Forecasting time-varying value-at-risk

In this thesis we are interested in financial risk and the instrument we want to use is Value-at-Risk (VaR). VaR is the maximum loss over a given period of time at a given confidence level. Many definitions of VaR exist and some will be introduced throughout this thesis. There two main ways to measure risk and VaR: through volatility and through percentiles. Large volatility in financial returns implies greater probability of large losses, but also larger probability of large profits. Percentiles describe tail behaviour. The estimation of VaR is a complex task. It is important to know the main characteristics of financial data to choose the best model. The existing literature is very wide, maybe controversial, but helpful in drawing a picture of the problem. It is commonly recognised that financial data are characterised by heavy tails, time-varying volatility, asymmetric response to bad and good news, and skewness. Ignoring any of these features can lead to underestimating VaR with a possible ultimate consequence being the default of the protagonist (firm, bank or investor). In recent years, skewness has attracted special attention. An open problem is the detection and modelling of time-varying skewness. Is skewness constant or there is some significant variability which in turn can affect the estimation of VaR? This thesis aims to answer this question and to open the way to a new approach to model simultaneously time-varying volatility (conditional variance) and skewness. The new tools are modifications of the Generalised Lambda Distributions (GLDs). They are four-parameter distributions, which allow the first four moments to be modelled nearly independently: in particular we are interested in what we will call para-moments, i.e., mean, variance, skewness and kurtosis. The GLDs will be used in two different ways. Firstly, semi-parametrically, we consider a moving window to estimate the parameters and calculate the percentiles of the GLDs. Secondly, parametrically, we attempt to extend the GLDs to include time-varying dependence in the parameters. We used the local linear regression to estimate semi-parametrically conditional mean and conditional variance. The method is not efficient enough to capture all the dependence structure in the three indices —ASX 200, S&P 500 and FT 30—, however it provides an idea of the DGP underlying the process and helps choosing a good technique to model the data. We find that GLDs suggest that moments up to the fourth order do not always exist, there existence appears to vary over time. This is a very important finding, considering that past papers (see for example Bali et al., 2008; Hashmi and Tay, 2007; Lanne and Pentti, 2007) modelled time-varying skewness, implicitly assuming the existence of the third moment. However, the GLDs suggest that mean, variance, skewness and in general the conditional distribution vary over time, as already suggested by the existing literature. The GLDs give good results in estimating VaR on three real indices, ASX 200, S&P 500 and FT 30, with results very similar to the results provided by historical simulation.

Election campaigns, and television news coverage : the case of the 2001 Australian election

This paper examines the patterns of television news coverage of the political parties, their leaders and the issues they raised during the 2001 Australian federal election campaign. By focusing on some issues, parties and leaders, television has long been argued to constrain voters' evaluations. We find that television news coverage in the 2001 Australian election campaign focused primarily on international issues, especially terrorism and asylum seekers, and on the two major parties - virtually to the exclusion of coverage of the minor parties and their leaders. Within the major party 'two-horse race', television gave substantially more coverage to the leaders than to the parties themselves, thereby sustaining what some have called a 'presidential'-style political contest. John Howard emerged as the winner in the leaders' stakes, garnering more coverage than Labor's Kim Beazley.

Forecasting crashes at the planning level: Simultaneous negative binomial crash model applied in Tucson, Arizona

At least two important transportation planning activities rely on planning-level crash prediction models. One is motivated by the Transportation Equity Act for the 21st Century, which requires departments of transportation and metropolitan planning organizations to consider safety explicitly in the transportation planning process. The second could arise from a need for state agencies to establish incentive programs to reduce injuries and save lives. Both applications require a forecast of safety for a future period. Planning-level crash prediction models for the Tucson, Arizona, metropolitan region are presented to demonstrate the feasibility of such models. Data were separated into fatal, injury, and property-damage crashes. To accommodate overdispersion in the data, negative binomial regression models were applied. To accommodate the simultaneity of fatality and injury crash outcomes, simultaneous estimation of the models was conducted. All models produce crash forecasts at the traffic analysis zone level. Statistically significant (p-values < 0.05) and theoretically meaningful variables for the fatal crash model included population density, persons 17 years old or younger as a percentage of the total population, and intersection density. Significant variables for the injury and property-damage crash models were population density, number of employees, intersections density, percentage of miles of principal arterial, percentage of miles of minor arterials, and percentage of miles of urban collectors. Among several conclusions it is suggested that planning-level safety models are feasible and may play a role in future planning activities. However, caution must be exercised with such models.

