Price Discovery in Canadian and U.S. 10-Year Government Bond Markets

This paper presents some new results on the price discovery process in both the Canadian and U.S. 10-year Government bond markets using high-frequency data not previously analyzed. Using techniques introduced by Hasbrouck (1995) and Gonzalo-Granger (1995), we look at the relative information content of cash and futures prices in the market for Canadian Government bonds using futures market data from the Montreal Exchange and OTC cash market data reflecting the inter-dealer market covered by CanPx. We also analyze similar data from the US market over a somewhat longer period using data on the Chicago Board of Trade (CBOT) futures market as well as the cash market from GovPx in the first part of the sample and subsequently from BrokerTec. In general, we find that relatively more price discovery occurs in the futures markets than the cash markets in both Canada and the U.S. and that the results look remarkably similar across the two countries despite the large differences in the sizes of their markets and in their characteristics, particularly on the cash side. These overall results, however, hide the fact that information shares for the U.S. futures markets declined throughout 2004-05 apparently as a result of improvements in the spot market BrokerTec platform. Day-to-day variation in price discovery information shares is related to bid-ask spreads, trading volumes, and realized volatility in the markets but there remains much unexplained.Financial markets; Market structure and pricing

Price Discovery in Canadian Government Bond Futures and Spot Markets

In this paper we look at the relative information content of cash and futures prices for Canadian Government bonds. We follow the information-share approaches introduced by Hasbrouck (1995) and Harris et al (1995), applying the techniques in Gonzalo-Granger (1995), to evaluate the relative contributions of trading in the cash and futures markets to the price discovery process. Both approaches estimate a vector error correction model that permits the separation of long-run price movements from short-run market microstructure effects. As well, we follow Yan and Zivot (2004) who introduce size measures of a market's adjustment to a new equilibrium during the price discovery process. We find that, on an average day, just over 70% of price discovery occurs on the futures market where bid-ask spreads are lower and trading activity is higher. The size of the responses to shocks and the time taken to adjust to a new equilibrium are found to be significantly larger for the cash market.Financial markets; Market structure and pricing

THE RISE OF RURAL-TO-RURAL LABOR MARKETS IN CHINA

The continued transfer of agricultural labor into the industrial sector is crucial to China's transformation into an industrial economy. We argue in this paper that rural industry offers an alternative to urban industry for receiving agricultural labor from areas without off-farm employment opportunities. Characteristics of rural industry differ from their urban counterparts. These characteristics may serve to shape the growth in employment for incoming workers in rural areas, provide opportunities for certain types of workers, and affect the impacts these workers have on the local economy. In this paper we examine the features of China's rural-to-rural labor movement and the villages where these workers are employed. Using a nationally representative sample of 215 villages, we show that the growth in rural-to-rural labor movement between 1988 and 1995 has been much faster than in rural-to-urban movement or in local off-farm employment. The rapid growth in rural-to-rural commuting and migration has not negatively affected off-farm income earning opportunities for workers living in the receiving villages. Rural-to-rural labor movement also has many positive effects. Labor movement into rural villages provides opportunities for workers generally underrepresented in other parts of the off-farm labor market, appears to dampen upward pressure on wages that allows rural industry to maintain labor intensive practices, and promotes national economic integration.Labor and Human Capital,

Commitment Contracts

We review the theoretical and empirical literature on commitment devices.A commitment device is any arrangement, entered into by an individual, with the aim of making it easier to fulfill his or her own future plans. We argue that there is growing empirical evidence supporting the proposition that people demand commitment devices and that these devices can change behavior. We highlight the importance of further research exploring soft commitment – those involving only psychological costs – and the welfare consequences of hard commitments – those involving actual costs – especially in the presence of bounded rationality.consumer/household economics, institutional and behavioral economics

