Are lifecycle funds appropriate as default options in participant-directed retirement plans?

The appropriateness of default investment options in participant-directed retirement plans like 401(k) has been in sharp focus given that most participants fail to nominate an investment option to direct their contributions. In United States (US), prior to the Pension Protection Act (PPA) of 2006, plan fiduciaries often selected a money market fund as the default option. Whilst this ‘low risk and low return’ investment option was considered to be a ‘safe’ choice by many fiduciaries who were fearful of litigation risk, it was heavily criticized for resulting in inadequate wealth at retirement, particularly when retirees were living much longer and facing inflation risk (see, for example, Viceira, 2008; Skinner, 2009)...

Decoupling 2 : technologies, opportunities and policy options

This report was produced by the Decoupling Working Group of the International Resource Panel. It explores technological possibilities and opportunities for both developing and developed countries to accelerate decoupling and reap the environmental and economic benefits of increased resource productivity. It also examines several policy options that have proved to be successful in helping different countries to improve resource productivity in various sectors of their economy, avoiding negative impacts on the environment. It does not seem possible for a global economy based on the current unsustainable patterns of resource use to continue into the future. The economic consequences of these patterns are already apparent in three areas: increases in resource prices, increased price volatility and disruption of environmental systems. The environment impacts of resource use are also leading to potentially irreversible changes to the world’s ecosystems, often with direct effects on people and the economy – for example through damage to health, water shortages, loss of fish stocks or increased storm damage. But there are alternatives to these scary patterns. Many decoupling technologies and techniques that deliver resource productivity increases as high as 5 to 10-fold are already available, allowing countries to pursue their development strategies while significantly reducing their resource footprint and negative impacts on the environment. This report shows that much of the policy design “know-how” needed to achieve decoupling is present in terms of legislation, incentive systems, and institutional reform. Many countries have tried these out with tangible results, encouraging others to study and where appropriate replicate and scale up such practices and successes.

Predicting stock market returns and volatility with investor sentiment : evidence from eight developed countries

We test the predictive ability of investor sentiment on the return and volatility at the aggregate market level in the U.S., four largest European countries and three Asia-Pacific countries. We find that in the U.S., France and Italy periods of high consumer confidence levels are followed by low market returns. In Japan both the level and the change in consumer confidence boost the market return in the next month. Further, shifts in sentiment significantly move conditional volatility in most of the countries, and in Italy such impacts lead to an increase in returns by 4.7% in the next month.

Improving access to housing for low-income communities in Dhaka: From rhetoric to reality in community participation

The research explores how community participation can address affordable housing problems of the poor in Dhaka. The research, based on extensive interviews, community focus groups and household surveys in different Dhaka slums, identifies the limiting factors to promote community participation in affordable housing creation. In Dhaka housing options for poor are currently limited to affordable shelters in informal settlements. Public housing programs have failed to reach the poor and meet affordability levels due to a number of factors including lack of beneficiary participation. Beneficiary participation, though widely recognized for success in housing initiatives, often deteriorates in process of implementation into mere involvement, not reflecting community needs and aspirations and thus failing to meet its core objectives. This research identified the most significant impediments as well as opportunities to advance participation in their own housing provisions in Dhaka city.

Socioeconomic inequalities in diet and bodyweight: Evidence, causes, and intervention options

Diets low in fruits, vegetables, and whole grains, and high in saturated fat, salt, and sugar are the major contributors to the burden of chronic diseases globally. Previous research, and studies in this issue of Public Health Nutrition (PHN), show that unhealthy diets are more commonly observed among socioeconomically disadvantaged groups, and are key contributors to their higher rates of chronic disease. Most research examining socioeconomic inequalities in diet and bodyweight has been descriptive, and has focused on identifying the nature, extent, and direction of the inequalities. These types of studies are clearly necessary and important. We need however to move beyond description of the problem and focus much more on the question of why inequalities in diet and bodyweight exist. Furthering our understanding of this question will provide the necessary evidence-base to develop effective interventions to reduce the inequalities. The challenge of tackling dietary inequalities however doesn’t finish here: a maximally effective approach will also require equity-based policies that address the unequal population-distribution of social and economic resources, which is the fundamental root-cause of dietary and bodyweight inequalities.

