A Bayesian time-varying autoregressive model for improved short-term and long-term prediction

Motivated by the application to German interest rates, we propose a time-varying autoregressive model for short-term and long-term prediction of time series that exhibit a temporary nonstationary behavior but are assumed to mean revert in the long run. We use a Bayesian formulation to incorporate prior assumptions on the mean reverting process in the model and thereby regularize predictions in the far future. We use MCMC-based inference by deriving relevant full conditional distributions and employ a Metropolis-Hastings within Gibbs sampler approach to sample from the posterior (predictive) distribution. In combining data-driven short-term predictions with long-term distribution assumptions our model is competitive to the existing methods in the short horizon while yielding reasonable predictions in the long run. We apply our model to interest rate data and contrast the forecasting performance to that of a 2-Additive-Factor Gaussian model as well as to the predictions of a dynamic Nelson-Siegel model.     

Twisting the Dollar? On the Consistency of Short‐Run and Long‐Run Exchange Rate Expectations

We examine consistency properties of the exchange rate expectation formation process of short‐run and long‐run forecasts in the dollar/euro and yen/dollar market. Applying nonlinear consistency restrictions we show that in a simple expectation formation structure short‐run forecasts are indeed inconsistent with long‐run predictions. Moreover, we establish a ‘twist’ in the dollar/euro expectation formation process, i.e. market participants expect bandwagon effects in the short run, while they have stabilizing expectations in their long‐run forecasts. Applying a panel probit analysis we find that this twisting behavior is more likely to occur in periods of excess exchange rate volatility. Copyright © 2011 John Wiley & Sons, Ltd.     

Insights from the genome of the biotrophic fungal plant pathogen Ustilago maydis

Ustilago maydis is a ubiquitous pathogen of maize and a well-established model organism for the study of plant-microbe interactions. This basidiomycete fungus does not use aggressive virulence strategies to kill its host. U. maydis belongs to the group of biotrophic parasites (the smuts) that depend on living tissue for proliferation and development. Here we report the genome sequence for a member of this economically important group of biotrophic fungi. The 20.5-million-base U. maydis genome assembly contains 6,902 predicted protein-encoding genes and lacks pathogenicity signatures found in the genomes of aggressive pathogenic fungi, for example a battery of cell-wall-degrading enzymes. However, we detected unexpected genomic features responsible for the pathogenicity of this organism. Specifically, we found 12 clusters of genes encoding small secreted proteins with unknown function. A significant fraction of these genes exists in small gene families. Expression analysis showed that most of the genes contained in these clusters are regulated together and induced in infected tissue. Deletion of individual clusters altered the virulence of U. maydis in five cases, ranging from a complete lack of symptoms to hypervirulence. Despite years of research into the mechanism of pathogenicity in U. maydis, no 'true' virulence factors had been previously identified. Thus, the discovery of the secreted protein gene clusters and the functional demonstration of their decisive role in the infection process illuminate previously unknown mechanisms of pathogenicity operating in biotrophic fungi. Genomic analysis is, similarly, likely to open up new avenues for the discovery of virulence determinants in other pathogens.     

An extrasolar planetary system with three Neptune-mass planets

Over the past two years, the search for low-mass extrasolar planets has led to the detection of seven so-called 'hot Neptunes' or 'super-Earths' around Sun-like stars. These planets have masses 5-20 times larger than the Earth and are mainly found on close-in orbits with periods of 2-15 days. Here we report a system of three Neptune-mass planets with periods of 8.67, 31.6 and 197 days, orbiting the nearby star HD 69830. This star was already known to show an infrared excess possibly caused by an asteroid belt within 1 au (the Sun-Earth distance). Simulations show that the system is in a dynamically stable configuration. Theoretical calculations favour a mainly rocky composition for both inner planets, while the outer planet probably has a significant gaseous envelope surrounding its rocky/icy core; the outer planet orbits within the habitable zone of this star.     

Validating cancer drug targets

A cancer drug target is only truly validated by demonstrating that a given therapeutic agent is clinically effective and acts through the target against which it was designed. Nevertheless, it is desirable to declare an early-stage drug target as 'validated' before investing in a full-scale drug discovery programme dedicated to it. Although the outcome of validation studies can guide cancer research programmes, strictly defined universal validation criteria have not been established.     

Crystal structure and mechanism of a bacterial fluorinating enzyme

Fluorine is the thirteenth most abundant element in the earth's crust, but fluoride concentrations in surface water are low and fluorinated metabolites are extremely rare. The fluoride ion is a potent nucleophile in its desolvated state, but is tightly hydrated in water and effectively inert. Low availability and a lack of chemical reactivity have largely excluded fluoride from biochemistry: in particular, fluorine's high redox potential precludes the haloperoxidase-type mechanism used in the metabolic incorporation of chloride and bromide ions. But fluorinated chemicals are growing in industrial importance, with applications in pharmaceuticals, agrochemicals and materials products. Reactive fluorination reagents requiring specialist process technologies are needed in industry and, although biological catalysts for these processes are highly sought after, only one enzyme that can convert fluoride to organic fluorine has been described. Streptomyces cattleya can form carbon-fluorine bonds and must therefore have evolved an enzyme able to overcome the chemical challenges of using aqueous fluoride. Here we report the sequence and three-dimensional structure of the first native fluorination enzyme, 5'-fluoro-5'-deoxyadenosine synthase, from this organism. Both substrate and products have been observed bound to the enzyme, enabling us to propose a nucleophilic substitution mechanism for this biological fluorination reaction.