Selectivity and timing performance of UK investment trusts

This study examines the selectivity and timing performance of 218 UK investment trusts over the period July 1981 to June 2009. We estimate the Treynor and Mazuy (1966) and Henriksson and Merton (1981) models augmented with the size, value, and momentum factors, either under the OLS method adjusted with the Newey-West procedure or under the GARCH(1,1)-in-mean method following the specification of Glosten et al. (1993; hereafter GJR-GARCH-M). We find that the OLS method provides little evidence in favour of the selectivity and timing ability, consistent with previous studies. Interestingly, the GJR-GARCH-M method reverses this result, showing some relatively strong evidence on favourable selectivity ability, particularly for international funds, as well as favourable timing ability, particularly for domestic funds. We conclude that the GJR-GARCH-M method performs better in evaluating fund performance compared with the OLS method and the non-parametric approach, as it essentially accounts for the time-varying characteristics of factor loadings and hence obtains more reliable results, in particular, when the high frequency data, such as the daily returns, are used in the analysis. Our results are robust to various in-sample and out-of-sample tests and have valuable implications for practitioners in making their asset allocation decisions across different fund styles. © 2012 Elsevier B.V.

Statnote 34 : the Kolmogorov-Smirnov (KS) test

The Kolmogorov-Smirnov (KS) test is a non-parametric test which can be used in two different circumstances. First, it can be used as an alternative to chi-square (?2) as a ‘goodness-of-fit’ test to compare whether a given ‘observed’ sample of observations conforms to an ‘expected’ distribution of results (KS, one-sample test). An example of the use of the one-sample test to determine whether a sample of observations was normally distributed was described previously. Second, it can be used as an alternative to the Mann-Whitney test to compare two independent samples of observations (KS, two-sample test). Hence, this statnote describes the use of the KS test with reference to two scenarios: (1) to compare the observed frequency (Fo) of soil samples containing cysts of the protozoan Naegleria collected each month for a year with an expected equal frequency (Fe) across months (one-sample test), and (2) to compare the abundance of bacteria on cloths and sponges sampled in a domestic kitchen environment (two-sample test).

A framework for performance evaluation of employment offices:a case of Tunisia

This paper proposes a new framework for evaluating the performance of employment offices based on non-parametric technique of data envelopment analysis. This framework is explained using the assessment of technical efficiency of 82 employment offices in Tunisia which are under the direction of the National Agency for Employment and Independent Work. We further investigated the exogenous factors that may explain part of the variation in efficiency scores using a bootstrapping approach in period January 2006 to December 2008. Given the specialisation of employment offices, we used the proposed approach for the efficiency evaluation of graduate employment offices and multi-services employment offices, separately.

An aggregate measure of financial ratios using a multiplicative DEA model

This paper examines the problems in the definition of the General Non-Parametric Corporate Performance (GNCP) and introduces a multiplicative linear programming as an alternative model for corporate performance. We verified and tested a statistically significant difference between the two models based on the application of 27 UK industries using six performance ratios. Our new model is found to be a more robust performance model than the previous standard Data Envelopment Analysis (DEA) model.

The measurement and decomposition of economy-wide productivity growth:Assessing the accuracy and selecting between different approaches

Productivity at the macro level is a complex concept but also arguably the most appropriate measure of economic welfare. Currently, there is limited research available on the various approaches that can be used to measure it and especially on the relative accuracy of said approaches. This thesis has two main objectives: firstly, to detail some of the most common productivity measurement approaches and assess their accuracy under a number of conditions and secondly, to present an up-to-date application of productivity measurement and provide some guidance on selecting between sometimes conflicting productivity estimates. With regards to the first objective, the thesis provides a discussion on the issues specific to macro-level productivity measurement and on the strengths and weaknesses of the three main types of approaches available, namely index-number approaches (represented by Growth Accounting), non-parametric distance functions (DEA-based Malmquist indices) and parametric production functions (COLS- and SFA-based Malmquist indices). The accuracy of these approaches is assessed through simulation analysis, which provided some interesting findings. Probably the most important were that deterministic approaches are quite accurate even when the data is moderately noisy, that no approaches were accurate when noise was more extensive, that functional form misspecification has a severe negative effect in the accuracy of the parametric approaches and finally that increased volatility in inputs and prices from one period to the next adversely affects all approaches examined. The application was based on the EU KLEMS (2008) dataset and revealed that the different approaches do in fact result in different productivity change estimates, at least for some of the countries assessed. To assist researchers in selecting between conflicting estimates, a new, three step selection framework is proposed, based on findings of simulation analyses and established diagnostics/indicators. An application of this framework is also provided, based on the EU KLEMS dataset.

StatNote 38 : The sign test

The sign test is a simple non-parametric test which can be used on paired data, i.e., two related samples, matched samples, or repeated measurements on the same sample. It was developed by Wilcoxon before the more powerful and familiar ‘Wilcoxon signed-rank test’ described in a previous statnote . This statnote describes the use of the sign test with reference to two scenarios: (1) to compare the cleanliness of two hospital wards as assessed by a sample of observers and (2) to compare bacterial contamination on cloths and sponges from a domestic kitchen.

