PERFORMANCE ANALYSIS OF A TACTICAL ASSET ALLOCATION – Evidence from the Black–Litterman model based fixed income portfolio

Over time the demand for quantitative portfolio management has increased among financial institutions but there is still a lack of practical tools. In 2008 EDHEC Risk and Asset Management Research Centre conducted a survey of European investment practices. It revealed that the majority of asset or fund management companies, pension funds and institutional investors do not use more sophisticated models to compensate the flaws of the Markowitz mean-variance portfolio optimization. Furthermore, tactical asset allocation managers employ a variety of methods to estimate return and risk of assets, but also need sophisticated portfolio management models to outperform their benchmarks. Recent development in portfolio management suggests that new innovations are slowly gaining ground, but still need to be studied carefully. This thesis tries to provide a practical tactical asset allocation (TAA) application to the Black–Litterman (B–L) approach and unbiased evaluation of B–L models’ qualities. Mean-variance framework, issues related to asset allocation decisions and return forecasting are examined carefully to uncover issues effecting active portfolio management. European fixed income data is employed in an empirical study that tries to reveal whether a B–L model based TAA portfolio is able outperform its strategic benchmark. The tactical asset allocation utilizes Vector Autoregressive (VAR) model to create return forecasts from lagged values of asset classes as well as economic variables. Sample data (31.12.1999–31.12.2012) is divided into two. In-sample data is used for calibrating a strategic portfolio and the out-of-sample period is for testing the tactical portfolio against the strategic benchmark. Results show that B–L model based tactical asset allocation outperforms the benchmark portfolio in terms of risk-adjusted return and mean excess return. The VAR-model is able to pick up the change in investor sentiment and the B–L model adjusts portfolio weights in a controlled manner. TAA portfolio shows promise especially in moderately shifting allocation to more risky assets while market is turning bullish, but without overweighting investments with high beta. Based on findings in thesis, Black–Litterman model offers a good platform for active asset managers to quantify their views on investments and implement their strategies. B–L model shows potential and offers interesting research avenues. However, success of tactical asset allocation is still highly dependent on the quality of input estimates.

Comparative analysis by protocol and key of seed storage behaviour of sixty Vietnamese tree species

Seed storage behaviour of 5 1 native and 9 introduced tree species in Vietnam was investigated using a brief protocol developed to aid biodiversity conservation in circumstances where little is known about the seeds. Of the 60 species, 34 appeared to show orthodox (Acacia auriculaeformis, Adenanthera pavonina, Afzelia xylocarpa, Bauhinia purpurea, Callistemon lanceolatus, Cananga odorata, Canarium nigrum, Cassia fistula, Cassia javanica, Cassia splendida, Chukrasia tabularis, Dalbergia bariaensis, Dialium cochinchinensis, Diospyros mollis, Diospyros mun, Dracuntomelon duperreanum, Erythrophleum fordii, Khaya senegalensis, Lagerstroemia speciosa, Leucaena leucocephala, Livistona cochinchinensis, Markhamia stipulata, Melaleuca cajuputi, Millettia ichthyotona, Peltophorum pterocarpum, Peltophorum tonkinensis, Pinus khasya, Pinus massoniana, Pinus merkusii, Pterocarpus macrocarpus, Sindora siamensis, Sophora tonkinense, Sterculia foetida, Swietenia macrophylla), 13 recalcitrant (Avicennia alba, Beilschmiedia roxburghiana, Caryota mitis, Dimocarpus sp., Diospyros malabarica, Dipterocarpus chartaceus, Dypsis pinnatifrons, Hopea odorata, Lithocarpus gigantophylla, Machilus odoratissimus, Melanorrhoea laccifera, Melanorrhea usitata, Syzygium cinereum) and 13 intermediate (Anisoptera cochinchinensis, Aphanamixis polystachya, Averrhoa carambola, Carissa carandas, Chrysopylum cainito, Cinnamomum camphora, Citrofortunella microcarpa, Citrus grandis var. grandis, Elaeis guineensis, Hydnocarpus anthelmintica, Madhuca floribunda, Manilkara achras, Mimusops elengi) seed storage behaviour. A double-criteria key to estimate likely seed storage behaviour showed good agreement with the above: the key can reduce the workload of seed storage behaviour identification considerably.

