Price discovery and volatility spillovers in index futures markets: Some evidence from Mexico

This paper investigates the hypotheses that the recently established Mexican stock index futures market effectively serves the price discovery function, and that the introduction of futures trading has provoked volatility in the underlying spot market. We test both hypotheses simultaneously with daily data from Mexico in the context of a modified EGARCH model that also incorporates possible cointegration between the futures and spot markets. The evidence supports both hypotheses, suggesting that the futures market in Mexico is a useful price discovery vehicle, although futures trading has also been a source of instability for the spot market. Several managerial implications are derived and discussed. (C) 2004 Elsevier B.V. All rights reserved.

Multivariate quantitative genetics and the Lek Paradox: Genetic variance in male sexually selected traits of Drosophila serrata under field control

Single male sexually selected traits have been found to exhibit substantial genetic variance, even though natural and sexual selection are predicted to deplete genetic variance in these traits. We tested whether genetic variance in multiple male display traits of Drosophila serrata was maintained under field conditions. A breeding design involving 300 field-reared males and their laboratory-reared offspring allowed the estimation of the genetic variance-covariance matrix for six male cuticular hydrocarbons (CHCs) under field conditions. Despite individual CHCs displaying substantial genetic variance under field conditions, the vast majority of genetic variance in CHCs was not closely associated with the direction of sexual selection measured on field phenotypes. Relative concentrations of three CHCs correlated positively with body size in the field, but not under laboratory conditions, suggesting condition-dependent expression of CHCs under field conditions. Therefore condition dependence may not maintain genetic variance in preferred combinations of male CHCs under field conditions, suggesting that the large mutational target supplied by the evolution of condition dependence may not provide a solution to the lek paradox in this species. Sustained sexual selection may be adequate to deplete genetic variance in the direction of selection, perhaps as a consequence of the low rate of favorable mutations expected in multiple trait systems.

Multivariate monitoring of a biological wastewater treatment process: a case study at Melbourne Water's Western Treatment Plant

Biological wastewater treatment is a complex, multivariate process, in which a number of physical and biological processes occur simultaneously. In this study, principal component analysis (PCA) and parallel factor analysis (PARAFAC) were used to profile and characterise Lagoon 115E, a multistage biological lagoon treatment system at Melbourne Water's Western Treatment Plant (WTP) in Melbourne, Australia. In this study, the objective was to increase our understanding of the multivariate processes taking place in the lagoon. The data used in the study span a 7-year period during which samples were collected as often as weekly from the ponds of Lagoon 115E and subjected to analysis. The resulting database, involving 19 chemical and physical variables, was studied using the multivariate data analysis methods PCA and PARAFAC. With these methods, alterations in the state of the wastewater due to intrinsic and extrinsic factors could be discerned. The methods were effective in illustrating and visually representing the complex purification stages and cyclic changes occurring along the lagoon system. The two methods proved complementary, with each having its own beneficial features. (C) 2003 Elsevier B.V. All rights reserved.

Multivariate genetic analysis of cognitive abilities in an adolescent twin sample

The sources of covariation among cognitive measures of Inspection Time, Choice Reaction Time, Delayed Response Speed and Accuracy, and IQ were examined in a classical twin design that included 245 monozygotic (MZ) and 298 dizygotic (DZ) twin pairs. Results indicated that a factor model comprising additive genetic and unique environmental effects was the most parsimonious. In this model, a general genetic cognitive factor emerged with factor loadings ranging from 0.28 to 0.64. Three other genetic factors explained the remaining genetic covariation between various speed and Delayed Response measures with IQ. However, a large proportion of the genetic variation in verbal (54%) and performance (25%) IQ was unrelated to these lower order cognitive measures. The independent genetic IQ variation may reflect information processes not captured by the elementary cognitive tasks, Inspection Time and Choice Reaction Time, nor our working memory task, Delayed Response. Unique environmental effects were mostly nonoverlapping, and partly represented test measurement error.

Experimental evidence for multivariate stabilizing sexual selection

Stabilizing selection is a fundamental concept in evolutionary biology. In the presence of a single intermediate optimum phenotype (fitness peak) on the fitness surface, stabilizing selection should cause the population to evolve toward such a peak. This prediction has seldom been tested, particularly for suites of correlated traits. The lack of tests for an evolutionary match between population means and adaptive peaks may be due, at least in part, to problems associated with empirically detecting multivariate stabilizing selection and with testing whether population means are at the peak of multivariate fitness surfaces. Here we show how canonical analysis of the fitness surface, combined with the estimation of confidence regions for stationary points on quadratic response surfaces, may be used to define multivariate stabilizing selection on a suite of traits and to establish whether natural populations reside on the multivariate peak. We manufactured artificial advertisement calls of the male cricket Teleogryllus commodus and played them back to females in laboratory phonotaxis trials to estimate the linear and nonlinear sexual selection that female phonotactic choice imposes on male call structure. Significant nonlinear selection on the major axes of the fitness surface was convex in nature and displayed an intermediate optimum, indicating multivariate stabilizing selection. The mean phenotypes of four independent samples of males, from the same population as the females used in phonotaxis trials, were within the 95% confidence region for the fitness peak. These experiments indicate that stabilizing sexual selection may play an important role in the evolution of male call properties in natural populations of T. commodus.

