Selecting from amongst non–nested conditional variance models: information criteria and portfolio determination

We consider the finite sample properties of model selection by information criteria in conditionally heteroscedastic models. Recent theoretical results show that certain popular criteria are consistent in that they will select the true model asymptotically with probability 1. To examine the empirical relevance of this property, Monte Carlo simulations are conducted for a set of non–nested data generating processes (DGPs) with the set of candidate models consisting of all types of model used as DGPs. In addition, not only is the best model considered but also those with similar values of the information criterion, called close competitors, thus forming a portfolio of eligible models. To supplement the simulations, the criteria are applied to a set of economic and financial series. In the simulations, the criteria are largely ineffective at identifying the correct model, either as best or a close competitor, the parsimonious GARCH(1, 1) model being preferred for most DGPs. In contrast, asymmetric models are generally selected to represent actual data. This leads to the conjecture that the properties of parameterizations of processes commonly used to model heteroscedastic data are more similar than may be imagined and that more attention needs to be paid to the behaviour of the standardized disturbances of such models, both in simulation exercises and in empirical modelling.

Early warning with calibrated and sharper probabilistic forecasts

Given a nonlinear model, a probabilistic forecast may be obtained by Monte Carlo simulations. At a given forecast horizon, Monte Carlo simulations yield sets of discrete forecasts, which can be converted to density forecasts. The resulting density forecasts will inevitably be downgraded by model mis-specification. In order to enhance the quality of the density forecasts, one can mix them with the unconditional density. This paper examines the value of combining conditional density forecasts with the unconditional density. The findings have positive implications for issuing early warnings in different disciplines including economics and meteorology, but UK inflation forecasts are considered as an example.

The conditional performance of UK property funds

The evaluation of investment fund performance has been one of the main developments of modern portfolio theory. Most studies employ the technique developed by Jensen (1968) that compares a particular fund's returns to a benchmark portfolio of equal risk. However, the standard measures of fund manager performance are known to suffer from a number of problems in practice. In particular previous studies implicitly assume that the risk level of the portfolio is stationary through the evaluation period. That is unconditional measures of performance do not account for the fact that risk and expected returns may vary with the state of the economy. Therefore many of the problems encountered in previous performance studies reflect the inability of traditional measures to handle the dynamic behaviour of returns. As a consequence Ferson and Schadt (1996) suggest an approach to performance evaluation called conditional performance evaluation which is designed to address this problem. This paper utilises such a conditional measure of performance on a sample of 27 UK property funds, over the period 1987-1998. The results of which suggest that once the time varying nature of the funds beta is corrected for, by the addition of the market indicators, the average fund performance show an improvement over that of the traditional methods of analysis.

The representation of conditional expectations of non-Gaussian noise

For Wiener spaces conditional expectations and $L^{2}$-martingales w.r.t. the natural filtration have a natural representation in terms of chaos expansion. In this note an extension to larger classes of processes is discussed. In particular, it is pointed out that orthogonality of the chaos expansion is not required.

Parcel theory in three dimensions and the calculation of SCAPE

Slantwise convective available potential energy (SCAPE) is a measure of the degree to which the atmosphere is unstable to conditional symmetric instability (CSI). It has, until now, been defined by parcel theory in which the atmosphere is assumed to be nonevolving and balanced, that is, two-dimensional. When applying this two-dimensional theory to three-dimensional evolving flows, these assumptions can be interpreted as an implicit assumption that a timescale separation exists between a relatively rapid timescale for slantwise ascent and a slower timescale for the development of the system. An approximate extension of parcel theory to three dimensions is derived and it is shown that calculations of SCAPE based on the assumption of relatively rapid slantwise ascent can be qualitatively in error. For a case study example of a developing extratropical cyclone, SCAPE calculated along trajectories determined without assuming the existence of the timescale separation show large SCAPE values for parcels ascending from the warm sector and along the warm front. These parcels ascend into the cloud head within which there is some evidence consistent with the release of CSI from observational and model cross sections. This region of high SCAPE was not found for calculations along the relatively rapidly ascending trajectories determined by assuming the existence of the timescale separation.

