‘Leger est aprendre mes fort est arendre’: wool, debt, and the dispersal of Pipewell Abbey (1280-1330)

It has long been known that English Cistercian monasteries often sold their wool in advance to foreign merchants in the late thirteenth century. The abbey of Pipewell in Northamptonshire features in a number of such contracts with Cahorsin merchants. This paper looks again at these contracts in the context of over 200 other such agreements found in the governmental records. Why did Pipewell descend into penury over this fifty year period? This case study demonstrates that the promise of ready cash for their most valuable commodity led such abbots to make ambitious agreements – taking on yet more debt to service existing creditors – that would lead to their eventual bankruptcy.

Corporate social performance and stock returns: UK evidence from disaggregate measures

This study examines the relation between corporate social performance and stock returns in the UK. We closely evaluate the interactions between social and financial performance with a set of disaggregated social performance indicators for environment, employment, and community activities instead of using an aggregate measure. While scores on a composite social performance indicator are negatively related to stock returns, we find the poor financial reward offered by such firms is attributable to their good social performance on the environment and, to a lesser extent, the community aspects. Considerable abnormal returns are available from holding a portfolio of the socially least desirable stocks. These relationships between social and financial performance can be rationalized by multi-factor models for explaining the cross-sectional variation in returns, but not by industry effects.

The long-term price-earnings ratio

price-earnings ratio;value premium;arbitrage trading rule;UK stock returns;contrarian investment Abstract:  The price-earnings effect has been thoroughly documented and is the subject of numerous academic studies. However, in existing research it has almost exclusively been calculated on the basis of the previous year's earnings. We show that the power of the effect has until now been seriously underestimated due to taking too short-term a view of earnings. Looking at all UK companies since 1975, using the traditional P/E ratio we find the difference in average annual returns between the value and glamour deciles to be 6%. This is similar to other authors' findings. We are able to almost double the value premium by calculating the P/E ratio using earnings averaged over the previous eight years.

Detecting intraday periodicities with application to high frequency exchange rates

Many recent papers have documented periodicities in returns, return volatility, bid–ask spreads and trading volume, in both equity and foreign exchange markets. We propose and employ a new test for detecting subtle periodicities in time series data based on a signal coherence function. The technique is applied to a set of seven half-hourly exchange rate series. Overall, we find the signal coherence to be maximal at the 8-h and 12-h frequencies. Retaining only the most coherent frequencies for each series, we implement a trading rule that is based on these observed periodicities. Our results demonstrate in all cases except one that, in gross terms, the rules can generate returns that are considerably greater than those of a buy-and-hold strategy, although they cannot retain their profitability net of transactions costs. We conjecture that this methodology could constitute an important tool for financial market researchers which will enable them to detect, quantify and rank the various periodic components in financial data better.

A three-regime model of speculative behaviour: modelling the evolution of the S&P 500 composite index

We examine whether a three-regime model that allows for dormant, explosive and collapsing speculative behaviour can explain the dynamics of the S&P 500. We extend existing models of speculative behaviour by including a third regime that allows a bubble to grow at a steady rate, and propose abnormal volume as an indicator of the probable time of bubble collapse. We also examine the financial usefulness of the three-regime model by studying a trading rule formed using inferences from it, whose use leads to higher Sharpe ratios and end of period wealth than from employing existing models or a buy-and-hold strategy.

A comparison of extreme value theory approaches for determining value at risk

This paper compares a number of different extreme value models for determining the value at risk (VaR) of three LIFFE futures contracts. A semi-nonparametric approach is also proposed, where the tail events are modeled using the generalised Pareto distribution, and normal market conditions are captured by the empirical distribution function. The value at risk estimates from this approach are compared with those of standard nonparametric extreme value tail estimation approaches, with a small sample bias-corrected extreme value approach, and with those calculated from bootstrapping the unconditional density and bootstrapping from a GARCH(1,1) model. The results indicate that, for a holdout sample, the proposed semi-nonparametric extreme value approach yields superior results to other methods, but the small sample tail index technique is also accurate.