Density forecasts of crude-oil prices using option-implied and ARCH-type models

The predictive accuracy of competing crude-oil price forecast densities is investigated for the 1994–2006 period. Moving beyond standard ARCH type models that rely exclusively on past returns, we examine the benefits of utilizing the forward-looking information that is embedded in the prices of derivative contracts. Risk-neutral densities, obtained from panels of crude-oil option prices, are adjusted to reflect real-world risks using either a parametric or a non-parametric calibration approach. The relative performance of the models is evaluated for the entire support of the density, as well as for regions and intervals that are of special interest for the economic agent. We find that non-parametric adjustments of risk-neutral density forecasts perform significantly better than their parametric counterparts. Goodness-of-fit tests and out-of-sample likelihood comparisons favor forecast densities obtained by option prices and non-parametric calibration methods over those constructed using historical returns and simulated ARCH processes. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:727–754, 2011

Network effects, network structure and consumer interaction in mobile telecommunications in Europe and Asia

This paper estimates the importance of (tariff-mediated) network effects and the impact of a consumer's social network on her choice of mobile phone provider. The study uses network data obtained from surveys of students in several European and Asian countries. We use the Quadratic Assignment Procedure, a non-parametric permutation test, to adjust for the particular error structure of network data. We find that respondents strongly coordinate their choice of mobile phone providers, but only if their provider induces network effects. This suggests that this coordination depends on network effects rather than on information contagion or pressure to conform to the social environment.

Statnote 40: Cochran's Q test

Cochran's Q-test is a non-parametric analysis which can be applied to a two-way design in which the data are binomial and can take only two possible outcomes, e.g., 0 or 1, alive or dead, present or absent, clean or dirty, infected or non-infected, and is an extension to the binomial tests introduced in Statnote 39 . This statnote describes the application of this test in the analysis of the changes which occur in the fungal flora of forestry nursery beds after two different sterilization procedures .

Social and financial efficiency of Islamic microfinance institutions:a Data Envelopment Analysis application

Microfinance has been developed as alternative solution for global poverty alleviation effort in the last 30 years. Microfinance institution (MFI) has unique characteristic wherein they face double bottom line objectives of outreach to the poor and financial sustainability. This study proposes a two-stage analysis to measure Islamic Microfinance institutions (IMFIs) performance by comparing them to conventional MFIs. First, we develop a Data Envelopment Analysis (DEA) framework to measure MFIs' efficiency in its double bottom line objectives, i.e. in terms of social and financial efficiency. In the second stage non-parametric tests are used to compare the performance and identify factors that contribute to the efficiency of IMFIs and MFIs.

Applications of data envelopment analysis in education

Non-parametric methods for efficiency evaluation were designed to analyse industries comprising multi-input multi-output producers and lacking data on market prices. Education is a typical example. In this chapter, we review applications of DEA in secondary and tertiary education, focusing on the opportunities that this offers for benchmarking at institutional level. At secondary level, we investigate also the disaggregation of efficiency measures into pupil-level and school-level effects. For higher education, while many analyses concern overall institutional efficiency, we examine also studies that take a more disaggregated approach, centred either around the performance of specific functional areas or that of individual employees.

An allocation Malmquist index with an application in the China securities industry

This paper proposes an allocation Malmquist index which is inspired by the work on the non-parametric cost Malmquist index. We first show that how to decompose the cost Malmquist index into the input-oriented Malmquist index and the allocation Malmquist index. An application in corporate management of the China securities industry with the panel data set of 40 securities companies during the period 2005–2011 shows the practicality of the propose model.

An Exploration of parametric software cost estimating models for Jackson Systems Development

Most parametric software cost estimation models used today evolved in the late 70's and early 80's. At that time, the dominant software development techniques being used were the early 'structured methods'. Since then, several new systems development paradigms and methods have emerged, one being Jackson Systems Development (JSD). As current cost estimating methods do not take account of these developments, their non-universality means they cannot provide adequate estimates of effort and hence cost. In order to address these shortcomings two new estimation methods have been developed for JSD projects. One of these methods JSD-FPA, is a top-down estimating method, based on the existing MKII function point method. The other method, JSD-COCOMO, is a sizing technique which sizes a project, in terms of lines of code, from the process structure diagrams and thus provides an input to the traditional COCOMO method.The JSD-FPA method allows JSD projects in both the real-time and scientific application areas to be costed, as well as the commercial information systems applications to which FPA is usually applied. The method is based upon a three-dimensional view of a system specification as opposed to the largely data-oriented view traditionally used by FPA. The method uses counts of various attributes of a JSD specification to develop a metric which provides an indication of the size of the system to be developed. This size metric is then transformed into an estimate of effort by calculating past project productivity and utilising this figure to predict the effort and hence cost of a future project. The effort estimates produced were validated by comparing them against the effort figures for six actual projects.The JSD-COCOMO method uses counts of the levels in a process structure chart as the input to an empirically derived model which transforms them into an estimate of delivered source code instructions.

High spectral efficiency transmission emulation for non-linear transmission performance estimation for high order modulation formats

We demonstrate a simple method to experimentally evaluate nonlinear transmission performance of high order modulation formats using a low number of channels and channel-like ASE. We verify it's behaviour is consistent with the AWGN model of transmission.