The impact of taxes on optimal portfolio choice : an Australian study

Taxes are an important component of investing that is commonly overlooked in both the literature and in practice. For example, many understand that taxes will reduce an investment’s return, but less understood is the risk-sharing nature of taxes that also reduces the investment’s risk. This thesis examines how taxes affect the optimal asset allocation and asset location decision in an Australian environment. It advances the model of Horan & Al Zaman (2008), improving the method by which the present value of tax liabilities are calculated, by using an after-tax risk-free discount rate, and incorporating any new or reduced tax liabilities generated into its expected risk and return estimates. The asset allocation problem is examined for a range of different scenarios using Australian parameters, including different risk aversion levels, personal marginal tax rates, investment horizons, borrowing premiums, high or low inflation environments, and different starting cost bases. The findings support the Horan & Al Zaman (2008) conclusion that equities should be held in the taxable account. In fact, these findings are strengthened with most of the efficient frontier maximising equity holdings in the taxable account instead of only half. Furthermore, these findings transfer to the Australian case, where it is found that taxed Australian investors should always invest into equities first through the taxable account before investing in super. However, untaxed Australian investors should invest their equity first through superannuation. With borrowings allowed in the taxable account (no borrowing premium), Australian taxed investors should hold 100% of the superannuation account in the risk-free asset, while undertaking leverage in the taxable account to achieve the desired risk-return. Introducing a borrowing premium decreases the likelihood of holding 100% of super in the risk-free asset for taxable investors. The findings also suggest that the higher the marginal tax rate, the higher the borrowing premium in order to overcome this effect. Finally, as the investor’s marginal tax rate increases, the overall allocation to equities should increase due to the increased risk and return sharing caused by taxation, and in order to achieve the same risk/return level as the lower taxation level, the investor must take on more equity exposure. The investment horizon has a minimal impact on the optimal allocation decision in the absence of factors such as mean reversion and human capital.

What drives the commodity price beta of oil industry stocks

We test theoretical drivers of the oil price beta of oil industry stocks. The strongest statistical and economic support comes for market conditions-type variables as the prime drivers: namely, oil price (+), bond rate (+), volatility of oil returns (−) and cost of carry (+). Though statistically significant, exogenous firm characteristics and oil firms' financing decisions have less compelling economic significance. There is weaker support for the prediction that financial risk management reduces the exposure of oil stocks to crude oil price variation. Finally, extended modelling shows that mean reversion in oil prices also helps explain cross-sectional variation in the oil beta.

Modeling Nonlinearities and Asymmetries in Asset Pricing

Financial time series tend to behave in a manner that is not directly drawn from a normal distribution. Asymmetries and nonlinearities are usually seen and these characteristics need to be taken into account. To make forecasts and predictions of future return and risk is rather complicated. The existing models for predicting risk are of help to a certain degree, but the complexity in financial time series data makes it difficult. The introduction of nonlinearities and asymmetries for the purpose of better models and forecasts regarding both mean and variance is supported by the essays in this dissertation. Linear and nonlinear models are consequently introduced in this dissertation. The advantages of nonlinear models are that they can take into account asymmetries. Asymmetric patterns usually mean that large negative returns appear more often than positive returns of the same magnitude. This goes hand in hand with the fact that negative returns are associated with higher risk than in the case where positive returns of the same magnitude are observed. The reason why these models are of high importance lies in the ability to make the best possible estimations and predictions of future returns and for predicting risk.

Valuation of wind energy projects: A real options approach

27 p.

Nutrient characteristics in the Yangtze River Estuary and the adjacent East China Sea before and after impoundment of the Three Gorges Dam

From November 2002 to 2006, five cruises were undertaken in the Yangtze River Estuary and the adjacent East China Sea to compare the nutrient concentrations, ratios and potential nutrient limitation of phytoplankton growth before and after impoundment (June 2003) of the Three Gorges Dam (TGD). Concentrations of dissolved inorganic nitrogen (DIN), soluble reactive phosphorus (SRP) and total nitrogen (TN) exhibited an increasing trend from 2002 to 2006. In contrast, total phosphorus (TP) concentration exhibited a decreasing trend. The mean concentrations of DIN, SRP, and TN in the total study area increased from 21.4 mu M, 0.9 mu M, and 41.8 mu M in 2002 to 37.5 mu M, 1.3 mu M. and 82.2 mu M in 2006, respectively. while TP decreased from 2.1 mu M to 1.7 mu M. The concentration of dissolved reactive silica (DRSi) had no major fluctuations and the differences were not significant. The mean concentration of DRSi in the total study area ranged from 52.5 to 92.3 mu M. The Si:N ratio decreased significantly from 2.7 in 2002 to 1.3 in 2006, while TN: TP ratio increased from 22.1 to 80.3. The area of potential P limitation of phytoplankton growth expanded after 2003 and potential Si limitation appeared in 2005 and 2006. Potential P limitation mainly occurred in an area of salinity less than 30 after 2003, while potential Si limitation occurred where the salinity was greater than 30. By comparison with historical data, the concentrations of nitrate and SRP in this upper estuary during November 1980-2006 increased obviously after impoundment of TGD but DRSi decreased. Meanwhile, the ratios of N:P, Si:N and Si:P decreased obviously. (c) 2009 Elsevier B.V. All rights reserved.

