Paying for long-term performance: restructuring bankers’ pay for risk regulation

The purpose of this paper is to propose hybrid capital securities as a new approach to compensation for senior bank executives and risk-takers instead of cash or equity-based compensation currently adopted by the industry. The global financial turmoil indicated that misaligned pay-for-performance compensation arrangements encouraged management short-termism and rewarded excessive risk-taking behaviour in Anglo-Saxon system. Rather than regulating specific instruments and processes, we believe that it is much more efficient to overhaul the compensation scheme to align it with risk management and governance. This empirical paper investigates the European hybrid market by employing data from the Merrill Lynch Global Index System from 2000 to 2010. Our paper contributes to both literature and practices by designing a structured scheme to tie the executive’s interests to long-term performance of the bank, the goal of regulators and the economy at large which consequently reduce the probability of future bank failures.

Providing extrinsic reward for test performance undermines long-term memory acquisition

Based on numerous studies showing that testing studied material can improve long-term retention more than restudying the same material, it is often suggested that the number of tests in education should be increased to enhance knowledge acquisition. However, testing in real-life educational settings often entails a high degree of extrinsic motivation of learners due to the common practice of placing important consequences on the outcome of a test. Such an effect on the motivation of learners may undermine the beneficial effects of testing on long-term memory because it has been shown that extrinsic motivation can reduce the quality of learning. To examine this issue, participants learned foreign language vocabulary words, followed by an immediate test in which one-third of the words were tested and one-third restudied. To manipulate extrinsic motivation during immediate testing, participants received either monetary reward contingent on test performance or no reward. After 1 week, memory for all words was tested. In the immediate test, reward reduced correct recall and increased commission errors, indicating that reward reduced the number of items that can benefit from successful retrieval. The results in the delayed test revealed that reward additionally reduced the gain received from successful retrieval because memory for initially successfully retrieved words was lower in the reward condition. However, testing was still more effective than restudying under reward conditions because reward undermined long-term memory for concurrently restudied material as well. These findings indicate that providing performance–contingent reward in a test can undermine long-term knowledge acquisition.

Evaluating the century C model using long-term fertilizer trials in the Indo-Gangetic Plains, India

The GEFSOC Project developed a system for estimating soil carbon (C) stocks and changes at the national and sub-national scale. As part of the development of the system, the Century ecosystem model was evaluated for its ability to simulate soil organic C (SOC) changes in environmental conditions in the Indo-Gangetic Plains, India (IGP). Two long-term fertilizer trials (LTFT), with all necessary parameters needed to run Century, were used for this purpose: a jute (Corchorus capsularis L.), rice (Oryza sativa L.) and wheat (Triticum aestivum L.) trial at Barrackpore, West Bengal, and a rice-wheat trial at Ludhiana, Punjab. The trials represent two contrasting climates of the IGP, viz. semi-arid, dry with mean annual rainfall (MAR) of < 800 mm and humid with > 1600 turn. Both trials involved several different treatments with different organic and inorganic fertilizer inputs. In general, the model tended to overestimate treatment effects by approximately 15%. At the semi-arid site, modelled data simulated actual data reasonably well for all treatments, with the control and chemical N + farm yard manure showing the best agreement (RMSE = 7). At the humid site, Century performed less well. This could have been due to a range of factors including site history. During the study, Century was calibrated to simulate crop yields for the two sites considered using data from across the Indian IGP. However, further adjustments may improve model performance at these sites and others in the IGP. The availability of more longterm experimental data sets (especially those involving flooded lowland rice and triple cropping systems from the IGP) for testing and validation is critical to the application of the model's predictive capabilities for this area of the Indian sub-continent. (C) 2007 Elsevier B.V. All rights reserved.

Evaluation of two soil carbon models using two Kenyan long term experimental datasets

RothC and Century are two of the most widely used soil organic matter (SOM) models. However there are few examples of specific parameterisation of these models for environmental conditions in East Africa. The aim of this study was therefore, to evaluate the ability of RothC and the Century to estimate changes in soil organic carbon (SOC) resulting from varying land use/management practices for the climate and soil conditions found in Kenya. The study used climate, soils and crop data from a long term experiment (1976-2001) carried out at The Kabete site at The Kenya National Agricultural Research Laboratories (NARL, located in a semi-humid region) and data from a 13 year experiment carried out in Machang'a (Embu District, located in a semi-arid region). The NARL experiment included various fertiliser (0, 60 and 120 kg of N and P2O5 ha(-1)), farmyard manure (FYM - 5 and 10 t ha(-1)) and plant residue treatments, in a variety of combinations. The Machang'a experiment involved a fertiliser (51 kg N ha(-1)) and a FYM (0, 5 and 10 t ha(-1)) treatment with both monocropping and intercropping. At Kabete both models showed a fair to good fit to measured data, although Century simulations for treatments with high levels of FYM were better than those without. At the Machang'a site with monocrops, both models showed a fair to good fit to measured data for all treatments. However, the fit of both models (especially RothC) to measured data for intercropping treatments at Machang'a was much poorer. Further model development for intercrop systems is recommended. Both models can be useful tools in soil C Predictions, provided time series of measured soil C and crop production data are available for validating model performance against local or regional agricultural crops. (C) 2007 Elsevier B.V. All rights reserved.