Phenetic analysis of anemone coronaria (ranunculaceae) and related species

This study clarifies the taxonomic status of Anemone coronaria and segregates the species and A. coronaria infraspecific variants using morphological and morphometric analyses. Principal component analysis of the coronaria group was performed on 25 quantitative and qualitative characters, and morphometric analysis of the A. coronaria infraspecific variants was performed on 21 quantitative and qualitative characters. The results showed that the A. coronaria group clustered into four major groups: A. coronaria L., A. biflora DC, A. bucharica (Regel) Juz.ex Komarov, and a final group including A. eranthioides Regel and A. tschernjaewii Regel. The data on the A. coronaria infraspecific variants clustered into six groups: A. coronaria L. var. coronaria L., var. cyanea Ard., var. albiflora Rouy & Fouc., var. parviflora Regel, var. ventreana Ard., and var. rissoana Ard. © 2007 The Linnean Society of London

3D-Var assimilation of insect-derived Doppler radar radial winds in convective cases using a high resolution model

The assimilation of Doppler radar radial winds for high resolution NWP may improve short term forecasts of convective weather. Using insects as the radar target, it is possible to provide wind observations during convective development. This study aims to explore the potential of these new observations, with three case studies. Radial winds from insects detected by 4 operational weather radars were assimilated using 3D-Var into a 1.5 km resolution version of the Met Office Unified Model, using a southern UK domain and no convective parameterization. The effect on the analysis wind was small, with changes in direction and speed up to 45° and 2 m s−1 respectively. The forecast precipitation was perturbed in space and time but not substantially modified. Radial wind observations from insects show the potential to provide small corrections to the location and timing of showers but not to completely relocate convergence lines. Overall, quantitative analysis indicated the observation impact in the three case studies was small and neutral. However, the small sample size and possible ground clutter contamination issues preclude unequivocal impact estimation. The study shows the potential positive impact of insect winds; future operational systems using dual polarization radars which are better able to discriminate between insects and clutter returns should provided a much greater impact on forecasts.

"Oft expectation fails": a time-series analysis of construction starts in the London office market

Expectations of future market conditions are generally acknowledged to be crucial for the development decision and hence for shaping the built environment. This empirical study of the Central London office market from 1987 to 2009 tests for evidence of adaptive and naive expectations. Applying VAR models and a recursive OLS regression with one-step forecasts, we find evidence of adaptive and naïve, rather than rational expectations of developers. Although the magnitude of the errors and the length of time lags vary over time and development cycles, the results confirm that developers’ decisions are explained to a large extent by contemporaneous and past conditions in both London submarkets. The corollary of this finding is that developers may be able to generate excess profits by exploiting market inefficiencies but this may be hindered in practice by the long periods necessary for planning and construction of the asset. More generally, the results of this study suggest that real estate cycles are largely generated endogenously rather than being the result of unexpected exogenous shocks.

Forecasting VaR using analytic higher moments for GARCH processes

It is widely accepted that some of the most accurate Value-at-Risk (VaR) estimates are based on an appropriately specified GARCH process. But when the forecast horizon is greater than the frequency of the GARCH model, such predictions have typically required time-consuming simulations of the aggregated returns distributions. This paper shows that fast, quasi-analytic GARCH VaR calculations can be based on new formulae for the first four moments of aggregated GARCH returns. Our extensive empirical study compares the Cornish–Fisher expansion with the Johnson SU distribution for fitting distributions to analytic moments of normal and Student t, symmetric and asymmetric (GJR) GARCH processes to returns data on different financial assets, for the purpose of deriving accurate GARCH VaR forecasts over multiple horizons and significance levels.

Exploring strategies for coupled 4D-Var data assimilation using an idealised atmosphere-ocean model

