Endogenous Risk Perception, Geospatial Characteristics and Temporal Variation in Hurricane Evacuation Behavior

The main focus of this thesis was to gain a better understanding about the dynamics of risk perception and its influence on people’s evacuation behavior. Another major focus was to improve our knowledge regarding geo-spatial and temporal variations of risk perception and hurricane evacuation behavior. A longitudinal dataset of more than eight hundred households were collected following two major hurricane events, Ivan and Katrina. The longitudinal survey data was geocoded and a geo-spatial database was integrated to it. The geospatial database was composed of distance, elevation and hazard parameters with respect to the respondent’s household location. A set of Bivariate Probit (BP) model suggests that geospatial variables have had significant influences in explaining hurricane risk perception and evacuation behavior during both hurricanes. The findings also indicated that people made their evacuation decision in coherence with their risk perception. In addition, people updated their hurricane evacuation decision in a subsequent similar event.

A Comprehensive Portfolio Construction Under Stochastic Environment

Prior research has established that idiosyncratic volatility of the securities prices exhibits a positive trend. This trend and other factors have made the merits of investment diversification and portfolio construction more compelling. A new optimization technique, a greedy algorithm, is proposed to optimize the weights of assets in a portfolio. The main benefits of using this algorithm are to: a) increase the efficiency of the portfolio optimization process, b) implement large-scale optimizations, and c) improve the resulting optimal weights. In addition, the technique utilizes a novel approach in the construction of a time-varying covariance matrix. This involves the application of a modified integrated dynamic conditional correlation GARCH (IDCC - GARCH) model to account for the dynamics of the conditional covariance matrices that are employed. The stochastic aspects of the expected return of the securities are integrated into the technique through Monte Carlo simulations. Instead of representing the expected returns as deterministic values, they are assigned simulated values based on their historical measures. The time-series of the securities are fitted into a probability distribution that matches the time-series characteristics using the Anderson-Darling goodness-of-fit criterion. Simulated and actual data sets are used to further generalize the results. Employing the S&P500 securities as the base, 2000 simulated data sets are created using Monte Carlo simulation. In addition, the Russell 1000 securities are used to generate 50 sample data sets. The results indicate an increase in risk-return performance. Choosing the Value-at-Risk (VaR) as the criterion and the Crystal Ball portfolio optimizer, a commercial product currently available on the market, as the comparison for benchmarking, the new greedy technique clearly outperforms others using a sample of the S&P500 and the Russell 1000 securities. The resulting improvements in performance are consistent among five securities selection methods (maximum, minimum, random, absolute minimum, and absolute maximum) and three covariance structures (unconditional, orthogonal GARCH, and integrated dynamic conditional GARCH).