Forecasting economic and financial time series with non-linear models

In this paper we discuss the current state-of-the-art in estimating, evaluating, and selecting among non-linear forecasting models for economic and financial time series. We review theoretical and empirical issues, including predictive density, interval and point evaluation and model selection, loss functions, data-mining, and aggregation. In addition, we argue that although the evidence in favor of constructing forecasts using non-linear models is rather sparse, there is reason to be optimistic. However, much remains to be done. Finally, we outline a variety of topics for future research, and discuss a number of areas which have received considerable attention in the recent literature, but where many questions remain.

Evaluation of biospheric components in Earth system models using modern and palaeo-observations: the state-of-the-art

Earth system models (ESMs) are increasing in complexity by incorporating more processes than their predecessors, making them potentially important tools for studying the evolution of climate and associated biogeochemical cycles. However, their coupled behaviour has only recently been examined in any detail, and has yielded a very wide range of outcomes. For example, coupled climate–carbon cycle models that represent land-use change simulate total land carbon stores at 2100 that vary by as much as 600 Pg C, given the same emissions scenario. This large uncertainty is associated with differences in how key processes are simulated in different models, and illustrates the necessity of determining which models are most realistic using rigorous methods of model evaluation. Here we assess the state-of-the-art in evaluation of ESMs, with a particular emphasis on the simulation of the carbon cycle and associated biospheric processes. We examine some of the new advances and remaining uncertainties relating to (i) modern and palaeodata and (ii) metrics for evaluation. We note that the practice of averaging results from many models is unreliable and no substitute for proper evaluation of individual models. We discuss a range of strategies, such as the inclusion of pre-calibration, combined process- and system-level evaluation, and the use of emergent constraints, that can contribute to the development of more robust evaluation schemes. An increasingly data-rich environment offers more opportunities for model evaluation, but also presents a challenge. Improved knowledge of data uncertainties is still necessary to move the field of ESM evaluation away from a "beauty contest" towards the development of useful constraints on model outcomes.

The road not taken: observing a process of issue selection and model conceptualization

This article describes a case study involving information technology managers and their new programmer recruitment policy, but the primary interest is methodological. The processes of issue generation and selection and model conceptualization are described. Early use of “magnetic hexagons” allowed the generation of a range of issues, most of which would not have emerged if system dynamics elicitation techniques had been employed. With the selection of a specific issue, flow diagraming was used to conceptualize a model, computer implementation and scenario generation following naturally. Observations are made on the processes of system dynamics modeling, particularly on the need to employ general techniques of knowledge elicitation in the early stages of interventions. It is proposed that flexible approaches should be used to generate, select, and study the issues, since these reduce any biasing of the elicitation toward system dynamics problems and also allow the participants to take up the most appropriate problem- structuring approach.

Mediating between hearer's and speaker's views in the generation of adaptive explanations

In this article, we examine the case of a system that cooperates with a “direct” user to plan an activity that some “indirect” user, not interacting with the system, should perform. The specific application we consider is the prescription of drugs. In this case, the direct user is the prescriber and the indirect user is the person who is responsible for performing the therapy. Relevant characteristics of the two users are represented in two user models. Explanation strategies are represented in planning operators whose preconditions encode the cognitive state of the indirect user; this allows tailoring the message to the indirect user's characteristics. Expansion of optional subgoals and selection among candidate operators is made by applying decision criteria represented as metarules, that negotiate between direct and indirect users' views also taking into account the context where explanation is provided. After the message has been generated, the direct user may ask to add or remove some items, or change the message style. The system defends the indirect user's needs as far as possible by mentioning the rationale behind the generated message. If needed, the plan is repaired and the direct user model is revised accordingly, so that the system learns progressively to generate messages suited to the preferences of people with whom it interacts.

The comparative toxicity to soil invertebrates of natural chemicals and their synthetic analogues

The introduction of Registration, Evaluation and Authorisation of Chemicals (REACH), requires companies to register and risk assess all substances produced or imported in volumes of >1 tonne per year. Extrapolation methods which use existing data for estimating the effects of chemicals are attractive to industry, and comparative data are therefore increasingly in demand. Data on natural toxic chemicals could be used for extrapolation methods Such as read-across. To test this hypothesis, the toxicity of natural chemicals and their synthetic analogues were compared using standardised toxicity tests. Two chemical pairs: the napthoquinones, juglone (natural) and 1,4-naphthoquinone (synthetic); and anthraquinones, emodin (natural) and quinizarin (synthetic) were chosen, and their comparative effects on the survival and reproduction of collembolans, earthworms, enchytraeids and predatory mites were assessed. Differences in sensitivity between the species were observed with the predatory mite (Hypoaspis aculeifer) showing the least sensitivity. Within the chemical pairs, toxicity to lethal and sub-lethal endpoints was very similar for the four invertebrate species. The exception was earthworm reproduction, which showed differential sensitivity to the chemicals in both naphthoquinone and anthraquinone pairs. Differences in toxicity identified in the present study may be related to degree of exposure and/or subtle differences in the mode of toxic action for the chemicals and species tested. It may be possible to predict differences by identifying functional groups which infer increased or decreased toxicity in one or other chemical. The development of such techniques would enable the use of read-across from natural to synthetic chemicals for a wider group of compounds. (C) 2009 Elsevier Ltd. All rights reserved.

