Is there a gold social seal? The financial effects of additions to and deletions from social stock indices

This study investigates the financial effects of additions to and deletions from the most well-known social stock index: the MSCI KLD 400. Our study makes use of the unique setting that index reconstitution provides and allows us to bypass possible issues of endogeneity that commonly plague empirical studies of the link between corporate social and financial performance. By examining not only short-term returns but also trading activity, earnings per share, and long-term performance of stocks that are involved in these events, we bring forward evidence of a ‘social index effect’ where unethical transgressions are penalized more heavily than responsibility is rewarded. We find that the addition of a stock to the index does not lead to material changes in its market price, whereas deletions are accompanied by negative cumulative abnormal returns. Trading volumes for deleted stocks are significantly increased on the event date, while the operational performances of the respective firms deteriorate after their deletion from the social index.

Atmospheric circulation as a source of uncertainty in climate change projections

The evidence for anthropogenic climate change continues to strengthen, and concerns about severe weather events are increasing. As a result, scientific interest is rapidly shifting from detection and attribution of global climate change to prediction of its impacts at the regional scale. However, nearly everything we have any confidence in when it comes to climate change is related to global patterns of surface temperature, which are primarily controlled by thermodynamics. In contrast, we have much less confidence in atmospheric circulation aspects of climate change, which are primarily controlled by dynamics and exert a strong control on regional climate. Model projections of circulation-related fields, including precipitation, show a wide range of possible outcomes, even on centennial timescales. Sources of uncertainty include low-frequency chaotic variability and the sensitivity to model error of the circulation response to climate forcing. As the circulation response to external forcing appears to project strongly onto existing patterns of variability, knowledge of errors in the dynamics of variability may provide some constraints on model projections. Nevertheless, higher scientific confidence in circulation-related aspects of climate change will be difficult to obtain. For effective decision-making, it is necessary to move to a more explicitly probabilistic, risk-based approach.

Effect of uncertainty in surface mass balance--elevation feedback on projections of the future sea level contribution of the Greenland ice sheet

We apply a new parameterisation of the Greenland ice sheet (GrIS) feedback between surface mass balance (SMB: the sum of surface accumulation and surface ablation) and surface elevation in the MAR regional climate model (Edwards et al., 2014) to projections of future climate change using five ice sheet models (ISMs). The MAR (Modèle Atmosphérique Régional: Fettweis, 2007) climate projections are for 2000–2199, forced by the ECHAM5 and HadCM3 global climate models (GCMs) under the SRES A1B emissions scenario. The additional sea level contribution due to the SMB– elevation feedback averaged over five ISM projections for ECHAM5 and three for HadCM3 is 4.3% (best estimate; 95% credibility interval 1.8–6.9 %) at 2100, and 9.6% (best estimate; 95% credibility interval 3.6–16.0 %) at 2200. In all results the elevation feedback is significantly positive, amplifying the GrIS sea level contribution relative to the MAR projections in which the ice sheet topography is fixed: the lower bounds of our 95% credibility intervals (CIs) for sea level contributions are larger than the “no feedback” case for all ISMs and GCMs. Our method is novel in sea level projections because we propagate three types of modelling uncertainty – GCM and ISM structural uncertainties, and elevation feedback parameterisation uncertainty – along the causal chain, from SRES scenario to sea level, within a coherent experimental design and statistical framework. The relative contributions to uncertainty depend on the timescale of interest. At 2100, the GCM uncertainty is largest, but by 2200 both the ISM and parameterisation uncertainties are larger. We also perform a perturbed parameter ensemble with one ISM to estimate the shape of the projected sea level probability distribution; our results indicate that the probability density is slightly skewed towards higher sea level contributions.

Harnessing the ancestors: mutuality, uncertainty and ritual practice in the Eastern Cape Province, South Africa

In the Eastern Cape Province of South Africa, chronic economic uncertainty has seen social relations stretched to breaking point. Informants speak of a 'war between men and women'. While grinding poverty, death in the shape of the 'axe' (HIV/AIDS) and suspicion stalk the land, and the project of building the umzi (homestead) falters, hope for the future and with it, trust between people, leaches away. One response to such uncertainty is a turn to ritual. Through a nearly relentless schedule of ritual activity which invokes the ancestors and the Christian deity in various forms, Xhosa people attempt to dam up trust, secure ongoing investment in the rural homestead and sustain ties of reciprocity both among rural people and between them and their urban kin. It is also through the staging of these rituals that women, acting together and in support of each other, are increasingly assertive – often in the face of a violent, rearguard opposition from men - in their efforts to exercise agency over the differentiated, fragmented and fragile social and economic relationships within their homesteads and across their villages.