Operational forecasting centres are currently developing data assimilation systems for coupled atmosphere-ocean models. Strongly coupled assimilation, in which a single assimilation system is applied to a coupled model, presents significant technical and scientific challenges. Hence weakly coupled assimilation systems are being developed as a first step, in which the coupled model is used to compare the current state estimate with observations, but corrections to the atmosphere and ocean initial conditions are then calculated independently. In this paper we provide a comprehensive description of the different coupled assimilation methodologies in the context of four dimensional variational assimilation (4D-Var) and use an idealised framework to assess the expected benefits of moving towards coupled data assimilation. We implement an incremental 4D-Var system within an idealised single column atmosphere-ocean model. The system has the capability to run both strongly and weakly coupled assimilations as well as uncoupled atmosphere or ocean only assimilations, thus allowing a systematic comparison of the different strategies for treating the coupled data assimilation problem. We present results from a series of identical twin experiments devised to investigate the behaviour and sensitivities of the different approaches. Overall, our study demonstrates the potential benefits that may be expected from coupled data assimilation. When compared to uncoupled initialisation, coupled assimilation is able to produce more balanced initial analysis fields, thus reducing initialisation shock and its impact on the subsequent forecast. Single observation experiments demonstrate how coupled assimilation systems are able to pass information between the atmosphere and ocean and therefore use near-surface data to greater effect. We show that much of this benefit may also be gained from a weakly coupled assimilation system, but that this can be sensitive to the parameters used in the assimilation.

An idealized study of coupled atmosphere-ocean 4D-Var in the presence of model error

Atmosphere only and ocean only variational data assimilation (DA) schemes are able to use window lengths that are optimal for the error growth rate, non-linearity and observation density of the respective systems. Typical window lengths are 6-12 hours for the atmosphere and 2-10 days for the ocean. However, in the implementation of coupled DA schemes it has been necessary to match the window length of the ocean to that of the atmosphere, which may potentially sacrifice the accuracy of the ocean analysis in order to provide a more balanced coupled state. This paper investigates how extending the window length in the presence of model error affects both the analysis of the coupled state and the initialized forecast when using coupled DA with differing degrees of coupling. Results are illustrated using an idealized single column model of the coupled atmosphere-ocean system. It is found that the analysis error from an uncoupled DA scheme can be smaller than that from a coupled analysis at the initial time, due to faster error growth in the coupled system. However, this does not necessarily lead to a more accurate forecast due to imbalances in the coupled state. Instead coupled DA is more able to update the initial state to reduce the impact of the model error on the accuracy of the forecast. The effect of model error is potentially most detrimental in the weakly coupled formulation due to the inconsistency between the coupled model used in the outer loop and uncoupled models used in the inner loop.

The South American Plasmodium falciparum var gene repertoire is limited, highly shared and possibly lacks several antigenic types

The Plasmodium falciparum var gene family encodes large variant antigens, which are important virulence factors, and also targets of the humoral host response. The frequently observed mild outcomes of falciparum malaria in many places of the Amazon area prompted us to ask whether a globally restricted variant (var) gene repertoire is present in currently circulating and older isolates of this area. By exhaustive analysis of var gene tags from 89 isolates and clones taken during many years from all over the Brazilian Amazon, we estimate that there are probably no more than 350-430 distinct sequence types, less than for any similar sized area studied so far. Detailed analysis of the var tags from genetically distinct clones obtained from single isolates revealed restricted and redundant repertoires suggesting either a low incidence of infective bites or restricted variant gene diversity in inoculated parasites. Additionally, we found a structuring of var gene repertoires observed as a higher pairwise typing sharing in isolates from the same microregion compared to isolates from different regions. Fine analysis of translated var tags revealed that certain Distinct Sequence Identifiers (DSIDs) were differently represented in Brazilian/South American isolates when compared to datasets from other continents. By global alignment of worldwide var DBL alpha sequences and sorting in groups with more than 76% identity, 125 clusters were formed and more than half of all genes were found in nine clusters with 50 or more sequences. While Brazilian/South American sequences were represented only in 64 groups, African sequences were found in the majority of clusters. DSID type 1 related sequences accumulated almost completely in one single cluster, indicating that limited recombination occurs in these specific var gene types. These data demonstrate the so far highest pairwise type sharing values for the var gene family in isolates from all over an entire subcontinent. The apparent lack of specific sequences types suggests that the P. falciparum transmission dynamics in the whole Amazon are probably different from any other endemic region studied and possibly interfere with the parasite`s ability to efficiently diversify its variant gene repertoires. (C) 2010 Elsevier B.V. All rights reserved.

