Evaluating multivariate volatility forecasts : how effective are statistical and economic loss functions?

Multivariate volatility forecasts are an important input in many financial applications, in particular portfolio optimisation problems. Given the number of models available and the range of loss functions to discriminate between them, it is obvious that selecting the optimal forecasting model is challenging. The aim of this thesis is to thoroughly investigate how effective many commonly used statistical (MSE and QLIKE) and economic (portfolio variance and portfolio utility) loss functions are at discriminating between competing multivariate volatility forecasts. An analytical investigation of the loss functions is performed to determine whether they identify the correct forecast as the best forecast. This is followed by an extensive simulation study examines the ability of the loss functions to consistently rank forecasts, and their statistical power within tests of predictive ability. For the tests of predictive ability, the model confidence set (MCS) approach of Hansen, Lunde and Nason (2003, 2011) is employed. As well, an empirical study investigates whether simulation findings hold in a realistic setting. In light of these earlier studies, a major empirical study seeks to identify the set of superior multivariate volatility forecasting models from 43 models that use either daily squared returns or realised volatility to generate forecasts. This study also assesses how the choice of volatility proxy affects the ability of the statistical loss functions to discriminate between forecasts. Analysis of the loss functions shows that QLIKE, MSE and portfolio variance can discriminate between multivariate volatility forecasts, while portfolio utility cannot. An examination of the effective loss functions shows that they all can identify the correct forecast at a point in time, however, their ability to discriminate between competing forecasts does vary. That is, QLIKE is identified as the most effective loss function, followed by portfolio variance which is then followed by MSE. The major empirical analysis reports that the optimal set of multivariate volatility forecasting models includes forecasts generated from daily squared returns and realised volatility. Furthermore, it finds that the volatility proxy affects the statistical loss functions’ ability to discriminate between forecasts in tests of predictive ability. These findings deepen our understanding of how to choose between competing multivariate volatility forecasts.

Economic prosperity, suburbanization, and the creative workforce : findings from Australian suburban communities

This paper considers the changing relationship between economic prosperity and Australian suburbs, noting that what has been termed “the first suburban nation” in experiencing an intensification of suburban growth in the 2000s, in the context of economic globalization. The paper reports on a three-year Australian Research Council funded project into “Creative Suburbia”, identifying the significant percentage of the creative industries workforce who live in suburban areas. Drawing on case studies from suburbs in the Australian cities of Brisbane and Melbourne, it notes the contrasts between the experience of these workers, who are generally positive towards suburban life, and the underlying assumptions of “creative cities” policy discourse that such workers prefer to be concentrated in high density inner urban creative clusters.

Exploring health behaviour determinants of ageing Australians with chronic diseases

Background: Chronic disease presents overwhelming challenges to elderly patients, their families, health care providers and the health care system. The aim of this study was to explore a theoretical model for effective management of chronic diseases, especially type 2 diabetes mellitus and/or cardiovascular disease. The assumed theoretical model considered the connections between physical function, mental health, social support and health behaviours. The study effort was to improve the quality of life for people with chronic diseases, especially type 2 diabetes and/or cardiovascular disease and to reduce health costs. Methods: A cross-sectional post questionnaire survey was conducted in early 2009 from a randomised sample of Australians aged 50 to 80 years. A total of 732 subjects were eligible for analysis. Firstly, factors influencing respondents‘ quality of life were investigated through bivariate and multivariate regression analysis. Secondly, the Theory of Planned Behaviour (TPB) model for regular physical activity, healthy eating and medication adherence behaviours was tested for all relevant respondents using regression analysis. Thirdly, TPB variable differences between respondents who have diabetes and/or cardiovascular disease and those without these diseases were compared. Finally, the TPB model for three behaviours including regular physical activity, healthy eating and medication adherence were tested in respondents with diabetes and/or cardiovascular diseases using Structure Equation Modelling (SEM). Results: This was the first study combining the three behaviours using a TPB model, while testing the influence of extra variables on the TPB model in one study. The results of this study provided evidence that the ageing process was a cumulative effect of biological change, socio-economic environment and lifelong behaviours. Health behaviours, especially physical activity and healthy eating were important modifiable factors influencing respondents‘ quality of life. Since over 80% of the respondents had at least one chronic disease, it was important to consider supporting older people‘s chronic disease self-management skills such as healthy diet, regular physical activity and medication adherence to improve their quality of life. Direct measurement of the TPB model was helpful in understanding respondents‘ intention and behaviour toward physical activity, healthy eating and medication adherence. In respondents with diabetes and/or cardiovascular disease, the TPB model predicted different proportions of intention toward three different health behaviours with 39% intending to engage in physical activity, 49% intending to engage in healthy eating and 47% intending to comply with medication adherence. Perceived behavioural control, which was proven to be the same as self-efficacy in measurement in this study, played an important role in predicting intention towards the three health behaviours. Also social norms played a slightly more important role than attitude for physical activity and medication adherence, while attitude and social norms had similar effects on healthy eating in respondents with diabetes and/or cardiovascular disease. Both perceived behavioural control and intention directly predicted recent actual behaviours. Physical activity was more a volitional control behaviour than healthy eating and medication adherence. Step by step goal setting and motivation was more important for physical activity, while accessibility, resources and other social environmental factors were necessary for improving healthy eating and medication adherence. The extra variables of age, waist circumference, health related quality of life and depression indirectly influenced intention towards the three behaviours mainly mediated through attitude and perceived behavioural control. Depression was a serious health problem that reduced the three health behaviours‘ motivation, mediated through decreased self-efficacy and negative attitude. This research provided evidence that self-efficacy is similar to perceived behavioural control in the TPB model and intention is a proximal goal toward a particular behaviour. Combining four sources of information in the self-efficacy model with the TPB model would improve chronic disease patients‘ self management behaviour and reach an improved long-term treatment outcome. Conclusion: Health intervention programs that target chronic disease management should focus on patients‘ self-efficacy. A holistic approach which is patient-centred and involves a multidisciplinary collaboration strategy would be effective. Supporting the socio-economic environment and the mental/ emotional environment for older people needs to be considered within an integrated health care system.

