The physical properties of the atmosphere in the new Hadley Centre Global Environmental Model (HadGEM1). Part II: Aspects of variability and regional climate

The performance of the atmospheric component of the new Hadley Centre Global Environmental Model (HadGEM1) is assessed in terms of its ability to represent a selection of key aspects of variability in the Tropics and extratropics. These include midlatitude storm tracks and blocking activity, synoptic variability over Europe, and the North Atlantic Oscillation together with tropical convection, the Madden-Julian oscillation, and the Asian summer monsoon. Comparisons with the previous model, the Third Hadley Centre Coupled Ocean-Atmosphere GCM (HadCM3), demonstrate that there has been a considerable increase in the transient eddy kinetic energy (EKE), bringing HadGEM1 into closer agreement with current reanalyses. This increase in EKE results from the increased horizontal resolution and, in combination with the improved physical parameterizations, leads to improvements in the representation of Northern Hemisphere storm tracks and blocking. The simulation of synoptic weather regimes over Europe is also greatly improved compared to HadCM3, again due to both increased resolution and other model developments. The variability of convection in the equatorial region is generally stronger and closer to observations than in HadCM3. There is, however, still limited convective variance coincident with several of the observed equatorial wave modes. Simulation of the Madden-Julian oscillation is improved in HadGEM1: both the activity and interannual variability are increased and the eastward propagation, although slower than observed, is much better simulated. While some aspects of the climatology of the Asian summer monsoon are improved in HadGEM1, the upper-level winds are too weak and the simulation of precipitation deteriorates. The dominant modes of monsoon interannual variability are similar in the two models, although in HadCM3 this is linked to SST forcing, while in HadGEM1 internal variability dominates. Overall, analysis of the phenomena considered here indicates that HadGEM1 performs well and, in many important respects, improves upon HadCM3. Together with the improved representation of the mean climate, this improvement in the simulation of atmospheric variability suggests that HadGEM1 provides a sound basis for future studies of climate and climate change.

Changes in the Mediterranean climate during the Holocene: insights from global and regional climate modelling

Palaeoproxy records alone are seldom sufficient to provide a full assessment of regional palaeoclimates. To better understand the possible changes in the Mediterranean climate during the Holocene, a series of palaeoclimate integrations for periods spanning the last 12 000 years have been performed and their results diagnosed. These simulations use the HadSM3 global climate model, which is then dynamically downscaled to approximately 50 km using a consistent regional climate model (HadRM3). Changes in the model’s seasonal-mean surface air temperatures and precipitation are discussed at both global and regional scales, along with the physical mechanisms underlying the changes. It is shown that the global model reproduces many of the large-scale features of the mid-Holocene climate (consistent with previous studies) and that the results suggest that many areas within the Mediterranean region were wetter during winter with a stronger seasonal cycle of surface air temperatures during the early Holocene. This precipitation signal in the regional model is strongest in the in the northeast Mediterranean (near Turkey), consistent with low-level wind patterns and earlier palaeosyntheses. It is, however, suggested that further work is required to fully understand the changes in the winter circulation patterns over the Mediterranean region.

Comparison of results from several AOGCMs for global and regional sea-level change 1900-2100

Sea-level rise is an important aspect of climate change because of its impact on society and ecosystems. Here we present an intercomparison of results from ten coupled atmosphere-ocean general circulation models (AOGCMs) for sea-level changes simulated for the twentieth century and projected to occur during the twenty first century in experiments following scenario IS92a for greenhouse gases and sulphate aerosols. The model results suggest that the rate of sea-level rise due to thermal expansion of sea water has increased during the twentieth century, but the small set of tide gauges with long records might not be adequate to detect this acceleration. The rate of sea-level rise due to thermal expansion continues to increase throughout the twenty first century, and the projected total is consequently larger than in the twentieth century; for 1990-2090 it amounts to 0.20-0.37 in. This wide range results from systematic uncertainty in modelling of climate change and of heat uptake by the ocean. The AOGCMs agree that sea-level rise is expected to be geographically non-uniform, with some regions experiencing as much as twice the global average, and others practically zero, but they do not agree about the geographical pattern. The lack of agreement indicates that we cannot currently have confidence in projections of local sea- level changes, and reveals a need for detailed analysis and intercomparison in order to understand and reduce the disagreements.

The relative importance sector and regional factors in Italy

The benefits of sector and regional diversification have been well documented in the literature but have not previously been investigated in Italy. In addition, previous studies have used geographically defined regions, rather than economically functional areas, when performing the analysis even though most would argue that it is the economic structure of the area that will lead to differences in demand and hence property performance. This study therefore uses economically defined regions of Italy to test the relative benefits of regional diversification versus sector diversification within the Italian real estate portfolio. To examine this issue we use constrained cross-section regressions the on the sector and regional affiliation of 14 cities in Italy to extract the “pure” return effects of the different factors using annual data over the period 1989 to 2003. In contrast, to previous studies we find that regional factors effects in Italy have a much greater influence on property returns than sector-specific effects, which is probably a direct result of using the extremely diverse economic regions of Italy rather than arbitrary geographically locations. Be that as it may, the results strongly suggest that that diversification across the regions of Italy used here is likely to offer larger risk reduction benefits than a sector diversification strategy within a region. In other words, fund managers in Italy must monitor the regional composition of their portfolios more closely than its sector allocation. Additionally, the results supports that contemporary position that ‘regional areas’ based on economic function, provide greater diversification benefits rather than areas defined by geographical location.

