Forecasting US output growth using leading indicators: an appraisal using MIDAS models

We evaluate the predictive power of leading indicators for output growth at horizons up to 1 year. We use the MIDAS regression approach as this allows us to combine multiple individual leading indicators in a parsimonious way and to directly exploit the information content of the monthly series to predict quarterly output growth. When we use real-time vintage data, the indicators are found to have significant predictive ability, and this is further enhanced by the use of monthly data on the quarter at the time the forecast is made

The cross-currency hedging performance of implied versus statistical forecasting models

This article examines the ability of several models to generate optimal hedge ratios. Statistical models employed include univariate and multivariate generalized autoregressive conditionally heteroscedastic (GARCH) models, and exponentially weighted and simple moving averages. The variances of the hedged portfolios derived using these hedge ratios are compared with those based on market expectations implied by the prices of traded options. One-month and three-month hedging horizons are considered for four currency pairs. Overall, it has been found that an exponentially weighted moving-average model leads to lower portfolio variances than any of the GARCH-based, implied or time-invariant approaches.

Chronic limitations of neo-liberal capitalism and oligopolistic markets: an urgent case for socialized capital

Purpose – The purpose of this paper is to highlight the serious limitations of neo-liberal capitalism and urge for a shift to socialized capital before further economic deterioration leads to a succession of global conflicts. Design/methodology/approach – This conceptual paper adopts a macro perspective in presenting argument on how global, financial markets integration and capital flow liberalization have led to inadequate market and corporate governance measures. The argument is couched in a selected literature and is preceded by a proposed solution – the requirement for socialized capital. An analysis of the nature of socialized capital is outlined and the questions that require attention identified if a paradigm shift from neo-liberal capitalism is to take place. Findings – The need to urgently shift to a new philosophy of capitalism is overwhelming. Emphasized is that capital needs to adopt a socialised identity and is supported by investment horizons of 30 years or more. It is argued that non-market (e.g. state, NGOs, civil society) intervention is critical in setting appropriate frameworks within which socialized capital can operate. Research limitations/implications – This is a theoretical paper, in which questions are raised which require transparent, public debate. Originality/value – The paper presents the case for a fundamental reconsideration of present day markets, the role of capital and the influence of elites in determining the public good.

A simple framework for assessing the trade-off between the climate impact of aviation carbon dioxide emissions and contrails for a single flight

Persistent contrails are an important climate impact of aviation which could potentially be reduced by re-routing aircraft to avoid contrailing; however this generally increases both the flight length and its corresponding CO emissions. Here, we provide a simple framework to assess the trade-off between the climate impact of CO emissions and contrails for a single flight, in terms of the absolute global warming potential and absolute global temperature potential metrics for time horizons of 20, 50 and 100 years. We use the framework to illustrate the maximum extra distance (with no altitude changes) that can be added to a flight and still reduce its overall climate impact. Small aircraft can fly up to four times further to avoid contrailing than large aircraft. The results have a strong dependence on the applied metric and time horizon. Applying a conservative estimate of the uncertainty in the contrail radiative forcing and climate efficacy leads to a factor of 20 difference in the maximum extra distance that could be flown to avoid a contrail. The impact of re-routing on other climatically-important aviation emissions could also be considered in this framework.

Forecast uncertainty—ex Ante and ex Post: U.S. inflation and output growth

Survey respondents who make point predictions and histogram forecasts of macro-variables reveal both how uncertain they believe the future to be, ex ante, as well as their ex post performance. Macroeconomic forecasters tend to be overconfident at horizons of a year or more, but overestimate (i.e., are underconfident regarding) the uncertainty surrounding their predictions at short horizons. Ex ante uncertainty remains at a high level compared to the ex post measure as the forecast horizon shortens. There is little evidence of a link between individuals’ ex post forecast accuracy and their ex ante subjective assessments.

