Short-run and long-run dynamic linkages among international stock markets

This paper investigates the dynamic linkages among the U.S., Japan, U.K. and German stock market indices using daily data for the April 1, 1984 to May 31,91 period. In contrast to previous studies, a vector error correction model of cointegrated variables as developed by Johansen (1988, 1991) and Johansen and Juselius (1990) is employed to examine both short-run and long-run intermarket relationships among these four stock markets. Significant evidence is found in support of both short-run and long-run relationships among these four stock market indices. The U.S. stock market leads other stock markets in short-run in the pre and post October 1987 crash, but leads all other markets in the long-run in all periods examined. The presence of a one long-run cointegrating equilibrium relationship among the four stock market indices implies a limited role of international diversification for investors with long holding periods. However, because the US-Japan-Germany stock market indices, and Japan-UK-Germany indices are not cointegrated with each other, these indices may yield international portfolio diversification in the long-run. Finally, the conflicting results from multivariate cointegration tests found in this study can not be used to provide conclusive evidence on international stock market efficiency.     

Volatility clustering,leverage effects,and jump dynamics in the US and emerging Asian equity markets

This paper proposes asymmetric GARCH-Jump models that synthesize autoregressive jump intensities and volatility feedback in the jump component. Our results indicate that these models provide a better fit for the dynamics of the equity returns in the US and emerging Asian markets, irrespective whether the volatility feedback is generated through a common GARCH multiplier or a separate measure of volatility in the jump intensity function. We also find that they can capture several distinguishing features of the return dynamics in emerging markets, such as, more volatility persistence, less leverage effects, fatter tails, and greater contribution and variability of the jump component.     

Markups,productivity and external market development of the service SMEs

During the last decade, economists and policy makers have extensively discussed what types of firms can exploit external markets by exporting and what happens to domestic firms if external competitors penetrate into the home market. Although both theoretical and empirical studies have been dedicated to these issues, few have been carried out for the service sector. Since the service sector accounts for the lion’s share of GDP, the lack of those studies indicates that a large part of the actual economy still remains veiled. Our study fills this gap. We examine whether or not the Melitz and Ottaviano (2008) model remains satisfied in the service sector, using data from Japanese SMEs. From our analysis, we confirm that larger market sizes are associated with higher productivity levels. On the other hand, firms with higher markups tend to develop their business in smaller markets, conditional of the simultaneity between production and consumption. These results reveal that further productivity growth in the service sector also requires markets to be larger and more integrated. In addition, the markup levels become lower in those markets.     

Unbiasedness of the Forward Exchange Rates

This paper derives an error correction model under the assumption that the spot and the forward rates are cointegrated, the first difference of forward rates is stationary, and the first order autocorrelation in the forecast error is allowed. When tests of the unbiasedness hypothesis are conducted with an error correction model using generalized methods of moments [GMM], the unbiasedness hypothesis cannot be rejected. Furthermore, the multivariate GMM estimation supports the hypothesis of unbiasedness of the forward exchange rates and the absence of a risk premium in the foreign exchange markets.     

Dynamic relationships among equity flows,equity returns and dividends: Behavior of U.S. investors in China and India

This research examines the linkages among U.S. equity flows to China and India, their equity returns, and their fundamental variables. We find that positive shocks to U.S. equity flows to China and India elicit an insignificant response to returns. This finding provides evidence that U.S. institutional investors are not a destabilizing influence in these markets. However, positive innovations to dividends in both China and India have a negative impact on returns. We conjecture that the high potential growth rates in these markets make it preferable for companies to retain earnings rather than pay dividends. In India, shocks to dividend yields have a strong negative influence on U.S. equity flows. Our results validate the need to take into account fundamental variables when examining U.S. investor behavior in emerging equity markets.     

DYNAMIC RELATIONS BETWEEN MACROECONOMIC VARIABLES AND THE JAPANESE STOCK MARKET: AN APPLICATION OF A VECTOR ERROR CORRECTION MODEL

By employing the vector error correction model (VECM) in a system of seven equations, we find that the Japanese stock market is cointegrated with a group of six macroeconomic variables. The signs of the long-term elasticity coefficients of the macroeconomic variables on stock prices generally support the hypothesized equilibrium relations. Our findings are robust to different combinations of macroeconomic variables in six-dimension systems and two subperiods. Also, the VECM consistently outperforms the vector autoregressive model in forecasting ability.     

