Covariance-based orthogonality tests for regressors with unknown persistence

This paper develops a new test of orthogonality based on a zero restriction on the covariance between the dependent variable and the predictor. The test provides a useful alternative to regression-based tests when conditioning variables have roots close or equal to unity. In this case standard predictive regression tests can suffer from well-documented size distortion. Moreover, under the alternative hypothesis, they force the dependent variable to share the same order of integration as the predictor, whereas in practice the dependent variable often appears stationary while the predictor may be near-nonstationary. By contrast, the new test does not enforce the same orders of integration and is therefore capable of detecting alternatives to orthogonality that are excluded by the standard predictive regression model. Moreover, the test statistic has a standard normal limit distribution for both unit root and local-to-unity conditioning variables, without prior knowledge of the local-to-unity parameter. If the conditioning variable is stationary, the test remains conservative and consistent. Thus the new test requires neither size correction nor unit root pre-test. Simulations suggest good small sample performance. As an empirical application, we test for the predictability of stock returns using two persistent predictors, the dividend-price-ratio and short-term interest rate.orthogonality test, covariance estimation, local-to-unity, unit roots, market efficiency, predictive regression, regression imbalance

The teaching and learning research programme (TLRP) in Wales: research evidence for educational policy and practice in Wales

Alex Morgan and Jane Waters, Swansea University; Jane Williams

Inference in Predictive Quantile Regressions

This paper studies inference in predictive quantile regressions when the predictive regressor has a near-unit root. We derive asymptotic distributions for the quantile regression estimator and its heteroskedasticity and autocorrelation consistent (HAC) t-statistic in terms of functionals of Ornstein-Uhlenbeck processes. We then propose a switching-fully modified (FM) predictive test for quantile predictability with persistent regressors. The proposed test employs an FM style correction with a Bonferroni bound for the local-to-unity parameter when the predictor has a near unit root. It switches to a standard predictive quantile regression test with a slightly conservative critical value when the largest root of the predictor lies in the stationary range. Simulations indicate that the test has reliable size in small samples and particularly good power when the predictor is persistent and endogenous, i.e., when the predictive regression problem is most acute. We employ this new methodology to test the ability of three commonly employed, highly persistent and endogenous lagged valuation regressors - the dividend price ratio, earnings price ratio, and book to market ratio - to predict the median, shoulders, and tails of the stock return distribution

Long Memory Regressors and Predictive Regressions: A two-stage rebalancing approach

Predictability tests with long memory regressors may entail both size distortion and incompatibility between the orders of integration of the dependent and independent variables. Addressing both problems simultaneously, this paper proposes a two-step procedure that rebalances the predictive regression by fractionally differencing the predictor based on a first-stage estimation of the memory parameter. Extensive simulations indicate that our procedure has good size, is robust to estimation error in the first stage, and can yield improved power over cases in which an integer order is assumed for the regressor. We also extend our approach beyond the standard predictive regression context to cases in which the dependent variable is also fractionally integrated, but not cointegrated with the regressor. We use our procedure to provide a valid test of forward rate unbiasedness that allows for a long memory forward premium

The Joker effect: cooperation driven by destructive agents

Understanding the emergence of cooperation is a central issue in evolutionary game theory. The hardest setup for the attainment of cooperation in a population of individuals is the Public Goods game in which cooperative agents generate a common good at their own expenses, while defectors "free-ride" this good. Eventually this causes the exhaustion of the good, a situation which is bad for everybody. Previous results have shown that introducing reputation, allowing for volunteer participation, punishing defectors, rewarding cooperators or structuring agents, can enhance cooperation. Here we present a model which shows how the introduction of rare, malicious agents -that we term jokers- performing just destructive actions on the other agents induce bursts of cooperation. The appearance of jokers promotes a rock-paper-scissors dynamics, where jokers outbeat defectors and cooperators outperform jokers, which are subsequently invaded by defectors. Thus, paradoxically, the existence of destructive agents acting indiscriminately promotes cooperation.Comment: Accepted for publication in the Journal of Theoretical Biology (JTB

No Impact of Calorie or Unit Information on Ad Libitum Alcohol Consumption.