Integration av webbaserat analysprogram och kartprogram : Integration of web based analysis-software andmap-software

I takt med att GIS (Grafiska InformationsSystem) blir allt vanligare och mer användarvänligt har WM-data sett att kunder skulle ha intresse i att kunna koppla information från sin verksamhet till en kartbild. Detta för att lättare kunna ta till sig informationen om hur den geografiskt finns utspridd över ett område för att t.ex. ordna effektivare tranporter. WM-data, som det här arbetet är utfört åt, avser att ta fram en prototyp som sedan kan visas upp för att påvisa för kunder och andra intressenter att detta är möjligt att genomföra genom att skapa en integration mellan redan befintliga system. I det här arbetet har prototypen tagits fram med skogsindustrin och dess lager som inriktning. Befintliga program som integrationen ska skapas mellan är båda webbaserade och körs i en webbläsare. Analysprogrammet som ska användas heter Insikt och är utvecklat av företaget Trimma, kartprogrammet heter GIMS som är WM-datas egna program. Det ska vara möjligt att i Insikt analysera data och skapa en rapport. Den ska sedan skickas till GIMS där informationen skrivs ut på kartan på den plats som respektive information hör till. Det ska även gå att välja ut ett eller flera områden i kartan och skicka till Insikt för att analysera information från enbart de utvalda områdena. En prototyp med önskad funktionalitet har under arbetets gång tagits fram, men för att ha en säljbar produkt är en del arbeta kvar. Prototypen har visats för ett antal intresserade som tyckte det var intressant och tror att det är något som skulle kunna användas flitigt inom många områden.

Forecasting accuracy and estimation uncertainty using VAR models with short- and long-term economic restrictions: a Monte-Carlo study

Using vector autoregressive (VAR) models and Monte-Carlo simulation methods we investigate the potential gains for forecasting accuracy and estimation uncertainty of two commonly used restrictions arising from economic relationships. The Örst reduces parameter space by imposing long-term restrictions on the behavior of economic variables as discussed by the literature on cointegration, and the second reduces parameter space by imposing short-term restrictions as discussed by the literature on serial-correlation common features (SCCF). Our simulations cover three important issues on model building, estimation, and forecasting. First, we examine the performance of standard and modiÖed information criteria in choosing lag length for cointegrated VARs with SCCF restrictions. Second, we provide a comparison of forecasting accuracy of Ötted VARs when only cointegration restrictions are imposed and when cointegration and SCCF restrictions are jointly imposed. Third, we propose a new estimation algorithm where short- and long-term restrictions interact to estimate the cointegrating and the cofeature spaces respectively. We have three basic results. First, ignoring SCCF restrictions has a high cost in terms of model selection, because standard information criteria chooses too frequently inconsistent models, with too small a lag length. Criteria selecting lag and rank simultaneously have a superior performance in this case. Second, this translates into a superior forecasting performance of the restricted VECM over the VECM, with important improvements in forecasting accuracy ñreaching more than 100% in extreme cases. Third, the new algorithm proposed here fares very well in terms of parameter estimation, even when we consider the estimation of long-term parameters, opening up the discussion of joint estimation of short- and long-term parameters in VAR models.

Social welfare analysis in a simple financial economy with risk regulation

In the last years, regulating agencies of rnany countries in the world, following recommendations of the Basel Committee, have compelled financiaI institutions to maintain minimum capital requirements to cover market risk. This paper investigates the consequences of such kind of regulation to social welfare and soundness of financiaI institutions through an equilibrium model. We show that the optimum level of regulation for each financiaI institution (the level that maximizes its utility) depends on its appetite for risk and some of them can perform better in a regulated economy. In addition, another important result asserts that under certain market conditions the financiaI fragility of an institution can be greater in a regulated econolny than in an unregulated one

Comparativo de metodologias de mensuração de VAR para o mercado financeiro brasileiro

Várias metodologias de mensuração de risco de mercado foram desenvolvidas e aprimoradas ao longo das últimas décadas. Enquanto algumas metodologias usam abordagens não-paramétricas, outras usam paramétricas. Algumas metodologias são mais teóricas, enquanto outras são mais práticas, usando recursos computacionais através de simulações. Enquanto algumas metodologias preservam sua originalidade, outras metodologias têm abordagens híbridas, juntando características de 2 ou mais metodologias. Neste trabalho, fizemos uma comparação de metodologias de mensuração de risco de mercado para o mercado financeiro brasileiro. Avaliamos os resultados das metodologias não-paramétricas e paramétricas de mensuração de VaR aplicados em uma carteira de renda fixa, renda variável e renda mista durante o período de 2000 a 2006. As metodologias não-paramétricas avaliadas foram: Simulação Histórica pesos fixos, Simulação Histórica Antitética pesos fixos, Simulação Histórica exponencial e Análise de Cenário. E as metodologias paramétricas avaliadas foram: VaR Delta-Normal pesos fixos, VaR Delta-Normal exponencial (EWMA), Simulação de Monte Carlo pesos fixos e Simulação de Monte Carlo exponencial. A comparação destas metodologias foi feita com base em medidas estatísticas de conservadorismo, precisão e eficiência.