Metrics for linking emissions of gases and aerosols to global precipitation changes

Recent advances in understanding have made it possible to relate global precipitation changes directly to emissions of particular gases and aerosols that influence climate. Using these advances, new indices are developed here called the Global Precipitation-change Potential for pulse (GPP_P) and sustained (GPP_S) emissions, which measure the precipitation change per unit mass of emissions. The GPP can be used as a metric to compare the effects of different emissions. This is akin to the global warming potential (GWP) and the global temperature-change potential (GTP) which are used to place emissions on a common scale. Hence the GPP provides an additional perspective of the relative or absolute effects of emissions. It is however recognised that precipitation changes are predicted to be highly variable in size and sign between different regions and this limits the usefulness of a purely global metric. The GPP_P and GPP_S formulation consists of two terms, one dependent on the surface temperature change and the other dependent on the atmospheric component of the radiative forcing. For some forcing agents, and notably for CO2, these two terms oppose each other – as the forcing and temperature perturbations have different timescales, even the sign of the absolute GPP_P and GPP_S varies with time, and the opposing terms can make values sensitive to uncertainties in input parameters. This makes the choice of CO2 as a reference gas problematic, especially for the GPP_S at time horizons less than about 60 years. In addition, few studies have presented results for the surface/atmosphere partitioning of different forcings, leading to more uncertainty in quantifying the GPP than the GWP or GTP. Values of the GPP_P and GPP_S for five long- and short-lived forcing agents (CO2, CH4, N2O, sulphate and black carbon – BC) are presented, using illustrative values of required parameters. The resulting precipitation changes are given as the change at a specific time horizon (and hence they are end-point metrics) but it is noted that the GPPS can also be interpreted as the time-integrated effect of a pulse emission. Using CO2 as a references gas, the GPP_P and GPP_S for the non-CO2 species are larger than the corresponding GTP values. For BC emissions, the atmospheric forcing is sufficiently strong that the GPP_S is opposite in sign to the GTP_S. The sensitivity of these values to a number of input parameters is explored. The GPP can also be used to evaluate the contribution of different emissions to precipitation change during or after a period of emissions. As an illustration, the precipitation changes resulting from emissions in 2008 (using the GPP_P) and emissions sustained at 2008 levels (using the GPP_S) are presented. These indicate that for periods of 20 years (after the 2008 emissions) and 50 years (for sustained emissions at 2008 levels) methane is the dominant driver of positive precipitation changes due to those emissions. For sustained emissions, the sum of the effect of the five species included here does not become positive until after 50 years, by which time the global surface temperature increase exceeds 1 K.

A comparative value of electricity storage within GB market mechanisms

This paper investigates the value of a generic storage system within two GB market mechanisms and one ancillary service provision: the wholesale power market, the Balancing Mechanism and Firm Frequency Response (FFR). Three models are evaluated under perfect foresight and fixed horizon which is subsequently extended to explore the impact of a longer foresight on market revenues. The results show that comparatively, the balancing mechanism represents the highest source of potential revenues followed by the wholesale power market and Firm Frequency Response respectively. Longer horizons show diminishing returns, with the 1 day horizon providing the vast majority of total revenues. However storage power capacity utilization benefits from such long horizons. These results could imply that short horizons are very effective in capturing revenues in both the wholesale market and balancing mechanism whereas sizing of a storage system should take into consideration horizon foresight and accuracy for greater benefit.

Root distributions of Australian herbaceous perennial legumes in response to phosphorus placement

