The lottery-panel task for bi-dimensional parameter-free elicitation of risk attitudes

We propose first, a simple task for the eliciting attitudes toward risky choice, the SGG lottery-panel task, which consists in a series of lotteries constructed to compensate riskier options with higher risk-return trade-offs. Using Principal Component Analysis technique, we show that the SGG lottery-panel task is capable of capturing two dimensions of individual risky decision making i.e. subjects’ average risk taking and their sensitivity towards variations in risk-return. From the results of a large experimental dataset, we confirm that the task systematically captures a number of regularities such as: A tendency to risk averse behavior (only around 10% of choices are compatible with risk neutrality); An attraction to certain payoffs compared to low risk lotteries, compatible with over-(under-) weighting of small (large) probabilities predicted in PT and; Gender differences, i.e. males being consistently less risk averse than females but both genders being similarly responsive to the increases in risk-premium. Another interesting result is that in hypothetical choices most individuals increase their risk taking responding to the increase in return to risk, as predicted by PT, while across panels with real rewards we see even more changes, but opposite to the expected pattern of riskier choices for higher risk-returns. Therefore, we conclude from our data that an “economic anomaly” emerges in the real reward choices opposite to the hypothetical choices. These findings are in line with Camerer's (1995) view that although in many domains, paid subjects probably do exert extra mental effort which improves their performance, choice over money gambles is not likely to be a domain in which effort will improve adherence to rational axioms (p. 635). Finally, we demonstrate that both dimensions of risk attitudes, average risk taking and sensitivity towards variations in the return to risk, are desirable not only to describe behavior under risk but also to explain behavior in other contexts, as illustrated by an example. In the second study, we propose three additional treatments intended to elicit risk attitudes under high stakes and mixed outcome (gains and losses) lotteries. Using a dataset obtained from a hypothetical implementation of the tasks we show that the new treatments are able to capture both dimensions of risk attitudes. This new dataset allows us to describe several regularities, both at the aggregate and within-subjects level. We find that in every treatment over 70% of choices show some degree of risk aversion and only between 0.6% and 15.3% of individuals are consistently risk neutral within the same treatment. We also confirm the existence of gender differences in the degree of risk taking, that is, in all treatments females prefer safer lotteries compared to males. Regarding our second dimension of risk attitudes we observe, in all treatments, an increase in risk taking in response to risk premium increases. Treatment comparisons reveal other regularities, such as a lower degree of risk taking in large stake treatments compared to low stake treatments and a lower degree of risk taking when losses are incorporated into the large stake lotteries. Results that are compatible with previous findings in the literature, for stake size effects (e.g., Binswanger, 1980; Antoni Bosch-Domènech & Silvestre, 1999; Hogarth & Einhorn, 1990; Holt & Laury, 2002; Kachelmeier & Shehata, 1992; Kühberger et al., 1999; B. J. Weber & Chapman, 2005; Wik et al., 2007) and domain effect (e.g., Brooks and Zank, 2005, Schoemaker, 1990, Wik et al., 2007). Whereas for small stake treatments, we find that the effect of incorporating losses into the outcomes is not so clear. At the aggregate level an increase in risk taking is observed, but also more dispersion in the choices, whilst at the within-subjects level the effect weakens. Finally, regarding responses to risk premium, we find that compared to only gains treatments sensitivity is lower in the mixed lotteries treatments (SL and LL). In general sensitivity to risk-return is more affected by the domain than the stake size. After having described the properties of risk attitudes as captured by the SGG risk elicitation task and its three new versions, it is important to recall that the danger of using unidimensional descriptions of risk attitudes goes beyond the incompatibility with modern economic theories like PT, CPT etc., all of which call for tests with multiple degrees of freedom. Being faithful to this recommendation, the contribution of this essay is an empirically and endogenously determined bi-dimensional specification of risk attitudes, useful to describe behavior under uncertainty and to explain behavior in other contexts. Hopefully, this will contribute to create large datasets containing a multidimensional description of individual risk attitudes, while at the same time allowing for a robust context, compatible with present and even future more complex descriptions of human attitudes towards risk.

