The Asymmetric Effect of the Business Cycle on the Realtion between Stock Market Returns and their Volatility

We examine the relation between US stock market returns and the US business cycle for the period 1960 - 2003 using a new methodology that allows us to estimate a time-varying equity premium. We identify two channels in the transmission mechanism. One is through the mean of stock returns via the equity risk premium, and the other is through the volatility of returns. We provide support for previous findings based on simple correlation analysis that the relation is asymmetric with downturns in the business cycle having a greater negative impact on stock returns than the positive effect of upturns. We also obtain a new result, that demand and supply shocks affect stock returns differently. Our model of the relation between returns and their volatility encompasses CAPM, consumption CAPM and Merton's (1973) inter-temporal CAPM. It is implemented using a multi-variate GARCH-in-mean model with an asymmetric time-varying conditional heteroskedasticity and correlation structure.Equity returns, risk premium, asymmetry

An Asset Market Integration Test Based on Observable Macroeconomic Stochastic Discount Factors

There are a number of tests and measures of the degree of integration in the literature. An example is the idea that integrated markets should provide rates of return that are highly correlated with one another and that a measure of correlation provides an appropriate test. This particular idea is clearly false; for substantial periods of time we don't ever see stocks traded on the same market moving together. Specific models of what prices risk in individual markets could provide the basis of a test of integration. However, as has been widely shown, any differences between these pricing models will be subject to arbitrage by informed traders and so cannot form the basis for a test. In this paper we exploit the absence of arbitrage possibilities and the operation of the 'Law of One Price' in stochastic discount factor (SDF) theory to construct a test of integration based on a common approach to pricing assets in all markets, not only for stocks. The SDF approach that we adopt says that one SDF should price all assets as the model is not market or asset-specific.Unlike much of the literature, we adopt a direct parametric approach which takes estimates of an identical SDF from two asset markets and asks whether the price of risk associated with this SDF is the same for the two assets as SDF theory says it should. Another distinctive feature of our approach is that we employ observable macroeconomic factors. This allows us to estimate and compare the estimated risk premia in the markets concerned, with and without the integration restriction being applied. The paper uses this methodology to test market integration between the UK equity and FOREX markets. Our test rejects market integration for the consumption-based capital asset pricing model (CCAPM) and two variable SDF models based on consumption growth and inflation and on output and money growth. As equity and FOREX returns have a similar degree of variability, the finding that the risk premium in the FOREX market is generally much more variable than that in the equity market may contribute to the the test outcome.

Discovery and Assessment of New Target Sites for Anti-HIV Therapies

Human immunodeficiency virus (HIV) infects cells by endocytosis and takes over parts of the cell’s reaction pathways in order to reproduce itself and spread the infection. One such pathway taken over by HIV becomes the inflammatory pathway which uses Nuclear Factor κB (NF-κB) as the principal transcription factor. Therefore, knocking out the NF-κB pathway would prevent HIV from reproducing itself. In this report, our goal is to produce a simple model for this pathway with which we can identify potential targets for anti-HIV therapies and test out various hypotheses. We present a very simple model with four coupled first-order ODEs and see what happens if we treat IκK concentration as a parameter that can be controlled (by some unspecified means). In Section 3, we augment this model to account for activation and deactivation of IκK, which is controlled (again, by some unspecified means) by TNF

Macroeconomic Sources of Equity Risk

There are very few estimates of a time-varying equity risk premium based on models that satisfy a no-arbitrage condition. The main aim of this paper is to estimate the US and UK equity risk premia implied by a number of well-known asset pricing models using monthly data for 1975-2001. The models include consumption-based CAPM with power utility, the Epstein-Zin general equilibrium model with time non-separable preferences, CAPM, and the SDF model. We show that most of the theoretical models of the equity risk premium that have been proposed in the literature are special cases the SDF model. We explain why some of them are unable to do this as formulated. In addition to examining existing theories of the equity risk premium, we use the SDF model to generate new theories. We find that macroeconomic variables not previously considered, and not consistent with standard general equilibrium theory, such as production, appear to be priced for the equity risk premium. This suggests that traditional general equilibrium considerations may not be the sole explanation for the equity risk premium; other short-term factors associated with pure price risk may also be involved. A related, and rapidly growing, literature adopts a more statistical approach. It focusses on the empirical relation between the return on equity (or the Sharpe ratio) and return volatility. We use SDF theory to show that this relation is misconceived. The reason for the absence of estimates of the equity risk premium is the difficulty of estimating it. Most of the empirical evidence on these asset pricing models is based on calibration, or the estimation of the Euler equation by GMM, neither of which delivers an estimate of the risk premium. We use a new empirical approach that does produce estimates of the risk premium and allows tests of the theories. As a result we provide the first estimates of the equity risk premium for some of these models. We then use our estimates to investigate the importance of different components of the equity risk premium including, amongst others, return volatility.

