Essays on the term structure of interest rates

This PhD thesis contains three main chapters on macro finance, with a focus on the term structure of interest rates and the applications of state-of-the-art Bayesian econometrics. Except for Chapter 1 and Chapter 5, which set out the general introduction and conclusion, each of the chapters can be considered as a standalone piece of work. In Chapter 2, we model and predict the term structure of US interest rates in a data rich environment. We allow the model dimension and parameters to change over time, accounting for model uncertainty and sudden structural changes. The proposed timevarying parameter Nelson-Siegel Dynamic Model Averaging (DMA) predicts yields better than standard benchmarks. DMA performs better since it incorporates more macro-finance information during recessions. The proposed method allows us to estimate plausible realtime term premia, whose countercyclicality weakened during the financial crisis. Chapter 3 investigates global term structure dynamics using a Bayesian hierarchical factor model augmented with macroeconomic fundamentals. More than half of the variation in the bond yields of seven advanced economies is due to global co-movement. Our results suggest that global inflation is the most important factor among global macro fundamentals. Non-fundamental factors are essential in driving global co-movements, and are closely related to sentiment and economic uncertainty. Lastly, we analyze asymmetric spillovers in global bond markets connected to diverging monetary policies. Chapter 4 proposes a no-arbitrage framework of term structure modeling with learning and model uncertainty. The representative agent considers parameter instability, as well as the uncertainty in learning speed and model restrictions. The empirical evidence shows that apart from observational variance, parameter instability is the dominant source of predictive variance when compared with uncertainty in learning speed or model restrictions. When accounting for ambiguity aversion, the out-of-sample predictability of excess returns implied by the learning model can be translated into significant and consistent economic gains over the Expectations Hypothesis benchmark.

Essays on the term structure of interest rates

This PhD thesis contains three main chapters on macro finance, with a focus on the term structure of interest rates and the applications of state-of-the-art Bayesian econometrics. Except for Chapter 1 and Chapter 5, which set out the general introduction and conclusion, each of the chapters can be considered as a standalone piece of work. In Chapter 2, we model and predict the term structure of US interest rates in a data rich environment. We allow the model dimension and parameters to change over time, accounting for model uncertainty and sudden structural changes. The proposed time-varying parameter Nelson-Siegel Dynamic Model Averaging (DMA) predicts yields better than standard benchmarks. DMA performs better since it incorporates more macro-finance information during recessions. The proposed method allows us to estimate plausible real-time term premia, whose countercyclicality weakened during the financial crisis. Chapter 3 investigates global term structure dynamics using a Bayesian hierarchical factor model augmented with macroeconomic fundamentals. More than half of the variation in the bond yields of seven advanced economies is due to global co-movement. Our results suggest that global inflation is the most important factor among global macro fundamentals. Non-fundamental factors are essential in driving global co-movements, and are closely related to sentiment and economic uncertainty. Lastly, we analyze asymmetric spillovers in global bond markets connected to diverging monetary policies. Chapter 4 proposes a no-arbitrage framework of term structure modeling with learning and model uncertainty. The representative agent considers parameter instability, as well as the uncertainty in learning speed and model restrictions. The empirical evidence shows that apart from observational variance, parameter instability is the dominant source of predictive variance when compared with uncertainty in learning speed or model restrictions. When accounting for ambiguity aversion, the out-of-sample predictability of excess returns implied by the learning model can be translated into significant and consistent economic gains over the Expectations Hypothesis benchmark.