Evaluating the Bank of England density forecasts of inflation

We consider evaluating the UK Monetary Policy Committee's inflation density forecasts using probability integral transform goodness-of-fit tests. These tests evaluate the whole forecast density. We also consider whether the probabilities assigned to inflation being in certain ranges are well calibrated, where the ranges are chosen to be those of particular relevance to the MPC, given its remit of maintaining inflation rates in a band around per annum. Finally, we discuss the decision-based approach to forecast evaluation in relation to the MPC forecasts

Evaluating the Survey of Professional Forecasters probability distributions of expected inflation based on derived event probability forecasts

Techniques are proposed for evaluating forecast probabilities of events. The tools are especially useful when, as in the case of the Survey of Professional Forecasters (SPF) expected probability distributions of inflation, recourse cannot be made to the method of construction in the evaluation of the forecasts. The tests of efficiency and conditional efficiency are applied to the forecast probabilities of events of interest derived from the SPF distributions, and supplement a whole-density evaluation of the SPF distributions based on the probability integral transform approach.

Combining probability forecasts

We consider different methods for combining probability forecasts. In empirical exercises, the data generating process of the forecasts and the event being forecast is not known, and therefore the optimal form of combination will also be unknown. We consider the properties of various combination schemes for a number of plausible data generating processes, and indicate which types of combinations are likely to be useful. We also show that whether forecast encompassing is found to hold between two rival sets of forecasts or not may depend on the type of combination adopted. The relative performances of the different combination methods are illustrated, with an application to predicting recession probabilities using leading indicators.

Communicating probabilistic information from climate model ensembles—lessons from numerical weather prediction

Climate model ensembles are widely heralded for their potential to quantify uncertainties and generate probabilistic climate projections. However, such technical improvements to modeling science will do little to deliver on their ultimate promise of improving climate policymaking and adaptation unless the insights they generate can be effectively communicated to decision makers. While some of these communicative challenges are unique to climate ensembles, others are common to hydrometeorological modeling more generally, and to the tensions arising between the imperatives for saliency, robustness, and richness in risk communication. The paper reviews emerging approaches to visualizing and communicating climate ensembles and compares them to the more established and thoroughly evaluated communication methods used in the numerical weather prediction domains of day-to-day weather forecasting (in particular probabilities of precipitation), hurricane and flood warning, and seasonal forecasting. This comparative analysis informs recommendations on best practice for climate modelers, as well as prompting some further thoughts on key research challenges to improve the future communication of climate change uncertainties.

Examining reliability of seasonal to decadal sea surface temperature forecasts: the role of ensemble dispersion

Useful probabilistic climate forecasts on decadal timescales should be reliable (i.e. forecast probabilities match the observed relative frequencies) but this is seldom examined. This paper assesses a necessary condition for reliability, that the ratio of ensemble spread to forecast error being close to one, for seasonal to decadal sea surface temperature retrospective forecasts from the Met Office Decadal Prediction System (DePreSys). Factors which may affect reliability are diagnosed by comparing this spread-error ratio for an initial condition ensemble and two perturbed physics ensembles for initialized and uninitialized predictions. At lead times less than 2 years, the initialized ensembles tend to be under-dispersed, and hence produce overconfident and hence unreliable forecasts. For longer lead times, all three ensembles are predominantly over-dispersed. Such over-dispersion is primarily related to excessive inter-annual variability in the climate model. These findings highlight the need to carefully evaluate simulated variability in seasonal and decadal prediction systems.Useful probabilistic climate forecasts on decadal timescales should be reliable (i.e. forecast probabilities match the observed relative frequencies) but this is seldom examined. This paper assesses a necessary condition for reliability, that the ratio of ensemble spread to forecast error being close to one, for seasonal to decadal sea surface temperature retrospective forecasts from the Met Office Decadal Prediction System (DePreSys). Factors which may affect reliability are diagnosed by comparing this spread-error ratio for an initial condition ensemble and two perturbed physics ensembles for initialized and uninitialized predictions. At lead times less than 2 years, the initialized ensembles tend to be under-dispersed, and hence produce overconfident and hence unreliable forecasts. For longer lead times, all three ensembles are predominantly over-dispersed. Such over-dispersion is primarily related to excessive inter-annual variability in the climate model. These findings highlight the need to carefully evaluate simulated variability in seasonal and decadal prediction systems.