Effect of resonance decays on hadron elliptic flows

The influence of resonance decays on the elliptic flows of stable hadrons is studied in the quark coalescence model. Although difference between the elliptic flow of pions from resonance decays, except the rho meson, and that of directly produced pions is appreciable, those for other stable hadrons are small. Since there are more pions from the decays of rho mesons than from other resonances, including resonance decays can only account partially the deviation of final pion elliptic flow from the observed scaling of hadron elliptic flows, i.e., the hadron elliptic flow per quark is the same at same transverse momentum per quark. The remaining deviation can be explained by including the effect due to the quark momentum distribution inside hadrons.Comment: 13 pages and 5 figures, version pubblished in PRC, updated references and figure

Tracking 3-D body motion for docking and robot control

An advanced method of tracking three-dimensional motion of bodies has been developed. This system has the potential to dynamically characterize machine and other structural motion, even in the presence of structural flexibility, thus facilitating closed loop structural motion control. The system's operation is based on the concept that the intersection of three planes defines a point. Three rotating planes of laser light, fixed and moving photovoltaic diode targets, and a pipe-lined architecture of analog and digital electronics are used to locate multiple targets whose number is only limited by available computer memory. Data collection rates are a function of the laser scan rotation speed and are currently selectable up to 480 Hz. The tested performance on a preliminary prototype designed for 0.1 in accuracy (for tracking human motion) at a 480 Hz data rate includes a worst case resolution of 0.8 mm (0.03 inches), a repeatability of plus or minus 0.635 mm (plus or minus 0.025 inches), and an absolute accuracy of plus or minus 2.0 mm (plus or minus 0.08 inches) within an eight cubic meter volume with all results applicable at the 95 percent level of confidence along each coordinate region. The full six degrees of freedom of a body can be computed by attaching three or more target detectors to the body of interest

Inelastic fingerprints of hydrogen contamination in atomic gold wire systems

We present series of first-principles calculations for both pure and hydrogen contaminated gold wire systems in order to investigate how such impurities can be detected. We show how a single H atom or a single H2 molecule in an atomic gold wire will affect forces and Au-Au atom distances under elongation. We further determine the corresponding evolution of the low-bias conductance as well as the inelastic contributions from vibrations. Our results indicate that the conductance of gold wires is only slightly reduced from the conductance quantum G0=2e^2/h by the presence of a single hydrogen impurity, hence making it difficult to use the conductance itself to distinguish between various configurations. On the other hand, our calculations of the inelastic signals predict significant differences between pure and hydrogen contaminated wires, and, importantly, between atomic and molecular forms of the impurity. A detailed characterization of gold wires with a hydrogen impurity should therefore be possible from the strain dependence of the inelastic signals in the conductance.Comment: 5 pages, 3 figures, Contribution to ICN+T2006, Basel, Switzerland, July-August 200

Coupling Nitrogen Vacancy Centers in Diamond to Superconducting Flux Qubits

We propose a method to achieve coherent coupling between Nitrogen-vacancy (NV) centers in diamond and superconducting (SC) flux qubits. The resulting coupling can be used to create a coherent interaction between the spin states of distant NV centers mediated by the flux qubit. Furthermore, the magnetic coupling can be used to achieve a coherent transfer of quantum information between the flux qubit and an ensemble of NV centers. This enables a long-term memory for a SC quantum processor and possibly an interface between SC qubits and light.Comment: Accepted in Phys. Rev. Lett. Updated text and Supplementary Material adde

Strong coupling of single emitters to surface plasmons

We propose a method that enables strong, coherent coupling between individual optical emitters and electromagnetic excitations in conducting nano-structures. The excitations are optical plasmons that can be localized to sub-wavelength dimensions. Under realistic conditions, the tight confinement causes optical emission to be almost entirely directed into the propagating plasmon modes via a mechanism analogous to cavity quantum electrodynamics. We first illustrate this result for the case of a nanowire, before considering the optimized geometry of a nanotip. We describe an application of this technique involving efficient single-photon generation on demand, in which the plasmons are efficiently out-coupled to a dielectric waveguide. Finally we analyze the effects of increased scattering due to surface roughness on these nano-structures.Comment: 34 pages, 7 figure