Asset allocation, cross-class correlation and the structure of property returns

Practical applications of portfolio optimisation tend to proceed on a “top down” basis where funds are allocated first at asset class level (between, say, bonds, cash, equities and real estate) and then, progressively, at sub-class level (within property to sectors, office, retail, industrial for example). While there are organisational benefits from such an approach, it can potentially lead to sub-optimal allocations when compared to a “global” or “side-by-side” optimisation. This will occur where there are correlations between sub-classes across the asset divide that are masked in aggregation – between, for instance, City offices and the performance of financial services stocks. This paper explores such sub-class linkages using UK monthly stock and property data. Exploratory analysis using clustering procedures and factor analysis suggests that property performance and equity performance are distinctive: there is little persuasive evidence of contemporaneous or lagged sub-class linkages. Formal tests of the equivalence of optimised portfolios using top-down and global approaches failed to demonstrate significant differences, whether or not allocations were constrained. While the results may be a function of measurement of market returns, it is those returns that are used to assess fund performance. Accordingly, the treatment of real estate as a distinct asset class with diversification potential seems justified.

An assessment of the MODIS collection 5 leaf area index product for a region of mixed coniferous forest

Canopy leaf area index (LAI), defined as the single-sided leaf area per unit ground area, is a quantitative measure of canopy foliar area. LAI is a controlling biophysical property of vegetation function, and quantifying LAI is thus vital for understanding energy, carbon and water fluxes between the land surface and the atmosphere. LAI is routinely available from Earth Observation (EO) instruments such as MODIS. However EO-derived estimates of LAI require validation before they are utilised by the ecosystem modelling community. Previous validation work on the MODIS collection 4 (c4) product suggested considerable error especially in forested biomes, and as a result significant modification of the MODIS LAI algorithm has been made for the most recent collection 5 (c5). As a result of these changes the current MODIS LAI product has not been widely validated. We present a validation of the MODIS c5 LAI product over a 121 km2 area of mixed coniferous forest in Oregon, USA, based on detailed ground measurements which we have upscaled using high resolution EO data. Our analysis suggests that c5 shows a much more realistic temporal LAI dynamic over c4 values for the site we examined. We find improved spatial consistency between the MODIS c5 LAI product and upscaled in situ measurements. However results also suggest that the c5 LAI product underestimates the upper range of upscaled in situ LAI measurements.

Assimilation of sea-ice concentration in a global climate model — physical and statistical aspects

We investigate the initialization of Northern-hemisphere sea ice in the global climate model ECHAM5/MPI-OM by assimilating sea-ice concentration data. The analysis updates for concentration are given by Newtonian relaxation, and we discuss different ways of specifying the analysis updates for mean thickness. Because the conservation of mean ice thickness or actual ice thickness in the analysis updates leads to poor assimilation performance, we introduce a proportional dependence between concentration and mean thickness analysis updates. Assimilation with these proportional mean-thickness analysis updates significantly reduces assimilation error both in identical-twin experiments and when assimilating sea-ice observations, reducing the concentration error by a factor of four to six, and the thickness error by a factor of two. To understand the physical aspects of assimilation errors, we construct a simple prognostic model of the sea-ice thermodynamics, and analyse its response to the assimilation. We find that the strong dependence of thermodynamic ice growth on ice concentration necessitates an adjustment of mean ice thickness in the analysis update. To understand the statistical aspects of assimilation errors, we study the model background error covariance between ice concentration and ice thickness. We find that the spatial structure of covariances is best represented by the proportional mean-thickness analysis updates. Both physical and statistical evidence supports the experimental finding that proportional mean-thickness updates are superior to the other two methods considered and enable us to assimilate sea ice in a global climate model using simple Newtonian relaxation.

