Incorporating Higher Moments into Value at Risk Forecasting

Value-at-risk (VaR) forecasting generally relies on a parametric density function of portfolio returns that ignores higher moments or assumes them constant. In this paper, we propose a simple approach to forecasting of a portfolio VaR. We employ the Gram-Charlier expansion (GCE) augmenting the standard normal distribution with the first four moments, which are allowed to vary over time. In an extensive empirical study, we compare the GCE approach to other models of VaR forecasting and conclude that it provides accurate and robust estimates of the realized VaR. In spite of its simplicity, on our dataset GCE outperforms other estimates that are generated by both constant and time-varying higher-moments models.

Chernobyl: Living with Risk and Uncertainty

The nuclear accident in Chernobyl in 1986 is a dramatic example of the type of incidents that are characteristic of a risk society. The consequences of the incident are indeterminate, the causes complex and future developments unpredictable. Nothing can compensate for its effects and it affects a broad population indiscriminately. This paper examines the lived experience of those who experienced biographical disruption as residents of the region on the basis of qualitative case studies carried out in 2003 in the Chernobyl regions of Russia, Ukraine and Belarus. Our analysis indicates that informants tend to view their future as highly uncertain and unpredictable; they experience uncertainty about whether they are already contaminated, and they have to take hazardous decisions about where to go and what to eat. Fear, rumours and experts compete in supplying information to residents about the actual and potential consequences of the disaster, but there is little trust in, and only limited awareness of, the information that is provided. Most informants continue with their lives and do what they must or even what they like, even where the risks are known. They often describe their behaviour as being due to economic circumstances; where there is extreme poverty, even hazardous food sources are better than none. Unlike previous studies, we identify a pronounced tendency among informants not to separate the problems associated with the disaster from the hardships that have resulted from the break-up of the USSR, with both events creating a deep-seated sense of resignation and fatalism. Although most informants hold their governments to blame for lack of information, support and preventive measures, there is little or no collective action to have these put in place. This contrasts with previous research which has suggested that populations affected by disasters attribute crucial significance to that incident and, as a consequence, become increasingly politicized with regard to related policy agendas.

Job strain as a risk factor for coronary heart disease:a collaborative meta-analysis of individual participant data

BACKGROUND: Published work assessing psychosocial stress (job strain) as a risk factor for coronary heart disease is inconsistent and subject to publication bias and reverse causation bias. We analysed the relation between job strain and coronary heart disease with a meta-analysis of published and unpublished studies. METHODS: We used individual records from 13 European cohort studies (1985-2006) of men and women without coronary heart disease who were employed at time of baseline assessment. We measured job strain with questions from validated job-content and demand-control questionnaires. We extracted data in two stages such that acquisition and harmonisation of job strain measure and covariables occurred before linkage to records for coronary heart disease. We defined incident coronary heart disease as the first non-fatal myocardial infarction or coronary death. FINDINGS: 30?214 (15%) of 197?473 participants reported job strain. In 1·49 million person-years at risk (mean follow-up 7·5 years [SD 1·7]), we recorded 2358 events of incident coronary heart disease. After adjustment for sex and age, the hazard ratio for job strain versus no job strain was 1·23 (95% CI 1·10-1·37). This effect estimate was higher in published (1·43, 1·15-1·77) than unpublished (1·16, 1·02-1·32) studies. Hazard ratios were likewise raised in analyses addressing reverse causality by exclusion of events of coronary heart disease that occurred in the first 3 years (1·31, 1·15-1·48) and 5 years (1·30, 1·13-1·50) of follow-up. We noted an association between job strain and coronary heart disease for sex, age groups, socioeconomic strata, and region, and after adjustments for socioeconomic status, and lifestyle and conventional risk factors. The population attributable risk for job strain was 3·4%. INTERPRETATION: Our findings suggest that prevention of workplace stress might decrease disease incidence; however, this strategy would have a much smaller effect than would tackling of standard risk factors, such as smoking. FUNDING: Finnish Work Environment Fund, the Academy of Finland, the Swedish Research Council for Working Life and Social Research, the German Social Accident Insurance, the Danish National Research Centre for the Working Environment, the BUPA Foundation, the Ministry of Social Affairs and Employment, the Medical Research Council, the Wellcome Trust, and the US National Institutes of Health.

Forecasting Death Rates Using Exogenous Determinants

Mortality models used for forecasting are predominantly based on the statistical properties of time series and do not generally incorporate an understanding of the forces driving secular trends. This paper addresses three research questions: Can the factors found in stochastic mortality-forecasting models be associated with real-world trends in health-related variables? Does inclusion of health-related factors in models improve forecasts? Do resulting models give better forecasts than existing stochastic mortality models? We consider whether the space spanned by the latent factor structure in mortality data can be adequately described by developments in gross domestic product, health expenditure and lifestyle-related risk factors using statistical techniques developed in macroeconomics and finance. These covariates are then shown to improve forecasts when incorporated into a Bayesian hierarchical model. Results are comparable or better than benchmark stochastic mortality models.

Myopia, spectacle wear, and risk of bicycle accidents among rural Chinese secondary school students: the Xichang Pediatric Refractive Error Study report no. 7.

OBJECTIVE: To study the effect of myopia and spectacle wear on bicycle-related injuries in rural Chinese students. Myopia is common among Chinese students but few studies have examined its effect on daily activities. METHODS: Data on visual acuity, refractive error, current spectacle wear, and history of bicycle use and accidents during the past 3 years were sought from 1891 students undergoing eye examinations in rural Guangdong province. RESULTS: Refractive and accident data were available for 1539 participants (81.3%), among whom the mean age was 14.6 years, 52.5% were girls, 26.8% wore glasses, and 12.9% had myopia of less than -4 diopters in both eyes. More than 90% relied on bicycles to get to school daily. A total of 2931 accidents were reported by 423 participants, with 68 requiring medical attention. Male sex (odds ratio, 1.55; P < .001) and spectacle wear (odds ratio, 1.38; P = .04) were associated with a higher risk of accident, but habitual visual acuity and myopia were unassociated with the crash risk, after adjusting for age, sex, time spent riding, and risky riding behaviors. CONCLUSION: These results may be consistent with data on motor vehicle accidents implicating peripheral vision (potentially compromised by spectacle wear) more strongly than central visual acuity in mediating crash risk.

The Baltic Dry Index: cyclicalities, forecasting and hedging strategies

The cyclical properties of the Baltic Dry Index (BDI) and their implications for forecasting performance are investigated. We find that changes in the BDI can lead to permanent shocks to trade of major exporting economies. In our forecasting exercise, we show that commodities and trigonometric regression can lead to improved predictions and then use our forecasting results to perform an investment exercise and to show how they can be used for improved risk management in the freight sector.