An evolutionary computing approach to minimize dynamic hedging error

The objective of our present paper is to derive a computationally efficient genetic pattern learning algorithm to evolutionarily derive the optimal rebalancing weights (i.e. dynamic hedge ratios) to engineer a structured financial product out of a multiasset, best-of option. The stochastic target function is formulated as an expected squared cost of hedging (tracking) error which is assumed to be partly dependent on the governing Markovian process underlying the individual asset returns and partly on
randomness i.e. pure white noise. A simple haploid genetic algorithm is advanced as an alternative numerical scheme, which is deemed to be
computationally more efficient than numerically deriving an explicit solution to the formulated optimization model. An extension to our proposed scheme is suggested by means of adapting the Genetic Algorithm parameters based on fuzzy logic controllers.

Predicting future earnings growth: a test of the dividend payout ratio in the Australian market

This paper examines the use of the payout ratio as a predictor of a firm’s future earnings growth. Recent evidence rejects the hypothesis that firm which retain a large portion of their earnings have strong future earnings growth. Higher dividend payout ratios instead correspond to higher future earnings growth. Examining both listed and delisted firms on the Australian stock exchange over the period 1989 to 2008, we provide further evidence that the dividend payout ratio is positively linked to future earnings growth. The results hold over both one, three and five year periods. Furthermore, our results rejected claims that such a relationship was caused by simple mean reversion in earnings. We find no evidence to support the cash flow signaling and free cash flow hypotheses as an explanation for this relationship.

Effectiveness, costs, and cost-effectiveness of recruitment strategies for a mammographic screening program to detect breast cancer

BACKGROUND AND PURPOSE: Since effective and affordable recruitment methods are essential for the widespread implementation of mammographic screening for detection of breast cancer, we studied the effectiveness, the costs, and the cost-effectiveness of various recruitment strategies in the population targeted by a pilot Australian program that offered free mammography screening between 1988 and 1990. METHODS: We evaluated three public recruitment strategies--local newspaper articles, community promotion, and promotion to physicians--and five personal strategies--invitation letters with or without specified appointment times, either alone or with a follow-up letter, or telephone call to nonattenders. The effectiveness of public recruitment strategies was estimated from monthly attendance rates by Poisson regression analysis, while the probability of attendance in response to personal strategies was calculated using logistic regression analysis. Costs were determined by resource usage studies. The cost-effectiveness ratios for personal strategies were determined using decision analysis. RESULTS: The costs in 1988-1989 Australian dollars per woman recruited were $22 for local newspaper articles and $106 for community promotion. No detectable increase in attendance resulted from promotion to physicians. When the cost of reserving an appointment was considered, the most cost-effective personal recruitment strategy was an invitation letter without a specified appointment time, followed by a second letter to nonattenders. This strategy recruited 35.6% of women in the sample targeted and cost $10.52 per attendee. In comparison, the most effective personal recruitment strategy was a letter with a specified appointment time followed by a second letter to nonattenders, which recruited 44.1% of women at an average cost of $19.99 and a marginal cost of $59.71 per additional attendee. CONCLUSIONS: Personal recruitment strategies were more cost-effective than public strategies. The most cost-effective personal strategy was an invitation letter without a specified appointment time, followed by a second letter to nonattenders.

HOSPEX in the antipodes

The Australian Army recently adopted the British concept of hospital exercise (HOSPEX) as a means of evaluating the capabilities of its deployable NATO Role 2E hospital, the 2nd General Health Battalion. The Australian approach to HOSPEX differs from the original UK model. This article describes the reasons why the Australian Army needed to adopt the HOSPEX concept, how it was adapted to suit local circumstances and how the concept may evolve to meet the needs of the wider Australian Defence Force and our allies.