Saccharomyces cerevisiae mutants lacking oxidative stress response genes were used to investigate which genes are required under normal aerobic conditions to maintain cellular redox homeostasis, using intracellular glutathione redox potential (glutathione E(h)) to indicate the redox environment of the cells. Levels of reactive oxygen species (ROS) and mitochondrial membrane potentials (MMP) were also assessed by FACS using dihydroethidium and rhodamine 123 as fluorescent probes. Cells became more oxidised as strains shifted from exponential growth to stationary phase. During both phases the presence of reduced thioredoxin and the activity of glutathione reductase were important for redox homeostasis. Thioredoxin reductase contributed less during exponential phase when there was a strong requirement for active Yap1p transcription factor, but was critical during stationary phase. The absence of ROS detoxification systems, such as catalases or superoxide dismutases, had a lesser effect on glutathione E(h), but a more pronounced effect on ROS levels and MMP. These results reflect the major shift in ROS generation as cells switch from fermentative to respiratory metabolism and also showed that there was not a strong correlation between ROS production, MMP and cellular redox environment. Heterogeneity was detected in populations of strains with compromised anti-oxidant defences, and as cells aged they shifted from one cell type with low ROS content to another with much higher intracellular ROS.

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This papers addresses whether observed violations in the Liquidity Preference Hypothesis (LPH) can be explained by the presence of multiple regimes in the term premia. The investigation proceeds by directly testing the LPH via a series of inequality tests which allow the moments to be conditioned on observable information using an instrumental variables approach. The apparent rejection of the LPH is then investigated by modelling the term premia over time using a simple Bayesian Markov mixture model. The results suggest the presence of time varying term premia and multiple regimes which may explain the violations of the LPH. The Liquidity Preference Hypothesis (LPH) states that the ex ante return on government bonds is a monotonically increasing function of time to maturity. In other words, conditional on all available information, the expected holding period return on a 10 year bond should be greater than that of a 7 year bond which is greater than that of a 5 year bond and so on. The intuition underpinning the LPH is that longer maturity bonds are more risky than shorter maturity and therefore a risk premium is included in the expected holding period return (see Hicks (1946) and Kessel (1965)). Therefore tests of the LPH amount to testing a series of inequality restrictions on the set of risk premiums. Tests of the LPH have fallen into two broad categories. Firstly, unconditional tests of the LPH have been conducted by Fama (1984), McCulloch (1987) and Richardson, Page 2 Richardson and Smith (1992) with mixed results. Moreover, the power of these tests is questionable as the econometrician is discarding information available to the economic agents. The LPH makes inferences about the monotonicity of conditional expected returns; so unconditional tests lack the power to fully test the theory. Secondly, the theory relates ex ante returns, which are unobservable. Many econometricians have attempted to address this issue by forming expectations models and testing the fitted values of the expected returns (see Fama (1986), Fama and Bliss (1987), Stambaugh (1988), Fama and French (1989) and Klemkosky and Pilotte (1992)). However, when the tests of the LPH are complicated with an expectations model it is difficult to decipher the true implications. That is, it is necessary to consider the joint statistical properties of both the LPH test and the expectations model. This complication makes the test results difficult to interpret. More recently, statistical methods for testing inequality constraints have been developed. Boudoukh, Richardson, Smith and Whitelaw (1999) (hereafter BRSW) developed a test of inequality constraints allowing moments to be conditioned on observable information using an instrumental variables approach consistent with Hansen and Singleton (1982). This procedure overcomes the problem of unobservable ex ante risk premia and allows the econometrician to condition the returns on available information. This procedure was particularly applicable to tests of the LPH as it accounts for cross correlation ...

This article models the US equity premium as a regime-switching process where the regimes are dependent on economic variables. To characterise the economic regimes, we employ the dimension reduction technique of a principal components analysis to extract business cycle signals from a set of observed macroeconomic variables. We use these conditioning agents to infer the ex ante economic regime. We then test a dynamic asset allocation strategy, which invests in equity and cash on the basis of the predicted regimes. This timing strategy is shown to outperform a simple buy and hold strategy on a risk-adjusted basis.

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