The heliospheric magnetic field

The heliospheric magnetic field (HMF) is the extension of the coronal magnetic field carried out into the solar system by the solar wind. It is the means by which the Sun interacts with planetary magnetospheres and channels charged particles propagating through the heliosphere. As the HMF remains rooted at the solar photosphere as the Sun rotates, the large-scale HMF traces out an Archimedean spiral. This pattern is distorted by the interaction of fast and slow solar wind streams, as well as the interplanetary manifestations of transient solar eruptions called coronal mass ejections. On the smaller scale, the HMF exhibits an array of waves, discontinuities, and turbulence, which give hints to the solar wind formation process. This review aims to summarise observations and theory of the small- and large-scale structure of the HMF. Solar-cycle and cycle-to-cycle evolution of the HMF is discussed in terms of recent spacecraft observations and pre-spaceage proxies for the HMF in geomagnetic and galactic cosmic ray records.

Access and excess in The Texas Chain Saw Massacre

Much is made of the viscerally disturbing qualities embedded in The Texas Chain Saw Massacre - human bodies are traumatised, mutilated and distorted – and the way these are matched by close and often intense access to the performers involved. Graphic violence focused on the body specifically indicates the film as a key contemporary horror text. Yet, for all this closeness to the performers, it soon becomes clear in undertaking close-analysis of the film that access to them is equally characterised by extreme distance, both spatially and cognitively. The issue of distance is particularly striking, not least because of its ramifications on engagement, which throws up various aesthetic and methodological questions concerning performers’ expressive authenticity. This article considers the lack of access to performance in The Texas Chain Saw Massacre, paying particular attention to how this fits in with contemporaneous presentations of performance more generally, as seen in films such as Junior Bonner (Sam Peckinpah, 1972). As part of this investigation I consider the affect of such a severe disruption to access on engagement with, and discussion of, performance. At the heart of this investigation lie methodological considerations of the place of performance analysis in the post-studio period. How can we perceive anything of a character’s interior life, and therefore engage with performers who we fundamentally lack access to? Does such an apparently significant difference in the way performers and their embodiment is treated mean that they can even be thought of as delivering a performance?

Dawn-dusk asymmetry in particles of solar wind origin within the magnetosphere

Solar wind/magnetosheath plasma in the magnetosphere can be identified using a component that has a higher charge state, lower density and, at least soon after their entry into the magnetosphere, lower energy than plasma from a terrestrial source. We survey here observations taken over 3 years of He2+ ions made by the Magnetospheric Ion Composition Sensor (MICS) of the Charge and Mass Mgnetospheric Ion Composition Experiment (CAMMICE) instrument aboard POLAR. The occurrence probability of these solar wind ions is then plotted as a function of Magnetic Local Time (MLT) and invariant latitude (3) for various energy ranges. For all energies observed by MICS (1.8–21.4 keV) and all solar wind conditions, the occurrence probabilities peaked around the cusp region and along the dawn flank. The solar wind conditions were filtered to see if this dawnward asymmetry is controlled by the Svalgaard-Mansurov effect (and so depends on the BY component of the interplanetary magnetic field, IMF) or by Fermi acceleration of He2+ at the bow shock (and so depends on the IMF ratio BX/BY ). It is shown that the asymmetry remained persistently on the dawn flank, suggesting it was not due to effects associated with direct entry into the magnetosphere. This asymmetry, with enhanced fluxes on the dawn flank, persisted for lower energy ions (below a “cross-over” energy of about 23 keV) but reversed sense to give higher fluxes on the dusk flank at higher energies. This can be explained by the competing effects of gradient/curvature drifts and the convection electric field on ions that are convecting sunward on re-closed field lines. The lower-energy He2+ ions E × B drift dawnwards as they move earthward, whereas the higher energy ions curvature/gradient drift towards dusk. The convection electric field in the tail is weaker for northward IMF. Ions then need less energy to drift to the dusk flank, so that the cross-over energy, at which the asymmetry changes sense, is reduced.