Gestural communication of music structure during solo classical piano performance

The production and perception of music is a multimodal activity involving auditory, visual and conceptual processing, integrating these with prior knowledge and environmental experience. Musicians utilise expressive physical nuances to highlight salient features of the score. The question arises within the literature as to whether performers’ non-technical, non-sound-producing movements may be communicatively meaningful and convey important structural information to audience members and co-performers. In the light of previous performance research (Vines et al., 2006, Wanderley, 2002, Davidson, 1993), and considering findings within co-speech gestural research and auditory and audio-visual neuroscience, this thesis examines the nature of those movements not directly necessary for the production of sound, and their particular influence on audience perception. Within the current research 3D performance analysis is conducted using the Vicon 12- camera system and Nexus data-processing software. Performance gestures are identified as repeated patterns of motion relating to music structure, which not only express phrasing and structural hierarchy but are consistently and accurately interpreted as such by a perceiving audience. Gestural characteristics are analysed across performers and performance style using two Chopin preludes selected for their diverse yet comparable structures (Opus 28:7 and 6). Effects on perceptual judgements of presentation modes (visual-only, auditory-only, audiovisual, full- and point-light) and viewing conditions are explored. This thesis argues that while performance style is highly idiosyncratic, piano performers reliably generate structural gestures through repeated patterns of upper-body movement. The shapes and locations of phrasing motions are identified particular to the sample of performers investigated. Findings demonstrate that despite the personalised nature of the gestures, performers use increased velocity of movements to emphasise musical structure and that observers accurately and consistently locate phrasing junctures where these patterns and variation in motion magnitude, shape and velocity occur. By viewing performance motions in polar (spherical) rather than cartesian coordinate space it is possible to get mathematically closer to the movement generated by each of the nine performers, revealing distinct patterns of motion relating to phrasing structures, regardless of intended performance style. These patterns are highly individualised both to each performer and performed piece. Instantaneous velocity analysis indicates a right-directed bias of performance motion variation at salient structural features within individual performances. Perceptual analyses demonstrate that audience members are able to accurately and effectively detect phrasing structure from performance motion alone. This ability persists even for degraded point-light performances, where all extraneous environmental information has been removed. The relative contributions of audio, visual and audiovisual judgements demonstrate that the visual component of a performance does positively impact on the over- all accuracy of phrasing judgements, indicating that receivers are most effective in their recognition of structural segmentations when they can both see and hear a performance. Observers appear to make use of a rapid online judgement heuristics, adjusting response processes quickly to adapt and perform accurately across multiple modes of presentation and performance style. In line with existent theories within the literature, it is proposed that this processing ability may be related to cognitive and perceptual interpretation of syntax within gestural communication during social interaction and speech. Findings of this research may have future impact on performance pedagogy, computational analysis and performance research, as well as potentially influencing future investigations of the cognitive aspects of musical and gestural understanding.

Which-path problem for one and two particles with two degrees of freedom and a relation between transverse spatial structure and group velocity of light

Quantum mechanics, optics and indeed any wave theory exhibits the phenomenon of interference. In this thesis we present two problems investigating interference due to indistinguishable alternatives and a mostly unrelated investigation into the free space propagation speed of light pulses in particular spatial modes. In chapter 1 we introduce the basic properties of the electromagnetic field needed for the subsequent chapters. In chapter 2 we review the properties of interference using the beam splitter and the Mach-Zehnder interferometer. In particular we review what happens when one of the paths of the interferometer is marked in some way so that the particle having traversed it contains information as to which path it went down (to be followed up in chapter 3) and we review Hong-Ou-Mandel interference at a beam splitter (to be followed up in chapter 5). In chapter 3 we present the first of the interference problems. This consists of a nested Mach-Zehnder interferometer in which each of the free space propagation segments are weakly marked by mirrors vibrating at different frequencies [1]. The original experiment drew the conclusions that the photons followed disconnected paths. We partition the description of the light in the interferometer according to the number of paths it contains which-way information about and reinterpret the results reported in [1] in terms of the interference of paths spatially connected from source to detector. In chapter 4 we briefly review optical angular momentum, entanglement and spontaneous parametric down conversion. These concepts feed into chapter 5 in which we present the second of the interference problems namely Hong-Ou-Mandel interference with particles possessing two degrees of freedom. We analyse the problem in terms of exchange symmetry for both boson and fermion pairs and show that the particle statistics at a beam splitter can be controlled for suitably chosen states. We propose an experimental test of these ideas using orbital angular momentum entangled photons. In chapter 6 we look at the effect that the transverse spatial structure of the mode that a pulse of light is excited in has on its group velocity. We show that the resulting group velocity is slower than the speed of light in vacuum for plane waves and that this reduction in the group velocity is related to the spread in the wave vectors required to create the transverse spatial structure. We present experimental results of the measurement of this slowing down using Hong-Ou-Mandel interference.