AIMS: To investigate the impact of unit and calorie information on drinking behaviour in an ad libitum taste test paradigm. METHODS: In this experimental human laboratory study, participants were randomized to one of four conditions, balanced by gender, using a 2 (unit information: present vs. absent) × 2 (calorie information: present vs. absent) between-subjects design. The percentage of beer consumed during the taste test was the primary outcome measure. RESULTS: Among this largely undergraduate student population, we found no evidence that either unit or calorie information impacted alcohol consumption in an ad libitum taste test. A manipulation check indicated that few of the participants receiving either unit and/or calorie information could accurately recall the number of units and/or calories in the beverages provided to them, indicating low levels of engagement with this information. Analysis of qualitative reactions to calorie and unit labelling indicated possible negative unintended consequences of calorie and unit information, including using unit information to facilitate consumption of higher strength beverages, and calorie information to reduce food consumption prior to a drinking episode. CONCLUSION: We find no evidence to support an effect of unit or calorie information, a public-health initiative supported by the alcohol industry, on drinking behaviour. It is possible that compulsory unit and calorie labelling, at least in the numeric format used here, would have no effect on alcohol intake and may even have some negative unintended consequences among certain populations

Valuating the capital structure under incomplete information

Can higher uncertainty increase the valuation (market-to-book value) of young firms compared to more established ones? As the current market shows higher levels of uncertainty about companies’ expected cash flows and changes in firm value, the question of the fundamental convex relationship between the two becomes more relevant. This paper aims to study how cash flow uncertainty affects the capital structure/leverage of a firm over time. A simple Bayesian learning framework is employed to assess leverage ratios in the presence of parameter uncertainty about expected cash flow. This study provides an analytical solution for leverage as a function of firm age and explores the implications using numerical results. The model links market leverage with expected cash flow volatility and firm age. Young firms face uncertainty about their expected cash flows and hence their firm value. Managers continuously update their evaluation of leverage ratios when they observe realized cash flow until firms reach maturity. Therefore, the paper provides a novel explanation of why the leverage ratio for many start-ups increases over time: the resolution of uncertainty decreases upside shock expectations as the firm ages. This result is useful both for academics, who can test the formulas derived in this paper for various industries, countries, and conditions, and for practitioners, who can use them to calibrate algorithmic trading models when linking uncertainty and firm valuation

The Internet profiles of men who have sex with men within bareback websites

The Internet has become a venue for men who have sex with men to search for sexual partners. Some of these men intentionally seek unprotected anal intercourse with other men (‘bareback’ sex). This paper focuses on the creation, use, and content of Internet personal profiles of men who have sex with men in the greater New York City metropolitan area who use bareback sites for sexual networking. We used a mixedmethods approach to examine data from a cybercartography of Internet sites conducted during the first phase of the research (199 personal profiles) and from in-depth interviews conducted during its second phase (120 men who have sex with men who sought partners online for bareback sex). Results indicate that men generally followed offline stereotypical patterns in their online profiles. However, men who disclosed being HIV-positive were more likely to include face and head pictures. Overall, the images they used were heavily sexualised in accordance with group norms perceived and reinforced by the websites’ design and imagery. Bottom-identified men tended to be more explicit in the exposition of their sexual and drug use interests online. This paper highlights how certain virtual and social performances play upon and reinforce other, in the flesh, performances

Association of Upper Gastrointestinal Surgery of Great Britain and Ireland (AUGIS)/Perioperative Quality Initiative (POQI) consensus statement on intraoperative and postoperative interventions to reduce pulmonary complications after oesophagectomy

BACKGROUND: Pulmonary complications are the most common morbidity after oesophagectomy, contributing to mortality and prolonged postoperative recovery, and have a negative impact on health-related quality of life. A variety of single or bundled interventions in the perioperative setting have been developed to reduce the incidence of pulmonary complications. Significant variation in practice exists across the UK. The aim of this modified Delphi consensus was to deliver clear evidence-based consensus recommendations regarding intraoperative and postoperative care that may reduce pulmonary complications after oesophagectomy. METHODS: With input from a multidisciplinary group of 23 experts in the perioperative management of patients undergoing surgery for oesophageal cancer, a modified Delphi method was employed. Following an initial systematic review of relevant literature, a range of anaesthetic, surgical, and postoperative care interventions were identified. These were then discussed during a two-part virtual conference. Recommendation statements were drafted, refined, and agreed by all attendees. The level of evidence supporting each statement was considered. RESULTS: Consensus was reached on 12 statements on topics including operative approach, pyloric drainage strategies, intraoperative fluid and ventilation strategies, perioperative analgesia, postoperative feeding plans, and physiotherapy interventions. Seven additional questions concerning the perioperative management of patients undergoing oesophagectomy were highlighted to guide future research. CONCLUSION: Clear consensus recommendations regarding intraoperative and postoperative interventions that may reduce pulmonary complications after oesophagectomy are presented

Rain-On-Snow Events, Ecology and Community Recording

No abstract availabl