Many Australian plant species have specific root adaptations for growth in phosphorus-impoverished soils, and are often sensitive to high external P concentrations. The growth responses of native Australian legumes in agricultural soils with elevated P availability in the surface horizons are unknown. The aim of these experiments was to test the hypothesis that increased P concentration in surface soil would reduce root proliferation at depth in native legumes. The effect of P placement on root distribution was assessed for two Australian legumes, Kennedia prorepens F. Muell. and Lotus australis Andrews, and the exotic Medicago sativa L. Three treatments were established in a low-P loam soil: amendment of 0.15 g mono-calcium phosphate in either (i) the top 50 mm (120 µg P g–1) or (ii) the top 500 mm (12 µg P g–1) of soil, and an unamended control. In the unamended soil M. sativa was shallow rooted, with 58% of the root length of in the top 50 mm. K. prorepens and L. australis had a more even distribution down the pot length, with only 4 and 22% of their roots in the 0–50 mm pot section, respectively. When exposed to amendment of P in the top 50 mm, root length in the top 50 mm increased 4-fold for K. prorepens and 10-fold for M. sativa, although the pattern of root distribution did not change for M. sativa. L. australis was relatively unresponsive to P additions and had an even distribution of roots down the pot. Shoot P concentrations differed according to species but not treatment (K. prorepens 2.1 mg g–1, L. australis 2.4 mg g–1, M. sativa 3.2 mg g–1). Total shoot P content was higher for K. prorepens than for the other species in all treatments. In a second experiment, mono-ester phosphatases were analysed from 1-mm slices of soil collected directly adjacent to the rhizosphere. All species exuded phosphatases into the rhizosphere, but addition of P to soil reduced phosphatase activity only for K. prorepens. Overall, high P concentration in the surface soil altered root distribution, but did not reduce root proliferation at depth. Furthermore, the Australian herbaceous perennial legumes had root distributions that enhanced P acquisition from low-P soils.

Effect of air-drying pre-treatment on the characterization of forest soil carbon pools

Archived soils could represent a valuable resource for the spatio-temporal inventory of soil carbon stability. However, archived soils are usually air-dried before storage and the impact of a drying pretreatment on physically and chemically-defined C fractions has not yet been fully assessed. Through the comparison of field-moist and corresponding air-dried (at 25oC for 2 weeks) forest soil samples, we examined the effect of air-drying on: a) the quantity and the quality of cold- (CWEC) and hot-water (HWEC) extractable C and b) the concentration of C in physically isolated fractions (free- and intra-aggregate light and organo-mineral). Soil samples were collected from the organic (O) and mineral (A and B) horizons of three different forest soils from southeastern England: (i) Cambisol under Pine (Pinus nigra); (ii) Cambisol under Beech (Fagus sylvatica) and (iii) Gleysol under oak (Quercus robur). CWEC concentrations for dry samples were up to 2 times greater than for corresponding field moist samples and had significantly (p < 0.001) higher phenolic content. However, the effect of drying pretreatment on HWEC, its phenolic content was not significant (p > 0.05) for most samples. Dried soils had significantly (p < 0.001) higher concentrations of free light-C while having lower concentrations of intra-aggregate-C when compared to moist samples (p < 0.001). However, fine silt and clay fractions were not significantly affected by the drying pretreatment (p=0.789). Therefore, based on the results obtained from gleysol and cambisol forest soils studied here, C contents in hot-water extractions and fine particle size physical fractions (< 25µm) seem to be robust measurements for evaluating C fractions in dried stored forest soils. Further soil types should be tested to evaluate the wider generality of these findings.

Forecasting elections

In this paper we assess opinion polls, prediction markets, expert opinion and statistical modelling over a large number of US elections in order to determine which perform better in terms of forecasting outcomes. In line with existing literature, we bias-correct opinion polls. We consider accuracy, bias and precision over different time horizons before an election, and we conclude that prediction markets appear to provide the most precise forecasts and are similar in terms of bias to opinion polls. We find that our statistical model struggles to provide competitive forecasts, while expert opinion appears to be of value. Finally we note that the forecast horizon matters; whereas prediction market forecasts tend to improve the nearer an election is, opinion polls appear to perform worse, while expert opinion performs consistently throughout. We thus contribute to the growing literature comparing election forecasts of polls and prediction markets.