Validation of three new measure-correlate-predict models for the long-term prospection of the wind resource

The estimation of the long-term wind resource at a prospective site based on a relatively short on-site measurement campaign is an indispensable task in the development of a commercial wind farm. The typical industry approach is based on the measure-correlate-predict �MCP� method where a relational model between the site wind velocity data and the data obtained from a suitable reference site is built from concurrent records. In a subsequent step, a long-term prediction for the prospective site is obtained from a combination of the relational model and the historic reference data. In the present paper, a systematic study is presented where three new MCP models, together with two published reference models �a simple linear regression and the variance ratio method�, have been evaluated based on concurrent synthetic wind speed time series for two sites, simulating the prospective and the reference site. The synthetic method has the advantage of generating time series with the desired statistical properties, including Weibull scale and shape factors, required to evaluate the five methods under all plausible conditions. In this work, first a systematic discussion of the statistical fundamentals behind MCP methods is provided and three new models, one based on a nonlinear regression and two �termed kernel methods� derived from the use of conditional probability density functions, are proposed. All models are evaluated by using five metrics under a wide range of values of the correlation coefficient, the Weibull scale, and the Weibull shape factor. Only one of all models, a kernel method based on bivariate Weibull probability functions, is capable of accurately predicting all performance metrics studied.

The interactive responses of water quality and hydrology to changes in multiple stressors, and implications for the long-term effective management of phosphorus

Soluble reactive phosphorus (SRP) plays a key role in eutrophication, a global problem decreasing habitat quality and in-stream biodiversity. Mitigation strategies are required to prevent SRP fluxes from exceeding critical levels, and must be robust in the face of potential changes in climate, land use and a myriad of other influences. To establish the longevity of these strategies it is therefore crucial to consider the sensitivity of catchments to multiple future stressors. This study evaluates how the water quality and hydrology of a major river system in the UK (the River Thames) respond to alterations in climate, land use and water resource allocations, and investigates how these changes impact the relative performance of management strategies over an 80-year period. In the River Thames, the relative contributions of SRP from diffuse and point sources vary seasonally. Diffuse sources of SRP from agriculture dominate during periods of high runoff, and point sources during low flow periods. SRP concentrations rose under any future scenario which either increased a) surface runoff or b) the area of cultivated land. Under these conditions, SRP was sourced from agriculture, and the most effective single mitigation measures were those which addressed diffuse SRP sources. Conversely, where future scenarios reduced flow e.g. during winters of reservoir construction, the significance of point source inputs increased, and mitigation measures addressing these issues became more effective. In catchments with multiple point and diffuse sources of SRP, an all-encompassing effective mitigation approach is difficult to achieve with a single strategy. In order to attain maximum efficiency, multiple strategies might therefore be employed at different times and locations, to target the variable nature of dominant SRP sources and pathways.

On the ability of statistical wind-wave models to capture the variability and long-term trends of the North Atlantic winter wave climate

A dynamical wind-wave climate simulation covering the North Atlantic Ocean and spanning the whole 21st century under the A1B scenario has been compared with a set of statistical projections using atmospheric variables or large scale climate indices as predictors. As a first step, the performance of all statistical models has been evaluated for the present-day climate; namely they have been compared with a dynamical wind-wave hindcast in terms of winter Significant Wave Height (SWH) trends and variance as well as with altimetry data. For the projections, it has been found that statistical models that use wind speed as independent variable predictor are able to capture a larger fraction of the winter SWH inter-annual variability (68% on average) and of the long term changes projected by the dynamical simulation. Conversely, regression models using climate indices, sea level pressure and/or pressure gradient as predictors, account for a smaller SWH variance (from 2.8% to 33%) and do not reproduce the dynamically projected long term trends over the North Atlantic. Investigating the wind-sea and swell components separately, we have found that the combination of two regression models, one for wind-sea waves and another one for the swell component, can improve significantly the wave field projections obtained from single regression models over the North Atlantic.