Equity market linkage and multinational trade accords: The case of NAFTA

This paper examines the impact of multinational trade accords on the degree of stock market linkage using NAFTA as a case study. Besides liberalizing trade among the U.S., Canada and Mexico, NAFTA has also sought to strengthen linkage among stock markets of these countries. If successful, this could lessen the appeal of asset diversification across the North American region and promote a higher degree of market efficiency. We assess the possible impact of NAFTA on market linkage using cross-correlations, multivariate price cointegrating systems, speed of convergence, and generalized variance decompositions of unexpected stock returns. The evidence proves robust and consistently indicates intensified equity market linkage since the NAFTA accord. The results also suggest that interdependent goods markets in the region are a primary reason behind the stronger equity market linkage observed in the post-NAFTA period. (c) 2005 Elsevier Ltd. All rights reserved.

Canonical valuation of options in the presence of stochastic volatility

Proposed by M. Stutzer (1996), canonical valuation is a new method for valuing derivative securities under the risk-neutral framework. It is non-parametric, simple to apply, and, unlike many alternative approaches, does not require any option data. Although canonical valuation has great potential, its applicability in realistic scenarios has not yet been widely tested. This article documents the ability of canonical valuation to price derivatives in a number of settings. In a constant-volatility world, canonical estimates of option prices struggle to match a Black-Scholes estimate based on historical volatility. However, in a more realistic stochastic-volatility setting, canonical valuation outperforms the Black-Scholes model. As the volatility generating process becomes further removed from the constant-volatility world, the relative performance edge of canonical valuation is more evident. In general, the results are encouraging that canonical valuation is a useful technique for valuing derivatives. (C) 2005 Wiley Periodicals, Inc.

Multivariate genetic analysis of academic skills of the Queensland Core Skills Test and IQ highlight the importance of genetic g

This study examined the genetic and environmental relationships among 5 academic achievement skills of a standardized test of academic achievement, the Queensland Core Skills Test (QCST; Queensland Studies Authority, 2003a). QCST participants included 182 monozygotic pairs and 208 dizygotic pairs (mean 17 years +/- 0.4 standard deviation). IQ data were included in the analysis to correct for ascertainment bias. A genetic general factor explained virtually all genetic variance in the component academic skills scores, and accounted for 32% to 73% of their phenotypic variances. It also explained 56% and 42% of variation in Verbal IQ and Performance IQ respectively, suggesting that this factor is genetic g. Modest specific genetic effects were evident for achievement in mathematical problem solving and written expression. A single common factor adequately explained common environmental effects, which were also modest, and possibly due to assortative mating. The results suggest that general academic ability, derived from genetic influences and to a lesser extent common environmental influences, is the primary source of variation in component skills of the QCST.

Studying phenotypic evolution using multivariate quantitative genetics

Quantitative genetics provides a powerful framework for studying phenotypic evolution and the evolution of adaptive genetic variation. Central to the approach is G, the matrix of additive genetic variances and covariances. G summarizes the genetic basis of the traits and can be used to predict the phenotypic response to multivariate selection or to drift. Recent analytical and computational advances have improved both the power and the accessibility of the necessary multivariate statistics. It is now possible to study the relationships between G and other evolutionary parameters, such as those describing the mutational input, the shape and orientation of the adaptive landscape, and the phenotypic divergence among populations. At the same time, we are moving towards a greater understanding of how the genetic variation summarized by G evolves. Computer simulations of the evolution of G, innovations in matrix comparison methods, and rapid development of powerful molecular genetic tools have all opened the way for dissecting the interaction between allelic variation and evolutionary process. Here I discuss some current uses of G, problems with the application of these approaches, and identify avenues for future research.

Using multivariate analysis to predict the behaviour of soils under effluent irrigation

Onsite wastewater treatment systems aim to assimilate domestic effluent into the environment. Unfortunately failure of such systems is common and inadequate effluent treatment can have serious environmental implications. The capacity of a particular soil to treat wastewater will change over time. The physical properties influence the rate of effluent movement through the soil and its chemical properties dictate the ability to renovate effluent. A research project was undertaken to determine the role that physical and chemical soil properties play in predicting the long-term behaviour of soil under effluent irrigation and to determine if they have a potential function as early indicators of adverse effects of effluent irrigation on treatment sustainability. Principal Component Analysis (PCA) and Cluster Analysis grouped the soils independently of their soil classifications and allowed us to distinguish the most suitable soils for sustainable long term effluent irrigation and determine the most influential soil parameters to characterise them. Multivariate analysis allowed a clear distinction between soils based on the cation exchange capacities. This in turn correlated well with the soil mineralogy. Mixed mineralogy soils in particular sodium or magnesium dominant soils are the most susceptible to dispersion under effluent irrigation. The soil Exchangeable Sodium Percentage (ESP) was identified as a crucial parameter and was highly correlated with percentage clay, electrical conductivity, exchangeable sodium, exchangeable magnesium and low Ca:Mg ratios (less than 0.5).