Determinants of fruit and vegetable intake in England: a re-examination based on quantile regression

Objective To examine die sociodemographic determinants of fruit and vegetable (F&V) consumption in England and determine the differential effects of socioeconomic variables at various parts of the intake distribution, with a special focus on severely inadequate intakes Design Quantile regression, expressing F&V intake as a function of sociodemographic variables, is employed. Here, quantile regression flexibly allows variables such as ethnicity to exert effects on F&V intake that. vary depending oil existing levels of intake. Setting The 2003 Health survey of England. Subjects Data were from 11044 adult individuals. Results The influence of particular sociodemographic variables is found to vary significantly across the intake distribution We conclude that women consume more F&V than men, Asians and Hacks mole dian Whites, co-habiting individuals more than single-living ones Increased incomes and education also boost intake However, the key general finding of the present study is that the influence of most variables is relatively weak in the area of greatest concern, i e among those with the most inadequate intakes in any reference group. Conclusions. Our findings emphasise the importance of allowing the effects of socio-economic drivers to vary across the intake distribution The main finding, that variables which exert significant influence on F&V Intake at other parts Of the conditional distribution have a relatively weak influence at the lower tail, is cause for concern. It implies that in any defined group, those consuming the lease F&V are hard to influence using compaigns or policy levers.

Plant variety protection, innovation, and transferability: Some empirical evidence

Under the Agreement on Trade-Related Aspects of Intellectual Property Rights, all member-countries of the World Trade Organization are required to provide an "effective" system of plant variety protection within a specific time frame. In many developing countries, this has led to a divisive debate about the fundamental desirability of extending intellectual property rights to agriculture. Empirical studies on the economic impacts of plant variety protection, especially its ability to generate large private sector investments in plant breeding and to facilitate the transfer of technology, have been very limited. This paper examines two aspects of the international experience of plant variety protection: (a) the relationship between legislation, research, and development expenditures and plant variety protection grants, i.e., the innovation effect and (b) the role of plant variety protection in facilitating the flow of varieties across countries, i.e., the transferability effect.

A dual role for integrin-linked kinase in platelets: regulating integrin function and alpha-granule secretion

Integrin-linked kinase (ILK) has been implicated in the regulation of a range of fundamental biological processes such as cell survival, growth, differentiation, and adhesion. In platelets ILK associates with beta 1- and beta 3-containing integrins, which are of paramount importance for the function of platelets. Upon stimulation of platelets this association with the integrins is increased and ILK kinase activity is up-regulated, suggesting that ILK may be important for the coordination of platelet responses. In this study a conditional knockout mouse model was developed to examine the role of ILK in platelets. The ILK-deficient mice showed an increased bleeding time and volume, and despite normal ultrastructure the function of ILK-deficient platelets was decreased significantly. This included reduced aggregation, fibrinogen binding, and thrombus formation under arterial flow conditions. Furthermore, although early collagen stimulated signaling such as PLC gamma 2 phosphorylation and calcium mobilization were unaffected in ILK-deficient platelets, a selective defect in alpha-granule, but not dense-granule, secretion was observed. These results indicate that as well as involvement in the control of integrin affinity, ILK is required for alpha-granule secretion and therefore may play a central role in the regulation of platelet function. (Blood. 2008; 112: 4523-4531)

Optimization algorithms in FMRF model-based segmentation for LIDAR data and co-registered bands

In this paper, a fuzzy Markov random field (FMRF) model is used to segment land-objects into free, grass, building, and road regions by fusing remotely, sensed LIDAR data and co-registered color bands, i.e. scanned aerial color (RGB) photo and near infra-red (NIR) photo. An FMRF model is defined as a Markov random field (MRF) model in a fuzzy domain. Three optimization algorithms in the FMRF model, i.e. Lagrange multiplier (LM), iterated conditional mode (ICM), and simulated annealing (SA), are compared with respect to the computational cost and segmentation accuracy. The results have shown that the FMRF model-based ICM algorithm balances the computational cost and segmentation accuracy in land-cover segmentation from LIDAR data and co-registered bands.

Infant-mother attachment and the growth of externalizing problems across the primary-school years

Background:  Some contend that attachment insecurity increases risk for the development of externalizing behavior problems in children. Method:  Latent-growth curve analyses were applied to data on 1,364 children from the NICHD Study of Early Child Care to evaluate the association between early attachment and teacher-rated externalizing problems across the primary-school years. Results:  Findings indicate that (a) both avoidant and disorganized attachment predict higher levels of externalizing problems but (b) that effects of disorganized attachment are moderated by family cumulative contextual risk, child gender and child age, with disorganized boys from risky social contexts manifesting increases in behavior problems over time. Conclusions:  These findings highlight the potentially conditional role of early attachment in children’s externalizing behavior problems and the need for further research evaluating causation and mediating mechanisms.

