Learning about Risk and Return: A Simple Model of Bubbles and Crashes

This paper demonstrates that an asset pricing model with least-squares learning can lead to bubbles and crashes as endogenous responses to the fundamentals driving asset prices. When agents are risk-averse they need to make forecasts of the conditional variance of a stock¡¯s return. Recursive updating of both the conditional variance and the expected return implies several mechanisms through which learning impacts stock prices. Extended periods of excess volatility, bubbles and crashes arise with a frequency that depends on the extent to which past data is discounted. A central role is played by changes over time in agents¡¯ estimates of risk.Risk, Asset Pricing, Bubbles, Adaptive Learning.

Spectroscopically Peculiar Type Ia Supernovae and Implications for Progenitors

In a recent paper Li et al. (2000) reported that 36 percent of 45 Type Ia supernovae (SNe Ia) discovered since 1997 in two volume-limited supernova searches were spectroscopically peculiar, and they suggested that because this peculiarity rate is higher than that reported for an earlier observational sample by Branch et al. (1993), it is now more likely that SNe Ia are produced by more than one kind of progenitor. In this paper I discuss and clarify the differences between the results of Li et al. and Branch et al. and I suggest that multiple progenitor systems are now less likely than they were before.Comment: 11 pages; accepted by PASP; several minor changes, 2 references added, main conclusions unchange

Adaptive learning, endogenous inattention, and changes in monetary policy

This paper develops an adaptive learning formulation of an extension to the Ball, Mankiw, and Reis (2005) sticky information model that incorporates endogenous inattention. We show that, following an exogenous increase in the policymaker’s preferences for price vs. output stability, the learning process can converge to a new equilibrium in which both output and price volatility are lower.Monetary policy ; Information theory

Learning about Risk and Return: A Simple Model of Bubbles and Crashes

This paper demonstrates that an asset pricing model with least-squares learning can lead to bubbles and crashes as endogenous responses to the fundamentals driving asset prices. When agents are risk-averse they need to make forecasts of the conditional variance of a stock’s return. Recursive updating of both the conditional variance and the expected return implies several mechanisms through which learning impacts stock prices. Extended periods of excess volatility, bubbles and crashes arise with a frequency that depends on the extent to which past data is discounted. A central role is played by changes over time in agents’ estimates of risk

A study of ignition phenomena of bulk metals by radiant heating

Early research on combustion of metals was motivated by the knowledge of the large heat release and corresponding high temperatures associated with metal-oxygen reactions. The advent of space flight brought about an increased interest in the ignition and combustion of metallic particles as additives in solid rocket propellants. More recently, attention has been given to the flammability properties of bulk, structural metals due to the number of accidental explosions of metal components in high-pressure oxygen systems. The following work represents a preliminary study that is part of a broader research effort aimed at providing further insight into the phenomena of bulk metal combustion by looking at the effects of gravity on the ignition behavior of metals. The scope of this preliminary experimental study includes the use of a non-coherent, continuous radiation ignition source, the measurement of temperature profiles of a variety of metals and a qualitative observation of the ignition phenomena at normal gravity. The specific objectives of the investigation include: (1) a feasibility study of the use of a continuous radiation source for metal ignition; (2) testing and characterization of the ignition behavior of a variety of metals; and (3) building a preliminary experimental database on ignition of metals under normal gravity conditions

Intrinsic Heterogeneity in Expectation Formation

We introduce the concept of a Misspecification Equilibrium to dynamic macroeconomics. Agents choose between a list of misspecified econometric models and base their selection on relative forecast performance. A Misspecification Equilibrium is an equilibrium stochastic process in which agents forecast optimally given their choices, with the forecasting model parameters and predictor proportions endogenously determined. For appropriate conditions on the exogenous driving process and the degree of feedback of expectations, the Misspecification Equilibrium will exhibit Intrinsic Heterogeneity. With Intrinsic Heterogeneity more than one misspecified model receives positive weight in the distribution of predictors across agents, even in the neoclassical limit in which only the most successful predictors are used