Speculative bubbles and the cross-sectional variation in stock returns

Evidence suggests that rational, periodically collapsing speculative bubbles may be pervasive in stock markets globally, but there is no research that considers them at the individual stock level. In this study we develop and test an empirical asset pricing model that allows for speculative bubbles to affect stock returns. We show that stocks incorporating larger bubbles yield higher returns. The bubble deviation, at the stock level as opposed to the industry or market level, is a priced source of risk that is separate from the standard market risk, size and value factors. We demonstrate that much of the common variation in stock returns that can be attributable to market risk is due to the co-movement of bubbles rather than being driven by fundamentals.

The long-run performance of IPOs: the case of the Stock Exchange of Mauritius

This study examines the long-run performance of initial public offerings on the Stock Exchange of Mauritius (SEM). The results show that the 3-year equally weighted cumulative adjusted returns average −16.5%. The magnitude of this underperformance is consistent with most reported studies in different developed and emerging markets. Based on multivariate regression models, firms with small issues and higher ex ante financial strength seem on average to experience greater long-run underperformance, supporting the divergence of opinion and overreaction hypotheses. On the other hand, Mauritian firms do not on average time their offerings to lower cost of capital and as such, there seems to be limited support for the windows of opportunity hypothesis.

Beyond the environmentalist's paradox and the debate on weak versus strong sustainability

Environmentalists generally argue that ecological damage will (eventually) lead to declines in human well-being. From this perspective, the recent introduction of the “environmentalist’s paradox” in BioScience by Raudsepp-Hearne and colleagues (2010) is particularly significant. In essence, Raudsepp-Hearne and colleagues (2010) claimed that although ecosystem services have been degraded, human well-being—paradoxically—has increased. In this article, we show that this debate is in fact rooted in a broader discussion on weak sustainability versus strong sustainability(the substitutability of human-made capital for natural capital). We warn against the reductive nature of focusing only on a stock–flow framework in which a natural-capital stock produces ecosystem services. Concretely, we recommend a holistic approach in which the complexity, irreversibility, uncertainty, and ethical predicaments intrinsic to the natural environment and its connections to humanity are also considered.

Time-varying price discovery in the eighteenth century: empirical evidence from the London and Amsterdam stock markets

This paper examines the time-varying nature of price discovery in eighteenth century cross-listed stocks. Specifically, we investigate how quickly news is reflected in prices for two of the great moneyed com- panies, the Bank of England and the East India Company, over the period 1723 to 1794. These British companies were cross-listed on the London and Amsterdam stock exchange and news between the capitals flowed mainly via the use of boats that transported mail. We examine in detail the historical context sur- rounding the defining events of the period, and use these as a guide to how the data should be analysed. We show that both trading venues contributed to price discovery, and although the London venue was more important for these stocks, its importance varies over time.

Do location specific forecasts pose a new challenge for communicating uncertainty?

In the last decade, the growth of local, site-specific weather forecasts delivered by mobile phone or website represents arguably the fastest change in forecast consumption since the beginning of Television weather forecasts 60 years ago. In this study, a street-interception survey of 274 members of the public a clear first preference for narrow weather forecasts above traditional broad weather forecasts is shown for the first time, with a clear bias towards this preference for users under 40. The impact of this change on the understanding of forecast probability and intensity information is explored. While the correct interpretation of the statement ‘There is a 30% chance of rain tomorrow’ is still low in the cohort, in common with previous studies, a clear impact of age and educational attainment on understanding is shown, with those under 40 and educated to degree level or above more likely to correctly interpret it. The interpretation of rainfall intensity descriptors (‘Light’, ‘Moderate’, ‘Heavy’) by the cohort is shown to be significantly different to official and expert assessment of the same descriptors and to have large variance amongst the cohort. However, despite these key uncertainties, members of the cohort generally seem to make appropriate decisions about rainfall forecasts. There is some evidence that the decisions made are different depending on the communication format used, and the cohort expressed a clear preference for tabular over graphical weather forecast presentation.