Forecasting negative effects of monotony and sensation seeking on performance during a vigilance task

The driving task requires sustained attention during prolonged periods, and can be performed in highly predictable or repetitive environments. Such conditions could create hypovigilance and impair performance towards critical events. Identifying such impairment in monotonous conditions has been a major subject of research, but no research to date has attempted to predict it in real-time. This pilot study aims to show that performance decrements due to monotonous tasks can be predicted through mathematical modelling taking into account sensation seeking levels. A short vigilance task sensitive to short periods of lapses of vigilance called Sustained Attention to Response Task is used to assess participants‟ performance. The framework for prediction developed on this task could be extended to a monotonous driving task. A Hidden Markov Model (HMM) is proposed to predict participants‟ lapses in alertness. Driver‟s vigilance evolution is modelled as a hidden state and is correlated to a surrogate measure: the participant‟s reactions time. This experiment shows that the monotony of the task can lead to an important decline in performance in less than five minutes. This impairment can be predicted four minutes in advance with an 86% accuracy using HMMs. This experiment showed that mathematical models such as HMM can efficiently predict hypovigilance through surrogate measures. The presented model could result in the development of an in-vehicle device that detects driver hypovigilance in advance and warn the driver accordingly, thus offering the potential to enhance road safety and prevent road crashes.

The blogification of Australian journalism? Notes from the election

My overall contention is that from Mark Latham to Grogsgate, from Tony’s speedos to Julia’s treasonous lack of handbags, Australian political journalism hasn’t exactly wowed us with the quality of its coverage these past months – with ample help, it should be noted, from the two sides of politics and the respective small target strategies themselves. Tim Dunlop has gone as far as to suggest that during the election we’ve seen politics and the media locked in a death spiral (http://www.abc.net.au/unleashed/35594.html) – an observation we might want to take up in the panel discussion – but even without the dramatic language the overall tendency has been that of a race to the bottom in the quality of political discourse in this country, with very few exceptions. And as a result, trust in journalism – the professional esteem in which journalists are held by their audiences – has been steadily declining for some time. Australian journalists are hardly alone in this, of course: this decline is a dynamic which has been observed in many other nations, too.

Journalism as social networking : the Australian youdecide project and the 2007 federal election

The increasing prevalence of new media technologies and the rise of citizen journalism has coincided with a crisis in industrial journalism –as the figure of the "journalist as hero" is fading, new media forms have facilitated the production of news content "from below" by citizens and "pro-am" journalists. Participation in an action-research project run during the 2007 Australian Federal Election, youdecide 2007, allowed the authors to gain first-hand insights into the progress of citizen-led news media in Australia, but also allowed us to develop an account of what the work of facilitating citizen journalism involves. These insights are important to understanding the future of professional journalism and journalism education, as more mainstream media organizations move to accommodate and harness user-created content. The paper considers the relevance of citizen journalism projects as forms of R&D for understanding news production and distribution in participatory media cultures, and the importance of grounded case studies for moving beyond normative debates about new media and the future of journalism.

Not yet the Internet election : online media, political commentary and the 2007 Australian federal election

This paper undertakes an overview of two developments in online media that coincided with the 'year-long campaign' that was the 2007 Australian Federal election. It discusses the relatively successful use of the Internet and social media in the 'Kevin07' Australian Labor Party campaign, and contrasts this to the Liberal-National Party's faltering use of You Tube for policy announcements. It also notes the struggle for authority in interpreting polling data between the mainstream media and various online commentators, and the 'July 12 incident' at The Australian, where it engaged in strong denunciation of alleged biases and prejudices among bloggers and on political Web sites. It concludes with consideration of some wider implication for political communication and the politics-media relationship, and whether we are seeing trends towards dispersal and diversification characterising the 'third age' of political communication.

Beware the doctrine of election!

The operation of the doctrine of election, as it applies in a conveyancing context, was recently considered by the Queensland Court of Appeal (McMurdo P and White and Fryberg JJ) in Barooga Projects (Investments) Pty Ltd v Duncan [2004] QCA 149.

