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

House Prices, Disposable Income, and Permanent and Temporary Shocks

This paper specifies a two-variable system of house prices and income for N.Z., U.K. and the U.S., covering periods from 1973:4 through 2008:2. The analysis allows the identification of differences in house priceincome relationships over sub-periods and, using an SVAR approach, compares the responses of house prices when faced with permanent and transitory shocks to income. It continues by decomposing each historical house prices series into their permanent, temporary and deterministic components. Our results suggest that while real house prices have a long-run relationship with real income in all three economies, the responsiveness of house prices to innovations in income will vary over both time and markets depending on whether the income disturbances are viewed as permanent or temporary. The evidence suggests that N.Z. and U.K. housing markets are sensitive to both permanent and transitory shocks to income while the U.S. market reacts to temporary shocks with the permanent component having a largely insignificant role to play in house price composition. In N.Z. the temporary component of house prices has tended to be positive over time, pushing prices higher than they would have been otherwise while in the U.K. both permanent and temporary components have tended to reinforce each other. Overall, there is no clear consistent global pattern regarding the importance of these shocks which implies that housing markets will react differently to the vagaries of global and domestic economic activity driving such shocks

House Prices, Non-Fundamental Components and Interstate Spillovers: The Australian Experience

Using Australian capital city data from 1984Q3-2008Q2, this paper utilizes a dynamic present value model within a VAR framework to construct time series of house prices depicting what aggregate house prices should be given expectations of future real disposable income – the ‘fundamental price’ – and continues by comparing capital city fundamental prices with actual prices. The extent to which revealed capital city ‘non-fundamental’ components spillover from state to state, as well as their long-term impact is also investigated. Results provide evidence of periods of sustained deviations of house prices from values warranted by income for all state capitals with the greatest deviations arising in the NSW market and starting around 2000. In general NSW is relatively more susceptible to spillovers transmitted from other states while ACT and WA are most isolated from the rest of the country.house prices, present value model, house price fundamentals, house price-income ratio, VAR/VEC modelling

House prices, fundamentals and bubbles

This paper studies actual (real) house prices relative to fundamental (real) house values. Such a focus is warranted since housing constitutes a large fraction of most household portfolios, and its characteristics are such that, in contrast to what prevails in financial markets, arbitrage will be limited and hence correction toward ‘true’ value is likely to be a prolonged process. Using UK data and a time-varying present value approach, our results preclude the existence of an explosive rational bubble due to non-fundamental factors. We further find that intrinsic bubbles have an important role to play in determining actual house prices although price dynamics appear to impact, particularly in periods of strong deviation from fundamental value. Price dynamics are found to by driven by momentum behaviour

Multiple Sclerosis Prevalence in New Zealand: Effects of Latitude and UV

Multiple Sclerosis (MS) is a disease with a complex aetiology and pathogenesis. It is the most common neurologically debilitating disorder to affect young people, but it also affects older people. This dissertation is based on data from the New Zealand National MS Prevalence Study, a project funded by the New Zealand Health Research Council and the New Zealand MS Society which explores the relationship between the prevalence of MS in New Zealand, coincident with the national 2006 population census, and factors including gender, ethnicity, MS phenotype, latitude of residence and UV radiation exposure. A latitudinal gradient of MS prevalence in New Zealand, which varies according to gender, ethnicity and MS phenotype, has been established previously. This dissertation extends this knowledge by examining the impact of lifetime residential migration in confounding this latitudinal gradient. In order to eliminate effects due to sample size, a prevalence–latitude rate ratio is considered for the prevalence of MS rather than the latitudinal gradient itself. Using GIS analysis, rate ratios have been determined for New Zealand. It is established that the north‐south ratios differ according to gender, MS phenotype and case age at residence locations, with particular reference to early life locations. The female RR/SPMS ratio is higher than the male RR/SPMS ratio, however, the female PPMS ratio is lower than the male PPMS ratio. Early life location ratios appear similar to those at census prevalence date, however, differences between rate ratios for different factors are more significant. The effect of replacing latitude with local ambient UV levels is also explored and the relationship between MS prevalence and UV exposure is seen to be very similar to that observed between MS prevalence and latitude. The implications of these results for future studies to investigate possible causes of MS are discussed

