Using non-parametric search algorithms to forecast daily excess stock returns

Are the learning procedures of genetic algorithms (GAs) able to generate optimal architectures for artificial neural networks (ANNs) in high frequency data? In this experimental study,GAs are used to identify the best architecture for ANNs. Additional learning is undertaken by the ANNs to forecast daily excess stock returns. No ANN architectures were able to outperform a random walk,despite the finding of non-linearity in the excess returns. This failure is attributed to the absence of suitable ANN structures and further implies that researchers need to be cautious when making inferences from ANN results that use high frequency data.

The sensitivity of US banks' stock returns to interest and exchange rate changes

Purpose – The purpose of this paper is to investigate the impact of foreign exchange and interest rate changes on US banks’ stock returns. Design/methodology/approach – The approach employs an EGARCH model to account for the ARCH effects in daily returns. Most prior studies have used standard OLS estimation methods with the result that the presence of ARCH effects would have affected estimation efficiency. For comparative purposes, the standard OLS estimation method is also used to measure sensitivity. Findings – The findings are as follows: under the conditional t-distributional assumption, the EGARCH model generated a much better fit to the data although the goodness-of-fit of the model is not entirely satisfactory; the market index return accounts for most of the variation in stock returns at both the individual bank and portfolio levels; and the degree of sensitivity of the stock returns to interest rate and FX rate changes is not very pronounced despite the use of high frequency data. Earlier results had indicated that daily data provided greater evidence of exposure sensitivity. Practical implications – Assuming that banks do not hedge perfectly, these findings have important financial implications as they suggest that the hedging policies of the banks are not reflected in their stock prices. Alternatively, it is possible that different GARCH-type models might be more appropriate when modelling high frequency returns. Originality/value – The paper contributes to existing knowledge in the area by showing that ARCH effects do impact on measures of sensitivity.

The microstructure of the foreign exchange market:the determinants of bid-ask spreads in the foreign exchange market

The purpose of this thesis is to shed more light in the FX market microstructure by examining the determinants of bid-ask spread for three currencies pairs, the US dollar/Japanese yen, the British pound/US dollar and the Euro/US dollar in different time zones. I examine the commonality in liquidity with the elaboration of FX market microstructure variables in financial centres across the world (New York, London, Tokyo) based on the quotes of three exchange rate currency pairs over a ten-year period. I use GARCH (1,1) specifications, ICSS algorithm, and vector autoregression analysis to examine the effect of trading activity, exchange rate volatility and inventory holding costs on both quoted and relative spreads. ICSS algorithm results show that intraday spread series are much less volatile compared to the intraday exchange rate series as the number of change points obtained from ICSS algorithm is considerably lower. GARCH (1,1) estimation results of daily and intraday bid-ask spreads, show that the explanatory variables work better when I use higher frequency data (intraday results) however, their explanatory power is significantly lower compared to the results based on the daily sample. This suggests that although daily spreads and intraday spreads have some common determinants there are other factors that determine the behaviour of spreads at high frequencies. VAR results show that there are some differences in the behaviour of the variables at high frequencies compared to the results from the daily sample. A shock in the number of quote revisions has more effect on the spread when short term trading intervals are considered (intra-day) compared to its own shocks. When longer trading intervals are considered (daily) then the shocks in the spread have more effect on the future spread. In other words, trading activity is more informative about the future spread when intra-day trading is considered while past spread is more informative about the future spread when daily trading is considered

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.

Employee absence and organizational commitment:moderation effects of age

This study examined the relations of organizational commitment and demographic factors with objectively measured absence frequency data of 106 staff at a UK school, collected over a 1-year period. We found significant associations of commitment and absenteeism, with high affective and normative commitment, and low continuance commitment being associated with lower levels of absence. Age moderated two of these associations, with low normative commitment and high continuance commitment predicting absence most strongly for older workers. Our findings help practitioners and researchers to understand how commitment may interact with other factors to predict absence. Interaction effects in our data showed that absence frequencies tended to be highest for older workers who felt a lower sense of obligation to their organization, or a lack of alternatives to their present employment. © 2012 Hogrefe Publishing.