A continuous time model for election timing

We consider a continuous time model for election timing in a Majoritarian Parliamentary System where the government maintains a constitutional right to call an early election. Our model is based on the two-party-preferred data that measure the popularity of the government and the opposition over time. We describe the poll process by a Stochastic Differential Equation (SDE) and use a martingale approach to derive a Partial Differential Equation (PDE) for the government’s expected remaining life in office. A comparison is made between a three-year and a four-year maximum term and we also provide the exercise boundary for calling an election. Impacts on changes in parameters in the SDE, the probability of winning the election and maximum terms on the call exercise boundaries are discussed and analysed. An application of our model to the Australian Federal Election for House of Representatives is also given.

Elections 2.0 : reflections on the 2010 federal election and the future of Australian electoral law

This article analyses the 2010 federal election and the impact the internet and social media had on electoral law, and what this may mean for electoral law in the future. Four electoral law issues arising out of the 2010 election as a result of the internet are considered, including online enrolment, regulation of online advertising and comment, fundraising and the role of lobby groups, especially when it comes to crowdsourcing court challenges. Finally, the article offers some suggestions as to how the parliament and the courts should respond to these challenges.

The impact of regulatory reforms on the earnings forecasting behaviour of IPO firms

Purpose – The purpose of this paper is to jointly assess the impact of regulatory reform for corporate fundraising in Australia (CLERP Act 1999) and the relaxation of ASX admission rules in 1999, on the accuracy of management earnings forecasts in initial public offer (IPO) prospectuses. The relaxation of ASX listing rules permitted a new category of new economy firms (commitments test entities (CTEs))to list without a prior history of profitability, while the CLERP Act (introduced in 2000) was accompanied by tighter disclosure obligations and stronger enforcement action by the corporate regulator (ASIC). Design/methodology/approach – All IPO earnings forecasts in prospectuses lodged between 1998 and 2003 are examined to assess the pre- and post-CLERP Act impact. Based on active ASIC enforcement action in the post-reform period, IPO firms are hypothesised to provide more accurate forecasts, particularly CTE firms, which are less likely to have a reasonable basis for forecasting. Research models are developed to empirically test the impact of the reforms on CTE and non-CTE IPO firms. Findings – The new regulatory environment has had a positive impact on management forecasting behaviour. In the post-CLERP Act period, the accuracy of prospectus forecasts and their revisions significantly improved and, as expected, the results are primarily driven by CTE firms. However, the majority of prospectus forecasts continue to be materially inaccurate. Originality/value – The results highlight the need to control for both the changing nature of listed firms and the level of enforcement action when examining responses to regulatory changes to corporate fundraising activities.

#Ausvotes : how Twitter covered the 2010 Australian federal election

While the 2007 Australian federal election was notable for the use of social media by the Australian Labor Party in campaigning, the 2010 election took place in a media landscape in which social media–especially Twitter–had become much more embedded in both political journalism and independent political commentary. This article draws on the computer-aided analysis of election-related Twitter messages, collected under the #ausvotes hashtag, to describe the key patterns of activity and thematic foci of the election’s coverage in this particular social media site. It introduces novel metrics for analysing public communication via Twitter, and describes the related methods. What emerges from this analysis is the role of the #ausvotes hashtag as a means of gathering an ad hoc ‘issue public’– a finding which is likely to be replicated for other hashtag communities.

(Not) the Twitter election: The dynamics of the #ausvotes conversation in relation to the Australian media ecology

This paper draws on a larger study of the uses of Australian user-created content and online social networks to examine the relationships between professional journalists and highly engaged Australian users of political media within the wider media ecology, with a particular focus on Twitter. It uses an analysis of topic based conversation networks using the #ausvotes hashtag on Twitter around the 2010 federal election to explore the key themes and issues addressed by this Twitter community during the campaign, and finds that Twitter users were largely commenting on the performance of mainstream media and politicians rather than engaging in direct political discussion. The often critical attitude of Twitter users towards the political establishment mirrors the approach of news and political bloggers to political actors, nearly a decade earlier, but the increasing adoption of Twitter as a communication tool by politicians, journalists, and everyday users alike makes a repetition of the polarisation experienced at that time appear unlikely.