Infant Attachment Security and the Timing of Puberty: Testing an Evolutionary Hypothesis

Life-history theories of the early programming of human reproductive strategy stipulate that early rearing experience, including that reflected in infant-parent attachment security, regulates psychological, behavioral, and reproductive development. We tested the hypothesis that infant attachment insecurity, compared with infant attachment security, at the age of 15 months predicts earlier pubertal maturation. Focusing on 373 White females enrolled in the National Institute of Child Health and Human Development Study of Early Child Care and Youth Development, we gathered data from annual physical exams from the ages of 9½ years to 15½ years and from self-reported age of menarche. Results revealed that individuals who had been insecure infants initiated and completed pubertal development earlier and had an earlier age of menarche compared with individuals who had been secure infants, even after accounting for age of menarche in the infants’ mothers. These results support a conditional-adaptational view of individual differences in attachment security and raise questions about the biological mechanisms responsible for the attachment effects we discerned.

Technologies for biological containment of GM and Non-GM crops

International Perspective The development of GM technology continues to expand into increasing numbers of crops and conferred traits. Inevitably, the focus remains on the major field crops of soybean, maize, cotton, oilseed rape and potato with introduced genes conferring herbicide tolerance and/or pest resistance. Although there are comparatively few GM crops that have been commercialised to date, GM versions of 172 plant species have been grown in field trials in 31 countries. European Crops with Containment Issues Of the 20 main crops in the EU there are four for which GM varieties are commercially available (cotton, maize for animal feed and forage, and oilseed rape). Fourteen have GM varieties in field trials (bread wheat, barley, durum wheat, sunflower, oats, potatoes, sugar beet, grapes, alfalfa, olives, field peas, clover, apples, rice) and two have GM varieties still in development (rye, triticale). Many of these crops have hybridisation potential with wild and weedy relatives in the European flora (bread wheat, barley, oilseed rape, durum wheat, oats, sugar beet and grapes), with escapes (sunflower); and all have potential to cross-pollinate fields non-GM crops. Several fodder crops, forestry trees, grasses and ornamentals have varieties in field trials and these too may hybridise with wild relatives in the European flora (alfalfa, clover, lupin, silver birch, sweet chestnut, Norway spruce, Scots pine, poplar, elm, Agrostis canina, A. stolonifera, Festuca arundinacea, Lolium perenne, L. multiflorum, statice and rose). All these crops will require containment strategies to be in place if it is deemed necessary to prevent transgene movement to wild relatives and non-GM crops. Current Containment Strategies A wide variety of GM containment strategies are currently under development, with a particular focus on crops expressing pharmaceutical products. Physical containment in greenhouses and growth rooms is suitable for some crops (tomatoes, lettuce) and for research purposes. Aquatic bioreactors of some non-crop species (algae, moss, and duckweed) expressing pharmaceutical products have been adopted by some biotechnology companies. There are obvious limitations of the scale of physical containment strategies, addressed in part by the development of large underground facilities in the US and Canada. The additional resources required to grow plants underground incurs high costs that in the long term may negate any advantage of GM for commercial productioNatural genetic containment has been adopted by some companies through the selection of either non-food/feed crops (algae, moss, duckweed) as bio-pharming platforms or organisms with no wild relatives present in the local flora (safflower in the Americas). The expression of pharmaceutical products in leafy crops (tobacco, alfalfa, lettuce, spinach) enables growth and harvesting prior to and in the absence of flowering. Transgenically controlled containment strategies range in their approach and degree of development. Plastid transformation is relatively well developed but is not suited to all traits or crops and does not offer complete containment. Male sterility is well developed across a range of plants but has limitations in its application for fruit/seed bearing crops. It has been adopted in some commercial lines of oilseed rape despite not preventing escape via seed. Conditional lethality can be used to prevent flowering or seed development following the application of a chemical inducer, but requires 100% induction of the trait and sufficient application of the inducer to all plants. Equally, inducible expression of the GM trait requires equally stringent application conditions. Such a method will contain the trait but will allow the escape of a non-functioning transgene. Seed lethality (‘terminator’ technology) is the only strategy at present that prevents transgene movement via seed, but due to public opinion against the concept it has never been trialled in the field and is no longer under commercial development. Methods to control flowering and fruit development such as apomixis and cleistogamy will prevent crop-to-wild and wild-to-crop pollination, but in nature both of these strategies are complex and leaky. None of the genes controlling these traits have as yet been identified or characterised and therefore have not been transgenically introduced into crop species. Neither of these strategies will prevent transgene escape via seed and any feral apomicts that form are arguably more likely to become invasives. Transgene mitigation reduces the fitness of initial hybrids and so prevents stable introgression of transgenes into wild populations. However, it does not prevent initial formation of hybrids or spread to non-GM crops. Such strategies could be detrimental to wild populations and have not yet been demonstrated in the field. Similarly, auxotrophy prevents persistence of escapes and hybrids containing the transgene in an uncontrolled environment, but does not prevent transgene movement from the crop. Recoverable block of function, intein trans-splicing and transgene excision all use recombinases to modify the transgene in planta either to induce expression or to prevent it. All require optimal conditions and 100% accuracy to function and none have been tested under field conditions as yet. All will contain the GM trait but all will allow some non-native DNA to escape to wild populations or to non-GM crops. There are particular issues with GM trees and grasses as both are largely undomesticated, wind pollinated and perennial, thus providing many opportunities for hybridisation. Some species of both trees and grass are also capable of vegetative propagation without sexual reproduction. There are additional concerns regarding the weedy nature of many grass species and the long-term stability of GM traits across the life span of trees. Transgene stability and conferred sterility are difficult to trial in trees as most field trials are only conducted during the juvenile phase of tree growth. Bio-pharming of pharmaceutical and industrial compounds in plants Bio-pharming of pharmaceutical and industrial compounds in plants offers an attractive alternative to mammalian-based pharmaceutical and vaccine production. Several plantbased products are already on the market (Prodigene’s avidin, β-glucuronidase, trypsin generated in GM maize; Ventria’s lactoferrin generated in GM rice). Numerous products are in clinical trials (collagen, antibodies against tooth decay and non-Hodgkin’s lymphoma from tobacco; human gastric lipase, therapeutic enzymes, dietary supplements from maize; Hepatitis B and Norwalk virus vaccines from potato; rabies vaccines from spinach; dietary supplements from Arabidopsis). The initial production platforms for plant-based pharmaceuticals were selected from conventional crops, largely because an established knowledge base already existed. Tobacco and other leafy crops such as alfalfa, lettuce and spinach are widely used as leaves can be harvested and no flowering is required. Many of these crops can be grown in contained greenhouses. Potato is also widely used and can also be grown in contained conditions. The introduction of morphological markers may aid in the recognition and traceability of crops expressing pharmaceutical products. Plant cells or plant parts may be transformed and maintained in culture to produce recombinant products in a contained environment. Plant cells in suspension or in vitro, roots, root cells and guttation fluid from leaves may be engineered to secrete proteins that may be harvested in a continuous, non-destructive manner. Most strategies in this category remain developmental and have not been commercially adopted at present. Transient expression produces GM compounds from non-GM plants via the utilisation of bacterial or viral vectors. These vectors introduce the trait into specific tissues of whole plants or plant parts, but do not insert them into the heritable genome. There are some limitations of scale and the field release of such crops will require the regulation of the vector. However, several companies have several transiently expressed products in clinical and pre-clinical trials from crops raised in physical containment.