On the efficacy of Fourier series approximations for pricing European options

This paper investigates several competing procedures for computing the prices of vanilla European options, such as puts, calls and binaries, in which the underlying model has a characteristic function that is known in semi-closed form. The algorithms investigated here are the half-range Fourier cosine series, the half-range Fourier sine series and the full-range Fourier series. Their performance is assessed in simulation experiments in which an analytical solution is available and also for a simple affine model of stochastic volatility in which there is no closed-form solution. The results suggest that the half-range sine series approximation is the least effective of the three proposed algorithms. It is rather more difficult to distinguish between the performance of the halfrange cosine series and the full-range Fourier series. However there are two clear differences. First, when the interval over which the density is approximated is relatively large, the full-range Fourier series is at least as good as the half-range Fourier cosine series, and outperforms the latter in pricing out-of-the-money call options, in particular with maturities of three months or less. Second, the computational time required by the half-range Fourier cosine series is uniformly longer than that required by the full-range Fourier series for an interval of fixed length. Taken together,these two conclusions make a case for pricing options using a full-range range Fourier series as opposed to a half-range Fourier cosine series if a large number of options are to be priced in as short a time as possible.

Estimating the parameters of stochastic volatility models using option price data

This article describes a maximum likelihood method for estimating the parameters of the standard square-root stochastic volatility model and a variant of the model that includes jumps in equity prices. The model is fitted to data on the S&P 500 Index and the prices of vanilla options written on the index, for the period 1990 to 2011. The method is able to estimate both the parameters of the physical measure (associated with the index) and the parameters of the risk-neutral measure (associated with the options), including the volatility and jump risk premia. The estimation is implemented using a particle filter whose efficacy is demonstrated under simulation. The computational load of this estimation method, which previously has been prohibitive, is managed by the effective use of parallel computing using graphics processing units (GPUs). The empirical results indicate that the parameters of the models are reliably estimated and consistent with values reported in previous work. In particular, both the volatility risk premium and the jump risk premium are found to be significant.

Economic analyses of options for weedy Sporobolus grass management

Weedy Sporobolus grasses have low palatability for livestock, with infestations reducing land condition and pastoral productivity. Control and containment options are available, but the cost of weed control is high relative to the extra return from livestock, thus, limiting private investment. This paper outlines a process for analysing the economic consequences of alternative management options for weedy Sporobolus grasses. This process is applicable to other weeds and other pastoral degradation or development issues. Using a case study property, three scenarios were developed. Each scenario compared two alternative management options and was analysed using discounted cash flow analysis. Two of the scenarios were based on infested properties and one scenario was based on a currently uninfested property but highly likely to become infested without active containment measures preventing weed seed transport and seedling establishment. The analysis highlighted why particular weedy Sporobolus grass management options may not be financially feasible for the landholder with the infestation. However, at the regional scale, the management options may be highly worthwhile due to a reduction in weed seed movement and new weed invasions. Therefore, to encourage investment by landholders in weedy Sporobolus grass management the investment of public money on behalf of landholders with non-infested properties should be considered.

Impacts of grazing management options on pasture and animal productivity in a Heteropogon contortus (black speargrass) pasture in central Queensland. 4. Animal production.

Steer liveweight gains were measured in an extensive grazing study conducted in a Heteropogon contortus (black speargrass) pasture in central Queensland between 1988 and 2001. Treatments included a range of stocking rates in native pastures, legume-oversown native pasture and animal diet supplement/spring-burning pastures. Seasonal rainfall throughout this study was below the long-term mean. Mean annual pasture utilisation ranged from 13 to 61%. Annual liveweight gains per head in native pasture were highly variable among years and ranged from a low of 43 kg/steer at 2 ha/steer to a high of 182 kg/steer at 8 ha/steer. Annual liveweight gains were consistently highest at light stocking and decreased with increasing stocking rate. Annual liveweight gain per hectare increased linearly with stocking rate. These stocking rate trends were also evident in legume-oversown pastures although both the intercept and slope of the regressions for legume-oversown pastures were higher than that for native pasture. The highest annual liveweight gain for legume-oversown pasture was 221 kg/steer at 4 ha/steer. After 13 years, annual liveweight gain per unit area occurred at the heaviest stocking rate despite deleterious changes in the pasture. Across all years, the annual liveweight advantage for legume-oversown pastures was 37 kg/steer. Compared with native pasture, changes in annual liveweight gain with burning were variable. It was concluded that cattle productivity is sustainable when stocking rates are maintained at 4 ha/steer or lighter (equivalent to a utilisation rate around 30%). Although steer liveweight gain occurred at all stocking rates and economic returns were highest at heaviest stocking rates, stocking rates heavier than 4 ha/steer are unsustainable because of their long-term impact on pasture productivity.

