Mean reversion in the short horizon returns of UK portfolios

This paper will show that short horizon stock returns for UK portfolios are more predictable than suggested by sample autocorrelation co-efficients. Four capitalisation based portfolios are constructed for the period 1976–1991. It is shown that the first order autocorrelation coefficient of monthly returns can explain no more than 10% of the variation in monthly portfolio returns. Monthly autocorrelation coefficients assume that each weekly return of the previous month contains the same amount of information. However, this will not be the case if short horizon returns contain predictable components which dissipate rapidly. In this case, the return of the most recent week would say a lot more about the future monthly portfolio return than other weeks. This suggests that when predicting future monthly portfolio returns more weight should be given to the most recent weeks of the previous month, because, the most recent weekly returns provide the most information about the subsequent months' performance. We construct a model which exploits the mean reverting characteristics of monthly portfolio returns. Using this model we forecast future monthly portfolio returns. When compared to forecasts that utilise the autocorrelation statistic the model which exploits the mean reverting characteristics of monthlyportfolio returns can forecast future returns better than the autocorrelation statistic, both in and out of sample.

The charge effect on the hindrance factors for diffusion and convection of a solute in pores II

The diffusion and convection of a solute suspended in a fluid across porous membranes are known to be reduced compared to those in a bulk solution, owing to the fluid mechanical interaction between the solute and the pore wall as well as steric restriction. If the solute and the pore wall are electrically charged, the electrostatic interaction between them could affect the hindrance to diffusion and convection. In this study, the transport of charged spherical solutes through charged circular cylindrical pores filled with an electrolyte solution containing small ions was studied numerically by using a fluid mechanical and electrostatic model. Based on a mean field theory, the electrostatic interaction energy between the solute and the pore wall was estimated from the Poisson-Boltzmann equation, and the charge effect on the solute transport was examined for the solute and pore wall of like charge. The results were compared with those obtained from the linearized form of the Poisson-Boltzmann equation, i.e.the Debye-Hückel equation. © 2012 The Japan Society of Fluid Mechanics and IOP Publishing Ltd.

Charge effects on hindrance factors for diffusion and convection of solute in pores I

The transport of a spherical solute through a long circular cylindrical pore filled with an electrolyte solution is studied numerically, in the presence of constant surface charge on the solute and the pore wall. Fluid dynamic analyses were carried out to calculate the flow field around the solute in the pore to evaluate the drag coefficients exerted on the solute. Electrical potentials around the solute in the electrolyte solution were computed based on a mean-field theory to provide the interaction energy between the charged solute and the pore wall. Combining the results of the fluid dynamic and electrostatic analyses, we estimated the rate of the diffusive and convective transport of the solute across the pore. Although the present estimates of the drag coefficients on the solute suggest more than 10% difference from existing studies, depending on the radius ratio of the solute relative to the pore and the radial position of the solute center in the pore, this difference leads to a minor effect on the hindrance factors. It was found that even at rather large ion concentrations, the repulsive electrostatic interaction between the charged solute and the pore wall of like charge could significantly reduce the transport rate of the solute.