing explanation of the equity premium puzzle. US excess returns. Hence, controlling for nominal e¤ects by subtracting a risk free rate and conditioning on real US excess returns provides an appealing explanation of the equity premium puzzle

A multifactor consumption based asset pricing model of the UK stock market: The US stock market as a wealth reference

Here a multifactor model of UK stock returns is developed, replacing the conventional consumption habit reference by a relation that depends on US wealth. Two step Instrumental Variables and Generalized Method of Moments estimators are applied to reduce the impact of weak instruments. The standard errors are corrected for the generated regressor problem and the model is found to explain UK excess returns by UK consumption growth and expected US excess returns. Hence, controlling for nomina l effects by subtracting a risk free rate and conditioning on real US excess returns provides a coherent explanation of the equity premium puzzle

Multifactor consumption based asset pricing models using the US stock market as a reference: Evidence from a panel of developed economies

In this paper we extend the time series analysis to the panel framework to test the C-CAPM driven by wealth references for developed countries. Specifically, we focus on a linearised form of the Consumption-based CAPM in a pooled cross section panel model with two-way error components. The empirical ndings of this two-factor model with various specifications all indicate that there is significant unobserved heterogeneity captured by cross-country fixed e¤ects when consumption growth is treated as a common factor, of which the average risk aversion coefficient is 4.285. However, the cross-sectional impact of home consumption growth varies dramatically over the countries, where unobserved heterogeneity of risk aversion can also be addressed by random effects

Construction of optimal multi-level supersaturated designs

A supersaturated design is a design whose run size is not large enough for estimating all the main effects. The goodness of multi-level supersaturated designs can be judged by the generalized minimum aberration criterion proposed by Xu and Wu [Ann. Statist. 29 (2001) 1066--1077]. A new lower bound is derived and general construction methods are proposed for multi-level supersaturated designs. Inspired by the Addelman--Kempthorne construction of orthogonal arrays, several classes of optimal multi-level supersaturated designs are given in explicit form: Columns are labeled with linear or quadratic polynomials and rows are points over a finite field. Additive characters are used to study the properties of resulting designs. Some small optimal supersaturated designs of 3, 4 and 5 levels are listed with their properties.Comment: Published at http://dx.doi.org/10.1214/009053605000000688 in the Annals of Statistics (http://www.imstat.org/aos/) by the Institute of Mathematical Statistics (http://www.imstat.org

An empirical investigation of the relationship between the real economy and stock returns for the United States

This paper tests for the relationship between excess returns and economic growth rates in the U.S., using a Seemingly Unrelated Regression (SUR) approach. The system includes monthly data for inflation, consumption, narrow money supply and personal disposable income and each equation has up to 24-lagged Autoregressive terms. After removing the four major shocks associated with Black Monday, the Asian Crisis, “9·11” and its anniversary, we cannot find any ARCH behaviour in either the excess returns or the money series. The models are reduced to their parsimonious forms and the inflation and real consumption equations are corrected for ARCH. To make the result more robust we reduce our system to four equations by conditioning on income and testing the remaining equations for stability. The SUR model suggests strong long-run feedback between the financial sector and the real economy firstly through inflation, then consumption while the influence of real money supply appears transitory. Consumption is more sensitive to the economic variables in short and long run as compared with stock market windfalls

GRBs and fundamental physics

Gamma-ray bursts (GRBs) are short and intense flashes at the cosmological distances, which are the most luminous explosions in the Universe. The high luminosities of GRBs make them detectable out to the edge of the visible universe. So, they are unique tools to probe the properties of high-redshift universe: including the cosmic expansion and dark energy, star formation rate, the reionization epoch and the metal evolution of the Universe. First, they can be used to constrain the history of cosmic acceleration and the evolution of dark energy in a redshift range hardly achievable by other cosmological probes. Second, long GRBs are believed to be formed by collapse of massive stars. So they can be used to derive the high-redshift star formation rate, which can not be probed by current observations. Moreover, the use of GRBs as cosmological tools could unveil the reionization history and metal evolution of the Universe, the intergalactic medium (IGM) properties and the nature of first stars in the early universe. But beyond that, the GRB high-energy photons can be applied to constrain Lorentz invariance violation (LIV) and to test Einstein's Equivalence Principle (EEP). In this paper, we review the progress on the GRB cosmology and fundamental physics probed by GRBs.Comment: 38 pages, 18 figures, Review based on ISSI workshop "Gamma-Ray Bursts: a Tool to Explore the Young Universe" (2015, Beijing, China), accepted for publication in Space Science Review

A thermal, thermoelastic, and wear analysis of high-energy disk brakes

A thermomechanical investigation of the sliding contact problem encountered in high-energy disk brakes is described. The analysis includes a modelling, using the finite element method of the thermoelastic instabilities that cause transient changes in contact area to occur on the friction surface. In order to include the effect of wear at the contact surface, a wear criterion is proposed that results in the prediction of wear rates for disk brakes that are quite close to experimentally determined wear rates. The thermal analysis shows that the transient temperature distribution in a disk brake assembly can be determined more accurately by use of this thermomechanical analysis than by a more conventional analysis that assumes constant contact conditions. It also shows that lower, more desirable, temperatures in disk brakes can be attained by increasing the volume, the thermal conductivity, and, especially, the heat capacity of the brake components