Mercado brasileiro: aplicação de análise de componentes principais no cálculo de VAR para carteiras de renda fixa

A abordagem do Value at Risk (VAR) neste trabalho será feita a partir da análise da curva de juros por componentes principais (Principal Component Analysis – PCA). Com essa técnica, os movimentos da curva de juros são decompostos em um pequeno número de fatores básicos independentes um do outro. Entre eles, um fator de deslocamento (shift), que faz com que as taxas da curva se movam na mesma direção, todas para cima ou para baixo; de inclinação (twist) que rotaciona a curva fazendo com que as taxas curtas se movam em uma direção e as longas em outra; e finalmente movimento de torção, que afeta vencimentos curtos e longos no mesmo sentido e vencimentos intermediários em sentido oposto. A combinação destes fatores produz cenários hipotéticos de curva de juros que podem ser utilizados para estimar lucros e perdas de portfolios. A maior perda entre os cenários gerados é uma maneira intuitiva e rápida de estimar o VAR. Este, tende a ser, conforme verificaremos, uma estimativa conservadora do respectivo percentual de perda utilizado. Existem artigos sobre aplicações de PCA para a curva de juros brasileira, mas desconhecemos algum que utilize PCA para construção de cenários e cálculo de VAR, como é feito no presente trabalho.Nesse trabalho, verificaremos que a primeira componente principal produz na curva um movimento de inclinação conjugado com uma ligeira inclinação, ao contrário dos resultados obtidos em curvas de juros de outros países, que apresentam deslocamentos praticamente paralelos.

Estudo comparativo do acúmulo de massa seca e macronutrientes por plantas de milho var. BR-106 e Brachiaria plantaginea

Foram realizados dois experimentos, em casa de vegetação, no Departamento de Biologia Aplicada à Agropecuária da FCAV-UNESP de Jaboticabal, objetivando-se determinar o acúmulo de massa seca e a distribuição e acúmulo de macronutrientes em plantas de milho, no período de outubro de 2000 a fevereiro de 2001, e de capim-marmelada, no período de setembro de 2003 a fevereiro de 2004. Os estudos foram realizados em delineamento experimental inteiramente casualizado, com quatro repetições. As plantas cresceram em vasos com capacidade de sete litros - preenchidos com areia de rio lavada e peneirada - e foram irrigadas diariamente com solução nutritiva. Os tratamentos foram representados pelas épocas de amostragem realizadas a intervalos de 14 dias, a saber: 21, 35, 49, 63, 77, 91, 105, 119 e 133 dias após a emergência (DAE) das plantas de milho; e 21, 35, 49, 63, 77, 91, 105, 119, 133 e 147 DAE das plantas de capim-marmelada. O ponto de máximo acúmulo teórico de massa seca deu-se aos 122 DAE para o milho (143,8 g por planta) e aos 143 DAE para o capim-marmelada (23,9 g por planta). A taxa de absorção diária dos macronutrientes atingiu maiores valores entre 71 e 104 DAE para o milho e entre 96 e 111 DAE para a planta daninha. Levando-se em conta a média dos valores de pontos de inflexão observados na cultura do milho, aos 85 DAE uma planta de milho acumula, teoricamente, 83,0 g de massa seca; 788,9 mg de N; 137,5 mg de P; 1.385,6 mg de K; 551,8 mg de Ca; 217,9 mg de Mg; e 92,5 mg de S. Enquanto que, no mesmo período, uma planta de B. plantaginea acumula, teoricamente, 9,6 g de massa seca; 127,8 mg de N; 15,9 mg de P; 217,3 mg de K; 43,9 mg de Ca; 58,3 mg de Mg; e 15,8 mg de S.