Essays on international parity conditions

This thesis brings together a collection of essays on parity conditions in international economics: covered interest parity: covered interest parity: purchasing power parity and real interest parity. While each essay is an independent study of a particular problem area, there exists a common theme in that the set of parity conditions chosen for analysis is thought to be important in determining the short and long-nm behaviour of exchange rates. The justification for the study arises from two related issues. Firstly, as it is often assumed that exchange rates are determined in efficient markets, an analysis of international parity conditions may help us comment on the efficient markets hypothesis. We define efficiency according to Fama (1970), Where the market is said to be efficient if prices 'fully reflect' all currently available information. Secondly, models of exchange rate determination, within which the above parity conditions play a fundamental role, have exhibited a poor empirical performance in the recent past. An examination of the foundations of such models may therefore be helpful in allocating 'blame'. Of the four problem areas analysed ally covered interest parity was unconditionally accepted as a plausible assumption. Fran a possible 6330 potential arbitrage opportunities observed during the months of August and September 1987, only eight would have been profitable. Agents were efficient in terms of ensuring the forward exchange premium equalled the relevant interest rate differentials, subject to transaction costs. Some evidence however was found for the existence of a risk premium in the forward exchange rate during the 1920s, but attempts to model the premium as both a function of past forecast errors and as a latent variable, had limited success. We were therefore unable to verify the existence of risk averse speculative agents in foreign exchange markets. Purchasing power parity, analysed in terms of a theory of arbitrage for the period 1975 to 1980, using a recently developed econometric technique - cointegration - was rejected. This would imply that commodity arbitrage may be inefficient. A direct test of real interest parity using the bivariate vector autoregression approach, was also decisively rejected for the period 1979 to 1986. The observation that real interest rates do not fully reflect all currently held information suggests that the long term credibility of the European Monetary System may be suspect and that governments can influence national investment/saving decisions by intervention in domestic financial markets

Previous pregnancy outcomes and subsequent pregnancy anxiety in a Quebec prospective cohort

Introduction— Pregnancy anxiety is an important psychosocial risk factor that may be more strongly associated with adverse birth outcomes than other measures of stress. Better understanding of the upstream predictors and causes of pregnancy anxiety could help to identify high-risk women for adverse maternal and infant outcomes. The objective of the present study was to measure the associations between five past pregnancy outcomes (live preterm birth (PTB), live term birth, miscarriage at <20 weeks, stillbirth at ≥20 weeks, and elective abortion) and pregnancy anxiety at three trimesters in a subsequent pregnancy. Methods— Analyses were conducted using data from the 3D Cohort Study, a Canadian birth cohort. Data on maternal demographic characteristics and pregnancy history for each known previous pregnancy were collected via interviewer-administered questionnaires at study entry. Pregnancy anxiety for the index study pregnancy was measured prospectively by self-administered questionnaire following three prenatal study visits. Results— Of 2366 participants in the 3D Study, 1505 had at least one previous pregnancy. In linear regression analyses with adjustment for confounding variables, prior live term birth was associated with lower pregnancy anxiety in all three trimesters, whereas prior miscarriage was significantly associated with higher pregnancy anxiety in the first trimester. Prior stillbirth was associated with greater pregnancy anxiety in the third trimester. Prior elective abortion was significantly associated with higher pregnancy anxiety scores in the first and second trimesters, with an association of similar magnitude observed in the third trimester. Discussion— Our findings suggest that the outcomes of previous pregnancies should be incorporated, along with demographic and psychosocial characteristics, into conceptual models framing pregnancy anxiety