Modelling market fundamentals: A model of the aluminium market

The standard approach to modelling primary commodity markets under rational expectations is to relate the commodity price to the production and consumption ‘surprises’ (i.e. the innovations on the equations). Using the world aluminium market, we show how this approach can be modified so that both the price and stock can be written in terms of one or more market ‘fundamentals’ which reflect the supply—demand balance on the market. This approach allows joint estimation of production, consumption, stock demand and price equations subject to cross-equation restrictions. It may be seen as a formalization of the approach adopted by metals industry analysts.     

Evidence of irreversibility in the UK property market

The real options approach to valuation of property investment suggests that various sources of uncertainty about future returns on investment have important effects on irreversible property investment decisions. Our aim in this study has been to examine how investment decisions at three main stages of the property development/investment processes respond to different sources of uncertainty. Based on the methodology developed by Episcopos (1995), the neo-classical proposition of Hartman-Abel that predicts a positive investment-uncertainty relationship is tested against that proposed by the real option theory. It is interesting to note that our empirical findings are generally consistent with the prediction of the real option theory that uncertainty increases the option value to wait for the arrival of new information thus decreasing the current investment activities. In periods of high volatility, we would expect investors in the property market to be more prudent and scale down their investment exposure to market volatility compared with periods of a relatively stable market environment.     

How tight is the UK labour market?

With the unemployment rate touching 25-year lows and some signs of a pick-up in earnings growth, concern has again focussed on how much scope the labour market has to meet the requirements of the above-trend growth forecast for the UK. This article by David Tinsley reviews some of the evidence for how 'tight' the UK labour market is. It suggests that, although the labour market has probably tightened over the last year or so, the headline figures give a somewhat misleading picture. It goes on to argue that there are a number of other margins for adjustment by which the demands of the robust growth forecast for the UK over the next few years can be met without igniting significant inflationary pressure.     

UK housing market: the impact of Home Information Packs

The government plan to make Home Information Packs (HIPs) a legal requirement when marketing a property from June 2007 has provoked much debate both in the House of Commons and the press in recent weeks. The scheme was subject to an eight month pilot in Bristol in 1999-2000 and an impact assessment has been conducted. These, however, assess the scheme almost wholly within its own terms. This article, by Sam Moore, discusses the wider implications of HIPs on the UK economy. The higher cost of moving house is likely to have implications for the volume of house sales. Two scenarios have been modelled. The first considers the implications of a 25 percent fall in housing transactions and the second considers a 10 percent fall. The research considers the direct effect on consumer spending and the medium term unemployment rate and the subsequent knock on implications for the rest of the UK economy. In the "25 percent" scenario at its peak unemployment is over 90,000 higher than the base and GDP is down by half a percentage point. The most affected regions are those in the south of the country.     

次贷危机阴影下的英国房地产市场

美联储前主席艾伦·格林斯潘在接受英国《金融时报》采访时曾把美国当前的次贷危机评价为二战结束以来最严重的危机。而次贷危机同样也正在向英国房地产市场蔓延。这场危机加上全球经济增长减速,使英国政府措手不及。由于没有历史经验,对于这场危机的深度和广度很难估计,目前英国房价出现持续下跌的趋势。     

Platform competition: Betfair and the UK market for sports betting

We examine two episodes of strategic interaction in the UK betting industry: (a) Betfair (an entrant multisided platform, or MSP) versus Flutter (also an MSP), and (b) Betfair versus traditional bookmakers. We find that although Betfair was an underfunded second mover in the betting exchange space, it was able to attract punters at a much faster rate than the better‐funded first mover, Flutter. Moreover, while Betfair and traditional bookmakers competed aggressively for market share, they also developed a highly complementary relationship that favored all parties. We discuss implications for research in the economics and management of MSPs. Specifically, we argue that the literature would benefit from work that endogenizes platform design and that considers the possible competitive and cooperative interactions between the business models of traditional incumbents and those of potential innovative MSP entrants.     

Testing a discrete switching disequilibrium model of the UK labour market

This paper develops a test procedure for serial correlation for discrete switching disequilibrium models which include both an endogenous price adjustment equation and lagged dependent variables. The tests are applied to a model of the UK labour market and the model is respecified in the light of the test results.     

The responsiveness of wages to labour market conditions in the UK

If wages are more flexible in the sense that pay is more responsive to labour market conditions, this has important implications for the workings of the aggregate economy. First, the real fluctuations generated by both demand and supply shocks are smaller, and second, the economy can operate at a higher level of activity relative to potential without adverse inflationary consequences (i.e., the NAIRU is lower). Our empirical analysis of wage flexibility suggests that UK wages have become more responsive to labour market conditions since the mid-1980s, at least relative to the previous decade. Furthermore, this has happened within certain industrial sectors. Finally, a part of this move towards greater responsiveness has been due to the decline in national pay bargaining over the relevant period. However, the majority of this change is due to some other factors.     