Query routing in cooperative semi-structured peer-to-peer information retrieval networks

Conventional web search engines are centralised in that a single entity crawls and indexes the documents selected for future retrieval, and the relevance models used to determine which documents are relevant to a given user query. As a result, these search engines suffer from several technical drawbacks such as handling scale, timeliness and reliability, in addition to ethical concerns such as commercial manipulation and information censorship. Alleviating the need to rely entirely on a single entity, Peer-to-Peer (P2P) Information Retrieval (IR) has been proposed as a solution, as it distributes the functional components of a web search engine – from crawling and indexing documents, to query processing – across the network of users (or, peers) who use the search engine. This strategy for constructing an IR system poses several efficiency and effectiveness challenges which have been identified in past work. Accordingly, this thesis makes several contributions towards advancing the state of the art in P2P-IR effectiveness by improving the query processing and relevance scoring aspects of a P2P web search. Federated search systems are a form of distributed information retrieval model that route the user’s information need, formulated as a query, to distributed resources and merge the retrieved result lists into a final list. P2P-IR networks are one form of federated search in routing queries and merging result among participating peers. The query is propagated through disseminated nodes to hit the peers that are most likely to contain relevant documents, then the retrieved result lists are merged at different points along the path from the relevant peers to the query initializer (or namely, customer). However, query routing in P2P-IR networks is considered as one of the major challenges and critical part in P2P-IR networks; as the relevant peers might be lost in low-quality peer selection while executing the query routing, and inevitably lead to less effective retrieval results. This motivates this thesis to study and propose query routing techniques to improve retrieval quality in such networks. Cluster-based semi-structured P2P-IR networks exploit the cluster hypothesis to organise the peers into similar semantic clusters where each such semantic cluster is managed by super-peers. In this thesis, I construct three semi-structured P2P-IR models and examine their retrieval effectiveness. I also leverage the cluster centroids at the super-peer level as content representations gathered from cooperative peers to propose a query routing approach called Inverted PeerCluster Index (IPI) that simulates the conventional inverted index of the centralised corpus to organise the statistics of peers’ terms. The results show a competitive retrieval quality in comparison to baseline approaches. Furthermore, I study the applicability of using the conventional Information Retrieval models as peer selection approaches where each peer can be considered as a big document of documents. The experimental evaluation shows comparative and significant results and explains that document retrieval methods are very effective for peer selection that brings back the analogy between documents and peers. Additionally, Learning to Rank (LtR) algorithms are exploited to build a learned classifier for peer ranking at the super-peer level. The experiments show significant results with state-of-the-art resource selection methods and competitive results to corresponding classification-based approaches. Finally, I propose reputation-based query routing approaches that exploit the idea of providing feedback on a specific item in the social community networks and manage it for future decision-making. The system monitors users’ behaviours when they click or download documents from the final ranked list as implicit feedback and mines the given information to build a reputation-based data structure. The data structure is used to score peers and then rank them for query routing. I conduct a set of experiments to cover various scenarios including noisy feedback information (i.e, providing positive feedback on non-relevant documents) to examine the robustness of reputation-based approaches. The empirical evaluation shows significant results in almost all measurement metrics with approximate improvement more than 56% compared to baseline approaches. Thus, based on the results, if one were to choose one technique, reputation-based approaches are clearly the natural choices which also can be deployed on any P2P network.