Why evolutionary realism underpins evolutionary economic analysis and theory

This paper offers a reply to Jochen Runde's critical appraisal of the ontological framework underpinning Dopfer and Potts's (2008) General Theory of Economic Evolution. We argue that Runde's comprehensive critique contains several of what we perceive to be misunderstandings in relation to the key concepts of ‘generic’ and ‘meso’ that we seek here to unpack and redress.

The structure of the mineral leogangite Cu10(OH)6(SO4)(AsO4)4•8H2O–implications for arsenic accumulation and removal

The objective of this research is to determine the molecular structure of the mineral leogangite. The formation of the types of arsenosulphate minerals offers a mechanism for arsenate removal from soils and mine dumps. Raman and infrared spectroscopy have been used to characterise the mineral. Observed bands are assigned to the stretching and bending vibrations of (SO4)2- and (AsO4)3- units, stretching and bending vibrations of hydrogen bonded (OH)- ions and Cu2+-(O,OH) units. The approximate range of O-H...O hydrogen bond lengths is inferred from the Raman spectra. Raman spectra of leogangite from different origins differ in that some spectra are more complex, where bands are sharp and the degenerate bands of (SO4)2- and (AsO4)3- are split and more intense. Lower wavenumbers of  H2O bending vibration in the spectrum may indicate the presence of weaker hydrogen bonds compared with those in a different leogangite samples. The formation of leogangite offers a mechanism for the removal of arsenic from the environment.

From go to woe : how a not-for-profit managed the change to accrual accounting

Purpose – The aim of this paper is to examine the process of change in an Australian not-for-profit organization, from a cash-based to an accrual-based accounting system. Its particular focus is the relationship between the image portrayed by accrual accounting adoption and the technical realities of the new system. Design/methodology/approach – Data were gathered from interviews, documents and meetings, and were contextualized and interpreted using institutional theory. Findings – The decision to change to accrual accounting was made at the top of the organizational hierarchy in response to institutional pressure to present a corporate image. The implementation of the new system was poorly conceived, inadequately resourced, and hampered by an authoritarian structure that effectively ignored the technical incompetence and training needs of many accounting staff. This resulted in an accounting system half way between cash and accrual, and very different from the system as it had been promoted. The process caused conflict at all levels of the organizational hierarchy. Research limitations/implications – Accounting in not-for-profit organizations is an under-researched area offering potential for fruitful research in a changing institutional landscape. This institutional approach, while offering just one interpretation of the qualitative data gathered in this project, provides valuable insights about the process of change. Practical implications – Not-for-profit organizations play a vital economic and social role, and need carefully to assess their responses to ongoing institutional pressures. In implementing change, they face the challenge of balancing the promotion of an institutionally acceptable image and the need for technical efficiencies. Originality/value – The examination of change in an organization provides a rich context for the exploration of the dynamic, problematic process by which a new accounting practice is embedded and institutionalized. Keywords Institutional theory, Not-for-profit organizations, Accrual accounting, Change process, Qualitative research, Change management, Decision making, Training needs, Australia Paper type Research paper