Long-term equity anticipation securities and stock market volatility dynamics

Recent empirical findings suggest that the long-run dependence in U.S. stock market volatility is best described by a slowly mean-reverting fractionally integrated process. The present study complements this existing time-series-based evidence by comparing the risk-neutralized option pricing distributions from various ARCH-type formulations. Utilizing a panel data set consisting of newly created exchange traded long-term equity anticipation securities, or leaps, on the Standard and Poor's 500 stock market index with maturity times ranging up to three years, we find that the degree of mean reversion in the volatility process implicit in these prices is best described by a Fractionally Integrated EGARCH (FIEGARCH) model. © 1999 Elsevier Science S.A. All rights reserved.

Does final demand for energy in Portugal exhibit long memory

In this paper, we measure the degree of fractional integration in final energy demand in Portugal using an ARFIMA model with and without adjustments for seasonality. We consider aggregate energy demand as well as final demand for petroleum, electricity, coal, and natural gas. Our findings suggest the presence of long memory in all of the energy demand variables, that the series are stationary, although the mean reversion process will be slower than in the typical short run processes. These results have important implications for the design of energy policies. The effects of temporary policy shocks on final energy demand will tend to disappear slowly. This means that even transitory shocks have long lasting effects. Given the temporary nature of these effects, however, permanent effects require permanent policies. This is unlike what would be suggested by the more standard but much more limited unit root approach, which would incorrectly indicate that even transitory policies would have permanent effects.

Age-period-cohort effects in the incidence of hip fractures: political and economic events are coincident with changes in risk

Introduction: Healthcare improvements have allowed prevention but have also increased life expectancy, resulting in more people being at risk. Our aim was to analyse the separate effects of age, period and cohort on incidence rates by sex in Portugal, 2000–2008. Methods: From the National Hospital Discharge Register, we selected admissions (aged ≥49 years) with hip fractures (ICD9-CM, codes 820.x) caused by low/moderate trauma (falls from standing height or less), readmissions and bone cancer cases. We calculated person-years at risk using population data from Statistics Portugal. To identify period and cohort effects for all ages, we used an age–period–cohort model (1-year intervals) followed by generalised additive models with a negative binomial distribution of the observed incidence rates of hip fractures. Results: There were 77,083 hospital admissions (77.4 % women). Incidence rates increased exponentially with age for both sexes (age effect). Incidence rates fell after 2004 for women and were random for men (period effect). There was a general cohort effect similar in both sexes; risk of hip fracture altered from an increasing trend for those born before 1930 to a decreasing trend following that year. Risk alterations (not statistically significant) coincident with major political and economic change in the history of Portugal were observed around birth cohorts 1920 (stable–increasing), 1940 (decreasing–increasing) and 1950 (increasing–decreasing only among women). Conclusions: Hip fracture risk was higher for those born during major economically/politically unstable periods. Although bone quality reflects lifetime exposure, conditions at birth may determine future risk for hip fractures.

Leverage instability and persistence: Evidence from the United States and Europe

We find that leverage behavior both in level and time-series variation is very similar between the United States and Europe throughout the 1990-2013 period. Leverage regimes are simultaneously unstable and persistent for both regions. We define instability as the extent to which firms largely deviate from their long-term leverage mean, while persistence as the extent to which today’s leverage influences its future levels. We then show that this simultaneous evidence imply a mean-reversion behavior of leverage and discuss some of its implications for future research on this field.

Valuing an offshore exploration project through real options analysis

This thesis applied real options analysis to the valuation of an offshore oil exploration project, taking into consideration the several options typically faced by the management team of these projects. The real options process is developed under technical and price uncertainties, where it is considered that the mean reversion stochastic process is more adequate to describe the movement of oil price throught time. The valuation is realized to two case scenarios, being the first a simplified approach to develop the intuition of the used concepts, and the later a more complete cases that is resolved using both the binomial and trinomial processes to describe oil price movement. Real options methodology demonstrated to be capable of assessing and valuing the projects options, and of overcoming common capital budgeting methodologies flexibility limitation. The added value of the application of real options is evident, but so is the method's increased complexity, which adversely influence its widespread implementation.

