The uncertainty of valuation

Valuation is often said to be “an art not a science” but this relates to the techniques employed to calculate value not to the underlying concept itself. Valuation is the process of estimating price in the market place. Yet, such an estimation will be affected by uncertainties. Uncertainty in the comparable information available; uncertainty in the current and future market conditions and uncertainty in the specific inputs for the subject property. These input uncertainties will translate into an uncertainty with the output figure, the valuation. The degree of the uncertainties will vary according to the level of market activity; the more active a market, the more credence will be given to the input information. In the UK at the moment the Royal Institution of Chartered Surveyors (RICS) is considering ways in which the uncertainty of the output figure, the valuation, can be conveyed to the use of the valuation, but as yet no definitive view has been taken apart from a single Guidance Note (GN5, RICS 2003) stressing the importance of recognising uncertainty in valuation but not proffering any particular solution. One of the major problems is that Valuation models (in the UK) are based upon comparable information and rely upon single inputs. They are not probability based, yet uncertainty is probability driven. In this paper, we discuss the issues underlying uncertainty in valuations and suggest a probability-based model (using Crystal Ball) to address the shortcomings of the current model.

International evidence on the predictability of returns to securitized real estate assets: econometric models versus neural networks

The performance of various statistical models and commonly used financial indicators for forecasting securitised real estate returns are examined for five European countries: the UK, Belgium, the Netherlands, France and Italy. Within a VAR framework, it is demonstrated that the gilt-equity yield ratio is in most cases a better predictor of securitized returns than the term structure or the dividend yield. In particular, investors should consider in their real estate return models the predictability of the gilt-equity yield ratio in Belgium, the Netherlands and France, and the term structure of interest rates in France. Predictions obtained from the VAR and univariate time-series models are compared with the predictions of an artificial neural network model. It is found that, whilst no single model is universally superior across all series, accuracy measures and horizons considered, the neural network model is generally able to offer the most accurate predictions for 1-month horizons. For quarterly and half-yearly forecasts, the random walk with a drift is the most successful for the UK, Belgian and Dutch returns and the neural network for French and Italian returns. Although this study underscores market context and forecast horizon as parameters relevant to the choice of the forecast model, it strongly indicates that analysts should exploit the potential of neural networks and assess more fully their forecast performance against more traditional models.

Monetary integration and real estate markets: an investigation of the impact of the introduction of a single currency on real estate performance

This paper assesses the impact of the monetary integration on different types of stock returns in Europe. In order to isolate European factors, the impact of global equity integration and small cap factors are investigated. European countries are sub-divided according to the process of monetary convergence. Analysis shows that national equity indices are strongly influenced by global market movements, with a European stock factor providing additional explanatory power. The global and European factors explain small cap and real estate stocks much less well –suggesting an increased importance of ‘local’ drivers. For real estate, there are notable differences between core and non-core countries. Core European countries exhibit convergence – a convergence to a European rather than a global factor. The non-core countries do not seem to exhibit common trends or movements. For the non-core countries, monetary integration has been associated with increased dispersion of returns, lower correlation and lower explanatory power of a European factor. It is concluded that this may be explained by divergence in underlying macro-economic drivers between core and non-core countries in the post-Euro period.

A comparative study of multilayered and single layered neural network based predictive controllers

The authors compare the performance of two types of controllers one based on the multilayered network and the other based on the single layered CMAC network (cerebellar model articulator controller). The neurons (information processing units) in the multi-layered network use Gaussian activation functions. The control scheme which is considered is a predictive control algorithm, along the lines used by Willis et al. (1991), Kambhampati and Warwick (1991). The process selected as a test bed is a continuous stirred tank reactor. The reaction taking place is an irreversible exothermic reaction in a constant volume reactor cooled by a single coolant stream. This reactor is a simplified version of the first tank in the two tank system given by Henson and Seborg (1989).

