Using extreme value theory to value stock market returns

Extreme stock price movements are of great concern to both investors and the entire economy. For investors, a single negative return, or a combination of several smaller returns, can possible wipe out so much capital that the firm or portfolio becomes illiquid or insolvent. If enough investors experience this loss, it could shock the entire economy. An example of such a case is the stock market crash of 1987. Furthermore, there has been a lot of recent interest regarding the increasing volatility of stock prices. ^ This study presents an analysis of extreme stock price movements. The data utilized was the daily returns for the Standard and Poor's 500 index from January 3, 1978 to May 31, 2001. Research questions were analyzed using the statistical models provided by extreme value theory. One of the difficulties in examining stock price data is that there is no consensus regarding the correct shape of the distribution function generating the data. An advantage with extreme value theory is that no detailed knowledge of this distribution function is required to apply the asymptotic theory. We focus on the tail of the distribution. ^ Extreme value theory allows us to estimate a tail index, which we use to derive bounds on the returns for very low probabilities on an excess. Such information is useful in evaluating the volatility of stock prices. There are three possible limit laws for the maximum: Gumbel (thick-tailed), Fréchet (thin-tailed) or Weibull (no tail). Results indicated that extreme returns during the time period studied follow a Fréchet distribution. Thus, this study finds that extreme value analysis is a valuable tool for examining stock price movements and can be more efficient than the usual variance in measuring risk. ^

Thinking in three dimensions: Exploring students' geometric thinking and spatial ability with the Geometer's Sketchpad

Current reform initiatives recommend that geometry instruction include the study of three-dimensional geometric objects and provide students with opportunities to use spatial skills in problem-solving tasks. Geometer's Sketchpad (GSP) is a dynamic and interactive computer program that enables the user to investigate and explore geometric concepts and manipulate geometric structures. Research using GSP as an instructional tool has focused primarily on teaching and learning two-dimensional geometry. This study explored the effect of a GSP based instructional environment on students' geometric thinking and three-dimensional spatial ability as they used GSP to learn three-dimensional geometry. For 10 weeks, 18 tenth-grade students from an urban school district used GSP to construct and analyze dynamic, two-dimensional representations of three-dimensional objects in a classroom environment that encouraged exploration, discussion, conjecture, and verification. The data were collected primarily from participant observations and clinical interviews and analyzed using qualitative methods of analysis. In addition, pretest and posttest measures of three-dimensional spatial ability and van Hiele level of geometric thinking were obtained. Spatial ability measures were analyzed using standard t-test analysis. ^ The data from this study indicate that GSP is a viable tool to teach students about three-dimensional geometric objects. A comparison of students' pretest and posttest van Hiele levels showed an improvement in geometric thinking, especially for students on lower levels of the van Hiele theory. Evidence at the p < .05 level indicated that students' spatial ability improved significantly. Specifically, the GSP dynamic, visual environment supported students' visualization and reasoning processes as students attempted to solve challenging tasks about three-dimensional geometric objects. The GSP instructional activities also provided students with an experiential base and an intuitive understanding about three-dimensional objects from which more formal work in geometry could be pursued. This study demonstrates that by designing appropriate GSP based instructional environments, it is possible to help students improve their spatial skills, develop more coherent and accurate intuitions about three-dimensional geometric objects, and progress through the levels of geometric thinking proposed by van Hiele. ^

Quantum transition state theory and solving a first order master equation for complex reactions numerically

The field of chemical kinetics is an exciting and active field. The prevailing theories make a number of simplifying assumptions that do not always hold in actual cases. Another current problem concerns a development of efficient numerical algorithms for solving the master equations that arise in the description of complex reactions. The objective of the present work is to furnish a completely general and exact theory of reaction rates, in a form reminiscent of transition state theory, valid for all fluid phases and also to develop a computer program that can solve complex reactions by finding the concentrations of all participating substances as a function of time. To do so, the full quantum scattering theory is used for deriving the exact rate law, and then the resulting cumulative reaction probability is put into several equivalent forms that take into account all relativistic effects if applicable, including one that is strongly reminiscent of transition state theory, but includes corrections from scattering theory. Then two programs, one for solving complex reactions, the other for solving first order linear kinetic master equations to solve them, have been developed and tested for simple applications.

The Effects of the Word of Wisdom Meditation Technique on the Development of Executive Function Skills in Early Childhood Education

This theory-based paper examines the definition of Executive Functioning (EF) skills, their importance in the early childhood classroom and how to aid in their natural development. The Word of Wisdom meditation technique is considered as a viable alternative to increase the natural development of EF skills in early childhood.