Cropping options to limit root-lesion nematodes

Australia’s northern grain-producing region is unique in that the root-lesion nematode (RLN), Pratylenchus thornei predominates. P. neglectus is also present. RLN cause substantial yield losses, particularly in wheat, but they reproduce on numerous summer and winter crops. Each nematode species prefers different crops and varieties. This project provides growers with a range of integrated management strategies to limit RLN (i.e. identify the problem, protect uninfested fields, rotate with resistant crops to keep populations low and choose tolerant crops to maximise yields). It also provides new information about soil-borne zoosporic fungi in the region.

Refining low-volume, high-concentration herbicide applications to control Chromolaena odorata (L.) King & Robinson (Siam weed) in remote areas

Chromolaena odorata (L.) King and Robinson (Siam weed) is a highly invasive plant and a high priority for control in north Queensland. It can be effectively treated using high-volume, groundbased herbicide spray equipment, but operational information shows that this control method becomes increasingly difficult in areas where vehicle access is prevented by rougher terrain. Low-volume, high-concentration herbicide applications have proven capable of causing high mortality in these remote situations. Two trials were undertaken between May 2010 and May 2012 to refine effective rates of aminopyralid/fluroxypyr, fluroxypyr and metsulfuron-methyl, only using low-volume, high-concentration applications on Siam weed. Fluroxypyr on its own was as effective as aminopyralid/fluroxypyr as both herbicides caused 95-100% mortality at overlapping rates containing 5 to 18.85 g a.i. L-1 of fluroxypyr. Metsulfuron-methyl caused 100% mortality when applied at 3 and 6 g a.i. L-1. Effective control was achieved with approximately 16 to 22 mL of the solutions per plant, so a 5 L mixture in a backpack could treat 170 to 310 adult plants. There are several options for treating Siam weed on the ground and the choice of methods reflects the area, plant density and accessibility of the infestation. Control information from Siam weed field crews shows that low volume, high concentration herbicide applications applied using a splatter gun are a more efficient method for controlling larger, denser remote infestations than physical removal. By identifying effective herbicides that are applied through low-volume equipment, these trials provide an additional and more efficient tool for controlling Siam weed in remote areas.

Elements of Volatility at High Frequency

Volatility is central in options pricing and risk management. It reflects the uncertainty of investors and the inherent instability of the economy. Time series methods are among the most widely applied scientific methods to analyze and predict volatility. Very frequently sampled data contain much valuable information about the different elements of volatility and may ultimately reveal the reasons for time varying volatility. The use of such ultra-high-frequency data is common to all three essays of the dissertation. The dissertation belongs to the field of financial econometrics. The first essay uses wavelet methods to study the time-varying behavior of scaling laws and long-memory in the five-minute volatility series of Nokia on the Helsinki Stock Exchange around the burst of the IT-bubble. The essay is motivated by earlier findings which suggest that different scaling laws may apply to intraday time-scales and to larger time-scales, implying that the so-called annualized volatility depends on the data sampling frequency. The empirical results confirm the appearance of time varying long-memory and different scaling laws that, for a significant part, can be attributed to investor irrationality and to an intraday volatility periodicity called the New York effect. The findings have potentially important consequences for options pricing and risk management that commonly assume constant memory and scaling. The second essay investigates modelling the duration between trades in stock markets. Durations convoy information about investor intentions and provide an alternative view at volatility. Generalizations of standard autoregressive conditional duration (ACD) models are developed to meet needs observed in previous applications of the standard models. According to the empirical results based on data of actively traded stocks on the New York Stock Exchange and the Helsinki Stock Exchange the proposed generalization clearly outperforms the standard models and also performs well in comparison to another recently proposed alternative to the standard models. The distribution used to derive the generalization may also prove valuable in other areas of risk management. The third essay studies empirically the effect of decimalization on volatility and market microstructure noise. Decimalization refers to the change from fractional pricing to decimal pricing and it was carried out on the New York Stock Exchange in January, 2001. The methods used here are more accurate than in the earlier studies and put more weight on market microstructure. The main result is that decimalization decreased observed volatility by reducing noise variance especially for the highly active stocks. The results help risk management and market mechanism designing.