Improved process topology for membrane distillation

In membrane distillation in a conventional membrane module, the enthalpies of vaporisation and condensation are supplied and removed by changes in the temperatures of the feed and permeate streams, respectively. Less than 5% of the feed can be distilled in a single pass, because the potential changes in the enthalpies of the liquid streams are much smaller than the enthalpy of vaporisation. Furthermore, the driving force for mass transfer reduces as the feed stream temperature and vapour pressure fall during distillation. These restrictions can be avoided if the enthalpy of vaporisation is uncoupled from the heat capacities of the feed and permeate streams. A specified distillation can then be effected continuously in a single module. Calculations are presented which estimate the performance of a flat plate unit in which the enthalpy of distillation is supplied and removed by the condensing and boiling of thermal fluids in separate circuits, and the imposed temperature difference is independent of position. Because the mass flux through the membrane is dependent on vapour pressure, membrane distillation is suited to applications with a high membrane temperature. The maximum mass flux in the proposed module geometry is predicted to be 30 kg/m2 per h at atmospheric pressure when the membrane temperature is 65°C. Operation at higher membrane temperatures is predicted to raise the mass flux, for example to 85 kg/m2 per h at a membrane temperature of 100°C. This would require pressurisation to 20 bar to prevent boiling at the heating plate of the feed channel. Pre-pressurisation of the membrane pores and control of the dissolved gas concentrations in the feed and the recyled permeate should be investigated as a means to achieve high temperature membrane distillation without pore penetration and wetting.

Dielectric properties of process cheese from 0.3 to 3 Ghz

Dielectric properties of 16 process cheeses were determined over the frequency range 0.3-3 GHz. The effect of temperature on the dielectric properties of process cheeses were investigated at temperature intervals of 10 degrees C between 5 and 85 degrees C. Results showed that the dielectric constant decreased gradually as frequency increased, for all cheeses. The dielectric loss factor (epsilon") decreased from above 125 to below 12 as frequency increased. epsilon' was highest at 5 degrees C and generally decreased up to a temperature between 55 and 75 degrees C. epsilon" generally increased with increasing temperature for high and medium moisture/fat ratio cheeses. epsilon" decreased with temperature between 5 and 55 degrees C and then increased, for low moisture/fat ratio cheese. Partial least square regression models indicated that epsilon' and epsilon" could be used as a quality control screening application to measure moisture content and inorganic salt content of process cheese, respectively. (c) 2005 Elsevier Ltd. All rights reserved..

Eliminating the small-angle component of the scattering calculated for models

A straightforward procedure (assuming spherical symmetry) is described, which enables the unwanted small-angle component of the scattering for a finite model to be calculated. The method may be applied to models of any shape or size. It is illustrated by means of a single polymer chain.

The uncertainty of valuation

Valuation is often said to be “an art not a science” but this relates to the techniques employed to calculate value not to the underlying concept itself. Valuation is the process of estimating price in the market place. Yet, such an estimation will be affected by uncertainties. Uncertainty in the comparable information available; uncertainty in the current and future market conditions and uncertainty in the specific inputs for the subject property. These input uncertainties will translate into an uncertainty with the output figure, the valuation. The degree of the uncertainties will vary according to the level of market activity; the more active a market, the more credence will be given to the input information. In the UK at the moment the Royal Institution of Chartered Surveyors (RICS) is considering ways in which the uncertainty of the output figure, the valuation, can be conveyed to the use of the valuation, but as yet no definitive view has been taken. One of the major problems is that Valuation models (in the UK) are based upon comparable information and rely upon single inputs. They are not probability based, yet uncertainty is probability driven. In this paper, we discuss the issues underlying uncertainty in valuations and suggest a probability-based model (using Crystal Ball) to address the shortcomings of the current model.