Monitoreo y marcación de invertebrados marinos, Callao, Perú, 2014

En los alrededores de la isla San Lorenzo, en el 2014, bimensualmente se efectuaron muestreos en siete estaciones, monitoreando a los bivalvos Argopecten purpuratus, Glycymeris ovata y los crustáceos Romaleon polyodon, Cancer coronatus, Cancer porteri y Hepatus chilensis; también, se efectuaron experimentos de marcación y recaptura para determinar tasas de crecimiento en A. purpuratus, G. ovata, Semele spp., Gari solida y Protothaca thaca. A. purpuratus fue más abundante a finales del año, periodo en el que (como en el 2013) se registraron mayores valores de oxígeno a nivel de fondo del mar. R. polyodon presentó tendencia creciente de la talla media y biomasa. C. coronatus fue observado frecuentemente al norte de la isla San Lorenzo con densidades máximas de 10,67 ejemplares.10min. El cangrejo Platymera gaudichaudii fue observado solo en diciembre con densidades medias de 24 ejemplares.10 min de buceo. Se marcaron 7214 ejemplares y recapturaron 2730 ejemplares. G. ovata tuvo el 80% de recaptura y A. purpuratus 24%. Las tasas de crecimiento presentaron tendencias decrecientes a mayores tallas en todas las especies. En G. ovata la tasa de crecimiento fue mayor en ejemplares liberados en La Pampa diferente al comportamiento en Cabinzas; también se observaron diferencias entre las almejas Semele spp. y Gari solida. La abundancia de G. ovata en mayo y setiembre fue de hasta 190 ejemplares y 648,6 g por m². Las mayores densidades se registraron al noroeste de la isla San Lorenzo, mayor incidencia de esta especie estuvo en el substrato formado por conchuela molida. El rendimiento de G. ovata fue mayor en el área La Pampa respecto a Cabinzas, Palomino y Mal Nombre.

Modelación estocástica y trading algorítmico del spread entre acciones mediante procesos de reversión a la media

Las estrategias de inversión pairs trading se basan en desviaciones del precio entre pares de acciones correlacionadas y han sido ampliamente implementadas por fondos de inversión tomando posiciones largas y cortas en las acciones seleccionadas cuando surgen divergencias y obteniendo utilidad cerrando la posición al converger. Se describe un modelo de reversión a la media para analizar la dinámica que sigue el diferencial del precio entre acciones ordinarias y preferenciales de una misma empresa en el mismo mercado. La media de convergencia en el largo plazo es obtenida con un filtro de media móvil, posteriormente, los parámetros del modelo de reversión a la media se estiman mediante un filtro de Kalman bajo una formulación de estado espacio sobre las series históricas. Se realiza un backtesting a la estrategia de pairs trading algorítmico sobre el modelo propuesto indicando potenciales utilidades en mercados financieros que se observan por fuera del equilibrio. Aplicaciones de los resultados podrían mostrar oportunidades para mejorar el rendimiento de portafolios, corregir errores de valoración y sobrellevar mejor periodos de bajos retornos.

Acrylamide concentrations in potato crisps in Europe from 2002 to 2011

A dataset of manufacturers' measurements of acrylamide levels in 40,455 samples of fresh sliced potato crisps from 20 European countries for years 2002 to 2011 was compiled. This dataset is by far the largest ever compiled relating to acrylamide levels in potato crisps. Analysis of variance was applied to the data and showed a clear, significant downward trend for mean levels of acrylamide, from 763 +/- 91.1 ng g(-1) (parts per billion) in 2002 to 358 +/- 2.5 ng g(-1) in 2011; this was a decrease of 53% +/- 13.5%. The yearly 95th quantile values were also subject to a clear downward trend. The effect of seasonality arising from the influence of potato storage on acrylamide levels was evident, with acrylamide in the first 6 months of the year being significantly higher than in the second 6 months. The proportion of samples containing acrylamide at a level above the indicative value of 1000ngg(-1) for potato crisps introduced by the European Commission in 2011 fell from 23.8% in 2002 to 3.2% in 2011. Nevertheless, even in 2011, a small proportion of samples still contained high levels of acrylamide, with 0.2% exceeding 2000ngg(-1).

Detection of recent changes in climate using meteorological data from south-eastern Bangladesh

Analysis of meteorological records from four stations (Chittagong, Cox’s Bazar, Rangamati, Sitakunda) in south-eastern Bangladesh show coherent changes in climate over the past three decades. Mean maximum daily temperatures have increased between 1980 and 2013 by ca. 0.4 to 0.6°C per decade, with changes of comparable magnitude in individual seasons. The increase in mean maximum daily temperature is associated with decreased cloud cover and wind speed, particularly in the pre- and post-monsoon seasons. During these two seasons, the correlation between changes in maximum temperature and clouds is between -0.5 and -0.7; the correlation with wind speed is weaker although similar values are obtained in some seasons. Changes in mean daily minimum (and hence mean) temperature differ between the northern and southern part of the basin: northern stations show a decrease in mean daily minimum temperature during the post-monsoon season of between 0.2 and 0.5°C per decade while southern stations show an increase of ca. 0.1 to 0.4°C per decade during the pre-monsoon and monsoon seasons. In contrast to the significant changes in temperature, there is no trend in mean or total precipitation at any station. However, there is a significant increase in the number of rain days at the northern sites during the monsoon season, with an increase per decade of 3 days in Sitakunda and 7 days at Rangamati. These climate changes could have a significant impact on the hydrology of the Halda Basin, which supplies water to Chittagong and is the major pisciculture centre in Bangladesh.