The baseline intracluster entropy profile from gravitational structure formation

The radial entropy profile of the hot gas in clusters of galaxies tends to follow a power law in radius outside of the cluster core. Here we present a simple formula giving both the normalization and slope for the power-law entropy profiles of clusters that form in the absence of non-gravitational processes such as radiative cooling and subsequent feedback. It is based on seventy-one clusters drawn from four separate cosmological simulations, two using smoothed-particle hydrodynamics (SPH) and two using adaptive-mesh refinement (AMR), and can be used as a baseline for assessing the impact of non-gravitational processes on the intracluster medium outside of cluster cores. All the simulations produce clusters with self-similar structure in which the normalization of the entropy profile scales linearly with cluster temperature, and these profiles are in excellent agreement outside of 0.2 r_200. Because the observed entropy profiles of clusters do not scale linearly with temperature, our models confirm that non-gravitational processes are necessary to break the self-similarity seen in the simulations. However, the core entropy levels found by the two codes used here significantly differ, with the AMR code producing nearly twice as much entropy at the centre of a cluster.Comment: Accepted to MNRAS, 8 pages, 9 figure

Morphological, textual, geochemical, and mineralogical properties of dolostone-derived residuum in Knox County, Tennessee

This research concerns the weathering of carbonate bedrock and subsequent genesis and properties of carbonate-derived residuum in Knox County, Tennessee. The carbonate-derived residuum evaluated in this study is classified as an Ultisol, and comprises up to 11 m of regolith overlying Mascot Fm. dolostone bedrock within the Valley and Ridge Province of East Tennessee. Morphological, textural, geochemical, and mineralogical analyses were performed on entire soil profiles and subjacent bedrock from core samples retrieved from 7 boreholes. Findings of this research reveal that the regolith is derived primarily from extensive weathering of the parent bedrock, but with evidence of substantial reworking of materials by flowing water, slope movement and pedogenesis, and possible inputs of material from other sources that include the overlying bedrock (Chickamauga Group). The occurrence of at least one paleosol found near the base of borehole 1 further supports this assertion. Based upon data that include mass-balance calculations for strain (volume change), translocations of clay-constituent elements (relative to TiO2), as well as physical characteristics of underlying Mascot Fm. bedrock that includes percentages of insoluble residues and estimated thickness of the bedrock at the study site, it is apparent that the Mascot Dolomite is a primary parent material for these soils. However, much clay has been introduced and translocated during soil genesis, and can only be accounted for by the addition of materials from outside (and stratigraphically overlying) sources in conjunction with the weathering of extensive thickness of dolostone bedrock. A multi-stage, 2-D conceptual model has been proposed to account for long-term Ultisol maturation within a dynamic geomorphic surface. Boundaries between genetic units within the soil residuum and overlying colluvium have been homogenized by advanced Ultisol pedogenesis, however, they are still detectable upon close inspection. Furthermore, results suggest that pore structure and macroporosity occlusion is most dependent on illuviation of pedogenic clays and precipitation of mineral precipitates, which commonly extend from 2 m depth down to the bedrock contact

Challenges for the Accurate Determination of the Surface Thermal Condition via In-Depth Sensor Data

The overall goal of this work is to provide a systematic methodology by which the difficulties associated with the inverse heat conduction problem (IHCP) can be resolved. To this end, two inverse heat conduction methods are presented. First, a space-marching IHCP method (discrete space, discrete time) utilizing a Gaussian low-pass filter for regularization is studied. The stability and accuracy of this inverse prediction is demonstrated to be more sensitive to the temporal mesh than the spatial mesh. The second inverse heat conduction method presented aims to eliminate this feature by employing a global time, discrete space inverse solution methodology. The novel treatment of the temporal derivative in the heat equation, combined with the global time Gaussian low-pass filter provides the regularization required for stable, accurate results. A physical experiment used as a test bed for validation of the numerical methods described herein is also presented. The physics of installed thermocouple sensors are outlined, and loop-current step response (LCSR) is employed to measure and correct for the delay and attenuation characteristics of the sensors. A new technique for the analysis of LCSR data is presented, and excellent agreement is observed between this model and the data. The space-marching method, global time method, and a new calibration integral method are employed to analyze the experimental data. First, data from only one probe is used which limits the results to the case of a semi-infinite medium. Next, data from two probes at different depths are used in the inverse analysis which enables generalization of the results to domains of finite width. For both one- and two-probe analyses, excellent agreement is found between the actual surface heat flux and the inverse predictions. The most accurate inverse technique is shown to be the calibration integral method, which is presently restricted to one-probe analysis. It is postulated that the accuracy of the global time method could be improved if the required higher-time derivatives of temperature data could be more accurately measured. Some preliminary work in obtaining these higher-time derivatives of temperature from a voltage-rate interface used in conjunction with the thermocouple calibration curve is also presented