The effect of nonlinearity on the variational assimilation of satellite observations using a simple column model

Cloud imagery is not currently used in numerical weather prediction (NWP) to extract the type of dynamical information that experienced forecasters have extracted subjectively for many years. For example, rapidly developing mid-latitude cyclones have characteristic signatures in the cloud imagery that are most fully appreciated from a sequence of images rather than from a single image. The Met Office is currently developing a technique to extract dynamical development information from satellite imagery using their full incremental 4D-Var (four-dimensional variational data assimilation) system. We investigate a simplified form of this technique in a fully nonlinear framework. We convert information on the vertical wind field, w(z), and profiles of temperature, T(z, t), and total water content, qt (z, t), as functions of height, z, and time, t, to a single brightness temperature by defining a 2D (vertical and time) variational assimilation testbed. The profiles of w, T and qt are updated using a simple vertical advection scheme. We define a basic cloud scheme to obtain the fractional cloud amount and, when combined with the temperature field, we convert this information into a brightness temperature, having developed a simple radiative transfer scheme. With the exception of some matrix inversion routines, all our code is developed from scratch. Throughout the development process we test all aspects of our 2D assimilation system, and then run identical twin experiments to try and recover information on the vertical velocity, from a sequence of observations of brightness temperature. This thesis contains a comprehensive description of our nonlinear models and assimilation system, and the first experimental results.

New evidence from Southern Jordan: rethinking the role of architecture in changing societies at the beginning of the Neolithic process

The development of architecture and the settlement is central to discussions concerning the Neolithic transformation asthe very visible evidence for the changes in society that run parallel to the domestication of plants and animals. Architecture hasbeen used as an important aspect of models of how the transformation occurred, and as evidence for the sharp difference betweenhunter-gatherer and farming societies. We suggest that the emerging evidence for considerable architectural complexity from theearly Neolithic indicates that some of our interpretations depend too much on a very basic understanding of structures which arenormally seen as being primarily for residential purposes and containing households, which become the organising principle for thenew communities which are often seen as fully sedentary and described as villages. Recent work in southern Jordan suggests that inthis region at least there is little evidence for a standard house, and that structures are constructed for a range of diverse primary purposes other than simple domestic shelters.

Comparison of different boundary layer surface schemes using single point micrometeorological field data

 In the last decade, a vast number of land surface schemes has been designed for use in global climate models, atmospheric weather prediction, mesoscale numerical models, ecological models, and models of global changes. Since land surface schemes are designed for different purposes they have various levels of complexity in the treatment of bare soil processes, vegetation, and soil water movement. This paper is a contribution to a little group of papers dealing with intercomparison of differently designed and oriented land surface schemes. For that purpose we have chosen three schemes for classification: i) global climate models, BATS (Dickinson et al., 1986; Dickinson et al., 1992); ii) mesoscale and ecological models, LEAF (Lee, 1992) and iii) mesoscale models, LAPS (Mihailović, 1996; Mihailović and Kallos, 1997; Mihailović et al., 1999) according to the Shao et al. (1995) classification. These schemes were compared using surface fluxes and leaf temperature outputs obtained by time integrations of data sets derived from the micrometeorological measurements above a maize field at an experimental site in De Sinderhoeve (The Netherlands) for 18 August, 8 September, and 4 October 1988. Finally, comparison of the schemes was supported applying a simple statistical analysis on the surface flux outputs.

Potential anti-cancer effects of virgin olive oil phenols on colorectal carcinogenesis models in vitro

The traditional Mediterranean diet is thought to represent a healthy lifestyle; especially given the incidence of several cancers including colorectal cancer is lower in Mediterranean countries compared to Northern Europe. Olive oil, a central component of the Mediterranean diet, is believed to beneficially affect numerous biological processes. We used phenols extracted from virgin olive oil on a series of in vitro systems that model important stages of colon carcinogenesis. The effect the extract on DNA damage induced by hydrogen peroxide was measured in HT29 cells using single cell microgel-electrophoresis. A significant anti-genotoxic linear trend (p=0.011) was observed when HT29 cells were pre-incubated with olive oil phenols (0, 5, 10, 25, 50, 75, 100 microg/ml) for 24 hr, then challenged with hydrogen peroxide. The olive oil phenols (50, 100 microg/ml) significantly (p=0.004, p=0.002) improved barrier function of CACO2 cells after 48 hr as measured by trans-epithelial resistance. Significant inhibition of HT115 invasion (p<0.01) was observed at olive oil phenols concentrations of 25, 50, 75, 100 microg/ml using the matrigel invasion assay. No effect was observed on HT115 viability over the concentration range 0, 25, 50 75, 100 microg/ml after 24 hr, although 75 and 100 microg/ml olive oil phenols significantly inhibited HT115 cell attachment (p=0.011, p=0.006). Olive oil phenols had no significant effect on metastasis-related gene expression in HT115 cells. We have demonstrated that phenols extracted from virgin olive oil are capable of inhibiting several stages in colon carcinogenesis in vitro.

