For realists regionalism remains a difficult phenomenon to explicate. A particular puzzle for realists is why major states should want to pursue regional institutionalisation. Nor are pluralist accounts satisfactory given the empirical evidence of state actor prominence in processes of regional institutionalisation. This article sets out to account for the formative phase of regionalist endeavours, proposing an ideational–institutional realism as the basis for understanding regionalism. On this basis a specific theory of co-operative hegemony is developed. Stressing the importance of the grand strategies of major regional powers and their responses to the balance-of-threat in a region, the author argues that major states may advance their interests through non-coercive means by applying a strategy of co-operative hegemony which implies an active role in regional institutionalisation and the use of, for instance, side payments, power-sharing and differentiation. The article outlines a number of preconditions for regional institutionalisation, stressing what is called the capacity for power-sharing; the power aggregation capacity and the commitment capacity of the biggest power in a region. While regionalising state elites are constrained, they possess a much greater freedom of choice than neo-realism claims.
Unpredictable dividend growth by the dividend-price ratio is considered a 'stylized fact' in post war US data. Using long-term annual data from the US and three European countries, we revisit this stylized fact, and we also report results on return predictability. We make two main contributions. First, we document that for the US, results for long-horizon predictability are crucially dependent on whether returns and dividend growth are measured in nominal or real terms, and this difference is due to long-term inflation being strongly negatively predictable by the dividend-price ratio. The impact of inflation is to reinforce real return predictability and to reduce -or change direction of -real dividend growth predictability. This provides an explanation for the strong predictability of long-horizon real returns in the 'right' direction, and the strong predictability of long-horizon real dividend growth in the 'wrong' direction, that we see in US post war data. Second, we find that predictability patterns in three European stock markets are in many ways different from what characterize the US stock market. In particular, in Sweden and Denmark dividend growth is strongly predictable by the dividend-price ratio in the 'right' direction while returns are not predictable. The results for the UK are mixed. Our results are robust to a number of changes in the modeling framework. We discuss the results for dividend growth predictability in terms of the 'dividend smoothing hypothesis'.
Based on Chen and Zhao's (2009) criticism of VAR based return decompositions, we explain in detail the various limitations and pitfalls involved in such decompositions. First, we show that Chen and Zhao's interpretation of their excess bond return decomposition is wrong: the residual component in their analysis is not 'cash ‡ow news'but 'interest rate news' which should not be zero. Consequently, in contrast to what Chen and Zhao claim, their decomposition does not serve as a valid caution against VAR based decompositions. Second, we point out that in order for VAR based decompositions to be valid, the asset price needs to be included as a state variable. In parts of Chen and Zhao's analysis the price does not appear as a state variable, thus rendering those parts of their analysis invalid. Finally, we clarify the intriguing issue of the role of the residual component in equity return decompositions. In a properly speci…ed VAR, it makes no di¤erence whether return news and dividend news are both computed directly or one of them is backed out as a residual.
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