Mutational activation of niche-specific genes provides insight into regulatory networks and bacterial function in a complex environment

The genome of the plant-colonizing bacterium Pseudomonas fluorescens SBW25 harbors a subset of genes that are expressed specifically on plant surfaces. The function of these genes is central to the ecological success of SBW25, but their study poses significant challenges because no phenotype is discernable in vitro. Here, we describe a genetic strategy with general utility that combines suppressor analysis with IVET (SPyVET) and provides a means of identifying regulators of niche-specific genes. Central to this strategy are strains carrying operon fusions between plant environment-induced loci (EIL) and promoterless 'dapB. These strains are prototrophic in the plant environment but auxotrophic on laboratory minimal medium. Regulatory elements were identified by transposon mutagenesis and selection for prototrophs on minimal medium. Approximately 106 mutants were screened for each of 27 strains carrying 'dapB fusions to plant EIL and the insertion point for the transposon determined in approximately 2,000 putative regulator mutants. Regulators were functionally characterized and used to provide insight into EIL phenotypes. For one strain carrying a fusion to the cellulose-encoding wss operon, five different regulators were identified including a diguanylate cyclase, the flagella activator, FleQ, and alginate activator, AmrZ (AlgZ). Further rounds of suppressor analysis, possible by virtue of the SPyVET strategy, revealed an additional two regulators including the activator AlgR, and allowed the regulatory connections to be determined.

E-commerce system simulation for construction and demolition waste exchange

This article introduces a quantitative approach to e-commerce system evaluation based on the theory of process simulation. The general concept of e-commerce system simulation is presented based on the considerations of some limitations in e-commerce system development such as the huge amount of initial investments of time and money, and the long period from business planning to system development, then to system test and operation, and finally to exact return; in other words, currently used system analysis and development method cannot tell investors about some keen attentions such as how good their e-commerce system could be, how many investment repayments they could have, and which area they should improve regarding the initial business plan. In order to exam the value and its potential effects of an e-commerce business plan, it is necessary to use a quantitative evaluation approach and the authors of this article believe that process simulation is an appropriate option. The overall objective of this article is to apply the theory of process simulation to e-commerce system evaluation, and the authors will achieve this though an experimental study on a business plan for online construction and demolition waste exchange. The methodologies adopted in this article include literature review, system analysis and development, simulation modelling and analysis, and case study. The results from this article include the concept of e-commerce system simulation, a comprehensive review of simulation methods adopted in e-commerce system evaluation, and a real case study of applying simulation to e-commerce system evaluation. Furthermore, the authors hope that the adoption and implementation of the process simulation approach can effectively support business decision-making, and improve the efficiency of e-commerce systems.

Second language listening strategy research: methodological challenges and perspectives

This paper explores methodological issues related to research into second language listening strategies. We argue that a number of central questions regarding research methodology in this line of enquiry are underexamined, and we engage in the discussion of three key methodological questions: (1) To what extent is a verbal report a valid and reliable way of eliciting information about strategies? (2) Should we control for learners' level of linguistic knowledge when examining their listening strategy use? and (3) What are the problems surrounding the analysis of data gained through verbal reports? We discuss each of these three methodological issues within the framework of a research project investigating listening strategies deployed by learners of French in secondary schools in England. Implications from these findings for future research are discussed.

Green tea (Camellia sinensis) catechins and vascular function

The health benefits of green tea (Camellia sinensis) catechins are becoming increasingly recognised. Amongst the proposed benefits are the maintenance of endothelial function and vascular homeostasis and an associated reduction in atherogenesis and CVD risk. The mounting evidence for the influential effect of green tea catechins on vascular function from epidemiological, human intervention and animal studies is subject to review together with exploration of the potential mechanistic pathways involved. Epigallocatechin-3-gallate, one of the most abundant and widely studied catechin found in green tea, will be prominent in the present review. Since there is a substantial inconsistency in the published data with regards to the impact of green tea catechins on vascular function, evaluation and interpretation of the inter- and intra-study variability is included. In conclusion, a positive effect of green tea catechins on vascular function is becoming apparent. Further studies in animal and cell models using physiological concentrations of catechins and their metabolites are warranted in order to gain some insight into the physiology and molecular basis of the observed beneficial effects.