On a stochastic Trotter formula with application to spontaneous localization models

We consider the relation between so called continuous localization models—i.e. non-linear stochastic Schrödinger evolutions—and the discrete GRW-model of wave function collapse. The former can be understood as scaling limit of the GRW process. The proof relies on a stochastic Trotter formula, which is of interest in its own right. Our Trotter formula also allows to complement results on existence theory of stochastic Schrödinger evolutions by Holevo and Mora/Rebolledo.

The role of atmosphere feedbacks during ENSO in the CMIP3 models. Part III: the shortwave flux feedback

Previous studies using coupled general circulation models (GCMs) suggest that the atmosphere model plays a dominant role in the modeled El Nin ̃ o–Southern Oscillation (ENSO), and that intermodel differences in the thermodynamical damping of sea surface temperatures (SSTs) are a dominant contributor to the ENSO amplitude diversity. This study presents a detailed analysis of the shortwave flux feedback (aSW) in 12 Coupled Model Intercomparison Project phase 3 (CMIP3) simulations, motivated by findings that aSW is the primary contributor to model thermodynamical damping errors. A ‘‘feedback decomposition method,’’ developed to elucidate the aSW biases, shows that all models un- derestimate the dynamical atmospheric response to SSTs in the eastern equatorial Pacific, leading to un- derestimated aSW values. Biases in the cloud response to dynamics and the shortwave interception by clouds also contribute to errors in aSW. Changes in the aSW feedback between the coupled and corresponding atmosphere-only simulations are related to changes in the mean dynamics. A large nonlinearity is found in the observed and modeled SW flux feedback, hidden when linearly cal- culating aSW. In the observations, two physical mechanisms are proposed to explain this nonlinearity: 1) a weaker subsidence response to cold SST anomalies than the ascent response to warm SST anomalies and 2) a nonlinear high-level cloud cover response to SST. The shortwave flux feedback nonlinearity tends to be underestimated by the models, linked to an underestimated nonlinearity in the dynamical response to SST. The process-based methodology presented in this study may help to correct model ENSO atmospheric biases, ultimately leading to an improved simulation of ENSO in GCMs.

The METAFOR project: preserving data through metadata standards for climate models and simulations

Climate modeling is a complex process, requiring accurate and complete metadata in order to identify, assess and use climate data stored in digital repositories. The preservation of such data is increasingly important given the development of ever-increasingly complex models to predict the effects of global climate change. The EU METAFOR project has developed a Common Information Model (CIM) to describe climate data and the models and modelling environments that produce this data. There is a wide degree of variability between different climate models and modelling groups. To accommodate this, the CIM has been designed to be highly generic and flexible, with extensibility built in. METAFOR describes the climate modelling process simply as "an activity undertaken using software on computers to produce data." This process has been described as separate UML packages (and, ultimately, XML schemas). This fairly generic structure canbe paired with more specific "controlled vocabularies" in order to restrict the range of valid CIM instances. The CIM will aid digital preservation of climate models as it will provide an accepted standard structure for the model metadata. Tools to write and manage CIM instances, and to allow convenient and powerful searches of CIM databases,. Are also under development. Community buy-in of the CIM has been achieved through a continual process of consultation with the climate modelling community, and through the METAFOR team’s development of a questionnaire that will be used to collect the metadata for the Intergovernmental Panel on Climate Change’s (IPCC) Coupled Model Intercomparison Project Phase 5 (CMIP5) model runs.