New York mark-ups on petroleum products

In this paper we analyse rigidities in the behaviour of the mark-up on regular, midgrade and premium varieties of petrol in the New York area using a set of weekly frequency data and a methodology that analyses the pricing process using deterministic and stochastic techniques. The results are consistent across methodologies and indicate that the speeds of adjustment to the long-run equilibrium mark-up differ across varieties of petrol with margins of the premium variety falling faster than they rise, contrary to the popular claim of welfare-decreasing asymmetries in price transmission. © 2012 The Authors. The Manchester School © 2012 Blackwell Publishing Ltd and The University of Manchester.

Maritime expressions:a corpus based exploration of maritime metaphors

This study uses a purpose-built corpus to explore the linguistic legacy of Britain’s maritime history found in the form of hundreds of specialised ‘Maritime Expressions’ (MEs), such as TAKEN ABACK, ANCHOR and ALOOF, that permeate modern English. Selecting just those expressions commencing with ’A’, it analyses 61 MEs in detail and describes the processes by which these technical expressions, from a highly specialised occupational discourse community, have made their way into modern English. The Maritime Text Corpus (MTC) comprises 8.8 million words, encompassing a range of text types and registers, selected to provide a cross-section of ‘maritime’ writing. It is analysed using WordSmith analytical software (Scott, 2010), with the 100 million-word British National Corpus (BNC) as a reference corpus. Using the MTC, a list of keywords of specific salience within the maritime discourse has been compiled and, using frequency data, concordances and collocations, these MEs are described in detail and their use and form in the MTC and the BNC is compared. The study examines the transformation from ME to figurative use in the general discourse, in terms of form and metaphoricity. MEs are classified according to their metaphorical strength and their transference from maritime usage into new registers and domains such as those of business, politics, sports and reportage etc. A revised model of metaphoricity is developed and a new category of figurative expression, the ‘resonator’, is proposed. Additionally, developing the work of Lakov and Johnson, Kovesces and others on Conceptual Metaphor Theory (CMT), a number of Maritime Conceptual Metaphors are identified and their cultural significance is discussed.

Data transmission by frequency-hopped multilevel frequency shift keying

Spread spectrum systems make use of radio frequency bandwidths which far exceed the minimum bandwidth necessary to transmit the basic message information.These systems are designed to provide satisfactory communication of the message information under difficult transmission conditions. Frequency-hopped multilevel frequency shift keying (FH-MFSK) is one of the many techniques used in spread spectrum systems. It is a combination of frequency hopping and time hopping. In this system many users share a common frequency band using code division multiplexing. Each user is assigned an address and the message is modulated into the address. The receiver, knowing the address, decodes the received signal and extracts the message. This technique is suggested for digital mobile telephony. This thesis is concerned with an investigation of the possibility of utilising FH-MFSK for data transmission corrupted by additive white gaussian noise (A.W.G.N.). Work related to FH-MFSK has so far been mostly confined to its validity, and its performance in the presence of A.W.G.N. has not been reported before. An experimental system was therefore constructed which utilised combined hardware and software and operated under the supervision of a microprocessor system. The experimental system was used to develop an error-rate model for the system under investigation. The performance of FH-MFSK for data transmission was established in the presence of A.W.G.N. and with deleted and delayed sample effects. Its capability for multiuser applications was determined theoretically. The results show that FH-MFSK is a suitable technique for data transmission in the presence of A.W.G.N.

Optical data transmission with fluctuating frequency offset and strong phase noise

We examine data transmission during the interval immediately after wavelength switching of a tunable laser and, through simulation, we demonstrate how choice of modulation format can improve the efficacy of an optical burst/packet switched network. © 2013 Optical Society of America.

Wireless power and data transfer via a common inductive link using frequency division multiplexing

For wireless power transfer (WPT) systems, communication between the primary side and the pickup side is a challenge because of the large air gap and magnetic interferences. A novel method, which integrates bidirectional data communication into a high-power WPT system, is proposed in this paper. The power and data transfer share the same inductive link between coreless coils. Power/data frequency division multiplexing technique is applied, and the power and data are transmitted by employing different frequency carriers and controlled independently. The circuit model of the multiband system is provided to analyze the transmission gain of the communication channel, as well as the power delivery performance. The crosstalk interference between two carriers is discussed. In addition, the signal-to-noise ratios of the channels are also estimated, which gives a guideline for the design of mod/demod circuits. Finally, a 500-W WPT prototype has been built to demonstrate the effectiveness of the proposed WPT system.