Assimilation of sea-ice concentration in a global climate model — physical and statistical aspects

We investigate the initialisation of Northern Hemisphere sea ice in the global climate model ECHAM5/MPI-OM by assimilating sea-ice concentration data. The analysis updates for concentration are given by Newtonian relaxation, and we discuss different ways of specifying the analysis updates for mean thickness. Because the conservation of mean ice thickness or actual ice thickness in the analysis updates leads to poor assimilation performance, we introduce a proportional dependence between concentration and mean thickness analysis updates. Assimilation with these proportional mean-thickness analysis updates leads to good assimilation performance for sea-ice concentration and thickness, both in identical-twin experiments and when assimilating sea-ice observations. The simulation of other Arctic surface fields in the coupled model is, however, not significantly improved by the assimilation. To understand the physical aspects of assimilation errors, we construct a simple prognostic model of the sea-ice thermodynamics, and analyse its response to the assimilation. We find that an adjustment of mean ice thickness in the analysis update is essential to arrive at plausible state estimates. To understand the statistical aspects of assimilation errors, we study the model background error covariance between ice concentration and ice thickness. We find that the spatial structure of covariances is best represented by the proportional mean-thickness analysis updates. Both physical and statistical evidence supports the experimental finding that assimilation with proportional mean-thickness updates outperforms the other two methods considered. The method described here is very simple to implement, and gives results that are sufficiently good to be used for initialising sea ice in a global climate model for seasonal to decadal predictions.

Connecting research and practice in TESOL: a community of practice perspective

In line with a growing interest in teacher research engagement in second language education, this article is an attempt to shed light on teachers’ views on the relationship between teaching and practice. The data comprise semi-structured interviews with 20 teachers in England, examining their views about the divide between research and practice in their field, the reasons for the persistence of the divide between the two and their suggestions on how to bridge it. Wenger’s (1998) Community of Practice (CoP) is used as a conceptual framework to analyse and interpret the data. The analysis indicates that teacher experience, learning and ownership of knowledge emerging from participation in their CoP are key players in teachers’ professional practice and in the development of teacher identity. The participants construe the divide in the light of the differences they perceive between teaching and research as two different CoPs, and attribute the divide to the limited mutual engagement, absence of a joint enterprise and lack of a shared repertoire between them. Boundary encounters, institutionalised brokering and a more research-oriented teacher education provision are some of the suggestions for bringing the two communities together.

Modeling the observed proton aurora and ionospheric convection responses to changes in the IMF clock angle: 2. Persistence of ionospheric convection

We apply a numerical model of time-dependent ionospheric convection to two directly driven reconnection pulses during a 15-min interval of southward IMF on 26 November 2000. The model requires an input magnetopause reconnection rate variation, which is here derived from the observed variation in the upstream IMF clock angle, q. The reconnection rate is mapped to an ionospheric merging gap, the MLT extent of which is inferred from the Doppler-shifted Lyman-a emission on newly opened field lines, as observed by the FUV instrument on the IMAGE spacecraft. The model is used to reproduce a variety of features observed during this event: SuperDARN observations of the ionospheric convection pattern and transpolar voltage; FUV observations of the growth of patches of newly opened flux; FUVand in situ observations of the location of the Open-Closed field line Boundary (OCB) and a cusp ion step. We adopt a clock angle dependence of the magnetopause reconnection electric field, mapped to the ionosphere, of the form Enosin4(q/2) and estimate the peak value, Eno, by matching observed and modeled variations of both the latitude, LOCB, of the dayside OCB (as inferred from the equatorward edge of cusp proton emissions seen by FUV) and the transpolar voltage FPC (as derived using the mapped potential technique from SuperDARN HF radar data). This analysis also yields the time constant tOCB with which the open-closed boundary relaxes back toward its equilibrium configuration. For the case studied here, we find tOCB = 9.7 ± 1.3 min, consistent with previous inferences from the observed response of ionospheric flow to southward turnings of the IMF. The analysis confirms quantitatively the concepts of ionospheric flow excitation on which the model is based and explains some otherwise anomalous features of the cusp precipitation morphology.