Data based constructive identification - overcoming the curse of dimensionality

The modelling of a nonlinear stochastic dynamical processes from data involves solving the problems of data gathering, preprocessing, model architecture selection, learning or adaptation, parametric evaluation and model validation. For a given model architecture such as associative memory networks, a common problem in non-linear modelling is the problem of "the curse of dimensionality". A series of complementary data based constructive identification schemes, mainly based on but not limited to an operating point dependent fuzzy models, are introduced in this paper with the aim to overcome the curse of dimensionality. These include (i) a mixture of experts algorithm based on a forward constrained regression algorithm; (ii) an inherent parsimonious delaunay input space partition based piecewise local lineal modelling concept; (iii) a neurofuzzy model constructive approach based on forward orthogonal least squares and optimal experimental design and finally (iv) the neurofuzzy model construction algorithm based on basis functions that are Bézier Bernstein polynomial functions and the additive decomposition. Illustrative examples demonstrate their applicability, showing that the final major hurdle in data based modelling has almost been removed.

Design considerations in the sequential analysis of matched case–control data

A role for sequential test procedures is emerging in genetic and epidemiological studies using banked biological resources. This stems from the methodology's potential for improved use of information relative to comparable fixed sample designs. Studies in which cost, time and ethics feature prominently are particularly suited to a sequential approach. In this paper sequential procedures for matched case–control studies with binary data will be investigated and assessed. Design issues such as sample size evaluation and error rates are identified and addressed. The methodology is illustrated and evaluated using both real and simulated data sets.

How different are GM food accepters and rejecters really? A means-end chains application to yogurt in Germany

The purpose of the paper is to identify and describe differences in cognitive structures between consumer segments with differing levels of acceptance of genetically modified (GM) food. Among a sample of 60 mothers three segments are distinguished with respect to purchase intentions for GM yogurt: non-buyers, maybe-buyers and likely-buyers. A homogeneity test for the elicited laddering data suggests merging maybe- and likely-buyers, yielding two segments termed accepters and rejecters. Still, overlap between the segments’ cognitive structures is considerable, in particular with respect to a health focus in the evaluation of perceived consequences and ambivalence in technology assessment. Distinct differences are found in the assessment of benefits offered by GM food and the importance of values driving product evaluation and thus purchase decisions.

Everything and nothing project

An EPRSC ‘Partnerships for Public Engagement’ scheme 2010. FEC 122,545.56/UoR 10K everything and nothing is a performance and workshop which engages the public creatively with mathematical concepts: the Poincare conjecture, the shape of the universe, topology, and the nature of infinity are explored through an original, thought provoking piece of music theatre. Jorge Luis Borges' short story 'The Library of Babel' and the aviator Amelia Earhart’s attempt to circumnavigate the globe combine to communicate to audience key mathematical concepts of Poincare’s conjecture. The project builds on a 2008 EPSRC early development project (EP/G001650/1) and is led by an interdisciplinary team the19thstep consisting of composer Dorothy Ker, sculptor Kate Allen and mathematician Marcus du Sautoy. everything and nothing has been devised by Dorothy Ker and Kate Allen, is performed by percussionist Chris Brannick, mezzo soprano Lucy Stevens and sound designer Kelcey Swain. The UK tour targets arts-going audiences, from the Green Man Festival to the British Science Festival. Each performance is accompanied with a workshop led by Topologist Katie Steckles. Alongside the performances and workshops is a website, http://www.everythingandnothingproject.com/ The Public engagement evaluation and monitoring for the project are carried out by evaluator Bea Jefferson. The project is significant in its timely relation to contemporary mathematics and arts-science themes delivering an extensive programme of public engagement.

Regularized logistic models for probabilistic forecasting and diagnostics

Logistic models are studied as a tool to convert dynamical forecast information (deterministic and ensemble) into probability forecasts. A logistic model is obtained by setting the logarithmic odds ratio equal to a linear combination of the inputs. As with any statistical model, logistic models will suffer from overfitting if the number of inputs is comparable to the number of forecast instances. Computational approaches to avoid overfitting by regularization are discussed, and efficient techniques for model assessment and selection are presented. A logit version of the lasso (originally a linear regression technique), is discussed. In lasso models, less important inputs are identified and the corresponding coefficient is set to zero, providing an efficient and automatic model reduction procedure. For the same reason, lasso models are particularly appealing for diagnostic purposes.

Experience and real estate investment decision-making: a process-tracing investigation

This study investigates the impact of experience upon trained behaviours in real estate investment decision‐making. In a controlled experiment design, two groups of subjects, experts and novices, conduct an evaluation and reach a decision about two investment options. Using a process‐tracing technique, each subject’s behaviour is observed and recorded. Differences between the groups are discovered in relation to some behaviour characteristics, but experience appears not to impact all behaviours. These findings are discussed in relation to the current absence of a universal normative model of real estate investment decision‐making. In an associated component of the study, the belief that monetary compensation is needed in order to render valid results from studies such as this is tested. We find this not to be the case.