On the High--Velocity Ejecta of the Type Ia Supernova 1994D

Synthetic spectra generated with the parameterized supernova synthetic-spectrum code SYNOW are compared to spectra of the Type Ia SN 1994D that were obtained before the time of maximum brightness. Evidence is found for the presence of two-component Fe II and Ca II features, forming in high velocity ($\ge 20,000$ \kms) and lower velocity ($\le 16,000$ \kms) matter. Possible interpretations of these spectral splits, and implications for using early--time spectra of SNe Ia to probe the metallicity of the progenitor white dwarf and the nature of the nuclear burning front in the outer layers of the explosion, are discussed.Comment: 15 pages, 3 figures, 3 tables, Astrophysical Journal, in pres

Ignition and Combustion of Bulk Metals in a Microgravity Environment

This annual report summarizes the latest results obtained in a NASA-supported project to investigate the effect of gravity on the ignition and combustion of bulk metals. The experimental arrangement used for this purpose consists of a 1000-W xenon lamp that irradiates the top surface of cylindrical titanium and magnesium specimens, 4 mm in diameter and 4 mm in height, in a quiescent, pure-oxygen environment at 1 atm. Reduced gravity is obtained from the NASA LeRC DC-9 aircraft flying parabolic trajectories. Values of critical and ignition temperatures are obtained from thermocouple records. Qualitative observations and propagation rates are extracted from high-speed cinematography. Emission spectra of gas-phase reactions are obtained with an imaging spectrograph/diode array system. It was found that high applied heating rates and large internal conduction losses generate critical and ignition temperatures that are several hundred degrees above the values obtained from isothermal experiments. Because of high conduction and radiation heat losses, no appreciable effect on ignition temperatures with reduced convection in low gravity is detected. Lower propagation rates of the molten interface on titanium and of ignition waves on magnesium are obtained at reduced gravity. These rates are compared to theoretical results from heat conduction analyses with a diffusion/convection controlled reaction. The close agreement found between experimental and theoretical values indicates the importance of the influence of natural convection-enhanced oxygen transport on combustion rates. Lower oxygen flux and lack of oxide product removal in the absence of convective currents appear to be responsible for longer burning times of magnesium diffusion flames at reduced gravity. The accumulation of condensed oxide particles in the flame front at low gravity produces a previously unreported unsteady explosion phenomenon in bulk magnesium flames. This spherically symmetric explosion phenomenon seems to be driven by increased radiation heat transfer from the flame front to an evaporating metal core covered by a porous, flexible oxide coating. These important results have revealed the significant role of gravity on the burning of metals, and are now being used as the database for future experiments to be conducted with different metals at various pressures, oxygen concentrations and gravity levels

Why does the Engel method work? Food demand, economies of size and household survey methods

Estimates of household size economies are needed for the analysis of poverty and inequality. This paper shows that Engel estimates of size economies are large when household expenditures are obtained by respondent recall but small when expenditures are obtained by daily recording in diaries. Expenditure estimates from recall surveys appear to have measurement errors correlated with household size. As well as demonstrating the fragility of Engel estimates of size economies, these results help resolve a puzzle raised by Deaton and Paxson (1998) about differences between rich and poor countries in the effect of household size on food demand

C-axis Raman spectra of a normal plane-chain bilayer cuprate and the pseudogap

We investigate the Raman spectra in the geometry where both incident and scattered photon polarizations are parallel to the $\hat{z}$-direction, for a plane-chain bilayer coupled via a single-particle tunneling $t_\perp$. The Raman vertex is derived in the tight-binding limit and in the absence of Coulomb screening, the Raman intensity can be separated into intraband ($\propto t_\perp^4$) and interband ($\propto t_\perp^2$) transitions. In the small-$t_\perp$ limit, the interband part dominates and a pseudogap will appear as it does in the conductivity. Coulomb interactions bring in a two-particle coupling and result in the breakdown of intra- and interband separation. Nevertheless, when $t_\perp$ is small, the Coulomb screening ($\propto t_\perp^4$) has little effect on the intensity to which the unscreened interband transitions contribute most. In general, the total Raman spectra are strongly dependent on the magnitude of $t_\perp$.Comment: 23 pages, 6 figures, submitted to Phys. Rev.