Do jumps matter for volatility forecasting? Evidence from energy markets

This paper characterizes the dynamics of jumps and analyzes their importance for volatility forecasting. Using high-frequency data on four prominent energy markets, we perform a model-free decomposition of realized variance into its continuous and discontinuous components. We find strong evidence of jumps in energy markets between 2007 and 2012. We then investigate the importance of jumps for volatility forecasting. To this end, we estimate and analyze the predictive ability of several Heterogenous Autoregressive (HAR) models that explicitly capture the dynamics of jumps. Conducting extensive in-sample and out-of-sample analyses, we establish that explicitly modeling jumps does not significantly improve forecast accuracy. Our results are broadly consistent across our four energy markets, forecasting horizons, and loss functions

Late persistence of the Acheulian in southern Britain in an MIS 8 interstadial: evidence from Harnham, Wiltshire

This paper presents evidence of the discovery of a new Middle Pleistocene site in central southern England, with undisturbed evidence of hominin occupation well-dated to an interstadial towards the end of Marine Isotope Stage 8, c. 250,000 BP. The site consists of a preserved remnant of a river terrace and its alluvial floodplain overlain by chalk-rich bankside deposits, all abutting a Chalk bedrock riverbank. It preserves an area of occupation with activity focused on the riverbank, complemented by occasional activity on a palaeo-landsurface developed on the surface of the alluvial floodplain. Lithic technology at the site consists almost entirely of handaxe manufacture, allowing attribution to an Acheulian industrial tradition. Mammalian and other palaeo-environmental remains are present and associated with the occupation horizons, including large mammal bones showing signs of hominin interference. Dating was based on OSL determinations on the sediments and amino acid racemisation of molluscan remains, supported by biostratigraphic indications. Besides being a rare instance of an undisturbed Palaeolithic palaeo-landscape covering several hectares, the site contributes to wider Quaternary research concerns over the ability of Middle Pleistocene hominins to tolerate colder climatic episodes in higher latitudes, and over settlement history and changing lithic industrial traditions of northwest Europe in relation to climate change and British peninsularity. It is suggested that the Harnham evidence may represent an insular population that had persisted in southern Britain since MIS 10/9, which became locally extinct during the glacial maximum 8.2 marking the end of MIS 8.

Fine-scale temporal characterization of trends in soil water dissolved organic carbon and potential drivers

Long-term monitoring of surface water quality has shown increasing concentrations of Dissolved Organic Carbon (DOC) across a large part of the Northern Hemisphere. Several drivers have been implicated including climate change, land management change, nitrogen and sulphur deposition and CO2 enrichment. Analysis of stream water data, supported by evidence from laboratory studies, indicates that an effect of declining sulphur deposition on catchment soil chemistry is likely to be the primary mechanism, but there are relatively few long term soil water chemistry records in the UK with which to investigate this, and other, hypotheses directly. In this paper, we assess temporal relationships between soil solution chemistry and parameters that have been argued to regulate DOC production and, using a unique set of co-located measurements of weather and bulk deposition and soil solution chemistry provided by the UK Environmental Change Network and the Intensive Forest Monitoring Level II Network . We used statistical non-linear trend analysis to investigate these relationships at 5 forested and 4 non-forested sites from 1993 to 2011. Most trends in soil solution DOC concentration were found to be non-linear. Significant increases in DOC occurred mostly prior to 2005. The magnitude and sign of the trends was associated qualitatively with changes in acid deposition, the presence/absence of a forest canopy, soil depth and soil properties. The strongest increases in DOC were seen in acidic forest soils and were most clearly linked to declining anthropogenic acid deposition, while DOC trends at some sites with westerly locations appeared to have been influenced by shorter-term hydrological variation. The results indicate that widespread DOC increases in surface waters observed elsewhere, are most likely dominated by enhanced mobilization of DOC in surficial organic horizons, rather than changes in the soil water chemistry of deeper horizons. While trends in DOC concentrations in surface horizons have flattened out in recent years, further increases may be expected as soil chemistry continues to adjust to declining inputs of acidity.