Ionospheric convection response to slow, strong variations in a northward interplanetary magnetic field: A case study for January 14, 1988

We analyze ionospheric convection patterns over the polar regions during the passage of an interplanetary magnetic cloud on January 14, 1988, when the interplanetary magnetic field (IMF) rotated slowly in direction and had a large amplitude. Using the assimilative mapping of ionospheric electrodynamics (AMIE) procedure, we combine simultaneous observations of ionospheric drifts and magnetic perturbations from many different instruments into consistent patterns of high-latitude electrodynamics, focusing on the period of northward IMF. By combining satellite data with ground-based observations, we have generated one of the most comprehensive data sets yet assembled and used it to produce convection maps for both hemispheres. We present evidence that a lobe convection cell was embedded within normal merging convection during a period when the IMF By and Bz components were large and positive. As the IMF became predominantly northward, a strong reversed convection pattern (afternoon-to-morning potential drop of around 100 kV) appeared in the southern (summer) polar cap, while convection in the northern (winter) hemisphere became weak and disordered with a dawn-to-dusk potential drop of the order of 30 kV. These patterns persisted for about 3 hours, until the IMF rotated significantly toward the west. We interpret this behavior in terms of a recently proposed merging model for northward IMF under solstice conditions, for which lobe field lines from the hemisphere tilted toward the Sun (summer hemisphere) drape over the dayside magnetosphere, producing reverse convection in the summer hemisphere and impeding direct contact between the solar wind and field lines connected to the winter polar cap. The positive IMF Bx component present at this time could have contributed to the observed hemispheric asymmetry. Reverse convection in the summer hemisphere broke down rapidly after the ratio |By/Bz| exceeded unity, while convection in the winter hemisphere strengthened. A dominant dawn-to-dusk potential drop was established in both hemispheres when the magnitude of By exceeded that of Bz, with potential drops of the order of 100 kV, even while Bz remained northward. The later transition to southward Bz produced a gradual intensification of the convection, but a greater qualitative change occurred at the transition through |By/Bz| = 1 than at the transition through Bz = 0. The various convection patterns we derive under northward IMF conditions illustrate all possibilities previously discussed in the literature: nearly single-cell and multicell, distorted and symmetric, ordered and unordered, and sunward and antisunward.

The statistical cusp: a flux transfer event model

Traditionally, the cusp has been described in terms of a time-stationary feature of the magnetosphere which allows access of magnetosheath-like plasma to low altitudes. Statistical surveys of data from low-altitude spacecraft have shown the average characteristics and position of the cusp. Recently, however, it has been suggested that the ionospheric footprint of flux transfer events (FTEs) may be identified as variations of the “cusp” on timescales of a few minutes. In this model, the cusp can vary in form between a steady-state feature in one limit and a series of discrete ionospheric FTE signatures in the other limit. If this time-dependent cusp scenario is correct, then the signatures of the transient reconnection events must be able, on average, to reproduce the statistical cusp occurrence previously determined from the satellite observations. In this paper, we predict the precipitation signatures which are associated with transient magnetopause reconnection, following recent observations of the dependence of dayside ionospheric convection on the orientation of the IMF. We then employ a simple model of the longitudinal motion of FTE signatures to show how such events can easily reproduce the local time distribution of cusp occurrence probabilities, as observed by low-altitude satellites. This is true even in the limit where the cusp is a series of discrete events. Furthermore, we investigate the existence of double cusp patches predicted by the simple model and show how these events may be identified in the data.