Country, sector and regional factors in European property returns

For those portfolio managers who follow a top-down approach to fund management when they are trying to develop a pan-European investment strategy they need to know which are the most important factors affecting property returns, so as to concentrate their management and research efforts accordingly. In order to examine this issue this paper examines the relative importance of country, sector and regional effects in determining property returns across Europe using the largest database of individual property returns currently available. Using annual data over the period 1996 to 2002 for a sample of over 25,000 properties the results show that the country-specific effects dominate sector-specific factors, which in turn dominate the regional-specific factors. This is true even for different sub-sets of countries and sectors. In other words, real estate returns are mainly determined by local (country specific) conditions and are only mildly affected by general European factors. Thus, for those institutional investors contemplating investment into Europe the first level of analysis must be an examination of the individual countries, followed by the prospects of the property sectors within the country and then an assessment of the differences in expected performance between the main city and the rest of the country.

The cyclical behaviour of sector and regional diversification benefits: 1987-2002

This paper investigates the time series behaviour of the relative benefits of sector and regional diversification strategies, using the notion of cross-sectional dispersion introduced by Solnik and Roulet (2000). Using monthly data over the period 1987:1 to 2002:12, four sector and four regional classifications are examined in the UK. The results indicate that sector and regional dispersion indices are highly time varying and so dwarf any lower frequency cyclical components that may be present. Nonetheless, periods of high dispersion are closely followed by periods of low dispersion, suggestive of cyclical behaviour of sector and regional diversification benefits. Then, using the HP-filter we isolated the cyclical component of the various dispersion indices and found that the sector dispersion indices are generally above the regional dispersion indices. This implies that a sector diversification strategy is likely to offer greater risk reduction benefits than a regional diversification approach. Nonetheless, we find that in some periods, certain regional diversification strategies are of equal or greater benefit than certain sector approaches. The results also appear to be quite sensitive to the classifications of sectors and regions. Hence, the appropriate definition of sectors and regions can have important implications for sector and regional diversification strategies.

Changes in the relative importance of sector and regional factors: 1987-2002

A stylised fact in the real estate portfolio diversification literature is that sector (property-type) effects are relatively more important than regional (geographical) factors in determining property returns. Thus, for those portfolio managers who follow a top-down approach to portfolio management, they should first choose in which sectors to invest and then select the best properties in each market. However, the question arises as to whether the dominance of the sector effects relative to regional effects is constant. If not property fund managers will need to take account of regional effects in developing their portfolio strategy. Using monthly data over the period 1987:1 to 2002:12 for a sample of over 1000 properties the results show that the sector-specific factors dominate the regional-specific factors for the vast majority of the time. Nonetheless, there are periods when the regional factors are of equal or greater importance than the sector effects. In particular, the sector effects tend to dominate during volatile periods of the real estate cycle; however, during calmer periods the sector and regional effects are of equal importance. These findings suggest that the sector effects are still the most important aspect in the development of an active portfolio strategy.

Sector and regional factors in real estate returns

This paper presents a simple method to measure the effect of sector and regional factors in real estate returns, and thus provides a quantitative framework for analysing the relative impact of these two diversification categories to real estate portfolio selection. Using data on Retail, Office and Industrial properties spread across 326 real estate locations in the UK, over the period 1981 to 1995, the results show that the performance of real estate is largely sector-driven. A result in line with previous work. Which implies that the sector composition of the real estate fund should be the first level of analysis in constructing and managing the real estate portfolio. As a consequence real estate fund managers need to pay more attention to the sector allocation of their portfolios than the regional spread.

Changes in the relative importance of sector and regional Factors: 1987-2002

A stylised fact in the real estate portfolio diversification literature is that sector (property-type) effects are relatively more important than regional (geographical) factors in determining property returns. Thus, for those portfolio managers who follow a top-down approach to portfolio management, they should first choose in which sectors to invest and then select the best properties in each market. However, the question arises as to whether the dominance of the sector effects relative to regional effects is constant. If not property fund managers will need to take account of regional effects in developing their portfolio strategy. We find the results show that the sector-specific factors dominate the regional-specific factors for the vast majority of the time. Nonetheless, there are periods when the regional factors are of equal or greater importance than the sector effects. In particular, the sector effects tend to dominate during volatile periods of the real estate cycle; however, during calmer periods the sector and regional effects are of equal importance. These findings suggest that the sector effects are still the most important aspect in the development of an active portfolio strategy.

Solar influence on global and regional climates

The literature relevant to how solar variability influences climate is vast—but much has been based on inadequate statistics and non-robust procedures. The common pitfalls are outlined in this review. The best estimates of the solar influence on the global mean air surface temperature show relatively small effects, compared with the response to anthropogenic changes (and broadly in line with their respective radiative forcings). However, the situation is more interesting when one looks at regional and season variations around the global means. In particular, recent research indicates that winters in Eurasia may have some dependence on the Sun, with more cold winters occurring when the solar activity is low. Advances in modelling ‘‘top-down’’ mechanisms, whereby stratospheric changes influence the underlying troposphere, offer promising explanations of the observed phenomena. In contrast, the suggested modulation of low-altitude clouds by galactic cosmic rays provides an increasingly inadequate explanation of observations.

Why the home region matters: location and regional multinationals

Much of the literature in international business analysing the multinational enterprise uses the country as the relevant environmental parameter. This paper presents both theoretical and empirical evidence to demonstrate that country-level analysis now needs to be augmented by analysis at the ‘regional’ level of the broad triad markets of Europe, North America and the Asia Pacific. The great majority of the world's 500 largest firms concentrate their activities within their home region of the triad. This study uses variance component analysis and finds that this home region effect outperforms the country effect. Together, the regional and industry effects explain most of the geographic expansion of multinational enterprises (MNEs), whereas country, firm and year effects are very minor. The new data and variance component analysis on the activities of large MNEs reported here suggest that new thinking is required about the importance of large regions of the triad as the relevant unit of analysis for business strategy to supplement the conventional focus on the country.