Equipped to deal with uncertainty in climate and impacts predictions: lessons from internal peer review

The quantification of uncertainty is an increasingly popular topic, with clear importance for climate change policy. However, uncertainty assessments are open to a range of interpretations, each of which may lead to a different policy recommendation. In the EQUIP project researchers from the UK climate modelling, statistical modelling, and impacts communities worked together on ‘end-to-end’ uncertainty assessments of climate change and its impacts. Here, we use an experiment in peer review amongst project members to assess variation in the assessment of uncertainties between EQUIP researchers. We find overall agreement on key sources of uncertainty but a large variation in the assessment of the methods used for uncertainty assessment. Results show that communication aimed at specialists makes the methods used harder to assess. There is also evidence of individual bias, which is partially attributable to disciplinary backgrounds. However, varying views on the methods used to quantify uncertainty did not preclude consensus on the consequential results produced using those methods. Based on our analysis, we make recommendations for developing and presenting statements on climate and its impacts. These include the use of a common uncertainty reporting format in order to make assumptions clear; presentation of results in terms of processes and trade-offs rather than only numerical ranges; and reporting multiple assessments of uncertainty in order to elucidate a more complete picture of impacts and their uncertainties. This in turn implies research should be done by teams of people with a range of backgrounds and time for interaction and discussion, with fewer but more comprehensive outputs in which the range of opinions is recorded.

Shackle on time, uncertainty and process

This paper is intended both as a contribution to the conceptual work on process in economic thought and as an attempt to connect a non-institutionalist, non-evolutionary thinker to it. The paper has two principal objectives: (i) to delineate a broad, philosophically grounded conception of what an economic process theory (EPT) is; and (ii) to locate the contributions of George Shackle within this broad conception of EPT. In pursuing these two objectives, I hope to draw out the originality and significance of Shackle’s economics with a particular emphasis on what he adds to process conceptions developed within other heterodox traditions such as institutional and evolutionary economics. I will also highlight some of the perceived limitations of Shackle’s approach and link them to the limitations of process philosophy.

Tracking the uncertainty in flood alerts driven by grand ensemble weather predictions

The incorporation of numerical weather predictions (NWP) into a flood warning system can increase forecast lead times from a few hours to a few days. A single NWP forecast from a single forecast centre, however, is insufficient as it involves considerable non-predictable uncertainties and can lead to a high number of false or missed warnings. Weather forecasts using multiple NWPs from various weather centres implemented on catchment hydrology can provide significantly improved early flood warning. The availability of global ensemble weather prediction systems through the ‘THORPEX Interactive Grand Global Ensemble’ (TIGGE) offers a new opportunity for the development of state-of-the-art early flood forecasting systems. This paper presents a case study using the TIGGE database for flood warning on a meso-scale catchment (4062 km2) located in the Midlands region of England. For the first time, a research attempt is made to set up a coupled atmospheric-hydrologic-hydraulic cascade system driven by the TIGGE ensemble forecasts. A probabilistic discharge and flood inundation forecast is provided as the end product to study the potential benefits of using the TIGGE database. The study shows that precipitation input uncertainties dominate and propagate through the cascade chain. The current NWPs fall short of representing the spatial precipitation variability on such a comparatively small catchment, which indicates need to improve NWPs resolution and/or disaggregating techniques to narrow down the spatial gap between meteorology and hydrology. The spread of discharge forecasts varies from centre to centre, but it is generally large and implies a significant level of uncertainties. Nevertheless, the results show the TIGGE database is a promising tool to forecast flood inundation, comparable with that driven by raingauge observation.

Efficient incorporation of channel cross-section geometry uncertainty into regional and global scale flood inundation models

This paper investigates the challenge of representing structural differences in river channel cross-section geometry for regional to global scale river hydraulic models and the effect this can have on simulations of wave dynamics. Classically, channel geometry is defined using data, yet at larger scales the necessary information and model structures do not exist to take this approach. We therefore propose a fundamentally different approach where the structural uncertainty in channel geometry is represented using a simple parameterization, which could then be estimated through calibration or data assimilation. This paper first outlines the development of a computationally efficient numerical scheme to represent generalised channel shapes using a single parameter, which is then validated using a simple straight channel test case and shown to predict wetted perimeter to within 2% for the channels tested. An application to the River Severn, UK is also presented, along with an analysis of model sensitivity to channel shape, depth and friction. The channel shape parameter was shown to improve model simulations of river level, particularly for more physically plausible channel roughness and depth parameter ranges. Calibrating channel Manning’s coefficient in a rectangular channel provided similar water level simulation accuracy in terms of Nash-Sutcliffe efficiency to a model where friction and shape or depth were calibrated. However, the calibrated Manning coefficient in the rectangular channel model was ~2/3 greater than the likely physically realistic value for this reach and this erroneously slowed wave propagation times through the reach by several hours. Therefore, for large scale models applied in data sparse areas, calibrating channel depth and/or shape may be preferable to assuming a rectangular geometry and calibrating friction alone.