The drivers of corporate climate change strategies and public policy: a new resource-based view perspective

Effective public policy to mitigate climate change footprints should build on data-driven analysis of firm-level strategies. This article’s conceptual approach augments the resource-based view (RBV) of the firm and identifies investments in four firm-level resource domains (Governance, Information management, Systems, and Technology [GISTe]) to develop capabilities in climate change impact mitigation. The authors denote the resulting framework as the GISTe model, which frames their analysis and public policy recommendations. This research uses the 2008 Carbon Disclosure Project (CDP) database, with high-quality information on firm-level climate change strategies for 552 companies from North America and Europe. In contrast to the widely accepted myth that European firms are performing better than North American ones, the authors find a different result. Many firms, whether European or North American, do not just “talk” about climate change impact mitigation, but actually do “walk the talk.” European firms appear to be better than their North American counterparts in “walk I,” denoting attention to governance, information management, and systems. But when it comes down to “walk II,” meaning actual Technology-related investments, North American firms’ performance is equal or superior to that of the European companies. The authors formulate public policy recommendations to accelerate firm-level, sector-level, and cluster-level implementation of climate change strategies.

Seasonality of westerly moisture transport in the East Asian summer monsoon and its implications for interpreting precipitation δ18O

East Asian summer monsoon (EASM) rainfall impacts the world's most populous regions. Accurate EASM rainfall prediction necessitates robust paleoclimate reconstructions from proxy data and quantitative linkage to modern climatic conditions. Many precisely dated oxygen isotope records from Chinese stalagmites have been interpreted as directly reflecting past EASM rainfall amount variability, but recent research suggests that such records instead integrate multiple hydroclimatic processes. Using a Lagrangian precipitation moisture source diagnostic, we demonstrate that EASM rainfall is primarily derived from the Indian Ocean. Conversely, Pacific Ocean moisture export peaks during winter, and the moisture uptake area does not differ significantly between summer and winter and is thus a minor contributor to monsoonal precipitation. Our results are substantiated by an accurate reproduction of summer and winter spatial rainfall distributions across China. We also correlate modern EASM rainfall oxygen isotope ratios with instrumental rainfall amount and our moisture source data. This analysis reveals that the strength of the source effect is geographically variable, and differences in atmospheric moisture transport may significantly impact the isotopic signature of EASM rainfall at the Hulu, Dongge, and Wanxiang Cave sites. These results improve our ability to isolate the rainfall amount signal in paleomonsoon reconstructions and indicate that precipitation across central and eastern China will directly respond to variability in Indian Ocean moisture supply.

The impact of the elderly on inflation rates in developed countries

What explains the cross-national variation in inflation rates in developed countries? Previous literature has emphasised the role of ideas and institutions, and to a lesser extent interest groups, while leaving the role of electoral politics comparatively unexplored. This paper seeks to redress this neglect by focusing on one case where electoral politics matters for inflation: the share of the population above 65 years old in a country. I argue that countries with a larger share of elderly have lower inflation because older people are both more inflation averse and politically powerful, forcing governments to pursue lower inflation. I test my argument in three steps. First, logistic regression analysis of survey data confirms older people are more inflation averse. Second, panel data regression analysis of party manifesto data reveals that European countries with more old people have more economically orthodox political parties. Third, time series cross-section regression analyses demonstrate that the share of the elderly is negatively correlated with inflation in both a sample of 21 advanced OECD economies and a larger sample of 175 countries. Ageing may therefore push governments to adopt a low inflation regime.

Doing well by talking good? A topic modelling-assisted discourse study of corporate social responsibility

Using the novel technique of topic modelling, this paper examines thematic patterns and their changes over time in a large corpus of corporate social responsibility (CSR) reports produced in the oil sector. Whereas previous research on corporate communications has been small-scale or interested in selected lexical aspects and thematic categories identified ex ante, our approach allows for thematic patterns to emerge from the data. The analysis reveals a number of major trends and topic shifts pointing to changing practices of CSR. Nowadays ‘people’, ‘communities’ and ‘rights’ seem to be given more prominence, whereas ‘environmental protection’ appears to be less relevant. Using more established corpus-based methods, we subsequently explore two top phrases - ‘human rights’ and ‘climate change’ that were identified as representative of the shifting thematic patterns. Our approach strikes a balance between the purely quantitative and qualitative methodologies and offers applied linguists new ways of exploring discourse in large collections of texts.