Measuring ion temperatures and studying the ion energy balance in the high-latitude ionosphere

Data are presented for a nighttime ion heating event observed by the EISCAT radar on 16 December 1988. In the experiment, the aspect angle between the radar beam and the geomagnetic field was fixed at 54.7°, which avoids any ambiguity in derived ion temperature caused by anisotropy in the ion velocity distribution function. The data were analyzed with an algorithm which takes account of the non-Maxwellian line-of-sight ion velocity distribution. During the heating event, the derived spectral distortion parameter (D∗) indicated that the distribution function was highly distorted from a Maxwellian form when the ion drift increased to 4 km s−1. The true three-dimensional ion temperature was used in the simplified ion balance equation to compute the ion mass during the heating event. The ion composition was found to change from predominantly O4 to mainly molecular ions. A theoretical analysis of the ion composition, using the MSIS86 model and published values of the chemical rate coefficients, accounts for the order-of-magnitude increase in the atomic/molecular ion ratio during the event, but does not successfully explain the very high proportion of molecular ions that was observed.

Thermospheric Control of the Auroral Source of O+Ions for the Magnetosphere

Linear theory, model ion-density profiles and MSIS neutral thermospheric predictions are used to investigate the stability of the auroral, topside ionosphere to oxygen cyclotron waves: variations of the critical height, above which the plasma is unstable, with field-aligned current, thermal ion density and exospheric temperature are considered. In addition, probabilities are assessed that interactions with neutral atomic gases prevent O+ ions from escaping into the magnetosphere after they have been transversely accelerated by these waves. The two studies are combined to give a rough estimate of the total O+ escape flux as a function of the field-aligned current density for an assumed rise in the perpendicular ion temperature. Charge exchange with neutral oxygen, not hydrogen, is shown to be the principle limitation to the escape of O+ ions, which occurs when the waves are driven unstable down to low altitudes. It is found that the largest observed field-aligned current densities can heat a maximum of about 5×1014 O+ ions m−2 to a threshold above which they are subsequently able to escape into the magnetosphere in the following 500s. Averaged over this period, this would constitute a flux of 1012 m−2 s−1 and in steady-state the peak outflow would then be limited to about 1013 m−2 s−1 by frictional drag on thermal O+ at lower altitudes. Maximum escape is at low plasma density unless the O+ scale height is very large. The outflow decreases with decreasing field-aligned current density and, to a lesser extent, with increasing exospheric temperature. Upward flowing ion events are evaluated as a source of O+ ions for the magnetosphere and as an explanation of the observed solar cycle variation of ring current O+ abundance.

Are Good or Bad Borrowers Discouraged From Applying for Loans?

This paper takes the concept of a discouraged borrower originally formulated by Kon and Storey [Kon, Y., Storey, D.J., 2003. A theory of discouraged borrowers. Small Business Economics 21, 37–49] and examines whether discouragement is an efficient self-rationing mechanism. Using US data it finds riskier borrowers have higher probabilities of discouragement, which increase with longer financial relationships, suggesting discouragement is an efficient self-rationing mechanism. It also finds low risk borrowers are less likely to be discouraged in concentrated markets than in competitive markets and that, in concentrated markets, high risk borrowers are more likely to be discouraged the longer their financial relationships. We conclude discouragement is more efficient in concentrated, than in competitive, markets.

Incentive effects on risk attitude in small probability prospects

We report between-subject results on the effect of monetary stakes on risk attitudes. While we find the typical risk seeking for small probabilities, risk seeking is reduced under high stakes. This suggests that utility is not consistently concave.