Reuse of treated sewage in Delhi city: Microbial evaluation of STPs and reuse options

Microbiological quality of the treated wastewater is an important parameter for its reuse. The data oil the Fecal Coliform (FC) and Fecal Streptococcus (FS) at different stages of treatment in the Sewage Treatment Plants (STPs) in Delhi watershed is not available, therefore in the present study microbial profiling of STPs was carried out to assess the effluent quality for present and future reuse options. This Study further evaluates the water quality profiles at different stages of treatment for 16 STPs in Delhi city. These STPs are based on conventional Activated Sludge Process (ASP), extended aeration, physical, chemical and biological treatment (BIOFORE), Trickling Filter and Oxidation Pond. The primary effluent quality produced from most of the STPs was suitable for Soil Aquifer Treatment (SAT). Extended Hydraulic Retention Time (HRT) as a result Of low inflow to the STPS Was responsible for high turbidity, COD and BODs removal. Conventional ASP based STPs achieved 1.66 log FC and 1.06 log FS removal. STPs with extended aeration treatment process produced better quality effluent with maximum 4 log order reduction in FC and FS levels. ``Kondli'' and ``Nilothi'' STPs employing ASP, produced better quality secondary effluent as compared to other STPs based oil similar treatment process. Oxidation Pond based STPs showed better FC and FS removals, whereas good physiochemical quality was achieved during the first half of the treatment. Based upon physical, chemical and microbiological removal efficiencies, actual integrated efficiency (IEa) of each STP was determined to evaluate its Suitability for reuse for irrigation purposes. Except Mehrauli'' and ``Oxidation Pond'', effluents from all other STPs require tertiary treatment for further reuse. Possible reuse options, depending Upon the geographical location, proximity of facilities of potential users based oil the beneficial uses, and sub-soil types, etc. for the Delhi city have been investigated, which include artificial groundwater recharge, aquaculture, horticulture and industrial uses Such as floor washing, boiler feed, and cooling towers, etc. (C) 2009 Elsevier B.V. All rights reserved.

Three Essays on the Volatility of Finnish Stock Returns (summary section only)

First, in Essay 1, we test whether it is possible to forecast Finnish Options Index return volatility by examining the out-of-sample predictive ability of several common volatility models with alternative well-known methods; and find additional evidence for the predictability of volatility and for the superiority of the more complicated models over the simpler ones. Secondly, in Essay 2, the aggregated volatility of stocks listed on the Helsinki Stock Exchange is decomposed into a market, industry-and firm-level component, and it is found that firm-level (i.e., idiosyncratic) volatility has increased in time, is more substantial than the two former, predicts GDP growth, moves countercyclically and as well as the other components is persistent. Thirdly, in Essay 3, we are among the first in the literature to seek for firm-specific determinants of idiosyncratic volatility in a multivariate setting, and find for the cross-section of stocks listed on the Helsinki Stock Exchange that industrial focus, trading volume, and block ownership, are positively associated with idiosyncratic volatility estimates––obtained from both the CAPM and the Fama and French three-factor model with local and international benchmark portfolios––whereas a negative relation holds between firm age as well as size and idiosyncratic volatility.

Optimal Risk Adoption: A Real Options Approach

This study develops a real options approach for analyzing the optimal risk adoption policy in an environment where the adoption means a switch from one stochastic flow representation into another. We establish that increased volatility needs not decelerate investment, as predicted by the standard literature on real options, once the underlying volatility of the state is made endogenous. We prove that for a decision maker with a convex (concave) objective function, increased post-adoption volatility increases (decreases) the expected cumulative present value of the post-adoption profit flow, which consequently decreases (increases) the option value of waiting and, therefore, accelerates (decelerates) current investment.