Essays on the Modeling and Prediction of Volatility and Higher Moments of Stock Returns (summary section only)

One of the most fundamental and widely accepted ideas in finance is that investors are compensated through higher returns for taking on non-diversifiable risk. Hence the quantification, modeling and prediction of risk have been, and still are one of the most prolific research areas in financial economics. It was recognized early on that there are predictable patterns in the variance of speculative prices. Later research has shown that there may also be systematic variation in the skewness and kurtosis of financial returns. Lacking in the literature so far, is an out-of-sample forecast evaluation of the potential benefits of these new more complicated models with time-varying higher moments. Such an evaluation is the topic of this dissertation. Essay 1 investigates the forecast performance of the GARCH (1,1) model when estimated with 9 different error distributions on Standard and Poor’s 500 Index Future returns. By utilizing the theory of realized variance to construct an appropriate ex post measure of variance from intra-day data it is shown that allowing for a leptokurtic error distribution leads to significant improvements in variance forecasts compared to using the normal distribution. This result holds for daily, weekly as well as monthly forecast horizons. It is also found that allowing for skewness and time variation in the higher moments of the distribution does not further improve forecasts. In Essay 2, by using 20 years of daily Standard and Poor 500 index returns, it is found that density forecasts are much improved by allowing for constant excess kurtosis but not improved by allowing for skewness. By allowing the kurtosis and skewness to be time varying the density forecasts are not further improved but on the contrary made slightly worse. In Essay 3 a new model incorporating conditional variance, skewness and kurtosis based on the Normal Inverse Gaussian (NIG) distribution is proposed. The new model and two previously used NIG models are evaluated by their Value at Risk (VaR) forecasts on a long series of daily Standard and Poor’s 500 returns. The results show that only the new model produces satisfactory VaR forecasts for both 1% and 5% VaR Taken together the results of the thesis show that kurtosis appears not to exhibit predictable time variation, whereas there is found some predictability in the skewness. However, the dynamic properties of the skewness are not completely captured by any of the models.

Prediction of swelling pressure of soil using artificial intelligence techniques

The swelling pressure of soil depends upon various soil parameters such as mineralogy, clay content, Atterberg's limits, dry density, moisture content, initial degree of saturation, etc. along with structural and environmental factors. It is very difficult to model and analyze swelling pressure effectively taking all the above aspects into consideration. Various statistical/empirical methods have been attempted to predict the swelling pressure based on index properties of soil. In this paper, the computational intelligence techniques artificial neural network and support vector machine have been used to develop models based on the set of available experimental results to predict swelling pressure from the inputs; natural moisture content, dry density, liquid limit, plasticity index, and clay fraction. The generalization of the model to new set of data other than the training set of data is discussed which is required for successful application of a model. A detailed study of the relative performance of the computational intelligence techniques has been carried out based on different statistical performance criteria.

Prediction of swelling pressure of soil using artificial intelligence techniques

The swelling pressure of soil depends upon various soil parameters such as mineralogy, clay content, Atterberg's limits, dry density, moisture content, initial degree of saturation, etc. along with structural and environmental factors. It is very difficult to model and analyze swelling pressure effectively taking all the above aspects into consideration. Various statistical/empirical methods have been attempted to predict the swelling pressure based on index properties of soil. In this paper, the computational intelligence techniques artificial neural network and support vector machine have been used to develop models based on the set of available experimental results to predict swelling pressure from the inputs; natural moisture content, dry density, liquid limit, plasticity index, and clay fraction. The generalization of the model to new set of data other than the training set of data is discussed which is required for successful application of a model. A detailed study of the relative performance of the computational intelligence techniques has been carried out based on different statistical performance criteria.