Conditional symmetric instability in sting-jet storms

Sting jets are transient mesoscale jets of air that descend from the tip of the cloud head towards the top of the boundary layer in severe extratropical cyclones and can lead to damaging surface wind gusts. This recently identified jet is distinct from the well-documented jets associated with the cold and warm conveyor belts. One mechanism proposed for their development is the release of conditional symmetric instability (CSI). Here the spatial distribution and temporal evolution of several CSI diagnostics in four severe storms are analysed. A sting jet has been identified in three of these storms; for comparison, we also analysed one storm that did not have a sting jet, even though it hadmany of the apparent features of sting-jet storms. The sting-jet storms are distinct from the non-sting-jet storms by having much greater andmore extensive conditional instability (CI) and CSI. CSI is released by ascending air parcels in the cloud head in two of the sting-jet storms and by descending air parcels in the other sting-jet storm. By contrast, only weak CI to ascending air parcels is present at the cloud-head tip in the non-sting-jet storm. CSI released by descending air parcels, as diagnosed by decaying downdraught slantwise convective available potential energy (DSCAPE), is collocated with the sting jets in all three sting-jet storms and has a localisedmaximum in two of them. Consistent evolutions of saturated moist potential vorticity are found.We conclude that CSI release has a role in the generation of the sting jet, that the sting jet may be driven by the release of instability to both ascending and descending parcels, and that DSCAPE could be used as a discriminating diagnostic for the sting jet based on these four case-studies.

An extreme value theory approach to calculating minimum capital risk requirements

This paper investigates the frequency of extreme events for three LIFFE futures contracts for the calculation of minimum capital risk requirements (MCRRs). We propose a semiparametric approach where the tails are modelled by the Generalized Pareto Distribution and smaller risks are captured by the empirical distribution function. We compare the capital requirements form this approach with those calculated from the unconditional density and from a conditional density - a GARCH(1,1) model. Our primary finding is that both in-sample and for a hold-out sample, our extreme value approach yields superior results than either of the other two models which do not explicitly model the tails of the return distribution. Since the use of these internal models will be permitted under the EC-CAD II, they could be widely adopted in the near future for determining capital adequacies. Hence, close scrutiny of competing models is required to avoid a potentially costly misallocation capital resources while at the same time ensuring the safety of the financial system.