No abstract

In this study, individual labour market dynamics are analysed using the Australian Longitudinal Survey. A random utility framework for analysing discrete choices is adopted. In this context, a model incorporating a state dependent relationship between employment outcomes is estimated. The influence on individual employment outcomes of additional variables including education, gender and unemployment benefits is also investigated. It is found that, even after controlling for observable and unobservable differences between individuals, there is evidence of state dependence, which may constitute evidence of a ‘scarring’ effect of unemployment.

Within the framework of the financial industry, when representing relationships between assets, correlation is typically used. However, academics have long since questioned this method due to the plethora of issues that plague it. Indeed, it is thought that cointegration is a natural replacement in some of the cases as it is able to represent the physical reality of these assets better. However, despite this general academic consensus, financial practitioners refuse to accept cointegration as a better tool, or even the lesser of two evils. This technical report attempts to explain this bias, specifically focusing on the various consequences of model selection considering the new and challenging regulatory environment and suggests a practical replacement hybrid alternative to both cointegration and correlation.