Customer Value Formation in Practice: A Practice-Theoretical Approach

This thesis introduces a practice-theoretical approach to understanding customer value formation to be used in the field of service marketing and management. In contrast to current studies trying to understand value formation by analysing customers as independent actors and thinkers, it is in this work suggested that customer value formation can be better understood by analysing how value is formed in the practices and contexts of the customers. The theoretical approach developed in this thesis is applied in an empirical study of family cruises. The theoretical analysis in this thesis results in a new approach for understanding customer value formation. Customer value is, according to this new approach, something that is formed in practice, meaning that value is formed in constellations of the customer and contextual elements like tools, physical spaces and contextually embedded images and know-how. This view is different from the current views that tend to see value as subjectively created, co-created, perceived or experienced by the customer. The new approach has implications on how we view customer value, but also on the methods and techniques we can use to understand customer value in empirical studies. It is also suggested that services could in fact be reconceptualised as practices. According to the stance presented in this thesis the empirical analysis of customer value should not focus on individual customers, but should instead take the contextual entity of practices as its unit of analysis. Therefore, ethnography is chosen as a method for exploring how customer value is formed in practice in the case of family cruises on a specific cruise vessel. The researcher has studied six families, as well as the context of the cruise vessel with various techniques including non-participant observation, participant observation and interviews in order to create an ethnographic understanding of the practices carried out on board. Twenty-one different practices are reported and discussed in order to provide necessary insight to customer value formation that can be used as input for service development.

Robust prediction of residual velocities and ballistic limits of projectiles for impact on thin aluminium plates

This paper deals with the simulation-driven study of the impact of hardened steel projectiles on thin aluminium target plates using explicit finite element analysis as implemented in LS-DYNA. The evaluation of finite element modelling includes a comprehensive mesh convergence study using shell elements for representing target plates and the solid element-based representation of ogivalnosed projectiles. A user-friendly automatic contact detection algorithm is used for capturing interaction between the projectile and the target plate. It is shown that the proper choice of mesh density and strain rate-dependent material properties is crucial as these parameters significantly affect the computed residual velocity. The efficacy of correlation with experimental data is adjudged in terms of a 'correlation index' defined in the present study for which values close to unity are desirable.By simulating laboratory impact tests on thin aluminium plates carried out by earlier investigators, extremely good prediction of experimental ballistic limits has been observed with correlation indices approaching unity. Additional simulation-based parametric studies have been carried out and results consistent with test data have been obtained. The simulation procedures followed in the present study can be applied with confidence in designing thin aluminium armour plates for protection against low calibre projectiles.

Theoretical foundations for multiple rendezvous of glowworm-inspired mobile agents with variable local-decision domains

We present the theoretical foundations for the multiple rendezvous problem involving design of local control strategies that enable groups of visibility-limited mobile agents to split into subgroups, exhibit simultaneous taxis behavior towards, and eventually rendezvous at, multiple unknown locations of interest. The theoretical results are proved under certain restricted set of assumptions. The algorithm used to solve the above problem is based on a glowworm swarm optimization (GSO) technique, developed earlier, that finds multiple optima of multimodal objective functions. The significant difference between our work and most earlier approaches to agreement problems is the use of a virtual local-decision domain by the agents in order to compute their movements. The range of the virtual domain is adaptive in nature and is bounded above by the maximum sensor/visibility range of the agent. We introduce a new decision domain update rule that enhances the rate of convergence by a factor of approximately two. We use some illustrative simulations to support the algorithmic correctness and theoretical findings of the paper.

Prediction of inplane damping from deterministic and stochastic models

This paper reviews computational reliability, computer algebra, stochastic stability and rotating frame turbulence (RFT) in the context of predicting the blade inplane mode stability, a mode which is at best weakly damped. Computational reliability can be built into routine Floquet analysis involving trim analysis and eigenanalysis, and a highly portable special purpose processor restricted to rotorcraft dynamics analysis is found to be more economical than a multipurpose processor. While the RFT effects are dominant in turbulence modeling, the finding that turbulence stabilizes the inplane mode is based on the assumption that turbulence is white noise.