An expected rank-size rule: A theoretical relationship between the rank size rule and city size distributions

This paper investigates a theoretical relationship between the rank-size rule and city size distributions. First, a method of relating a certain city size distribution to ranked city size is formulated by employing order statistics. Second, it is shown that there do not exist city size distributions which satisfy the rank-size rule. Third, an alternative rank-size rule is proposed as $\text{E(P}{}_{\mathrm{r}}\text{)?(r)}\text{?(r?y)}\text{=c}$, which is equivalent to the Pareto city size distribution. Last, an alternative statistical test for the rank-size rule is proposed to overcome a shortcoming of the conventional test. Along this line, the Hokkaido region data is analyzed.     

Evaluating the cost-effectiveness of secukinumab in moderate-to-severe psoriasis: a Japanese perspective

Aim: To evaluate the cost-effectiveness of secukinumab, a fully human anti-interleukin-17A monoclonal antibody, compared to other clinically used biologics (adalimumab, infliximab, and ustekinumab) in Japan for the treatment of moderate-to-severe psoriasis from the healthcare system (total costs) and patient co-payment (using different frequencies of drug purchase) perspectives.

Methods: A decision-tree (first year)/Markov model (subsequent years), with an annual cycle, was developed. The model adopted a 5-year time horizon. Efficacy inputs were obtained from a mixed-treatment comparison analysis, and other model inputs were collected from published literature and local Japanese sources. Model outcomes included quality-adjusted life years (QALYs) and an incremental cost-effectiveness ratio (ICER) in terms of cost per QALY gained. The annual discounting rate of 2% was applied to both costs and outcomes.

Results: Results for the healthcare system perspective showed that secukinumab had the highest number of quality-adjusted life years (QALYs) (4.07) vs other biologics, dominated ustekinumab and infliximab, and the ICER of secukinumab compared to adalimumab was ¥8,418,222/QALY gained. In the patient co-payment perspective with the monthly purchase of drugs, ustekinumab had the lowest co-payment cost, followed by infliximab, adalimumab, and secukinumab. In the patient co-payment perspective with a once every 3 months purchase of secukinumab and adalimumab, the co-payment costs of secukinumab, adalimumab, and ustekinumab became comparable, and infliximab had the highest co-payment cost.

Limitations: Only short-term efficacy data was modeled, as there was a lack of data on long-term outcomes. Treatment sequencing was restricted to first-line biologic treatment. Drop-out rates for comparators were assumed to be equivalent to secukinumab in the absence of available data.

Conclusions: Secukinumab is a cost-efficient treatment for moderate-to-severe psoriasis, providing greater health outcomes to patients at lower total costs compared to infliximab and ustekinumab, as well as comparable patient co-payment relative to other biologic treatments.     

A multiple state model for the working-age disabled population using cross-sectional data

A multiple state model describes the transitions of the disability risk among the states of active, inactive and dead. Ideally, estimations of transition probabilities and transition intensities rely on longitudinal data; however, most of the national surveys of disability are based on cross-sectional data measuring the disabled status of an individual at one point in time. This paper aims to propose a generic method of the estimation of the expected transition probabilities when the model allows recovery from disability using the UK cross-sectional data. The disability prevalence rates are modelled by taking into consideration the effect of age and time. Under some plausible assumptions concerning the death rates among inactive and active people, the estimated prevalence rates of disability are used to decompose survival probabilities in each state.     

A Bayesian Multivariate Risk-Neutral Method for Pricing Reverse Mortgages

In this article, we propose a Bayesian multivariate framework to price reverse mortgages that involve several risks in both insurance and financial sectors (e.g., mortality rates, interest rates, and house prices). Our method is a multivariate extension of the Bayesian risk-neutral method developed by Kogure and Kurachi. We apply the proposed method to Japanese data to examine the possibility for a successful introduction of reverse mortgages into Japan. The results suggest a promising future for this new market.