Measuring the response of macroeconomic uncertainty to shocks

Recent research documents the importance of uncertainty in determining macroeconomic outcomes, but little is known about the transmission of uncertainty across such outcomes. This paper examines the response of uncertainty about inflation and output growth to shocks documenting statistically significant size and sign bias and spillover effects. Uncertainty about inflation is a determinant of output uncertainty, whereas higher growth volatility tends to raise inflation volatility. Both inflation and growth volatility respond asymmetrically to positive and negative shocks. Negative growth and inflation shocks lead to higher and more persistent uncertainty than shocks of equal magnitude but opposite sign.

Autoregressive conditional kurtosis

This article proposes a new model for autoregressive conditional heteroscedasticity and kurtosis. Via a time-varying degrees of freedom parameter, the conditional variance and conditional kurtosis are permitted to evolve separately. The model uses only the standard Student’s t-density and consequently can be estimated simply using maximum likelihood. The method is applied to a set of four daily financial asset return series comprising U.S. and U.K. stocks and bonds, and significant evidence in favor of the presence of autoregressive conditional kurtosis is observed. Various extensions to the basic model are proposed, and we show that the response of kurtosis to good and bad news is not significantly asymmetric.

Motivation, rationale and key results from the GERBILS Saharan dust measurement campaign

The Geostationary Earth Radiation Budget Intercomparison of Longwave and Shortwave radiation (GERBILS) was an observational field experiment over North Africa during June 2007. The campaign involved 10 flights by the FAAM BAe-146 research aircraft over southwestern parts of the Sahara Desert and coastal stretches of the Atlantic Ocean. Objectives of the GERBILS campaign included characterisation of mineral dust geographic distribution and physical and optical properties, assessment of the impact upon radiation, validation of satellite remote sensing retrievals, and validation of numerical weather prediction model forecasts of aerosol optical depths (AODs) and size distributions. We provide the motivation behind GERBILS and the experimental design and report the progress made in each of the objectives. We show that mineral dust in the region is relatively non-absorbing (mean single scattering albedo at 550 nm of 0.97) owing to the relatively small fraction of iron oxides present (1–3%), and that detailed spectral radiances are most accurately modelled using irregularly shaped particles. Satellite retrievals over bright desert surfaces are challenging owing to the lack of spectral contrast between the dust and the underlying surface. However, new techniques have been developed which are shown to be in relatively good agreement with AERONET estimates of AOD and with each other. This encouraging result enables relatively robust validation of numerical models which treat the production, transport, and deposition of mineral dust. The dust models themselves are able to represent large-scale synoptically driven dust events to a reasonable degree, but some deficiencies remain both in the Sahara and over the Sahelian region, where cold pool outflow from convective cells associated with the intertropical convergence zone can lead to significant dust production.

Examination of long-wave radiative bias in general circulation models over North Africa during May–July

Satellite data are used to quantify and examine the bias in the outgoing long-wave (LW) radiation over North Africa during May–July simulated by a range of climate models and the Met Office global numerical weather prediction (NWP) model. Simulations from an ensemble-mean of multiple climate models overestimate outgoing clear-sky long-wave radiation (LWc) by more than 20 W m−2 relative to observations from Clouds and the Earth's Radiant Energy System (CERES) for May–July 2000 over parts of the west Sahara, and by 9 W m−2 for the North Africa region (20°W–30°E, 10–40°N). Experiments with the atmosphere-only version of the High-resolution Hadley Centre Global Environment Model (HiGEM), suggest that including mineral dust radiative effects removes this bias. Furthermore, only by reducing surface temperature and emissivity by unrealistic amounts is it possible to explain the magnitude of the bias. Comparing simulations from the Met Office NWP model with satellite observations from Geostationary Earth Radiation Budget (GERB) instruments suggests that the model overestimates the LW by 20–40 W m−2 during North African summer. The bias declines over the period 2003–2008, although this is likely to relate to improvements in the model and inhomogeneity in the satellite time series. The bias in LWc coincides with high aerosol dust loading estimated from the Ozone Monitoring Instrument (OMI), including during the GERBILS field campaign (18–28 June 2007) where model overestimates in LWc greater than 20 W m−2 and OMI-estimated aerosol optical depth (AOD) greater than 0.8 are concurrent around 20°N, 0–20°W. A model-minus-GERB LW bias of around 30 W m−2 coincides with high AOD during the period 18–21 June 2007, although differences in cloud cover also impact the model–GERB differences. Copyright © Royal Meteorological Society and Crown Copyright, 2010