Intelligent prediction of the stress-strain response of intact and jointed rocks

An application of Artificial Neural Networks for predicting the stress-strain response of jointed rocks under different confining pressures is presented in this paper. Rocks of different compressive strength with different joint properties (frequency, orientation and strength of joints) are considered in this study. The database for training the neural network is formed from the results of triaxial compression tests on different intact and jointed rocks with different joint properties tested at different confining pressures reported by various researchers in the literature. The network was trained using a three-layered network with the feed-forward back propagation algorithm.About 85% of the data was used for training and the remaining 15% was used for testing the network. Results from the analyses demonstrated that the neural network approach is effective in capturing the stress-strain behaviour of intact rocks and the complex stress-strain behaviour of jointed rocks. A single neural network is demonstrated to be capable of predicting the stress-strain response of different jointed rocks, whose intact strength varies from 11.32 MPa to 123 MPa, spacing of joints varies from 10 cm to 100 cm. and confining pressures range from 0 to 13.8 MPa. (C) 2010 Elsevier Ltd. All rights reserved.

Prediction of breakout noise from an elliptical duct of finite length

This paper describes a predictive model for breakout noise from an elliptical duct or shell of finite length. The transmission mechanism is essentially that of ``mode coupling'', whereby higher structural modes in the duct walls get excited because of non-circularity of the wall. Effect of geometry has been taken care of by evaluating Fourier coefficients of the radius of curvature. The noise radiated from the duct walls is represented by that from a finite vibrating length of a semi infinite cylinder in a free field. Emphasis is on understanding the physics of the problem as well as analytical modeling. The analytical model is validated with 3-D FEM. Effects of the ovality, curvature, and axial terminations of the duct have been demonstrated. (C) 2010 Institute of Noise Control Engineering.

Modified linear prediction method for directions of arrival estimation of narrow-band plane waves

A modified linear prediction (MLP) method is proposed in which the reference sensor is optimally located on the extended line of the array. The criterion of optimality is the minimization of the prediction error power, where the prediction error is defined as the difference between the reference sensor and the weighted array outputs. It is shown that the L2-norm of the least-squares array weights attains a minimum value for the optimum spacing of the reference sensor, subject to some soft constraint on signal-to-noise ratio (SNR). How this minimum norm property can be used for finding the optimum spacing of the reference sensor is described. The performance of the MLP method is studied and compared with that of the linear prediction (LP) method using resolution, detection bias, and variance as the performance measures. The study reveals that the MLP method performs much better than the LP technique.

Solvation of an ion and of a dipole in a dipolar liquid: How different are the dynamics

Theoretical expressions for the time-dependent solvation energy of an ion and of a dipole in a dense dipolar liquid are derived from microscopic considerations. We show that in contradiction to the prediction of the continuum models, the dynamics of these two species are significantly different from each other. Especially, the zero wavevector contribution, which is significant for ions, is totally absent for dipoles. Dipolar solvation may be profoundly influenced by the translational modes of the host solvent.

Improved prediction of plane transverse jets in supersonic crossflows

THE flowfield due to transverse injection of a round sonic jet into a supersonic flowis a configuration of interest in the design of supersonic combustors or thrust vector control of supersonic jets. The flow is also of fundamental interest because it presents separation from a smooth surface, embedded subsonic regions, curved shear layers, strong shocks, an unusual development of the injected jet into a kidney-shaped streamwise vortex pair, and a wake behind the jet. Although the geometry is simple, the flow is complex and is a good candidate for assessing the behavior of turbulence models for high-speed flow, beginning with the corresponding two-dimensional flow shown in Fig. 1. At the slot, an underexpanded sonic jet expands rapidly into the supersonic crossflow. Expansion waves reflect at the jet boundary, coalesce, and give rise to a Mach surface (Mach disk for round jets).

Theoretical Estimation of Length Dependent In-Plane Stiffness of Single Walled Carbon Nanotubes Using the Nonlocal Elasticity Theory

In the present paper, Eringen's nonlocal elasticity theory is employed to evaluate the length dependent in-plane stiffness of single-walled carbon nanotubes (SWCNTs). The SWCNT is modeled as an Euler-Bernoulli beam and is analyzed for various boundary conditions to evaluate the length dependent in-plane stiffness. It has been found that the nonlocal scaling parameter has a significant effect on the length dependent in-plane stiffness of SWCNTs. It has been observed that as the nonlocal scale parameter increases the stiffness ratio of SWCNT decreases. In nonlocality, the cantilever SWCNT has high in-plane stiffness as compared to the simply-supported and the clamped cases.