On the long-term interannual variability of the east Asian winter monsoon

The East Asian Winter Monsoon (EAWM) and Siberian High (SH) are inherently related, based on prior studies of instrumental data available for recent decades (since 1958). Here we develop an extended instrumental EAWM index since 1871 that correlates significantly with the SH. These two indices show common modes of variation on the biennial (2-3 year) time scale. We also develop an index of the pressure gradient between the SH and the Aleutian Low, a gradient which critically impacts EAWM variability. This difference series, based on tree-ring reconstructions of the SH and the North Pacific Index (NPI) over the past 400 years, shows that the weakening of this gradient in recent decades has not been unusual in a long-term context. Correlations between the SH series and a tree-ring reconstruction of the El Nino-Southern Oscillation (ENSO) suggest a variable tropical-higher latitude teleconnection.

Effect of manure application on crop yield and soil chemical properties in a long-term field trial of semi-arid Kenya

The sustainability of cereal/legume intercropping was assessed by monitoring trends in grain yield, soil organic C (SOC) and soil extractable P (Olsen method) measured over 13 years at a long-term field trial on a P-deficient soil in semi-arid Kenya. Goat manure was applied annually for 13 years at 0, 5 and 10 t ha(-1) and trends in grain yield were not identifiable because of season-to-season variations. SOC and Olsen P increased for the first seven years of manure application and then remained constant. The residual effect of manure applied for four years only lasted another seven to eight years when assessed by yield, SOC and Olsen P. Mineral fertilizers provided the same annual rates of N and P as in 5 t ha(-1) manure and initially ,gave the same yield as manure, declining after nine years to about 80%. Therefore, manure applications could be made intermittently and nutrient requirements topped-up with fertilizers. Grain yields for sorghum with continuous manure were described well by correlations with rainfall and manure input only, if data were excluded for seasons with over 500 mm rainfall. A comprehensive simulation model should correctly describe crop losses caused by excess water.

Sampling the soil in long-term forest plots: The implications of spatial variation

Long-term monitoring of forest soils as part of a pan-European network to detect environmental change depends on an accurate determination of the mean of the soil properties at each monitoring event. Forest soil is known to be very variable spatially, however. A study was undertaken to explore and quantify this variability at three forest monitoring plots in Britain. Detailed soil sampling was carried out, and the data from the chemical analyses were analysed by classical statistics and geostatistics. An analysis of variance showed that there were no consistent effects from the sample sites in relation to the position of the trees. The variogram analysis showed that there was spatial dependence at each site for several variables and some varied in an apparently periodic way. An optimal sampling analysis based on the multivariate variogram for each site suggested that a bulked sample from 36 cores would reduce error to an acceptable level. Future sampling should be designed so that it neither targets nor avoids trees and disturbed ground. This can be achieved best by using a stratified random sampling design.

Long-term change, interannual and intra-seasonal variability in climate and glacier mass balance in the Central Greater Caucasus, Russia

Long-term trends, interannual and intra-seasonal variability in the mass-balance record from Djankuat glacier, central Greater Caucasus, Russia, are related to local climate change, synoptic and large-scale anomalies in atmospheric circulation. A clear warming signal emerged in the central Greater Caucasus in the early 1990s, leading to a strong increase in ablation. In the absence of a compensating change in winter accumulation, the net mass balance of Djankuat has declined. The highest value of seasonal ablation on record was registered in the summer of 2000. At the beginning of the 21st century these trends reversed. Ablation was below average even in the summer of 2003, which was unusually warm in western Europe. Precipitation and winter accumulation were high, allowing for a partial recovery of net mass balance. The interannual variability in the components of mass balance is weakly related to the North Atlantic Oscillation (NAO) and the Scandinavian teleconnection patterns, but there is a clear link with the large-scale circulation anomalies represented by the Rossby pattern. Five synoptic categories have been identified for the ablation season of 2005, revealing a strong separation between components of radiation budget, air temperature and daily melt. Air temperature is the main control over melt. The highest values of daily ablation are related to the strongly positive NAO which forces high net radiation, and to the warm and moist advection from the Black Sea.

Evidence for long-term regional changes in precipitation on the East Coast Mountains in Mauritius

Global climate change and its impacts are being increasingly studied and precipitation trends are one of the measures of quantifying climate change especially in the tropics. This study uses daily rainfall data to determine if there are changes in the long-term trends in rainfall variability in the East Coast Mountains of Mauritius during the last few decades, and to investigate the factors influencing the trends in the inter-annual to inter-decadal rainfall variability. Statistical modelling has been used to investigate the trends in total seasonal rainfall, the number of rain days and the mean amount of rain per rainy days and the local, regional and large-scale factors that affect them on inter-annual to inter-decadal time scales. The strongest inter-decadal trend was found in the number of rain days for both rainfall seasons, and the other variables were found to have weak or insignificant trends. Both local factors, such as the surrounding sea surface temperatures and large-scale phenomena such as Indian Monsoon and the El Niño Southern Oscillation were found to influence rainfall patterns.