Product strategy and size of firm in the UK fertilizer market

The paper analyses three aspects of product strategy: the size of product range offered, the extent and type of product differentiation and product matching, and the role of new product innovation in firms' competitive strategies. In essence the paper is concerned with competitive behaviour where the product is treated as a variable. Three conclusions emerged. First, there was no significant correlation between the size of product range offered and the size of firm. Second, while the three main oligopolists almost always tried to differentiate their products the competitive fringe showed a strong tendency to match the major firms' products. Third, new product competition was a persistent feature of oligopolistic rivalry, though the competitive fringe was required to stimulate some developments.     

The value of statistical forecasts in the UK association football betting market

In this paper, we evaluate the economic significance of statistical forecasts of UK Association Football match outcomes in relation to betting market prices. We present a detailed comparison of odds set by different bookmakers in relation to forecast model predictions, and analyse the potential for arbitrage across firms. We also examine extreme odds biases. A detailed re-examination of match result odds and a new examination of correct score odds for the period 1993 to 1996 suggest that the market is inefficient.     

The myths and realities of structural change in the UK labour market

Recent discussion of developments within the UK labour market has highlighted the growth of more 'flexible' types of employment: part-time work, temporary jobs, and self-employment. The structure of employment has also been shifting – away from manufacturing and manual employment and towards the service sector and non-manual employment. In this article, Peter Robinson argues that these are not new developments and in some respects the pace of structural change in the labour market has slowed down. Together with evidence that the labour market is now adapting successfully to earlier structural changes, this bodes well for the prospect of further gradual reductions in unemployment.     

UK Asian communities: A profitable market for nonprofits?

The ethnic minority communities in the UK are an increasingly powerful force. But UK charities have not had a great deal of experience in approaching this market, despite a readily acknowledged desire to increase their own levels of cultural diversity. How many want a better ethnic representation among their donor base? How many want greater cultural diversity among volunteers, let alone staff? This paper examines the Asian communities within the UK, and suggests that these are groupings with which UK charities should be engaging. The communities are identifiable, with strong philanthropic traditions, they have increasing economic power and they are accessible. The paper also looks briejly at a positive response generated by one organisation-the Aga Khan Foundation (UK) — to a non-denominational, intercommunal appeal for funds from the Asian Communities in the UK.     

The down-payment constraint and UK housing market: Does the theory fit the facts?

This paper considers empirical implications of the down-payment constraint for the UK housing market. It shows that, at the aggregate-level, models of the housing market with this constraint are consistent with a number of stylized facts. The paper then exploits variation across local housing markets and considers how leverage affects the response of house price inflation to shocks. The evidence, based on data for 147 district-level housing markets for the period 1993–2002, suggests that a large incidence of households with high leverage (loan-to-value ratios) raises the sensitivity of house prices to a shock. This is also consistent with the down-payment constraint model.     

The UK housing market and the monetary policy transmission mechanism: An SVAR approach

I estimate an eight variable structural vector autoregression (SVAR) model of the UK economy based upon that of Kim and Roubini [Kim, S., Roubini, N., 2000. Exchange rate anomalies in the industrial countries: a solution with a structural VAR approach. J. Monet. Econ. 45(3), 561–586] for the purpose of investigating the role of the housing market in the transmission of monetary policy. Retail sales fall by just under 0.4% following a temporary positive 100 basis points shock to short-term domestic interest rates; inflation is also lowered. House prices fall by 0.75%. House price shocks increase consumption, the price level and interest rates. Combining the central estimates for interest rate and house price shocks suggests that house price movements can explain about one-seventh of the fall in consumption following an interest rate shock. A counterfactual simulation comes to a similar figure.     

Modelling conditional skewness: Heterogeneous beliefs,short sale restrictions and market declines

This paper tests the relationship among heterogeneous beliefs, short sale restrictions and time-varying conditional skewness under different market conditions. The results show that heterogeneous beliefs and short sale restrictions have negative impacts on conditional skewness during periods of market decline but have negative, positive or no impacts during periods of market growth. This evidence reconciles conflicting evidence in recent empirical studies on the relationship among heterogeneous beliefs, short sale restrictions and conditional skewness.     

Modelling and forecasting stock returns: exploiting the futures market,regime shifts and international spillovers

This paper proposes a vector equilibrium correction model of stock returns that exploits the information in the futures market, while allowing for both regime‐switching behaviour and international spillovers across stock market indices. Using data for three major stock market indices since 1989, we find that: (i) in sample, our model outperforms several alternative models on the basis of standard statistical criteria; (ii) in out‐of‐sample forecasting, our model does not produce significant gains in terms of point forecasts relative to more parsimonious alternative specifications, but it does so both in terms of market timing ability and in density forecasting performance. The economic value of the density forecasts is illustrated with an application to a simple risk management exercise. Copyright © 2005 John Wiley & Sons, Ltd.